Off-marketplace and non-ACA compliant plans remain attractive to many consumers.

Oct. 31—The national uninsured rate is at a record low 8.6 percent, but many individual market consumers will have fewer choices and double-digit premium increases for 2017. Those challenges raise doubts about whether the government-run insurance marketplace will attract new enrollees, as predicted.

U.S. Department of Health and Human Services (HHS) announced Oct. 19 that 13.8 million individuals were expected to select a marketplace plan during the 2017 open enrollment period, which is 1.1 million more than 2016. But a week later, reports noted premiums will increase by an average of 25 percent in 41 states as many large insurance companies, like Aetna, shrink their marketplace presence in the face of big losses.

A subsequent HHS announcement concluded more than 70 percent of consumers in government-run marketplace plans will have access to plans with premiums of less than $75 a month.

Kevin Griffis, an HHS spokesman, noted during an Oct. 24 news conference that many affected consumers are eligible for subsidies and so their costs will not be increasing as much.

“Ultimately, they will be surprised by the affordability of the products,” Griffis said.

Benefit Literacy

The growth in marketplace plan enrollment is expected to come from among the 10.7 million people who are uninsured but are eligible for marketplace coverage. Of those, about 85 percent are eligible for some level of financial assistance, according to an HHS report.

Additionally, 40 percent of the eligible uninsured are between 18 and 34 years old, according to the report. This “young invincible” population has low utilization of healthcare services and makes them attractive candidates for risk pools. But this population is reluctant to purchase expensive or high-deductible insurance they believe they may not need.

Larry Boress, president and CEO of the Midwest Business Group on Health (MBGH), said in an interview that the third-tier bronze-level marketplace plans still have value—despite high deductibles—because they cover free preventive services and cover catastrophic care.

Improvements to the federally operated marketplaces’ website provide shoppers with more information to make better choices, Boress said. But “benefit literacy” issues remain around terms, such as co-payment, co-insurance, in-network and out-of-network.

“People were choosing the lowest-cost premium before seeing they had $6,000 deductibles,” Boress said. “Or they’d find an affordable plan and then realize that the doctor or hospital they wanted is not there.”

A May 2016 report on open enrollment by McKinsey & Co. noted that awareness of penalties and subsidies has increased “but fewer consumers understand their eligibility.”

The report also said that plan switching was largely driven by plan discontinuation, dissatisfaction with the insurance carrier, the influence of brokers, and large premium increases.

The Outsiders

HHS also expected to draw some people who purchased individual coverage outside the marketplace. About 9 million people purchased off-exchange coverage in 2016, and this number is expected to shrink to 7 million by 2026, according to a recent Congressional Budget Office (CBO) report.

In addition, about 3 million to 4 million consumers were covered by older “grandfather” plans that were created by March 23, 2010 and are exempt from some Affordable Care Act (ACA) requirements. But such plans could lose that status if benefits are significantly reduced or costs markedly increase.

“Progressive cancellation” of these plans was predicted in a March 17 report by Kev Coleman, head of research and data at Healthpocket. It’s hard to predict where these consumers will find coverage if their plans cease to exist, according to the report.

“The fact that they choose to remain in noncompliant plans for as long as they have, suggests that a significant portion will explore non-ACA alternatives in their health coverage shopping,” Coleman wrote.

Coleman said in an interview that the grandfathered plans are an offshoot of President Barack Obama’s promise that, “if you like your insurance you can keep it.” But the number of people covered by them has been “dwindling since 2014,” Coleman said.

There is another category of transitional insurance that has been dubbed “grandmothered” plans for those plans purchased between the signing of the ACA and its first enrollment period. They were to be phased out by Oct. 1, 2016, but that has been extended to Dec. 31, 2017.

While the CBO said there were 9 million people buying individual insurance off the exchange, Coleman said it’s a “fuzzy number” and that earlier HHS reports estimated there were between 8 million and 12 million people with this type of coverage.

“It’s very difficult to find information on the unsubsidized market,” Coleman said.

The HHS report estimated 6.9 million people were covered by off-market individual plans. Of those, the report said about 2.5 million could qualify for financial assistance through ACA marketplace plans.

Coleman noted that the off-marketplace plans share the same risk pool as the marketplace plans, but its consumers are believed to be healthier—especially those purchasing non-ACA compliant plans that don’t provide coverage for pre-existing conditions.

Price was the main driver for buying a noncompliant, unsubsidized plan, according to Coleman.

“The price could be so low in some cases that individuals could pay the premium and the penalty and still pay less than they would for an exchange plan,” Coleman said.

Coleman added that some of these plans also offer more provider choices than marketplace plans, which have used narrow provider networks as a mechanism to keep costs down.

“Health insurance is only as good as the doctors and hospitals that accept it,” Coleman said.

Papering Over Problems

In his March report, Coleman predicted that, if the average ACA-compliant plan rate increase reached the double digits, consumers in the unsubsidized health insurance market “may become vocal” in calling health insurance reforms to “benefit a wider audience beyond the heavily subsidized.”

The CBO report calculated that the federal government will spend $600 billion on subsidizing healthcare coverage for people under 65 years old in 2016. Coleman described that as “papering over problems with government money,” and said he didn’t think it was realistic to think future subsidies would extend beyond their current reach.

“The existing model of layer and layer of government subsidization, I don’t see as a sustainable strategy,” Coleman said. “We need reforms that promote lower costs at the point of healthcare delivery.”

The current focus on wellness, diet and exercise may help reduce future healthcare costs, Coleman said, but more immediate action is needed such as the facilitation of telemedicine.

“The ACA did precious little to affect the cost of healthcare delivery,” Coleman said.

High premium costs for individual coverage will mean employer-sponsored coverage remains more attractive to most consumers than marketplace options, Coleman said.

Fortunately, Boress said a MBGH survey found that less than 5 percent of employers are not offering insurance to their workers and healthcare benefits remain a top talent recruitment and retention tool.

Andis Robeznieks is a freelance writer based in Chicago. Follow Andis on Twitter at @AndisRobeznieks.


Publication Date: Monday, October 31, 2016