The public exchange system has been selling plenty of 2016 health insurance coverage, but it appears to be on track to cover only about as many people as Centers for Medicare & Medicaid Services (CMS) officials had predicted in the fall.
Patient Protection and Affordable Care Act (PPACA) exchange plans covered about 9.1 million paid enrollees at the end of 2015. The current PPACA enrollment period, which started Nov. 1, is set to end Jan. 31.
CMS, the arm of the U.S. Department of Health and Human Services (HHS) in charge of the exchange system, estimated in October that the PPACA exchange system might attract 11 million to 14.1 million 2016 exchange plan choosers.
CMS reported Wednesday that the HHS HealthCare.gov exchange enrollment system had received plan selection information for just 103,172 people for the week ending Jan. 23, bringing the total for the open enrollment period to 8.9 million. Officials have promised to respond to exchange plan issuer pleas for more fairness to issuers and underwriting discipline in the exchange system by being strict about the Jan. 31 application deadline, and not offering access to the kinds of broad enrollment extension periods they offered at the end of the first two open enrollment periods.
HHS set up HealthCare.gov to provide exchange enrollment and administration services in the states that are unwilling or unable to run their own PPACA exchange enrollment programs.
Charles Gaba has estimated at his ACASignsups.net blog that all exchange programs, including both the state-based exchange programs and the HealthCare.gov programs, will end up with about 12.4 million to 12.9 million plans.
The final 2016 open enrollment period numbers could be much higher than what the Jan. 23 enrollment figures suggest. During the first two Patient Protection and Affordable Care Act (PPACA) open enrollment periods, the public exchange system brought in a huge percentage of its enrollees shortly before (and after) critical deadlines, and history could repeat itself.
One sign of pent-up procrastinator demand lies in the CMS HealthCare.gov call center volume totals. During the open enrollment period as a whole, HealthCare.gov received an average of 1.4 calls at the call center per plan selection. During the week ending Jan. 23, the ratio soared to about 9 calls per plan selection. That might mean that many nearly completed applications are in the HealthCare.gov pipeline.
But, if the final enrollment numbers are just okay, or somewhat disappointing, that could cause problems for public exchange system stability. For a look at why so-so enrollment could be a problem, read on.
1. The exchange system faced headwinds this year, but it faced headwinds last year, too.
Exchange enrollment activity may be a bit soft this year partly because of continuing problems with technical glitches at some exchange programs, and partly due to the blizzard that swept over much of the eastern United States last week.
But exchange program managers had to cope with glitches during the first two open enrollment periods. During the second open enrollment period, HHS had to oversee and promote the exchange system while fighting to contain the Ebola virus.
This year, exchange program managers are facing a more alarming reason for soft sales: Some exchange plan issuers now believe that exchange plan users tend to be poor risks, and that the prices they set for 2016 coverage are too low.
Issuers can’t normally change their rates or take plans off an exchange in the middle of the year. Some insurers have tried to reduce the risk of attracting older, sicker enrollees by suspending marketing efforts and reducing or eliminating agent sales commissions.
Humana Inc. (NYSE:HUM) and UnitedHealth Group Inc. (NYSE:UNH) are some of the companies that have made widely reported changes in 2016 agent compensation arrangements.
Some of the other companies include Aetna Inc. (NYSE:AET), which has decided not to pay commissions for new individual business sold from March 1 through Dec. 31; Blue Cross and Blue Shield of North Carolina, which will not pay commissions for individual major medical coverage sold from April 1 through Dec. 1; Oscar Health of New York, and Oscar Health, which reduced its standard commission for a 2016 enrollment to $6 per contract per month, from the base amount of $14 per subscriber per month that it had originally hoped to pay.
The agent comp announcements suggest that the exchange system might have been able to sell considerably more coverage if the issuers had wanted to provide the coverage.
2. Weak marketing efforts could hurt exchange plan issuer efforts to attract young invincibles.
Peter Lee, the executive director of Covered California, noted recently that effective, active marketing can help improve exchange plan profitability, by increasing sales of coverage to younger, healthier people who may not be eager to buy coverage.
The more obscure the exchange program is, and the harder it is to use the exchange system to get covered, the more likely it is that the people who do buy coverage will be those who know they are likely to use their coverage.
3. If insurers try to compensate for higher-than-expected 2016 claims by increasing 2017 premiums, that could make attracting young, healthy people who don’t think they really need coverage even harder.
One reason PPACA drafters included the unpopular penalty on people who lack minimum essential coverage is that, in the past, efforts to set up many different kinds of group insurance purchasing arrangements have failed because the best risks either slip out to get their coverage elsewhere, or go uninsured.
PPACA drafters also created the so-called “three R’s” programs — a reinsurance program, a risk corridors profit margin protection program, and a risk-adjustment program — in an effort to keep glitches and early underwriting problems from chasing issuers away from the exchange system.
The risk corridors is on track with only enough cash to pay a maximum of about 13 percent of its 2014 obligations, and insurers have been complaining recently about problems with the risk-adjustment program, which is supposed to use cash from issuers with low-risk enrollees to compensate issuers with high-risk enrollees.
The three R’s problems could give insurers a reason to ask for significantly higher individual premiums for 2017, and poor 2015 results could give insurers another reason to ask for higher premiums.
If weak underwriting pushes up 2016 enrollees claims, that could put pressure on insurers to increase premiums even more.
If the increases are very high, the higher rates may push even more of the younger, healthier consumers out of the market and lead to even bigger pricing problems in 2018.
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