More insurers have been pulling out of the Affordable Care Act-enabled exchanges, and recent counts suggest that 45 or more counties may soon have no ACA market options at all. Three major insurers are dropping out – one state by state – and several others are reluctant to commit to anything until they’re more certain about the ACA’s future.
Among those that remain, premium hikes are becoming part and parcel to doing business in the individual market. The average premium rose by about 25 percent from 2016 to 2017, and in several states, insurers are requesting increases of 50 percent or more.
Fortunately for most retirees and pre-retirees, this activity won’t have much effect on Medicare or employer-provided plans – at least not yet. Still, there are a few situations that warrant concern – particularly for clients with a gap between the time that they retire and the age at which they become eligible for Medicare.
To allay clients’ fears and help them make financially sound health care decisions, advisors will need to stay abreast of the unfolding situations.
Higher premiums, lower competition
What’s the reason for the current state of affairs?
“I think the main reason companies are pulling out is due to the restrictions that require them to insure people with pre-existing conditions,” says Garrett Ball, owner of Secure Medicare Solutions.
Combined with the IRS’ weak enforcement of the individual mandate, this factor results in fewer healthy people to balance out the risk pool.
“Health insurance carriers’ decisions to pull out of these exchanges isn’t a new phenomenon,” adds Ryan McCostlin of Bernard Health. “While the group and Medicare markets are more stable, the individual health insurance market is unpredictable at best, and it’s a segment where most insurers have been losing money the last few years.”
Where Medicare stands
Fortunately, Medicare seems as stable as ever.
“Since the ACA came into law, I haven’t seen a big impact on either the number of companies or the rates in the Medicare market,” says Ball.
The average Medicare Advantage premium actually dropped from $32.60 in 2016 to $31.40 in 2017, and Part B premiums have fluctuated between $100 and $134 between 2010 and 2017.
One might worry about the ripple effect of individual market instability that might reach Medicare, but that doesn’t seem to be a risk.
“Companies participating in both markets will continue to compete with companies participating in Medicare but not in the individual segment, and they can’t afford to just raise premiums as their competitors offer better rates,” says McCostlin.
If anything, Medicare’s stability will continue to draw insurers away from the exchanges and into the over-65 market.
“One possible effect on Medicare is that we’ll see even greater competition, which could be a good things for rates,” says Ball.
Part B may not change, but private Advantage insurers may ultimately offer better coverage with lower premiums and deductibles. Likewise, Medicare Supplement Insurance providers may offer better, more consistent rates on their standardized plans – great news for seniors subject to fickle price fluctuations.
One way in which Medicare buyers might be affected is in a lack of knowledge and resources. Agents are seeing dwindling commissions for products sold to clients under 65, and while they may have also sold to the Medicare crowd, many are leaving the business altogether.
“There are fewer Medicare resources than there have ever been,” says McCostlin. “Smart financial advisors are telling us that they see this as an opportunity to step in and be that health care resource for clients and prospects.”
Employer-sponsored insurance is the most common coverage for the under-65 market. For now, at least, the group market isn’t experiencing same tumult as in the individual market.
“Just because a company doesn’t offer insurance on the public exchanges doesn’t mean they won’t offer coverage on the private exchanges,” says McCostlin. “It’s a separate decision for carriers to make, and we don’t see them pulling out of private exchanges at the same rate.”
According the ACA, however, private market insurers can’t impose a waiting period for pre-existing conditions.
ACA repeal may change that rule, but in the meantime, that restriction could make it tougher for employers to affordably cover older workers.
“One trend I’ve seen is with employers with employees working past Medicare age,” says Ball. “Rather than keep them on their group plan, they’re giving them a stipend to purchase Medicare coverage, and that’s significantly less expensive.”
Group coverage aside, the bigger issue for most seniors will be the ability to purchase individual coverage between the early retirement and Medicare eligibility ages.
The average premium for a 60-year-old already jumped from $615.15 in 2016 to $743.52 in 2017. That’s the same 21 percent increase seen across the board and roughly 2.5 times the $311.17 average premium for 30-year-olds. If the ACHA passes the Senate its current form, however, insurers will be able to charge older consumers up to five times the rate they charge younger consumers.
Ultimately, pre-retirees may end up delaying retirement just to retain coverage not just for themselves, but potentially also for their younger spouses who rely on their group plans.
“This impact is already playing out where people don’t want to have any in-between years,” says Ball. “The number one emotion my clients have when they go on Medicare is the relief and peace of mind of have more comprehensive coverage for a much lower premium.”
Still, between COBRA coverage, HSA withdrawals and sound Medicare planning, there are several cost-efficient alternatives to delaying retirement for the sake of health insurance.
Capturing clients with health care expertise
While the current situation presents challenges to early retirees, it also present advisors with a perfect opportunity to capture clients and offer peace of mind. And, even for clients who aren’t trying to retire early, health care knowledge is invaluable – particularly where Medicare is concerned.
“While the Medicare market is relatively stable, consumers need as much help as they’ve ever needed,” says McCostlin. “Smart advisors are using the situation to their advantage by having health care conversations their competitors aren’t, giving them higher chances for meetings and higher close ratios.”