Tag Archive: individal mandate

Tax bill’s evisceration of individual mandate will shrink, bifurcate non-group market

Reforms of the non-group market aimed at revitalizing it as it faced the death spiral of adverse selection at the start of the decade have reached a turning point. A major tax reform bill almost certain to be signed into law this month effectively cancels out one of three foundational elements designed to rescue the market contained in the Patient Protection and Affordable Care Act: the tax penalty levied on households that go “bare” without medical coverage.

The Affordable Care Act reforms effectively force buyers and sellers together to sustain a functional non-group market. Plan issuers must accept everyone applying for coverage without medical underwriting. On the buyer side, the thinking was the penalty would provide incentive to purchase an individual plan, with the segment acting as a residual market for those without access to other forms of coverage. In retrospect, turns out the incentive wasn’t strong enough, particularly to improve the spread of risk by creating a diversified risk pool of young and old and those in good and ill health. Many households found the tax penalty the superior option over purchasing coverage, eroding the intended effect of strengthening the market and ensuring a good spread of risk.

Zeroing out the tax penalty as the pending tax bill does would not collapse non-group into a rapid adverse selection death spiral, accounting to the Congressional Budget Office. The CBO projects the negation of the tax penalty will cut the estimated 15 million Americans in the individual market by one third by 2027. Nevertheless, the CBO said, the segment “would continue to be stable in almost all areas of the country throughout the coming decade.” In other words, a shrunken but not a fatally crippled market over the near term.

Going forward, a couple of factors not addressed in the CBO analysis could further downsize the non-group segment:

  • The exit of households earning in excess of 400 percent of federal poverty and therefore ineligible for premium subsidies offered though state health benefit exchanges, particularly for family plans and for individuals aged 50 to 64. Premium rates are already considered out of reach for many of these households. According to the CBO analysis, premiums will continue to rise by 10 percent a year over the next 10 years. The CBO analysis notes non-enforcement of the tax penalty would help drive the increases as healthier people would be less likely to obtain insurance, requiring plan issuers to make up the lost premium revenue by raising rates.
  • The replacement of Affordable Care Act compliant individual plans with short term plans. In October, the Trump administration directed three federal agencies to consider new regulations or guidance that would expand the availability of short term policies beyond the current 90 day limit. If short term policies are defined as up to 12 versus three months and be renewable for another year, they would offer a medically underwritten, lower cost alternative to those who can pass underwriting standards. That would reintroduce medical risk selection mostly barred by the Affordable Care Act, which permits premium rating based only on age, location, family size and tobacco use. According to  Modern Healthcare, at least two plan issuers – UnitedHealth and Aetna – are looking into issuing short term plans, potentially offering covered benefits on a par with individual plans. That would create a bifurcated non-group market rather than the single state risk pooling under the Affordable Care Act’s reforms and has raised concerns among stakeholders and state regulators according to Modern Healthcare.
 


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. 

Administration, Congress would leave CSR subsidies in limbo in latest court filing

President Donald Trump and House Republicans have decided not to blow up the Obamacare health insurance markets just yet. In a filing to a federal appeals court Monday, the Justice Department and lawyers representing House Republicans have requested another 90-day delay in the proceedings from a case challenging the legality of payments made to health insurers serving low-income customers. “The parties continue to discuss measures that would obviate the need for judicial determination of this appeal, including potential legislative action,” attorneys for both parties wrote to the appeals court.

Source: Trump Decides Not To Blow Up Obamacare — Yet | HuffPost

If the U.S. District Court of Appeals grants this request, the legal uncertainty over the reduced cost sharing subsidies for silver actuarial value (AV) plans sold in state health benefit exchanges would potentially continue for the rest of the summer. As the article notes, those subsidies could be cut off at any time by the Trump administration and an appeal in the case, House v. Price, dropped. That would leave intact a U.S. District Court ruling one year ago finding the subsidies cannot be allocated by the executive branch without congressional appropriation. Neither the Trump administration nor the current Congress are committed to keeping the exchange market functional and have little motivation to resolve the matter.

These circumstances will likely prompt plan issuers to increase plan year 2018 premium rates as a precaution as rate filings are due to state regulators in the next month since the Affordable Care Act would continue to require them to offer more generous coverage than standard 70 percent AV silver plans for households earning below 250 percent of federal poverty levels and purchasing though the exchanges. At least one plan issuer, Anthem, has indicated it would have to boost premiums by at least 20 percent to cover the potential loss of the CSR subsidies.

A second consecutive year of double digit premium increases could threaten the actuarial viability of the state non-group market risk pools since those eligible for little or no advance premium tax credit subsidies would likely flee the market. Particularly if the Trump administration doesn’t enforce the ACA’s individual mandate, making that option more appealing.

Some state regulators including California and most recently New Mexico have asked plan issuers to file two sets of premium rates, one assuming continuation of the subsidies and another without them.

 


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. 

Indication of trouble with ACA’s individual mandate compliance

Stung by losses under the federal health law, major insurers are seeking to sharply limit how policies are sold to individuals in ways that consumer advocates say seem to discriminate against the sickest and could hold down future enrollment.In recent days Anthem, Aetna and Cigna, all among the top five health insurers, told brokers they will stop paying them sales commissions to sign up most customers who qualify for new coverage outside the normal enrollment period, according to the companies and broker documents.The health law allows people who lose other coverage, families with new children and others in certain circumstances to buy insurance after enrollment season ends. In most states the deadline for 2016 coverage was Jan. 31.Last year, these “special enrollment” clients were much more expensive than expected because lax enforcement allowed many who didn’t qualify to sign up, insurers said. Nearly a million special-enrollment customers selected plans in the first half of 2015, half of them after losing previous coverage.In addition, Cigna and Humana, another big health insurer, have ceased paying brokers to sell many higher-benefit “gold” marketplace plans for individuals and families while continuing to pay commissions on more-profitable, lower-benefit “bronze” plans, according to documents and interviews.

Source: Licking Wounds, Insurers Accelerate Moves To Limit Health-Law Enrollment | California Healthline

This is a development that should be followed closely because it hints at fundamental problems with the implementation of the keystone policy bargain of the Affordable Care Act’s individual market reforms. Health plan issuers agreed to forgo medical underwriting and accept all applicants regardless of health status and medical history. Provided everyone not covered by an employer or government-paid health plan have continuous, year round coverage.

This story suggests that at least some consumers aren’t keeping up their end of the policy bargain to be continuously covered and are gaming the rules that allow enrollment outside of three-month-long annual open enrollment period for those who lost employer-sponsored coverage, moved or had a change in family status and other life circumstances. They are effectively using coverage actuarially designed for annual enrollment terms as short term coverage of less than one year since according to some insurers, they’re dropping their coverage soon after signing up under the special enrollment provisions. And since they’re only in for the short term, they’re inclined to select plans that have the lowest out of pocket cost sharing: gold and platinum plans. (Plans sold as short term coverage aren’t covered by the Affordable Care Act’s individual market reforms. Pre-existing conditions can be excluded and they typically offer a much narrower scope of benefits than ACA-compliant plans).

The Obama administration apparently recognizes this issue undermines the individual market reform framework. Andy Slavitt, acting administrator of the Centers for Medicare and Medicaid Services, told a J.P. Morgan health-care conference in San Francisco last month that CMS will tighten up its rules governing special enrollments outside of the annual open enrollment period, according to The Wall Street Journal.

Clearly, more information is needed to better understand this phenom. For example, are peoples’ lives so subject to changing life circumstances that most anyone can qualify for special enrollment, mooting the annual enrollment periods? Does “waiting to get sick” as reported in mainstream media as a driver for special enrollments really mean getting high cost elective procedures given that most people aren’t able to time when they will develop a serious illness or be injured in an accident? If consumers are defrauding the special enrollment rules by falsely claiming a life event, is that part of the “culture of coping” the Affordable Care Act is intended to reduce, with consumers too financially pinched to pay their premiums for the entire year, even with advance premium tax credits?

 


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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