Given that it is extremely likely that the individual mandate will be repealed in the next couple of weeks and the rule making for limited duration plan extensions is slowly grinding forward, what will the individual market look like on January 1, 2019?
Right now for someone who has to either buy their insurance on the individual market or go uninsured, there are a couple of broad pathways. They can buy a subsidized or unsubsidized ACA plan, they can participate in a Health Sharing Ministry, get on a three month short term plan or go uninsured.
The individual health insurance market in 2019 will look very different. The Office of Management and Budget (OMB) are processing rules for association health plans and 364 day limited duration plan expansions. Those are plans that can underwrite people out of coverage and limit benefits. The lack of the individual mandate will also increase the price of the ACA community rated, guaranteed issue policies. So what happens?
People who qualify for significant Advanced Premium Tax Credits (APTC) and CSR assistance will most likely stay in the ACA market. There will be some leakage of healthier individuals who can pass medical underwriting and who receive some but not large APTC credits move to the non-regulated individual market. Insurers will have strong incentives to aggressively strategize their product offerings to maximize Silver Gaps and potential CSR based Silver-Loads to lower the absolute post-subsidy prices; this will minimize the loss of healthy subsidized buyers to lightly regulated plans.
Healthy people who make too much for APTC or otherwise don’t qualify for it can buy much cheaper coverage. Some of the coverage is good coverage, some is appropriate for the hit by a meteor/congrats you have cancer situations and some is junk. These individuals have had this choice to some degree already today as there are the Health Sharing Ministries but the options will be much broader and more aggressively sold.
So far we’ve talked about either subsidized individuals or healthy individuals. They’ll be okay or better off. The big problem are people who aren’t healthy and who make too much to qualify for the ACA subsidy pool. They are in trouble.
The average ACA premium will increase because the lack of an individual mandate will draw out some of the healthier and cheaper individuals from paying premiums. The average ACA premium will also increase as the underwritten plans can offer cheaper/better deals to the healthiest/youngest people who would still want to be insured even without the mandate. For subsidized buyers, they don’t feel the incremental rate increases. Non-subsidized buyers are not protected.
For non-subsidy eligible people with moderate risk, they might be able to get an underwritten plan at an up-rated premium that may be cheaper than an ACA plan without any subsidies. But for people with low risk but high guaranteed expenses such as individuals with metastatic cancers, hemophilia and cystic fibrosis, no underwritten plan will touch them with a thirty foot pole. Their application would be burned on the spot and the ashes placed on a rocket that will crash into the sun.
These individuals are being left out of what will be effectively a well subsidized and well funded high risk ACA pool and they are underwritten out of the market for healthy, non-subsidized individuals. These are the people who are at the most long run risk as the off-Exchange market segment will get proportionally far sicker and thus the entire ACA risk pool will get sicker, holding everything else constant, and thus more expensive.
I again am not too worried about entire states not having insurers for the ACA market. Insurers know how to price sick risk pools as long as they can expect sick risk pools. Single insurer regions and states are probably more likely to increase as the risk of getting a disproportionally sick risk pool declines when there is no competition that can cherry pick the comparatively healthy.
Smart insurers with years of claims data will be able to aggressively self-cherry pick low cost members who are likely to drop coverage and push them into lower premium underwritten plans. The outcome is a four section system of the individual market: the uninsured, the underwritten, the subsidized high cost risk pool for 100-400% FPL ACA plans and the truly SOL.
ArchTeryx
So, basically what we had before the ACA save for the subsidies. That’s not nothing, but a whole lot more people are going to be SOL than before, and probably will start clamoring for the ACA to be repealed.
And everything old will be new again.
David Anderson
@ArchTeryx:
Actually no, it is still a dramatic improvement over 2008 status quo (assuming nothing else changes between now and the next Congress beyond individual mandate whackage). Medicaid expansion in 30+ states with another 10 states that could implement expansion via ballot iniative, highly subisidized guarantee issue/community rated coverage for 100-400% FPL. The truly SOL are truly SOL but it is a much smaller universe of people.
And remember, none of the proposed changes are that popular with the general public and the expansion of limited duration plans and association plans means that the healthy people who don’t get subsidies and thus pay either the mandate OR full price won’t be screaming. At that point, moving to a Medicaid buy-in for all is a reasonable-ish next step for Democrats.
Scott
I have a nephew who was talking about his renewal of his individual policy on the exchanges. I got the impression that he was now in the habit of the annual rite of renewal. Is there any data on people not needing the individual mandate anymore for incentive because they just go ahead and buy the insurance as a matter of everyday living?
StringOnAStick
My husband and I are in the SOL category but only if he does what he really wants to do and becomes a contractor so he can work part time; if he stays at his job then we have nice health insurance and at age 60 with plenty of pre-existing conditions, that’s not nothing. What that means on a larger scale is a reduction in the number of people willing to start small businesses because the health insurance issues either leaves them and their families running naked, utterly under-insured, or the small business dead before it even gets off the ground, never even attempted. So much for the magic of the marketplace and small enterpreneurs.
Fred Fnord
You say that the Medicaid expansion is a huge difference but isn’t a very large chunk of the funding for Medicaid going away? Given that most states will respond to a loss of federal funds by reducing eligibility (probably for the poorest because that’s what we do right?) won’t that offset that part?
David Anderson
@Fred Fnord: . Medicaid expansion goes from a 95% Fed pay to a 90% Fed pay on 1/1/20
Bob Hertz
If the Repub-nicans had an ounce of sense and compassion, they would expand the subsidies to at least 500% or 600% of poverty.
With that, the healthy persons would feel like winners and the unhealthy would be more or less pacified.
Let’s say that among the 20 million potential buyers in the individual market, one million are markedly unhealthy and unsubsidized. That is probably too high but I will move on.
Assume their average income as individuals is $60,000. Assume we want to hold their health policy spending to 9% of income. Assume the average ACA premium becomes $12,000 a year.
So the subsidy for each of them would be $6,600, The total cost of the expansion would be $6.6 billion.
This is peanuts in federal health spending.
Daddio7
@Bob Hertz: Last year my 50 year old wife’s market place premium with subsidy was still 20% of her pay. This year it jumped to 40% of her pay. Fortunately she is able this year to qualify for the Bronze quality plan at work for $286 a month. I’m on Medicare, getting old does have some perks.
Bob Hertz
good point. this can happen when a household has two persons but only one applies for subsidized insurance. It also needs correction.
Along with the family glitch that hits about 3 million younger persons very hard.
Other federal programs like Social Security and Medicare had numerous patches and fixes in their first ten and twenty years. But ACA has had full bore Congressional blockage of any fixes.