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ACA health exchange rate increases may slam young adults

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Big individual health insurance rate increases could hurt exchange plan issuers’ medical loss ratios in 2017, by pushing many young adults out of the market.

Alisha Baines Simon and Stefan Gildemeister, economists at the Minnesota Department of Health, have raised that possibility in a survey report prepared for MNsure, Minnesota’s state-based Affordable Care Act health insurance exchange. 

The exchange, which has an office in St. Paul, Minnesota, is gearing up for the fourth annual ACA individual major medical coverage open enrollment period. The open enrollment period for 2017 is set to run from Nov. 1 through Jan. 31.

Related: HHS to issuers: You need to improve, too

The economists found that use of individual and family coverage has increased significantly in Minnesota since Jan. 1, 2014, when the ACA brought the health insurance exchange system to life and put strict limits on medical underwriting.

Total Minnesota non-group health enrollment increased to 297,000 in 2015, from 248,000 in 2013, according to a survey results slidedeck.

The economists also found that enrollment in non-group major medical coverage appears to be getting more stable: 84 percent of the Minnesota residents who had non-group major medical coverage in 2015 kept the coverage all year, up from 80 percent who kept non-group coverage all year in 2013.

But, the economists found that only about 17 percent of the Minnesota residents ages 18 to 34 who used non-group coverage in 2015 qualified for help from the ACA premium tax credit subsidy program.

About 77 percent of non-group health coverage users in the 35-to-54 age group and 89 percent of the non-group health coverage users ages 50 and older qualified for subsidies.

ACA critis say the "age rating band" system may already discourage young adults from enrolling by making their premiums higher than they would be if insurers had more flexibility. (Photo: iStock)

ACA critis say the “age rating band” system may already discourage young adults from enrolling by making their premiums higher than they would be if insurers had more flexibility. (Photo: iStock)

Exchange program managers and exchange plan issuers have emphasized that the exchange system needs to attract as many “young invincible” enrollees as possible, to protect young people from unexpected health catastrophes; to make sure young, healthy people get help with staying healthy; and to use premium revenue from enrollees with relatively low average medical claim totals to hold down overall plan claim costs.

ACA rules limit an issuer to charging its oldest enrollees rates that are only three times as high as the rates it charges its 21-year-old enrollees for the same coverage.

That “age rating band” system may already discourage young people from enrolling, by making premiums for young adults higher than they would be if insurers had more flexibility, according to many critics of ACA implementation, such as Michael Bertaut, an economist at Baton Rouge, Louisiana-based Blue Cross and Blue Shield of Louisiana.

Analysts working for Connect for Health Colorado, a state-based ACA exchange with offices in Denver, recently showed that ACA premium subsidies may reduce net cash costs for the Colorado exchange enrollees who qualify for the subsidies in 2017, even as premium payments increase significantly for consumers who have to use their own cash to pay all of the premiums.

If 2017 individual health rate increases have a much bigger effect on unsubsidized enrollees in the typical state, and the typical young-adult user of individual coverage is a full-price customer, than the coming rate increases may have an especially big impact on the young adults whom the exchange insurers would most like to attract.


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