The health-care story of the summer will be 2015 premiums, but a new analysis suggests 2017 could be the key year for gauging the Affordable Care Act's implementation.
Stephen Parente, a University of Minnesota health economist who advised Sen. John McCain's (R-Ariz.) 2008 presidential campaign, used the Obama administration's final 2014 enrollment reports and his microsimulation model to project health plan prices and enrollment over the next decade. His projections, shared first with the Washington Post, find an increase in individual plan enrollment in 2015 and 2016, before sharply dropping off in 2017 and then slowly decreasing below 2015 levels by 2024. At the same time, he projects a steady decrease in employer coverage that will be steeper than the gains in Medicaid enrollment, resulting in a greater number of uninsured 10 years out.
Parente's projections differ from the ones from the nonpartisan Congressional Budget Office, which in April found the number of uninsured working-age adults will drop from 42 million to 30 million by 2016 and not change much through 2024.
Of course, both Parente's and CBO's numbers are both their best guesses of what the insurance market will look like in the next 10 years. Which is to say they are very much guesses. Parente's model, developed about a decade ago, emphasizes the types of health plans people tend to choose, as opposed to what's available.
So, how does Parente's model explain the big drop-off in coverage between 2016 and 2017? He cites two major factors: the scheduled expiration of ACA programs meant to blunt major rate hikes and the phasing in of new health plan requirements as old health plans come to an end.
On the first point, the temporary reinsurance and risk corridor programs are scheduled to end in 2016. These programs are designed to stabilize premiums as insurers adjust to the health-care law's new coverage requirements, with the idea that the reformed market will settle within three years.
To the second point, Parente estimates between 4 million and 6 million people will see their existing individual coverage end in the next few years when either their plans lose grandfathered status or the White House's extension of non-compliant health plans runs out near the end of 2016. These holdovers from the individual market predating the ACA are expected to be younger, healthier and more sensitive to price.
Parente's model finds these factors will have the most significant affect on 2017 premiums for less-robust plans in Obamacare's "metal tiers." These include catastrophic and bronze-level health plans, which have the cheapest premiums but the highest out-of-pocket costs. The effects will differ by state, but the national picture shows a big price jump for bronze and catastrophic plans between 2016 and 2017 — premiums for the average individual bronze plan, before subsidies, are projected to climb between $2,132 and $4,174 between those two years.
People buying the bronze plans tend to be more sensitive to price, and Parente's model finds the premiums will outpace the value of federal subsidies to purchase coverage through Obamacare health insurance exchanges. As a signal of price sensitivity, people getting coverage through exchanges in 2014 were much more likely to pick bronze plans if they didn't have help from federal subsidies.
There are, of course, many unknowns surrounding the ACA's future, such as how many states will expand Medicaid and the employer mandate. But Parente's analysis suggests the Obama administration faces some significant implementation challenges in 2016, which is also a presidential election year.
And, of course, by 2017, a new administration will be responsible for the law's ongoing implementation.