Rising premiums--particularly for those who don't receive subsidies--will likely slow down enrollment growth for Affordable Care Act exchange plans in 2017.
A new forecast from Standard & Poor's Global Ratings unit estimates that changes in marketplace enrollment numbers will vary between 4 percent growth and an 8 percent contraction. The effectuated enrollment should fall between a range of 10.2 million and 11.6 million, according to the report.
Higher premiums can drive nonsubsidized enrollees out of the market primarily because they are more likely to change their purchasing decisions because of the sticker price, whereas subsidy-eligible enrollees--85 percent or 9.4 million people--are effectively “hedged” against rate hikes, the report adds.
But unless something happens to the subsidy mechanism or premiums continue to climb in a comparable magnitude as 2017, a marketplace "death spiral" does not seem likely, primary credit analyst Deep Banerjee writes in the report.
Banerjee also agreed with the argument that the 2017 premium hikes are a one-time price correction as opposed to a trend. It's not a promise that premiums will go down, “but the range of hikes will go down,” Banerjee told FierceHealthPayer in an interview Friday.
“Expect 2017 to be better in terms of profitability than 2016,” Banerjee said, adding that premium hikes will "correct" the pricing schedules of marketplace plans.
The Department of Health and Human Services estimates 2.5 million people who currently buy health plans outside of the marketplace are eligible for subsidies, FierceHealthPayer reported. If 2017 premium hikes are high enough, that figure could be slightly higher, according to Banerjee. Higher 2017 premiums could also make more on-exchange enrollees eligible for subsidies, though the effect on enrollment “wouldn’t be drastic,” he added.
Increased outreach to the 9 million uninsured who are eligible for subsidies, combined with the premise that some of the subsidy-eligible off-exchange plan members will sign up, could continue the trend of exchange enrollment growth, according to the S&P report. Still, enrollees who lack the shielding effect of subsidies will be more sensitive to rising premiums, which could slow enrollment growth.