It’s not easy to have a nuanced conversation about the Affordable Care Act (ACA) the week before a national election. So it’s no wonder that the recent announcement of average premium increases for plans sold on the health insurance Marketplaces was met with media hysteria and partisan posturing about the so-called demise of the ACA.
The truth, however, is that while nobody wants to see premiums go up, this news will not affect the vast majority of North Carolinians. What’s more, health economists suggest that these increases may be a one-time market adjustment in response to underpricing by insurers in previous years.
It’s also important to note that much of the responsibility for these increases undoubtedly rests on the shoulders of opponents of the ACA, as congressional Republicans defunded provisions of the law that would have alleviated the financial losses incurred by insurance companies selling on the Marketplace. In turn, those losses led some insurers to abandon ship and others to request premium increases for 2017.
Whoever is responsible, however, it’s important going forward that policymakers rise above partisan divisions and push for solutions that ensure the long-term stability and sustainability of the Marketplaces. Ultimately, curbing the growth of premiums helps consumers, especially the relative few who do not qualify for subsidies to buy an individual plan.
These efforts will help protect the gains of the ACA, which has succeeded in providing coverage to 20 million previously uninsured Americans, reducing the national uninsured rate down to single digits for the first time in history.
Steps we should take to broaden the risk pool
One thing we know for sure right now is that too few young and healthy people have signed up for health insurance, thus leaving the individual market risk pools with a disproportionate mix of sicker and older patients who require more frequent and more expensive care. This in turn drives up costs for the insurance companies, causing them to pass the buck (in the form of higher premiums) to consumers who did enroll. In order to balance out the risk pool, policymakers should take steps to broaden its base, as many Americans remain uninsured but eligible for the Marketplaces (also called “exchanges”).
In order to determine how we can lure them in (an approach that is, for a variety of reasons, preferable to increasing penalties), it’s important to understand why consumers remain uninsured. Many uninsured Americans are still not aware of the Marketplace or of the availability of financial help. Fortunately, the federal government has continued to invest in enrollment assisters, such as navigators and certified application counselors, who conduct outreach and education about insurance options, as well as help people apply and enroll.
Even those who are aware of the Marketplace, however, may remain uninsured because of affordability concerns. The ACA provides premium tax credits to most people with incomes below 400% of the federal poverty guidelines ($97,200 a year for a family of four), as long as they’re not eligible for other types of coverage. However, due to a strange rule nicknamed the “family glitch,” some two-to-four million people—including half a million children—are disqualified from premium tax credits because a family member has access to employer-sponsored coverage. For years, advocates and enrollment assisters have noted that this rule unfairly locks low- and moderate-income families out of coverage they need. The next presidential administration can rectify this by helping to change this rule.
While many people remain uninsured because they cannot qualify for financial help, some people experience affordability barriers even when they qualify for financial help. Financial assistance for reducing monthly premiums gets much less generous for consumers whose incomes exceed 250% of the federal poverty level. For low- and middle-income consumers alike, keeping up with premium payments can be a challenge, especially when unexpected expenses arise, causing families to make tough decisions about whether to make rent, put food on the table, or pay their insurance premium. Making premium tax credits more generous will attract new enrollees and prevent existing enrollees from churning out of coverage due to missed payments throughout the year.
While most strategies should involve recruiting more consumers into the Marketplace risk pool, North Carolina lawmakers can reduce premiums in the Marketplace by closing the state’s coverage gap. In states that have expanded Medicaid under the ACA, Marketplace premiums are seven percent lower than those in non-expansion states like North Carolina.
Improving the quality of ACA coverage
Improved premium affordability will help recruit and retain enrollees. But to continue attracting enrollees, health insurance plans must offer value. At the end of the day, when consumers pay a monthly premium, they expect to get something in return. State and federal policymakers should take steps to ensure that health insurance plans meet certain quality and value standards so that they remain attractive to and useful for consumers.
More and more health plans have begun narrowing the size of their provider networks since the ACA’s passage. This strategy helps them keep their overall costs down so that they can offer competitive premium rates. However, a narrow provider network is an inadequate network if enrollees lack access to in-network doctors and hospitals that they can travel to. North Carolina has not updated its network adequacy regulations in roughly 20 years; fortunately, state lawmakers can modernize these standards so that plans sold in the state actually guarantee access to health care.
Under the ACA, consumers with incomes up to 250% of the poverty level can qualify for a benefit that reduces their out-of-pocket costs, like deductibles and copays. However, those with incomes above that level may face much higher costs when they use their health insurance. Not only are high out-of-pocket costs a deterrent to accessing care, they can also subject enrollees to unaffordable bills and financial risk as a result. Congress and the next presidential administration must find a way to reduce the burdens that out-of-pocket costs create for consumers.
Federal lawmakers can do this through a variety of options: they could increase the purchasing power of premium tax credits so that consumers can better afford gold and platinum plans that offer more robust cost-sharing; they could expand eligibility for the cost-sharing reduction benefit to consumers with incomes above 250% of poverty; or they could consider offering a tax credit to refund consumers whose out-of-pocket costs exceed a certain threshold.
Each of these reforms would help improve the value equation for consumers. If plans offer adequate networks and protect against high out-of-pocket costs, consumers will continue to see value in purchasing insurance.
Increase insurance company competition
While competition alone does not guarantee meaningful choice to consumers, studies have shown that counties with greater degrees of insurer competition have seen lower Marketplace premiums. Even before implementation of the ACA’s Marketplace, North Carolina experienced minimal competition in the private insurance market, with Blue Cross Blue Shield dominating both the large group and individual markets. We’ve noted before that increasing competition is complicated, as the major barrier companies usually face to entering new markets comes down to whether they can build competitive provider networks.
The federal government ought to consider requiring health insurance companies that sell insurance products in public health programs in certain counties to also offer products on the Marketplace in those areas. Companies who made high-profile and controversial exits from the Marketplace make much of their profit through public programs like Medicare Advantage and Medicaid. These companies already maintain relationships with local providers in these markets through those programs, so they could reasonably compete on the Marketplace.
Another option that would increase consumer choice as well as contain costs would be the introduction of a public option plan. However such a program is designed, a public option could take advantage of the federal government’s bargaining power to keep costs down for consumers and for taxpayers, and it’s possible to do so without crowding out private insurance companies.
Ultimately, of course, accomplishing the daunting and sometimes conflicting goals of covering more people, lowering out-of-pocket costs, and keeping private industries sustainable, all the while containing system costs, will be no easy task. It will require a number of different reforms at the state and federal levels like those discussed above, as well as continued implementation of provisions already in the ACA that reform the health care payment and delivery systems in order to contain overall system costs.
Let’s hope that the officials elected in November will treat our nation’s health care needs with the seriousness, attention to detail and can-do, problem-solving attitude that the country deserves.
Brendan Riley is a Policy Analyst at the North Carolina Justice Center’s Health Advocacy Project.