Health Reform WK-EDGE Higher enrollment leads to lower costs, reflects healthier risk pool
Thursday, August 18, 2016

Higher enrollment leads to lower costs, reflects healthier risk pool

By Sarah E. Baumann, J.D.

Per-member-per-month (PMPM) claims in the individual Patient Protection and Affordable Care Act (ACA) (P.L. 111-148) market fell by 0.1 percent from 2014 to 2015, compared to an increase in per-employee costs of 3 to 6 percent in the broader market. According to CMS Center for Consumer Information & Insurance Oversight (CCIIO) analysis of reinsurance payments data, higher enrollment correlated with lower costs, suggesting that the risk pool is becoming healthier. The CCIIO suggested that the data reflect "moderate but real progress toward a broader risk pool" (CCIIO Report, August 11, 2016).

The CCIIO analyzed claims data that insurance companies uploaded to External Data Gathering Environment (EDGE) servers in calendar years 2014 and 2015. It excluded data from issuers that admitted to material errors, as well as cross-year claims—claims beginning in the year before the benefit year—from 2015, since cross-year claims were not possible in 2014. It determined that cost growth was lower, and sometimes negative, in states with increased marketplace enrollment. Specifically, states with member-month growth exceeding 100 percent saw an average decrease in cost growth of 5 percent in PMPM claims, compared to a 3 percent average decrease in states with member-month growth between 50 and 100 percent. In contrast, states with member-month growth below 50 percent saw a 2 percent average increase in costs.

The CCIIO also noted that it likely overstated claims growth, since its analysis did not take into consideration 2016 efforts to strengthen the marketplace risk pool, including the implementation of processes to prevent abuse of special enrollment periods (see Special enrollment rules tightened, improving financial viability of CO-OPs, May 11, 2016), reduce the number of consumers losing coverage or financial assistance due to data-matching issues (see CMS moves income verification thresholds, decreases need for additional verifications, July 27, 2016), help marketplace consumers who turn 65 switch to Medicare, and curb abuses of short-term plans that are keeping some of the healthiest customers out of the ACA risk pool (see CMS announces risk adjustment proposals, June 15, 2016). It expects that this risk adjustment pool will become stronger as it implements efforts prior to the next open enrollment period to communicate with people who paid the individual responsibility penalty and help 26-year-olds transition from parental plans to marketplace plans and when remaining transitional policies expire by the end of 2017.

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