Plans to allow people to keep their individual health insurance policies, even if they don’t meet the requirements of the health-care law, are unlikely to threaten the short-term viability of the new health insurance marketplace, according to a new Rand Corp. study.
The study, released Tuesday, examines the impact of President Obama’s decision in November to allow consumers to keep their insurance plans, even if those plans don’t meet the requirements of the Affordable Care Act.
Obama made the announcement after millions of cancellation notices were sent to consumers who buy insurance on their own, angering supporters and critics who accused him of breaking his promise that people who liked their plans could keep them.
While the president’s announcement was aimed at solving a problem that was threatening his credibility and public faith in the law, it raised a slew of questions about the impact on the new online exchanges, including whether enrollment in the marketplace would drop and whether premiums would increase as a result.
The study predicts that the president’s actions will have only minimal effect on enrollment and premiums in 2015.
“We figured that enrollment would go down about 4 percent, or about a half a million, for 2015,” said Evan Saltzman, the study’s lead author and a project associate at Rand, a nonprofit research organization.
Rand projects that 12.2 million people will be enrolled in private health insurance plans by 2015, a figure that closely tracks the prediction of the Congressional Budget Office, which forecast that 13 million would be enrolled by 2015. The Rand study also projects a 1 percent increase in premiums that year due to Obama’s pledge.
Researchers used an economic model based on data about how people make insurance decisions and how firms decide to offer health coverage to employees and their families. The model predicted that people eligible for federal subsidies would tend to seek insurance on the marketplace in much larger numbers, even if they had the option of renewing their noncompliant plans. Researchers also found that older consumers would tend to move to the marketplace because of new protections that restrict insurance companies from charging a 64-year-old enrollee more than three times what they charge a 21-year-old enrollee.
But the Rand projections don’t take into account the disastrous rollout of the error-plagued federal Web site, HealthCare.gov, which significantly reduced enrollment in October and November.
“That’s a limitation of our study because it doesn’t allow you to model a Web site that doesn’t work,” Saltzman said. “It’s very hard to credibly do something like that.”
Two alternative proposals, one sponsored by Rep. Fred Upton (R-Mich.) and the other by Sen. Mary Landrieu (D-La.), would be more aggressive in extending plans that don’t meet the requirements of the health-care law. But those proposals have stalled.
Upton’s bill, which passed the House the day after Obama’s announcement, would allow anyone — not just current enrollees — to buy a noncompliant individual plan. Landrieu’s bill would require insurers to continue to offer noncompliant individual plans indefinitely but would limit future enrollment in these plans to current participants.
Rand researchers found that allowing anyone to buy a noncompliant plan would have a far more detrimental effect, raising premiums as much as 10 percent and decreasing enrollment by 3.2 million, or 26 percent.
Although the proposals may allow millions of Americans to keep their health-care plans, critics have said the new marketplace would be deprived of the young and healthy enrollees it needs for premiums to remain affordable. If not enough young and healthy people sign up on the federal and state insurance marketplaces, that could lead to a cycle of increasing premiums and decreasing enrollment, or what some call a “death spiral.”
Data from the Department of Health and Human Services show that nearly 2.2 million people selected an insurance plan through the federal marketplace or state marketplaces from Oct. 1 to Dec. 28.
Young adults account for slightly less than one-fourth of those who signed up — fewer, so far, than the government has said will be needed to make the economics of the new exchanges work.