Sharp premium increases could boost tax penalty exemptions, undermining ACA goal to enhance individual health insurance market risk pool

Steep premium increases next year could potentially shrink state individual health insurance risk pools, particularly among individuals and families whose household incomes are too high to qualify them for premium and cost sharing subsidies on state health benefit exchanges. That in turn would undermine a goal of the Patient Protection and Affordable Care Act to boost the viability of the individual market by enhancing the spread of risk among a larger pool of people. Fewer people in the pool means less premium dollars to cover the cost of medical care for those who use it.

Big premium hikes for this cohort that I’ve dubbed the 401 percenters (the subsidies end at 401 percent of federal poverty levels) could result in more constituents seeking exemptions from the individual shared responsibility mandate to have some form of health insurance coverage in place throughout the year under pain of an income tax penalty for going bare.

One category worth watching for a possible bump as 2017 open enrollment begins is health sharing ministries. Like insurance plans, they are based on risk spreading but technically aren’t health plans and thus don’t have to meet Affordable Care Act provisions such as offering 10 essential health benefits and disallowing consideration of pre-existing health conditions. As faith-based nonprofit organizations, they can exercise a large degree of discretion as to who they wish to offer coverage – something Affordable Care Act compliant individual plans cannot. If health sharing ministries take off in 2017, advantage will go to those that have the best reputations and largest number of members since like insurance, the law of large numbers is paramount. More sharing members equates to greater risk sharing and greater likelihood of remaining solvent (having enough money to cover members’ medical care) to use insurance industry terminology.


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 or call 530-295-1473. 

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Frederick Pilot

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