As the ACA open enrollment period gets closer, I’m getting more press calls about pricing, enrollment and mechanics. This post is mainly an organizing post of how I am thinking about the history of the ACA in terms of software releases. I think that we have several different implementations of the law over time and recognizing those differences is critical in thinking about the mechanics of what is happening now and what could be happening in the future. I am mainly looking at these versions from the point of view of insurers as they are filing rates and signing contracts which means this is how insurers saw the market in the summer before each open enrollment.
ACA Version 1.0 2014-2016
This is the ACA implemented per the black letter law, Supreme Court decisions, and seat of the pants legal maneuvering. The major elements of ACA 1.0 was that insurers had no clue what the actual market would look like, Medicaid expansion was fundamentally a Blue State project, and there were significant federal supports assumed to be available through federally financed reinsurance and risk-corridors. The major elements to note is that a lot of insurers priced very aggressively either because they fundamentally misread the market and its morbidity and became a victim of the winner’s curse, or made a strategic decision to invest and harvest on the dual assumption that risk corridor payments would quickly cover most of the losses and that the profitable membership would be sticky even as premiums increased to sustainable levels in the out-years. There were many new entries to the market, including Co-Ops and VC backed start-ups that fundamentally had no clue.
ACA Version 1.8 2017
2017 was a major transitional year. Risk corridor payments had not been made. Insurers had received their 2014 and 2015 final risk adjustment reports by the summer of 2016 when real money was on the line that was dependent on actuarial and managerial competence. Enough experience had been gained that at least some pricing was being based on actual claims instead of overly optimistic projections from 2012 and 2013. Federal reinsurance had faded to nothing as scheduled. All claims had to be paid out of premiums. There were an increasing number of monopolies and the first whispers of bare counties in the summer of 2016. Rates had started to increase significantly. States were allowed to file their first 1332 waivers. These waivers were predominantely local reinsurance waivers that blended state funds with subsidies to lower gross premiums which mattered to non-subsidized buyers. Medicaid expansion has become more common in a wider variety of states with predictable risk pool effects.
ACA Version 2.0 2018
The plan development cycle for 2018 was full of policy and political uncertainty. As plans were being developed, no one knew if Repeal and Replace would pass and what that would actually look like. Marketing and elite messaging support had cratered. No one knew if and when CSR payments would be terminated. No one was sure if Silverloading would be allowed. Insurers respond to big unknowns in one of two ways: run like hell or jack up rates. Underpricing risk in 2018 was a lose the company choice. Overpricing risk was a mediocre year that could be adjusted for in 2019. Insurers ran like hell. Monopolies increased dramatically. Insurers also Silverloaded en masse. CSRs were terminated and everyone shrugged it off as there was not enough time left in the year to sink thinly capitalized insurers. Lots of lawyers were going to be paid quite a lot.
ACA Version 2.1 2019-2020
Insurers realized that Silverloading was a gold mine. Insurers re-entered the markets and monopolies are becoming less common again. States are continuing to file 1332 reinsurance waivers. Premiums are pretty flat. Parallel markets are proliferating through a combination of Farm Bureau, Short Term Limited Duration plans, Association Plans and faith based sharing ministries. Subsidized enrollment is durable but unsubsidized enrollment has stabilized at a new and fairly low equilibrium.
ACA Version 2.5 2021
The Trump Administration introduced ICHRA which allows group plans to subsidized their employees to go to the individual markets. This could be a big deal if millions of covered lives move out of the self-insured group markets and to the fully insured individual market. ICHRA was available in 2020 but very few insurers had the ability to build out the needed plumbing in time. If this works, it is a sustainable way to move more people out of insurance products that pay providers at 160% or 200% or 250% Medicare fee schedule to plans that pay providers 130% or 150% Medicare. This could be a big deal if it is popular. It is likely to be a self-sustaining policy shift independent of election results.
ACA Version 3.0 2022
Really big changes dependent on election results and the Supreme Court decision in Texas v California. I have no idea what 2022 looks like besides “different”