The Obama administration’s claims that the ACA marketplaces are stabilizing drew sharp rebukes from some industry observers.


Aug. 11—The risk pools for the Affordable Care Act (ACA) marketplaces are becoming healthier, according to the Centers for Medicare & Medicaid Services (CMS). And agency officials say their data prove it.

Per-member per-month claims in the individual market were essentially unchanged from 2014 to 2015, falling by 0.1 percent, according to a CMS report. The officials contrasted that finding with per-member cost growth of 3 percent to 6 percent in the overall private insurance market, including employer-sponsored health insurance.

“Our analysis suggested this happened, at least in part, because the [ACA] risk pool improved in 2015, with the marketplace gaining healthier and lower-cost consumers as a group,” Aviva Aron-Dine, senior counselor to the secretary at the U.S. Department of Health and Human Services (HHS), said in a media call about the report.

Obama administration officials said the conclusion of a healthier risk pool was supported by the report’s finding that states experiencing higher-than-average 2015 enrollment increases also saw greater-than-average reductions in per-member per-month costs.

But insurance industry observers said the closure of most CO-OP plans, steep ongoing premium increases, and claims of rapidly rising costs by the largest marketplace insurers belie the assertions of the new report.

“Just what planet is CMS on?” Robert Laszewski, president of Health Policy and Strategy Associates, said in emailed comments. “We now have all five of the largest publicly traded health plans saying they are losing money and the risk pool has been getting worse rather than better. I know of nobody other than not-for-profit Blues plans that would say otherwise.”

Insurers made their growing concerns about the ACA marketplaces clear in recent earnings calls. For instance, UnitedHealth Group said it is leaving most of the marketplaces, and Humana plans to drop most policies in the marketplaces and all individual plans outside the marketplaces. Anthem complained about enrolling higher-than-expected numbers of chronically ill beneficiaries. Aetna announced a “complete reevaluation” of its marketplace involvement after steep losses.

The impact was even worse for the Blue Cross and Blue Shield (BCBS) plans, according to Fitch Ratings. In a February report, Fitch expected full-year 2015 earnings for BCBS companies to decline—in contrast to results for commercial insurers. The ratings firm said “cost and utilization trends from the state insurance exchanges from the Affordable Care Act have been higher than anticipated and are the primary drivers of declining earnings.”

“The HHS findings are inconsistent with pretty overwhelming evidence,” Brian Blase, a senior research fellow at the Mercatus Center of George Mason University, said in an interview. “Ultimately, do you believe what the administration is saying with its analysis or what the marketplace participants are doing?”

The new report also ran counter to other data, including an S&P Global Institute report, which found monthly costs for covered members increased 23 percent from 2014 to 2015, Blase noted. The S&P data was based on insurers’ claims, while the HHS report came from an analysis of data from the ACA’s transitional reinsurance and risk adjustment programs.

“Somebody’s data is wrong,” Blase said.

2017 Significance

The findings also were seen by HHS officials as positive signs for the current market because they showed improvement even without accounting for the effects of recent HHS efforts to bolster insurers in the marketplaces and to improve outreach to young people.

For instance, HHS has partnered with the IRS to contact people who paid the individual mandate penalty in 2014 for lacking qualifying health insurance coverage. Insurance industry observers said many people consciously chose to pay the penalty rather than take on the higher cost of monthly premiums in available plans.

“That’s a group that we know is disproportionately young and we think is disproportionately healthy, and here we have a new tool to reach those millions of people that we didn’t have before,” Aron-Dine said

However, the marketplaces’ ongoing struggles with young adults was another issue that appeared to run counter to the administration’s claims of a healthier risk pool. Efforts to increase the share of so-called young invincibles, or enrollees ages 18 to 34, who were enrolled in the marketplaces stagnated at 28 percent in 2014, 2015, and 2016. The consensus of industry experts is that young invincibles should comprise at least 40 percent of the total in a healthy market.

Enrollees’ age is a common proxy for enrollee health because the ACA restricts insurers from basing rates on enrollees’ health.

Another strike against the Obama administration’s insistence that the ACA marketplace is stabilizing was the 23.3 percent average premium hike request for 2017 across all 50 states and the District of Columbia, according to tabulations by ACAsignups.net, which supports the law.

Administration officials have responded to the news of these requested increases by pointing out that premiums are below the levels estimated when the ACA was enacted and by projecting that the increases will not repeat.

“2017 marketplace rates are subject to a number of predictable, transitory upward pressures—those are pressures that will dissipate next year—that include the end of the ACA’s temporary reinsurance program as well as the fact that many issuers seem to have priced below cost for 2014 and seem to be sort of truing up this year,” Aron-Dine said.

Information Lacking

The new report on relative cost increases also lacked data on what the underlying average costs were in 2014 and 2015. Aron-Dine said HHS did not have the average cost for ACA marketplace enrollees in those years “because our focus was really on how the marketplace evolved between the two years.”

Blase said it was unclear how HHS could determine cost changes without knowing the underlying costs.

Amid concerns of some market watchers that the lower healthcare spending might indicate that some enrollees cannot afford to use their coverage, including coverage in high-deductible health plans (HDHPs), administration officials highlighted survey data finding positive views among enrollees. For instance, 68 percent of 2016 ACA plan enrollees were satisfied with their coverage, according to a survey conducted by the Kaiser Family Foundation after open enrollment closed in January.

But the KFF survey also showed increasing dissatisfaction with marketplace coverage, Blase said. As the share of HDHP enrollees increased over the three years, the percentage of all enrollees who described their coverage as a “good value” declined from 58 percent in 2014 to 45 percent in 2016.

 “If individuals don’t get those cost-sharing reduction subsidies, they are not satisfied with their coverage and don’t think it provides very high value,” Blase said.


Rich Daly is a senior writer/editor in HFMA’s Washington, D.C. office. Follow Rich on Twitter: @rdalyhealthcare

Publication Date: Thursday, August 11, 2016