The next few months will be a pivotal period for the future of the Affordable Care Act marketplaces. Facing departures from key insurers and a firestorm of premium rate increases, many are wondering what the future holds for the exchanges.
Built to provide consumers with an an easier way to compare and shop for individual health plans, the exchanges are a key part of the ACA. Initially, each state was intended to build their own exchanges, though many—particularly conservative states opposed to the ACA—chose to use the federal marketplace, Healthcare.gov.
The exchanges have had a rocky history, beginning with the tough rollout in 2013. But after the first open enrollment period, the enrollment process was ironed out, and enrollment numbers continued to climb—most recently hitting 12.7 million enrollees for 2016.
But there have been other problems. Though enrollment has continued to be robust, sinking uninsured rates to historic lows, the demographics of enrollees have been less than desirable for insurers. The individual market has been older and sicker than carriers hoped, meaning enrollees are expensive to insure. On top of that, most carriers underpriced in the first few years of the marketplaces to gain market share, leading to steep losses.
As a result, UnitedHealthcare and Aetna announced this year that they would not participate on the exchanges for 2017 due to sustainability concerns. By pulling out of the marketplaces, competition in many counties around the country diminished. According to an investigation by Vox, there will be 687 counties with just one marketplace insurer in 2017.
These dynamics have led many to ask—are the marketplaces failing? In Tennessee, for example, insurance commissioner Julie Mix McPeak said the state’s exchange was “near collapse.”
This current open enrollment period will be key in determining whether these collapse predictions are paranoid or prescient.
If insurers and ACA administrators aren’t successful in attracting younger, healthier consumers to the marketplaces—the “young invincibles” needed to balance out carriers’ risk pools, the possible collapse could become a reality. If even just one more insurer decided not to offer plans in 2018, consumers in many parts of the country could lose access to marketplace coverage altogether. If that happens, what alternatives to the exchanges exist?
Here are two possible reforms that could take the place of the exchanges.
The public option
A public health insurance option was originally part of the ACA, though it was cut out of the legislation’s final draft. A public option is a government-run health plan that would be offered alongside private plans on the marketplaces.
In his article in the Journal of the American Medicine Association, President Barack Obama called for revisiting the public option, and Democratic presidential candidate Hillary Clinton has also said she would work to make a public option possible.
If competition on the exchanges continued to diminish, one alternative would be to implement a public option in the counties with no private carrier option. Hospitals and other providers, which tend to oppose a public option over concerns of lower reimbursement rates, would theoretically be less opposed if the alternative was no carriers at all.
However, an unintended outcome could be that private insurers would cease operating in any high-risk counties, choosing instead to concentrate in healthier areas and let the government take the financial hit in unhealthy counties.
The return to high-risk pools
High-risk pools are a pre-ACA health policy that could be revisited if the exchanges fail. Before health reform, insurers could deny coverage to people based on pre-existing conditions. If you didn’t have job-based coverage, you might be unable to obtain private health insurance.
But in 35 states, another option existed for these consumers. As early as 1976, some states began running health insurance plans specifically for the “uninsurable,” or otherwise high-risk patients. High-risk pools are sort of like the public option, but specifically for people with pre-existing conditions.
Already, some members of Congress are making moves to implement this exchange alternative. A bill introduced to the House would repeal the ACA and replace it with a number of changes, including $2.5 billion annually for ten years to help states start these risk pools.
According to the Kaiser Family Foundation, an individual would have a one-time opportunity to enroll in private health coverage regardless of health status. Then, only individuals who maintain continuous coverage could keep it regardless of health status. Others would have to go to high-risk pools.
Open enrollment for 2017 closes January 31. By February, we should have a sense of whether the newly enrolled will be able to offset the current downward trajectory of the exchanges. If they can’t, you may be hearing more about public options and high-risk pools, and what it would take to implement them.