When ACA individual market reforms fail and reprise de facto high risk pool

The Minnesota Department of Commerce struck a deal with five health plans in the state’s individual market to prevent a market collapse. In June, Blue Cross Blue Shield announced that it was leaving the individual market, with 103,000 individuals left to find a new plan when open enrollment starts on November 1. It was feared that other plans would quickly follow suit. Given that BCBS had a broad network and notably higher risk profile, the remaining plans were not eager to take on new enrollees in a guaranteed issue environment. The agreement reached included caps on health plan enrollment and significant rate increases between 50-66.8 percent. Only one of the five plans, BCBS’s narrow-network HMO plan, Blue Plus, agreed to offer plans without an enrollment cap.

Source: Capping Enrollment To Save Minnesota’s Individual Market

A key element of the Patient Protection and Affordable Care Act’s reforms of the individual health insurance market is the formation of statewide risk pools comprised of those not covered by government or employer-sponsored plans. But as the Minnesota Department of Commerce notes in this news release, just five percent of Minnesota residents or 250,000 people don’t fall into these categories and make up the entire universe of the individual market.

When Affordable Care Act rules that permit health plan issuers to slice and dice state individual risk pools into county-sized rating areas where they can choose — or not — to offer a plan or plans are factored in, that universe is narrowed down. That effectively reduces the spread of risk for health plan issuers offering coverage in those rating areas if there are few issuers offering plans within them. Ultimately, the number of those in the individual market becomes too small to achieve effective spread of risk, even with the law’s individual shared responsibility mandate to have some form of health coverage in force. Especially in smaller states like Minnesota, where it appears from this Health Affairs blog post that rather than spreading risk across a larger population, the individual market is functioning more like a high risk rather than true insurance pool. That’s why Minnesota regulators accommodated health plan issuer concerns by capping enrollment — a defining characteristic of a high risk pool.

That’s a perverse development given the Affordable Care Act’s reforms of the individual market were specifically intended to restore the individual market to healthy functioning and obsolete state high risk pools that offered tightly limited coverage to those whose health status fell short of health plan issuers’ medical underwriting standards that existed prior to the reforms taking effect in 2014.

 


Need a speaker or webinar presenter on the Affordable Care Act and the outlook for health care reform? Contact Pilot Healthcare Strategies Principal Fred Pilot by email fpilot@pilothealthstrategies.com or call 530-295-1473. 

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Frederick Pilot

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