In contrast, industry observers emphasize the need for federal rule changes to ensure the survival of the marketplaces.


Oct. 6—Despite calls for a range of steps at the federal level to help the ailing government-run health insurance marketplaces, Obama administration officials this week emphasized steps that insurers should take to improve their own fortunes.

During the Obama administration’s second forum in four months for insurers selling plans on the marketplaces created by the Affordable Care Act, senior U.S. Department of Health and Human Services (HHS) leaders played down rule changes sought by the insurance industry and instead emphasized actions insurers could take.

“We’ve acted to strengthen program integrity around special enrollment periods, and we’re planning to pilot additional changes,” HHS Secretary Sylvia Mathews Burwell said. “But one of the most important opportunities to strengthen the risk pool is right around the corner: Open Enrollment [No.] 4 [under the Affordable Care Act] starting in just four weeks.”

Insurers have called for a range of steps to bolster the marketplaces, including further limiting the use of special enrollment periods, broadening age bands, and increasing the potential penalties for individuals who are required to buy health insurance.

Instead, Andy Slavitt, acting administrator of the Centers for Medicare & Medicaid Services (CMS), identified five questions that the leaders of insurance companies offering ACA marketplace plans should ask themselves “to be successful in this space.” Among those questions: “How well do you know your customer?” and “When you find what works, how do you replicate it into a growth strategy?”

Similarly, Josh Peck, chief marketing officer for the ACA marketplace, presented data that tried to identify the most effective steps insurers have taken on their own, including approaches some used to improve the rate at which their enrollees paid premiums and effectuated coverage.

Insurers invited by HHS to address the forum stuck to addressing the steps they took to improve their outcomes.

For Molina Healthcare, among the keys to success was the creation of marketplace plans that were “very Medicaid-like,” with features such as low co-pays for generic drugs, said Janet Fosdick, a vice president with the organization. The company also has adopted the same communication approach it has used for its Medicaid enrollees and limited its marketing to marketplace enrollees who were eligible for subsidies.

Meridian Health Plan, another marketplace insurer that historically covered Medicaid patients, continues to find that premium price “remains the single most important factor for members,” said Sean Lancaster, executive director of operations.

Despite the financial success of some traditional Medicaid managed care insurers in the marketplaces, some analysts doubted whether more widespread adoption of the model used by those insurers—including narrow networks, high deductibles, and a focus on low-income populations—would be enough to save the marketplaces.

“For the vast majority of insurers, I don’t know if that model is applicable if other insurers try it,” Brian Blase, a senior research fellow at the Mercatus Center of George Mason University, said in an interview. “The law needs major, fundamental change because the coverage is just not attractive to young and healthy people, and it is going to be less attractive with 25 percent average premium increases coming.”

Needed Action

Although individual insurer performance could improve by following best practices for the exchange population, insurance industry observers said, government action at the federal and state levels is needed to ensure survival of the marketplaces.

Key steps include “significant outreach and enrollment to get young and healthy people in, and/or legislative changes that bring more money into this market through reinsurance or other means,” Cynthia Cox, an associate director at The Kaiser Family Foundation, said in an interview.

However, Cox noted that the administration’s outreach funding is less than it would like to spend, so it has had to use partnerships and social media “to reach people through less expensive means.”

Federal legislation would be needed to undertake changes to the risk adjustment program—the only one of the three insurer-support plans continuing after this year—to bring in subsidies from employer-sponsored insurance, Cox said.

Enactment of legislation bolstering the marketplaces is seen as unlikely during the current Congress, which is contemplating a measure to block any administrative effort to increase funding available under the risk corridor program.

SEP Changes

Conversely, the administration has the authority to tighten eligibility for special enrollment periods (SEPs), but it is trying to avoid creating access barriers. According to the Blue Cross and Blue Shield Association, 33 SEPs were available in the ACA marketplaces before CMS eliminated six of the periods in January. 

“If you make the [SEPs] too rigid, that could have the opposite effect where people leave the market and aren’t being replaced by healthy people coming in during the year,” Cox said. “So there is a balance that has to be struck.”

The extent to which SEP enrollees compound financial challenges for marketplace insurers was underscored by new Avalere research that found per-member, per-month costs of 2015 SEP enrollees were 5 percent higher even though their risk scores were 20 percent lower on average than those of people who signed up during open enrollment. In the first half of 2015, the federal marketplace saw 943,934 SEP sign-ups, amounting to about 10 percent of the open enrollment total, according to a CMS report.

“The abuse of the [SEPs] has been very detrimental to insurers, so if they can cut down on the abuse, then yes,” it could have a substantive impact on their financial health, Blase said.

Legislative action also would be required to widen the 3-to-1 limit on the allowable variance in charges based on enrollees’ age, but HHS has the administrative authority to change the “slope” that determines the age at which age-related increases begin, Cox said. States also have the authority to change the age curves for their own ACA marketplaces, and some—for example, Washington, D.C.—have taken such steps.

“And it’s been pretty successful at getting young people enrolled, although the market here does seem to be fundamentally different,” Cox said at a D.C. briefing.

Other marketplace changes that some industry observers say are needed but would require congressional authorization include extending the two expiring insurer backstop programs, creating larger marketplaces of multiple states or rating areas, and increasing both the individual mandate penalty and the subsidies.

“The market has not been as dynamic as one would have thought,” Bob Kocher, MD, a former healthcare adviser to President Barack Obama, said at a Sept. 5 congressional briefing. “We haven’t built an ecosystem like Amazon or Ebay where there is lots of choice and lots of competition and downward price pressure. There are some things we can do to make that market work better.”


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

Publication Date: Thursday, October 06, 2016