Over the past few months of the election, In Theory will be asking policy experts to weigh in on the critical questions our presidential candidates should be addressing — but often aren’t. This week we’re discussing health insurance exchanges.
The Affordable Care Act was signed into law in 2010 with the intention of increasing the quality and affordability of health insurance and lowering the uninsured rate by expanding health insurance coverage, through a combination of mandates, subsidies and insurance exchanges.
The legislation was passed over much opposition, but after the Supreme Court upheld the health insurance subsidies in King v. Burwell in 2015, health policy pundits argued that since the law effectively survived its last major legal challenge, it would now have to withstand the marketplace. Would insurance companies offering plans in the exchanges be able to cover their costs? Would enough people enroll to reduce the risk pool and keep premiums at a manageable level?
By 2016, the portion of uninsured Americans had fallen to 11 percent, a record low. Yet over the past few months, a number of major insurance companies — Humana, UnitedHealth Group and recently Aetna — have announced plans to significantly reduce their involvement in the exchanges, citing losses. It’s clear that the next president — regardless of his or her intent to strengthen or dismantle the ACA — will face a difficult task to make health-care coverage affordable. Are the Affordable Care Act exchanges sustainable? What is one change the next president could implement to make the program a better value for Americans?
Ezekiel Emanuel is a physician, the chair of the Department of Medical Ethics and Health Policy at the University of Pennsylvania and the author of “Reinventing American Health Care.” He served in the Obama White House from January 2009 to January 2011. Topher Spiro is vice president for health policy at the Center for American Progress.
Aetna’s withdrawal from Affordable Care Act markets has sparked the latest round of dire predictions about the law’s survival. Yet time and time again the ACA has proved durable, insuring 20 million Americans with improvements each year. This time will be no different.
Contrary to popular perception, the “risk pool” — the balance of healthy and sick enrollees — has been stable. Indeed, it was broadened as total enrollment increased by 66 percent in 2015, and per enrollee costs declined 0.1 percent between 2014 and 2015. While data is not yet available for 2016, and results vary by state, this indicates that the Affordable Care Act is not facing a crisis.
So why are insurers substantially increasing premiums or withdrawing from markets? They are making a one-time correction to bring premiums in line with costs. Setting a price is difficult when entering new markets — when the ACA was implemented in 2014, many insurers did not initially price their products accurately, and some may have even underpriced their plans deliberately in an attempt to establish market share.
While this correction is significant, the subsidy structure of the Affordable Care Act holds harmless the vast majority of enrollees. According to a recent analysis, premiums will remain lower than they would have been without the ACA even after the correction — and they are already 20 percent lower than the Congressional Budget Office projected in 2009. Insurer’s financial losses must also be seen in context: Even Aetna’s losses are well below what it would have normally cost the company to expand its business.
That said, there are actions the next administration should take to ensure the exchanges remain stable and expand. First, we should consider a public option triggered when consumers do not have adequate choice. Consumers should never be subject to the whims of insurer withdrawals or withdrawal threats.
Second, policymakers can take action to further improve the risk pool — for instance, by making student loan payments deductible from younger enrollees’ incomes to boost their tax credits. Additionally, insurers should not be able to fragment the risk pool by only offering policies outside the exchange.
Third, the government needs to expand marketing efforts targeted to young people, including more effectively communicating the responsibility to buy insurance and better explaining the exchange, subsidies, and the penalties if people remain uninsured. Buying health insurance is still viewed as a “grudge purchase,” not as a cultural norm and responsibility.
Fourth, policymakers should foster markets in which the same insurers cover both Medicaid and exchange enrollees. Not only are Medicaid managed care plans among the most successful exchange plans, but they also ensure continuous coverage when enrollees switch eligibility.
Finally, keeping health-care costs under control is the best way to minimize premium increases. The rising cost of prescription drugs is one major component of growth in medical costs, and the insurance industry must get off the fence and back meaningful solutions, such as value-based pricing. All payers must reform payments for health care to reward quality, not volume.
In the meantime, the public, stakeholders and policymakers should act constructively to make the law work and fix any problems that arise, rather than root for its failure or cut and run.