Is the exchange market stable? Depends on how you think about it, experts say

Topics: Politics and Policy, Health Care Reform, Federal Government, Insurance, Exchanges

By Ashley Fuoco Antonelli, associate editor

Republicans and Democrats are deeply divided when it comes to health care, and perhaps no question more sharply divides the parties than the question of how well the Affordable Care Act's (ACA) exchanges are working.

President Trump has suggested the exchange markets are about to "implode." But Democrats take a far more sanguine view: Senate Democratic leader Chuck Schumer (N.Y.), for instance, has said the markets need only "easy" fixes.

So who's right?

To find out, American Health Line recently spoke with some experts about the current viability of the exchanges, and what needs to be done to ensure U.S. residents have access to affordable coverage for 2018. 

The short version: While the exchange markets are unlikely to implode, big questions remain about the exchanges' viability—for instance, will all exchange markets have at least one insurer selling coverage? And will premiums be affordable for U.S. residents who do not receive federal subsidies?

The question we're all asking

First, the big question: In their current state, are the exchange markets stable? Well, experts said, that answer depends on your definition of "stability."

John Holahan, a fellow at the Urban Institute's Health Policy Center, told American Health Line the exchange market is stable, but in a "not so good place."

Likewise, Joseph Antos, a resident scholar and Wilson H. Taylor scholar in health care and retirement policy at the American Enterprise Institute, told American Health Line that although the market technically is stable, "[i]t's stable in a way that nobody really wants it to be."

Overall, the experts said the exchange market is not as robust as policymakers had intended it to be under the ACA. Holahan noted that exchange plan premiums are rising and competition in the exchange market is decreasing, making the market more robust in some areas than in others.

Further, Antos said although it's likely people currently enrolled in exchange plans will continue enrolling in such coverage under the market's current state, it's possible enrollment in exchange plans will not grow.

Single-insurer markets, and what they mean for exchange stability

One reason experts have cited for the exchange markets' underperformance is the recent rise in single-insurer exchange markets.

Katherine Hempstead, who directs the Robert Wood Johnson Foundation's work on health insurance, told American Health Line that about one-third of U.S. counties had only one insurer selling exchange plans for the 2017 coverage year, but that about half of U.S. counties could have just one exchange insurer for the 2018 coverage year. For instance, Hempstead said in some counties, and in particular rural counties, "one [insurer] might be the right number, meaning that is all their market can support, even if people might wish they had more choice."

But there are some downsides. Tim Jost, a professor emeritus at Washington and Lee University, noted that insurers without competition essentially "can raise premiums as much as they can get away with" and those who do not qualify for federal subsidies would bear the burden of those increases.

The impact of premium rates would be blunted, however, by the fact that most enrollees do receive subsidies:  "Not to say nearly 7 million people [who don't receive subsidies] facing hikes isn't a concern, but it's not an indication of a system-wide crisis," Rabah Kamal, a policy analyst at the Kaiser Family Foundation, told American Health Line.

Further, Jost said while a single insurer could offer various health plan options, exchange enrollees in areas with only one insurer also could be forced to purchase health plans with a narrow provider network, which would limit their provider options.

Overall, Holahan said in order for the ACA to "be sustainable and popular" long-term, "consumers are going to need more choices."

Uncertainty about cost-sharing reductions contributes to instability, but not as much as you might think

Many observers and stakeholders over the past few months also have cited uncertainty over whether the Trump administration will continue to pay insurers cost-sharing reductions (CSRs) called for under the ACA as a major reason why insurers are exiting the exchanges and requesting premium hikes.

Experts generally agree that providing the CSRs would help keep premiums down and could encourage more insurers to stay in or enter new exchange markets—but some argue the effects of discontinuing the CSR payments could be more minimal than observers might think.

Jost said stopping CSR payments to insurers would have different effects in different states. For instance, in the event the administration decides to discontinue the payments, some state insurance regulators have instructed insurers to only raise premiums on silver-level exchange plans, which are the only plans that qualify for CSRs. If that happens, subsidies individuals received to help offset their coverage costs under the ACA also will increase, because the subsidies are tied to average silver-level premium costs.

The caveat, though, is that as the premiums and subsidies rise, so does federal spending on the subsidies. Antos said while the market could continue to be somewhat stable without CSR payments, rising taxes to pay for the increasing subsidies eventually could "get so high" that "middle-class [U.S. residents] would call for changes."

In other states, Jost said insurers could load the premium increases across all plan levels, meaning subsidies wouldn't increase as much but more consumers would see their out-of-pocket costs for coverage rise. In addition, some insurers could choose to exit the market if they don't get CSR payments, Jost said, which could lead to bare counties.

Antos said, however, that such a scenario is not a given. "Stopping [CSR] payments doesn't necessarily mean there would be massive dropouts" by insurers, because "state insurance commissioners could apply formal or informal tools to get insurers to stay" in the markets "or to get other insurers to [enter] the markets," much like how states insurance regulators worked to ensure there wouldn't be any bare counties for the 2018 coverage year, he said.

Further, Holahan predicted the "market won't fall apart" without the CSR payments because the premium and subsidy increases that could result from stopping CSR payments essentially would create "a new equilibrium" in the market.

What could improve stability?

Hempstead said the individual insurance market will "always be more volatile" than the group insurance market. However, she added that the individual market could become more stable "if there were more enrollees in general and more healthy enrollees in particular."

Holahan also recognized the need to increase enrollees in the exchange market. However, such growth likely will require policy changes, as recent data from CDC and the U.S. Census Bureau suggest coverage gains made under the ACA may be levelling off.

Holahan said one potential change policymakers could make would be to "improve premium subsidies" available under the ACA so that enrollees would "pay less as a percentage of their incomes."

Further, Jost said the administration should "focus on enrollment and outreach" as a way to get more people to enroll in exchange plans, though it appears as if the administration is scaling back such efforts for the upcoming open enrollment period.

Antos also said policymakers should work to "tighten up on special enrollment periods" and eliminate the three-month grace period exchange enrollees have to pay their premiums to help stop individuals from churning in and out of exchange plans and thus create more stability for insurers.

Antos, Jost, and Hempstead all agreed that reducing insurers' risk by re-implementing some type of reinsurance program also could improve exchange stability, while both Jost and Hempstead touted the benefits of enforcing the law's individual mandate.

Worth watching Congress

The Senate Health, Education, Labor and Pensions (HELP) Committee is working to create a "small, limited bipartisan" bill to bolster the ACA's exchange market.

But the committee will need to act quickly for any potential policy changes to affect the 2018 coverage year. Insurers must sign final contracts to sell 2018 exchange plans by Sept. 27, which leaves Congress about two weeks to reach an agreement and pass such legislation.

But even lawmakers don't pass legislation to bolster the exchanges in time, experts seem confident that the market, for the 2018 coverage year at least, will reach an equilibrium that is, in its own way, stable.