| October 16, 2018 12:00 AM
Congressional Democrats argue that new regulations from the Trump administration will put the exchanges on the brink of collapse.
(CatLane/Getty Images)
Obamacare's insurance exchanges, after years of skyrocketing premiums and bolting insurers, are showing signs of something that has been elusive since the first open enrollment six years ago: Stability.
When consumers take part in this year's open enrollment period on Nov. 1, they'll be avoiding the sticker shock of previous years. Insurers are, on average, making modest rate increases ahead of the period. And some insurers are also returning to Obamacare’s insurance exchanges after watching their colleagues rake in profits.
“Carriers that stayed in the market figured out how to make money,” said Katherine Hempstead, senior policy adviser for the Robert Wood Johnson Foundation. “Other carriers watched that.”
Yet there is still room for doubt over the future. Obamacare's allies are worried about the effects of cuts to advertising and outreach for open enrollment, along with the presence of new competition from Trump administration-approved plans that could erode enrollment in the exchanges.
Congressional Democrats argue that new regulations from the Trump administration will put the exchanges on the brink of collapse.
Democrats and Obamacare allies warn that the Trump administration is "sabotaging" the healthcare law by expanding access to short-term and association health plans that could compete with plans sold on the law’s insurance exchanges. They also claim that the GOP has damaged the law by eliminating Obamacare’s individual mandate penalty for not having insurance, a provision that was considered the linchpin of the healthcare system.
And even though rates aren’t going up as much as in 2018, people who earn too much to get income-based subsidies that offer lower premiums remain in a tough spot.
All of these factors put Obamacare in a place of triumph and trepidation ahead of the sixth open enrollment period that runs from Nov. 1 to Dec. 15 for healthcare.gov, which residents in 39 states use to buy health insurance. The remaining 11 states and the District of Columbia run their own exchanges through which residents buy plans, and some have decided to hold a longer enrollment period.
Two estimates show that Obamacare’s premiums look to be on course for relative stability for 2019 compared to the 2018 coverage year.
Premiums across 47 states and the District of Columbia are expected to inch by an average 3 percent, according to an analysis from the Associated Press and the consulting firm Avalere Health published on Sept. 7.
The Trump administration also announced last week that the average premiums on Obamacare are expected to be 1.5 percent lower than in 2019.
Department of Health and Human Services Secretary Alex Azar estimated that the benchmark Obamacare plan, which is the second-cheapest silver plan, would see premiums go down on average by 2 percent for 2019.
The increases are slightly below the rate of medical inflation and a far cry from the double-digit average premium increases in 2018. Overall, 2018 saw a 32 percent increase in premiums for the cheapest silver plan, the middle of Obamacare’s four metal plan tiers, according to the Urban Institute, a left-of-center think tank.
Compensating for Trump
Last year's large premium hikes can be traced back to Trump administration policy.
Insurers increased rates in response to the administration cutting off payments called cost-sharing reduction payments. Obamacare makes the payments to reimburse insurers for lowering out-of-pocket costs for low-income Obamacare customers, as they are required to do.
But Trump cut off those payments last fall on the grounds that they were subsidizing Obamacare.
One factor that has allowed them to set modest rate hikes for 2019 may be the buffer they created with big increases in 2018.
“So it looks like insurers overshot the mark last year for the uncertainty and some of them overdid it,” said Karen Pollitz, senior fellow at the Kaiser Family Foundation.
Another reason for the lower premiums could be that insurers finally figured out the most efficient way to operate in Obamacare’s insurance exchanges, which were implemented in 2014.
Obamacare plans sold on the individual market, which is for those who don't get coverage through work or through a government program, must meet certain requirements such as covering pre-existing conditions and offering certain benefits, such as maternity care, that regulators deem essential.
Major insurance giants such as UnitedHealth began leaving the exchanges in 2015 and 2016 after suffering financial losses due in part to a sicker-than-expected enrollee population.
In 2014, there was an average of five Obamacare insurers per state. That number dropped to 3.5 in 2018, according to the Kaiser Family Foundation.
But now insurers are starting to re-enter the market for 2019.
“So far we are counting 15 states with an insurer coming back,” Pollitz said.
Kaiser also reported that insurers on the exchanges started to turn a profit in 2017 and in the first six months of 2018.
So how did insurers start earning money? The key was limiting consumers to a narrow network of doctors, Hempstead said. “I think that control of network is a key aspect of success in this market,” she said.
Offering a narrow network helps an insurer control costs by restricting the services and doctors that a consumer can go to. But the downside is that it also hinders access to services for consumers, and can result in surprise medical bills when consumers unwittingly go to doctors or hospitals outside of their network.
There's been a steep decline in plans that allow consumers to go to any doctor. In 2018, just 29 percent of the plans provided that option. In 2015, 58 percent did, according to data from the Robert Wood Johnson Foundation.
Hempstead said insurers are also coming back to areas that were hit hard by defections in prior years.
“The increases … are really occurring more in places that had not been successful in the past,” Hempstead said.
For the 2018 coverage year, for example, Tennessee had only three insurers offering plans, and rates went up 36 percent. But for 2019, the state has five Obamacare insurers, and another expanded its coverage area.
Hempstead added that this year there are no "bare counties," which are counties that have no insurer at all.
Some counties were bare in the run up to Obamacare’s open enrollments in 2016 and 2017. In those cases, eventually insurers stepped in to offer coverage, but at very high rates.
Obamacare gets competition
But while insurers are poised to make profits in the exchanges, Democrats and Obamacare advocates warn that there is trouble ahead in the form of cheaper plans offered by the Trump administration that don't have to offer as many benefits as a plan sold on the exchanges.
The Trump administration has allowed for a new alternative to the Obamacare exchanges in the form of "short-term plans." The administration made the plans viable by permitting insurers to offer plans that don't comply with Obamacare regulations for up to nearly 12 months, up from the original 90 days. The regulation went into effect this month.
Obamacare allies charge that the new regulation, coupled with the repeal of the individual mandate penalty starting in 2019, are acts of “sabotage” to undermine the law. But the Trump administration says the short-term plans provide an option for people who can't afford insurance on Obamacare’s exchanges.
Short-term plans were available during the early years of Obamacare, but the Obama administration in 2016 curtailed the duration from 12 months to 90 days because they were concerned they were competing with the exchanges.
Not only has the Trump administration expanded the duration of the plans, it's also creating regulatory space for other kinds of plans that don't meet Obamacare rules. It has expanded access to association health plans, which involve individuals and small businesses banding together for insurance.
Short-term and association plans are cheaper than Obamacare plans because they do not offer as many benefits. In particular, they do not have to provide coverage for pre-existing conditions.
Some critics worry that the plans will prompt younger and healthier people to not buy Obamacare coverage on the exchanges and instead opt for short-term plans or association plans because they are cheaper.
Congressional Democrats frame the alternative plans as “junk insurance.”
“The Trump Administration is rewriting the rules on guaranteed health care protections that millions of Americans depend on,” said Sen. Tammy Baldwin, D-Wis., in a statement last week. Baldwin introduced a resolution to overturn the regulation that expanded the short-term plans, which are more readily available than the association plans But it did not get enough votes to get out of the Senate.
Experts are divided over whether the plans will lead to the end of Obamacare’s exchanges.
“Nobody knows the answer to that question,” Hempstead said.
She added that insurers don’t appear to be spooked by the plans, since they are entering the individual market and competing.
Pollitz fears that the the short-term plans will be pushed on consumers.
“I don’t know what those policies are going to look like or how they are going to be priced,” she said. “At least some insurers are going to aggressively market these policies.”
Consumers must be aware that the coverage that short-term plans offer is skimpy compared to Obamacare, Pollitz said.
“These policies are not very protective if you get sick,” she said.
Brokers of short-term plans acknowledge that Obamacare plans need to be the first choice for consumers.
“Our priority is always to tell people that if you can afford an [Affordable Care Act] plan that is always going to be your best bet,” said Sean Malia, senior director of carrier relations at eHealth.com. “The reality is that not everyone is going to afford those plans.”
Another insurance broker aims to target people who don’t get subsidies that lower the cost of an Obamacare plan.
“What we are really competing for are those people who are priced out of the market,” said Shaun Greene, senior vice president and general manager of Agilehealthinsurance.com, which sells short-term plans. “I think there are people who have Obamacare plans who decide I don’t need all the bells and whistles.”
More than 80 percent of the enrollees on Obamacare’s insurance exchange get some form of income-based subsidy. The people who do not get subsidies face extremely high costs.
“The markets work reasonably well for people who make between 100-400 [above the federal poverty level],” said David Anderson, a research associate at Duke University’s Margolis Center for Health Policy. “That I think is a significant policy challenge.”
The Trump administration’s short-term regulation included new requirements for insurers to disclose that the plans don’t cover as much as Obamacare plans.
Four states — Vermont, Oregon, Maryland and Hawaii — limit the duration of short-term plans to 90 days, according to data from the National Conference of State Legislatures.
California, meanwhile, has banned the plans altogether.
Outreach will be limited for 2019
While insurers are expected to aggressively market short-term plans this fall, a corresponding increase in funding for outreach programs that help consumers find plans and sign up is not likely. Even so, analysts do not expect fallout for the exchanges.
During the 2018 open enrollment, the first of the Trump administration, the Centers for Medicare & Medicaid Services made steep cuts to funding for Obamacare outreach, slashing spending from $100 million to $10 million.
CMS Administrator Seema Verma previously told the Washington Examiner that the agency would keep ad funding at $10 million for the 2019 open enrollment.
But CMS did severely cut funding to nonprofit groups called “navigators” that assist in Obamacare outreach, dedicating just $10 million for 39 navigators, down from $36 million for 90 navigators in 2018.
CMS has criticized the navigator program for not signing up enough people. The Obama administration gave navigators $100 million for the 2017 open enrollment period.
Navigators are now searching for ways to do more with less.
“We won’t really have [public service announcements] out there the way we have had in the past,” said Jodi Ray, executive director of the navigator Florida Covering Kids and Families, which is part of the University of South Florida.
Ray said Florida got $9 million in navigator funding in previous years, but now that is down to $1.2 million.
She said the navigator is moving more to virtual or phone appointments to assist people in choosing plans, as it must cut back on in-person outreach.
Yet it's not clear that the cutbacks to advertising and navigators will affect enrollment.
Several state-run Obamacare insurance exchanges decided to use their own funding for outreach for the 2018 open enrollment. Most notable was California, which provided $100 million for outreach.
“However, last year state-based marketplaces were flat on enrollment while healthcare.gov was down by a fraction,” Anderson said.
Healthcare.gov signups for the 2018 coverage year were around 8.7 million, slightly down from 2017’s open enrollment signup of 9.2 million people.
The Trump administration has declined to set a goal for 2019 enrollment, just as it did for the 2018 coverage year.
CMS told the Washington Examiner that it is doing what it can to improve the enrollment process for Americans who go to healthcare.gov, which the agency runs.
"Last year’s open enrollment was the agency’s most cost effective and successful experience for HealthCare.gov consumers to date," the agency said.
Losing the mandate
Another area of uncertainty over enrollment is how big of a deal the loss of the individual mandate penalty will be starting in 2019.
Opinions abound on what it will actually mean for Obamacare. But some insurers aren’t too concerned. A study from the Brookings Institution found that the damage done by the loss of the mandate might not be as bad as expected.
“Most rigorous analytic studies conclude that repeal of the individual mandate penalty will adversely affect premiums and enrollment,” the think tank said in a July study that included responses from insurers, regulators, insurance agents and advocates across 10 states. "However, the dominant view in study states and nationally is that this adverse effect will be less than many people originally thought.”
The reason is the mandate’s weakness.
“The mandate itself didn’t have a lot of teeth to begin with,” said eHealth.com’s Malia. “If you are in a position where you were not sure if you could afford an ACA plan, having to pay a $600 tax penalty to avoid having to pay $1,200 a month for insurance seems like a no-brainer.”
But the combination of the loss of the mandate, new cheaper plans and less enrollment outreach funding are still creating some headaches for Obamacare's insurance exchanges.
"This is the sixth open enrollment and I would have thought by now we would be at steady state," Pollitz said.
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