Summary
Last week, Aetna – one of the nation’s largest private insurers – announced that it would withdraw from 11 of the 15 Affordable Care Act (ACA) state exchanges where it sells health plans. Aetna, which had 838,000 exchange customers at the end of June, said its policyholders are turning out to be sicker and costlier than expected. In addition to Aetna, a growing number of insurers on the ACA exchanges are voicing concerns about the viability of the program as they continue to take significant losses three years after the exchanges launched in October 2013. Many say that their premiums were too low and failed to cover the cost of care because participating consumers are much less healthy than they anticipated.
While Republicans have pointed to Aenta’s withdrawal as part of the “inevitable collapse” of the ACA’s marketplaces, analysts have suggested that the move indicates tweaks should be made to the law’s insurance regulations. Insurance industry officials have called for exchange reforms, including actions to curb third-party payers, which they said have spurred high claims, particularly in the specialty pharmacy area. Meanwhile, others have been led to speculate whether a “public option” would be a viable policy alternative in areas where private insurers have failed to produce robust marketplace competition.
This brief update provides an overview of the potential legislative and regulatory response to the uncertainty currently surrounding the health insurance marketplaces.
The Political Response
- The administration continues to defend the ACA marketplaces and stresses it will further tweak exchange policies to stabilize the market in the wake of Aetna’s decision to significantly pull back on exchange offerings. Officials pointed to a series of tweaks the Administration has made aimed at bolstering the marketplaces, including some moves to limit off-season enrollment and planned efforts to entice more young people to buy plans.
- Republican policymakers blasted Aetna’s announcement as further proof that the ACA is failing. “Aetna’s exit isn’t the beginning and it won’t be the end, but it is another unmistakable sign of Obamacare’s slow-motion death spiral,” Sen. Ben Sasse (R-NE) said. “With ugly withdraws, painful co-op failures, and rotten choices and costs, Obamacare’s collapse is crushing American families.”
- Democrats largely came to the law’s defense amid Aetna’s mass departure. “Insurers are continuing to adapt to the necessity of competing on quality and cost, instead of being able to leave Americans with pre-existing conditions out in the cold,” said House Minority Leader Nancy Pelosi (D-CA). “It’s not a surprise that in a competitive marketplace, some insurers have adapted more quickly and successfully than others.”
Limits on Third-Party Payments
- In response to Aetna’s announcement, CMS released a Request for Information last week (details attached) seeking information on issuers’ concerns that some third-party entities might be inappropriately steering consumers eligible for Medicare or Medicaid into exchange plans for the purpose of gleaning higher reimbursement for certain providers. The agency signaled that it is considering slapping civil monetary penalties on providers whose actions result in patients’ late enrollment into Medicare.
- The agency also says it is considering steps to “prohibit or limit premium payments and routine waiver of cost-sharing for qualified health plans by health care providers, revisions to Medicare and Medicaid provider enrollment rules, the imposition of civil monetary penalties for individuals that fail to provide correct information about consumers enrolling in a plan, and potential changes that would allow issuers to limit their payment to health care providers to Medicare-based amounts for particular services and items of care.”
- The administration’s RFI does not directly address another common complaint among insurers: that third-party payers that support pharmacy services are detrimental to their risk pool. Insurers have suggested that pharmacy benefits should be included in the risk adjustment mechanism, and that eligibility requirements should be implemented for third-party payers paying premiums.
- At least one state has also already taken action to limit third-party payments. In a June bulletin, Minnesota regulators told issuers they only must accept payments from religious and non-profit organizations if the assistance is offered on a basis of the consumer’s financial need, the organization is not a health care provider, and the organization does not have financial interest in the payment of health claims.
AHIP’s Wish List
- In a recent USA Today op-ed, Marilyn Tavenner, former CMS administrator and current President and CEO of America’s Health Insurance Plans (AHIP), said that CMS could improve the exchange marketplace by implementing pre-enrollment verification and improving risk adjustment, and that Congress should permanently repeal the tax on health insurance plans.
- Pre-enrollment verification. Exchanges were lax on enforcement at first, but have recently bolstered the verification process for consumers seeking to purchase coverage outside of the set enrollment period, including by requiring consumers to prove their eligibility by providing documents. The agency has also created more criteria for those using the permanent special enrollment period (SEP), which issuers had cited as one of the easiest categories to game. Using a SEP now requires consumers to have been insured for at least one day in the two months prior to relocating. However, CMS has stopped short of requiring consumers receive an eligibility determination prior to signing up for a plan. Beneficiary advocates are strongly opposed to pre-enrollment verification and it is unclear whether CMS is willing to go that far.
- Improved risk adjustment. Tavenner urges additional fixes to the risk adjustment program. CMS has already said that it will add drug utilization and payment for partial-year enrollees to the risk adjustment program, and recently confirmed plans to address high-cost claims within the formula.
- Repeal the health insurance tax. Tavenner calls on Congress to permanently repeal the tax on health insurance plans. Policymakers paused the tax for one-year in the most recent spending bill, which CMS officials pointed to when urging plans to mitigate rate increases. A bill (R. 938) introduced by Rep. Charles Boustany (R-LA) has 235 co-sponsors, including seven Democrats, while a Senate version (S. 183) from Sen. John Barrasso (R-WY) has 39 GOP co-sponsors. This legislative proposal could be considered in a Clinton administration, while the healthcare landscape on the Hill would be more volatile under a Trump administration.
Hillary Clinton and the ‘Public Option’
- Secretary Clinton has expressed support throughout her campaign for the public option – a separate, government-run insurance plan that would compete with private insurers offering coverage through the ACA’s exchanges. The hope is that this competition can help keep premiums for all the insurance plans low, particularly if the government-run plan has the ability to dictate low reimbursement rates to doctors, hospitals, drugmakers, and other suppliers of medical care.
- There are many ways to structure a public option, and the details matter. Allowing a government-run plan to operate in every marketplace would likely have a far different effect than allowing such a plan to participate only in areas with limited competition.
- There is some concern a public option could price lower than private insurers, creating downward pressure on private plans’ premiums. This is problematic, considering premiums already are not sufficient to compensate for claims paid out.
- Some marketplaces have already stabilized themselves and a public option could throw off the balance by pricing lower than private plans could handle. But in other places, where consumers have only one or even no options to choose from, instituting a public option would be
- For all the talk of a public option, it is likely politically unrealistic. Even when Democrats had a filibuster-proof majority in the Senate, a public option was removed from the ACA because it was deemed too liberal for more centrist Democrats. Instead, the co-ops were included in the health care law as a way to stabilize premiums on exchanges.
Forecasting the Viability of the HIX
- S&P Global Ratings Analyst, Deep Banerjee: “Aetna’s move is not the death knell for the exchanges, but simply the marketplace making adjustments. Some issuers will come in, some will leave, but the number of consumer options will be no worse than the pre-ACA landscape.”
- CC Law & Policy’s Chris Condeluci: “Aetna’s move does not mean the exchanges are on the brink of imploding, but an argument could be made that it is on the path to the brink if changes are not made. Tweaks to the risk adjustment program are critical in order to incentivize issuers to cover the young, healthy population, and better balance the risk pools. For example, the program now encourages issuers to avoid healthier people in favor of sicker patients that more positively impact their risk adjustment payments.”
- Harvard Professor Robert Blendon: “The idea was that people who use the exchanges would have a variety of plans by different carriers. If it isn’t addressed, you will have more companies drop out and you’ll have more pressure on the other companies in terms of their potential losses.”
- American Enterprise Institute’s Joe Antos: “Unless there is a change in the law, conditions aren’t going to change. [The insurers are] basically saying, ‘If this is the way it’s got to be, we have to leave.’”
- CMS Acting Administrator Andy Slavitt: “One question I’ve been asked a few times today is if Marketplace is long-term attractive for health plans. Yes. And it’s why even those slowing their investment are still investing significant capital. Why? 2 reasons. 1st is most strategic — most health plans know they need to convert to new world of [business to consumer] & meet new consumer expectations. 2nd reason: the economics are compelling. Not many $40B new opportunities. With even modest margins/growth, big business. But plans need to create affordable offerings & build consumer relationships to win.”