With roughly 20 million Americans depending on insurance markets to obtain individual health plans, their functioning is essential to the U.S. health system and is central to the debate surrounding congressional Republicans' plans to repeal the ACA.
However, both the ACA and House Republicans' proposed ACA replacement plan, the American Health Care Act, fall short in improving the health insurance markets, according to David Blumenthal, MD, president of the Commonwealth Fund, and Sara Collins, vice president for healthcare coverage and access at the Commonwealth Fund.
In a recent article published in the Harvard Business Review, Dr. Blumenthal and Ms. Collins detail three key points to consider regarding the debate around health reform, as well as how to save the private insurance markets.
1. Private markets were declining before the ACA. Individual markets were in trouble prior to the 2010 enactment of the ACA, according to Dr. Blumenthal and Ms. Collins. First, premiums on policies sold on these markets were increasing more than 10 percent per year. Meanwhile, the policies often excluded pre-existing conditions, placed limits on annual and lifetime benefits and charged higher premiums to young women and people with greater health risks. Without premium tax credits or subsidies, many consumers who sought private healthcare coverage remain uninsured.
2. The ACA helped, but not enough. The ACA expanded access to coverage by introducing new patient protections and mandating insurance. The health reform law made coverage more affordable with tax credits. As a result, the size of the individual marketplace nearly doubled since 2010 and the share of consumers who reported difficulty finding affordable plans was virtually cut in half in the same timeframe. However, national enrollment through the marketplaces has lagged behind initial projections, according to Dr. Blumenthal and Ms. Collins. Also, serious affordability issues have persisted for middle- and lower-income people who don't qualify for premium tax credits. Lower enrollment and regulatory uncertainty have resulted in financial losses for many payers, while others have been unable to compete for consumers.
3. The AHCA will not resolve these issues. In its current state (as of March 21), the AHCA is forecasted to produce significant declines in enrollment rates in the individual market, according to Dr. Blumenthal and Ms. Collins. They contend the provisions that would replace the ACA's income-based premium tax credits with the "less generous" age-adjusted tax credits would raise prices and discourage enrollment. Additionally, repeal of the ACA's cost-sharing subsidies, which help low-income people afford their deductibles, would hinder enrollment further. The GOP-led plan would lower premiums for young people while increasing the age-rating allowance from 3:1 to 5:1 for seniors. While ultimately the bipartisan Congressional Budget Office projects the AHCA would create a healthier insurance pool, it would also increase the number of uninsured seniors.
Four steps to turn around the private insurance markets.
Four changes must be made to fortify the private insurance markets, according to Dr. Blumenthal and Ms. Collins.
1. Create balanced risk pools that include healthy people and sick people. This will require increasing subsidies for younger, healthy consumers without lowering subsidies for older adults. On top of addressing financial barriers to coverage, there needs to be a meaningful penalty for skipping out on insurance. Without the individual mandate or another factor driving enrollment, the young and healthy are less likely to sign up. To be considered "meaningful," the penalty must be higher than the cost of buying insurance in the first place, which wasn't the case with the ACA.
2. Extend subsidies higher up the income sale. Under the ACA, those whose income is higher than 400 percent of the federal poverty level don't qualify for subsidies, but if they did, more healthy, middle-class individuals would have the means to purchase insurance.
3. Implement reinsurance and risk corridors. According to Dr. Blumenthal and Ms. Collins, the most effective approaches to managing the inherent uncertainties associated with the business of selling insurance in individual markets are reinsurance and risk corridors. Reinsurance, also known as stop-loss insurance, is a means of risk management for payers. Dr. Blumenthal and Ms. Collins argue reinsurance must be available and affordable for payers that sell individual and small group products. Risk corridors are also a means of protection for payers that accumulate high risks by giving them access to money collected by insurers who have lower-risk pools.
4. Control the cost of healthcare services. Public and private stakeholders must enhance cost-controlling initiatives in the healthcare delivery space, as the costs of medical services are the main determinants of health insurance costs in all markets. One of the reasons other nations are able to insure their whole populations is because their healthcare costs are half or less of ours, according to Dr. Blumenthal and Ms. Collins.