By RUBY SIMMONS
The passage of the 2012 Affordable Care Act influenced the individual health insurance marketplace and in 2021, the market is still in impact.
Amendments to the Affordable Care Act (ACA) were crucial to the individual health insurance market. The ACA was meant to reform a dysfunctional system while providing incentives for insurers to manage risk and competition fairly.
But a new policy and administration resulted in fluctuating enrollment, premium rates, and insurer participation. The individual market consists of many Americans who are between jobs, in early retirement, or underinsured. This makes it so important for people to be able to access these plans consistently and regardless of an individual’s income or medical history.
In an evolution analysis of policy changes between 2014 and 2019 (published in the March edition of Health Affairs) authors encouraged policymakers to continue increasing accessibility to facilitate comprehensive coverage for patients and financial success for payers.
The passage of ACA meant a rise of insurers in the market. Medicaid only plans expanded their coverage to the individual market, anticipating that lower premiums would lead to higher market share. Moreover, for-profit national insurers avoided unnecessary high-risk enrollees by setting premiums higher than competitors.
The new market entrants brought down the average premium rates. It also slightly increased the 2015 rates and eliminated policies around risk-corridor programs and grandmothered plans, resulting to a higher-than-expected risk-adjusted payment in some plans.
With time, the rising knowledge and data meant insurers could make more informed decisions on pricing and 2016 rates were higher. Health plans with smaller provider networks were less negotiable while plans in large urban areas had to maintain a low premium rate to keep competing.
Insurers also reduced their participating providers because of high costs, which had little impact in urban areas but particularly risky to rural area inhabitants who lacked providers.
The threat of repeal and replacement of ACA made many insurers increase their premiums and introduce less plans who feared lower enrollment in 2018.
The non-repealing of ACA made premium, participation, and enrollment rates restabilize in 2019 and this progressed to 2020.
According to the study authors, these national statistics usually overemphasize the federal insurance marketplaces while undermining what’s happening in individual states. Several states control their own marketplace, resulting in reduced premium growth rate compared to federally run marketplaces.
Nonetheless, the individual market practice shows that expanded coverage benefited over 20 million individuals receiving care. Most of the beneficiaries are low-income earners who have gained financial stability due to the supplemental policies. Moreover, people with pre-existing conditions also benefit from coverage.
However, one of the biggest challenges of ACA has been access restriction and affordability for those who do not qualify for a subsidy.
State or federal-wide policy intervention can expand coverage options for individuals by limiting the sale of short-term plans, expanding subsidies, and encouraging reinsurance. Therefore, individual insurers have the space to expand their risk pool and promote financial success.
Impact of ACA on Short term plans marketplace
According to one analysis, short-term limited duration plans offer less beneficial coverage and offer lower financial protection than ACA plans.
Popular short-term limited duration plans lacked coverage for prescriptions, mental healthcare services, or maternity services. For many plans in the area, mental healthcare services included substance abuse care, which were not covered by the short-term limited duration plans.
All short-term limited duration policies covered in the study had a pre-existing conditions exclusion provision, which doesn’t fall under ACA-compliant plans.
The plans duration was usually 6 months and sometimes without renewal, unlike ACA-compliant plans. This gave patients the burden of high out-of-pocket costs if they failed to renew their plan because they can use a different policy only during the next enrollment period.
The maximum deductible for the popular short-term limited duration health plan was thrice the ACA plan. Around 25% of the short-term limited duration policies had a deductible surpassing the ACA-compliant policies maximum limit.
Nonetheless, short-term plans are still used by consumers who want lower premiums.
For example, a 27-year-old female nonsmoker will use $77.10 per month to stay on a short-term plan such as UnitedHealthcare Short Term Medical Value Select A policy, but this same woman will use $293.01 per month to afford the Anthem Bronze Pathway X Guided Access HMO 4600 Online Plus ACA-compliant bronze policy or similar for a plan from BCBS, Ambetter or other carriers in Florida.
But what reduces spending in the short-term, month-to-month might lead to high medical bills when she actually has to use the policy.
However, some consumers are quite aware of this and this has also strengthened the demand and market for GAP plans that help cover deductibles for major ACA-compliant medical insurance. Companies like LifeShield and Aspen STM offer products in this market.
The Challenges for ACA
Before the implementation of Affordable Care Act, health insurance companies refused covering patients with pre-existing conditions, thus consumers with past diagnoses couldn’t discover a health plan that covers the higher costs of their care. However, the Affordable Care Act removed clauses which allowed payers to stop covering these patients, enhancing affordability.
This is good for patients, but problematic for payers. The ACA prevents payers from charging higher premiums to patients with existing medical conditions and complex needs, leading to loses for payers.
These increases spending for payers who then transfer the costs to consumers using higher deductibles and premiums. While the individual mandate demands eligible citizens to purchase healthcare coverage to avoid a tax penalty, many consumers without employer-sponsored coverage must purchase these higher-cost plans through the health insurance exchanges.
High financial losses on the exchanges made national insurers, like UnitedHealthcare and Aetna eliminate the exchanges and focus on few regions.
During the last quarter of 2015, UnitedHealthcare dropped out of the ACA health insurance exchanges.
In August 2016, Aetna started serving few regions through the health insurance exchanges.
The difficulties of operating under the ACA has made healthcare payers become wise in the new environment the ACA brought. Firstly, commercial payers could gain more ground in the public marketplace by being the first to take care of consumer health care needs and securing loyalty from their customers.
Improving patient satisfaction requires steps to improve price transparency and the development of convenient payment and price comparison strategies.
When payers improve price transparency within their provider network, it helps their consumers choose affordable healthcare options when in need of X-rays, specialty care, or other medical testing. This works for payers offering high-deductible health plans that facilitates more critical purchasing decisions among patients.
Also, payers should collaborate with their provider network to share patient and spending data to ensure better care and strengthen health management for a reduced overall cost.
For example, emphasizing more on wellness and preventative care reduces high-cost emergency room and hospital admissions by patients.
These simple strategies may be helpful for payers hoping to benefit from the difficult market and ensure higher enrollment leads to more profitability despite lower average premiums and also ensure the best experience for ACA consumers.
Ruby Simmons specializes in finance & healthcare topics. She has completed numerous projects for startups and established businesses, providing research focused content that discuss the potential of a better health care system to improve the quality and efficiency of health care. She writes for Allinsuranceinfo and FBC HealthPlans, healthcare review publication of FHC Plans, an independent health insurance agency in Florida. She can be contacted at ruby.simmons@allinsuranceinfo.org. FBC Health Plans provide consultancy to consumers on health plans in Florida.
