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Consumer Rep: Exchanges Might Not Affect Plan Mobility

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If the Patient Protection and Affordable Care Act of 2010 (PPACA) survives, and if PPACA creates a new system of health insurance exchanges, the exchanges might not lead to a big, long-term increase in the percentage of enrollees who change plans in a given year.

Timothy Jost, a law professor who represents consumer interests in proceedings at the National Association of Insurance Commissioners (NAIC), Kansas City, Mo., makes that case in a comment submitted to the Health Care Reform Actuarial Working Group.

The working group is an arm of the NAIC’s Health Actuarial Task Force.

Members of the task force considered the comment Wednesday during a task force conference call session on medical loss ratio (MLR) calculations.

A PPACA provision already in effect requires health insurers to spend 85% of large group revenue and 80% of small group revenue on health care and quality improvement efforts. The actuarial working group is talking about possible adjustments to and clarifications of the rules for calculating MLRs. One question that has come up is whether the new PPACA health insurance exchanges will lead consumers to shift quickly from plan to plan in a way that could throw off the credibility of MLR data.

Jost looks at the experience of exchange programs in the United States and Europe, including the Medicare Advantage program and Federal Employee Health Benefit Plan program, and concludes that exchange programs tend to reduce plan enrollee mobility.

Jost says exceptions can occur when consumers suddenly get access to cheaper prices, or more information about prices.

In the Netherlands, for example, changes made in 2006 suddenly gave many Dutch people with individual coverage access to more affordable group plans.

“Since premiums for group health plans were lower than for individual policies, a large number of enrollees moved from individual to group plans,” Jost says.

In Germany, a law that took effect in 2009 made premium cost differentials much more visible. That law doubled plan switching rates for 2010, Jost says.

Most of the time, however, enrollees resist changing plans, because changing plans means changing doctors or hospitals, Jost says.

Plan change rates tend to be 5% or lower for consumers using exchanges in Europe, and one study of Medicare Advantage enrollees found that their 2004 plan change rate was less than 5%, Jost says.

“Switching rates are higher for Medicare Part D drug plans, but this is largely an artifact of the auto-enrollment of low-income subsidy members, who are moved to a new plan when their current plan increases its premiums too much but then can themselves switch plans again if they do not like the plan in which they are autoenrolled,” Jost says. “Plan switching among enrollees who are not low-income-subsidy recipients is only about 6%. Plan switching in the FEHBP is also uncommon.”

Carriers participating in Massachusetts’ subsidized Commonwealth Care exchange program have plan switching rates of 2.5% to 7%, Jost says.

Even when consumers do change plans, they often change from one plan offered by a carrier to another plan offered by the same carrier, Jost adds.

In the first few years after PPACA took full effect, enrollment in individual and family options would grow rapidly, but experience suggests that risk pools would soon stabilize, and PPACA already includes temporary risk-adjustment feature that could help protect carriers against any short-term risk pool volatility, Jost says.

Jost notes that high first-year sales commissions can add to volatility by giving agents and brokers an incentive to get consumers who already have coverage to switch plans.

Because of concerns about health plan enrollee “churning,” Medicare limited first-year commissions to 200% of renewal-year commissions for both the Medicare Advantage and Medicare Part D prescription drug plan program in 2009, Jost says.