Some Affordable Care Act change proposals that sound good on paper might jack up claims, chase customers away, or cause other unexpected problems.
In short, health insurance policy is complicated.
Members of the Individual and Small Group Markets Committee, an arm of the Washington-based American Academy of Actuaries, make that point in a look at many popular ideas for improving the ACA system.
The actuaries at the academy are people who have taken exams showing they understand statistics and risk analysis.
The academy is a professional association that tries to give policymakers and the public objective advice regarding risk and financial security issues.
The academy’s Individual and Small Group Markets Committee prepared the new ACA report to help readers, including insurance agents and brokers, understand what possible alternatives to the current ACA rules might do to the commercial health insurance market.
Here’s a look at some of what the committee said about five commonly discussed ACA change ideas.
Higher subsidies could help a lot, but there’s one little catch… (Image: Thinkstock)
1. Spend more government money on subsidies.
Increasing subsidy amounts might be expensive for the government, but it could greatly improve the quality of the commercial health insurance risk pool by cutting healthy people’s out-of-pocket premium costs and making the idea of buying health coverage more attractive, the actuaries say.
“The impact of any changes in subsidies on enrollment, premiums, and government spending would depend on the details,” the actuaries say.
One problem with the current subsidy program is that net coverage costs are higher for healthy older adults as well as older adults with known health problems, the actuaries say.
“Enrolling low-cost individuals of all ages should be the goal,” the actuaries say.
Actuaries say simply ending the open enrollment period Dec. 31 might do some good. (Image: iStock)
2. Shorten the open enrollment period.
The individual major medical open enrollment period, or time when people can now buy health coverage without showing they have what the government thinks of as a good excuse to buy health coverage, now runs from Nov. 1 through Jan. 31.
Insurers, regulators and ACA public exchange managers developed the open enrollment period system to discourage healthy consumers from waiting until they know they will be sick to pay for coverage.
Simply ending open enrollment on Dec. 31 would help health insurers by giving them a better idea of who their enrollees will be in the coming calendar year, the actuaries say.
Shortening the open enrollment period would also further reduce opportunities for consumers to wait until they get sick to pay for coverage, the actuaries say.
Some ACA watchers want to let everyone buy a plan that’s cheaper than the bare-bones bronze plan. (Image: Thinkstock)
3. Add barer-bones ‘copper’ level plans.
Current ACA rules let insurers sell major medical plans in four levels of benefits richness, ranging from bronze to platinum.
Young consumers and consumers who do not qualify for subsidies can buy a fifth type of coverage, catastrophic coverage.
Some ACA watchers have argued that regulators should let insurers sell catastrophic coverage or another type of plan, bare-bones “copper” coverage, to all consumers. This could help consumers who feel that even a bronze plan is unaffordable.
Adding copper plans could increase plan sales to healthy people. But since the premiums for the plans would be lower, the copper plans would hurt the risk profile of the richer plans, the actuaries say.
The copper plans or catastrophic plans would also have high cost-sharing requirements, and, in practice, many consumers would have a hard time handling the out-of-pocket costs, the actuaries warn.
Today, an insurer can charge a 64-year-old parent only three times as much as it covers the parent’s 21-year-old son. (Photo: Thinkstock)
4. Let insurers widen the gap between what the youngest and oldest enrollees pay.
Today, the ACA lets an insurer charge its oldest enrollees only three times as much as they charge the youngest adult enrollees.
Some want to let insurers charge the oldest enrollees five times as much.
Widening the allowable age variation “would more closely align premiums to underlying costs by age,” the actuaries say.
One study showed a plan that would cut premiums 22 percent for 21-year-olds.
But the same study showed that approach would increase premiums by 29 percent for 54-year-olds, “likely reducing older adult enrollment, while also increasing federal costs for premium subsidies due to the higher premiums,” the actuaries say.
In that scenario, older adults who cannot qualify for subsidies might drop their coverage, the actuaries say.
The actuaries say widening age variations could increase ACA subsidy costs by $11 billion in 2018, if other current program rules stay in effect.
If the United States returned to using risk pools, people with conditions such as diabetes or hemophilia might end up in special health insurance programs just for those with potentially expensive-to-treat conditions. (Photo: Thinkstock)
5. Set up high-risk pools for people with health problems.
Some Republicans and insurers have talked about the possibility of bringing back high-risk pools, or special subsidized health insurance programs for people with serious health problems such as cancer, heart disease or Type 1 diabetes.
In the past, when states set up risk pools, “enrollment has generally been low, coverage has been limited and expensive, they require external funding, and they have typically operated at a loss,” the actuaries say.
The government has to provide substantial funding to make any new risk pools sustainable, the actuaries say.
Over time, the actuaries say, the benefits of putting high-risk people in risk pools shrink, as the health of high-risk people and other people becomes more similar, and that would put upward pressure on premiums, the actuaries say.
Another, comparable approach might be to take the money that could be used to subsidize risk pools and instead give the money to ordinary health insurers that happen to cover high-risk people, the actuaries say.
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