Health Reform WK-EDGE Erosion of ACA policies causes higher premiums, analysis finds
Thursday, March 29, 2018

Erosion of ACA policies causes higher premiums, analysis finds

By Sheila Lynch-Afryl, J.D., M.A.

Most insurers in a study conducted by the Robert Wood Johnson Foundation and the Urban Institute are committed to offering coverage in the individual market, but that commitment has been "tested" by the erosion of policies designed to maintain stability in the insurance pools. The analysis concluded that federal policies have caused insurers to implement significant premium increases and offer fewer plan choices in 2018, and predicted that even higher prices and potentially greater retrenchment of participation could occur in 2019.

Threats to ACA. The analysis noted three policies of the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148)—the individual mandate (see ACA Secs. 1411, 1501), tax credits and cost-sharing subsidies (see ACA Sec. 1401), and the ACA’s pre-existing condition policy (see ACA Sec. 1201)—are the "three-legged stool" of the ACA because repealing any of them could cause insurers to leave the market or increase premiums. Just as the market began to stabilize, however, the new administration and Congress changes policies "fundamental to the ACA’s long-term stability."

For example, the Tax Cuts and Jobs Act (P.L. 115-97) repealed the individual mandate penalty beginning in 2019 (see Tax Cuts and Jobs Act, effectively repealing individual mandate, signed by Trump, January 10, 2018). In addition, an October 13, 2017, executive order called for the expansion of alternative coverage options, which are not required to comply with many ACA protections for people with pre-existing conditions (see Trump suggests regulatory changes, possibly undermining ACA protections & market stability, October 18, 2017). The Trump Administration also discontinued cost-sharing reduction (CSR) payments to insurers (see Trump terminates CSR payments, October 18, 2017).

Individual mandate. Although most of the interviews were conducted before the Tax Cuts and Jobs Act was passed, every representative interviewed reported that his or her company considered the implications of losing the mandate when setting 2018 premiums and were doing the same for 2019 premiums. Representatives were "united in their strong view" that the individual insurance market would be better off, and premiums would be lower, if the individual mandate penalty was maintained. They differed, however, in how large of an effect they thought the mandate has had.

CSRs. Insurers reported premium rate increases of 10 percent to 20 percent as a result of lost CSRs. In addition, the abrupt termination of CSR funding was "extremely disruptive" and required significant internal efforts to recalculate premium rates and adjust plan benefit designs.

Short-term plans. The October 2017 executive order raised questions among insurers about how non-ACA-compliant policies might affect the individual market and whether competing insurers would aggressively market such coverage options. Respondents also noted that to remain competitive, they might market short-term plans or association health plans to maintain market share.

Companies: Robert Wood Johnson Foundation; Urban Institute

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