There are other factors beside premium changes at work this year impacting available consumer choices. A major one is the changing composition of insurance companies still offering products in the Marketplaces. Nationally, many of the nonprofit cooperative insurers that had more than 500,000 customers between them have closed this year. Some states are losing other large insurers. And just before Thanksgiving, one of the largest insurers in the country, UnitedHealthcare, started rumbling about its lower than expected earnings that many see as a harbinger for UHC pulling out of the Marketplaces fully for 2017 (see NY Times, Wall Street Journal accounts). This would have major ramifications for insurance options available to many Americans.
Is this the fault of the ACA? The reasons behind this are complicated. Some might say that attempting to insure the previously uninsurable, the sickest, through a model that doesn’t allow the business shouldering that risk to recoup fully their expenses was unsustainable to start with. Remember, the reason for the individual mandate is so that healthy folks, and young folks (usually the most healthy) would be part of the risk pool, generating revenue and balancing out the expenses of the sickest. However, until the individual mandate penalties hurt enough to push more healthy folks to purchase health insurance, and all of the consumers who have less adequate plans join the Marketplaces fully (when the grandfathered provisions of their health plans run out), there may not be enough healthy people in the plans to make this work. (The young have done a good job of getting enrolled but many of these are under 26 and on their parents’ employers’ plans, not adding to the Marketplace policy pools.)
In a new and uncertain market, the ACA did create a “risk corridor” program to cushion insurers from extraordinary costs. All insurers who offer QHP (qualified health plans) in the Marketplaces pay for this “risk corridor insurance,” and the government pays out their claims. (Good detail on how risk corridors work can be found in this Health Affairs blog). However, the program that was to be self-sustaining off of those premiums is not. There are more claims that there is money for pay out so insurers are getting proportionally less than they would have expected. The tenuousness in the risk corridor program may be pushing certain insurers to leave the Marketplaces. That was the case that Coventry made when it pulled out of Kansas. The withdrawals from the Marketplaces is understandable as these are, for the most part, for-profit companies and it may not make sense to require them to be in the business of losing money.
A differently funded risk corridor system, perhaps one that put more federal dollars in the pot to support insurers, could likely overcome this particular shortfall. It would keep more insurers in the pool, continue to foster competition among insurers for “covered lives” to choose their plans, and give consumers more choice. However, in this political climate it is more than unlikely than any fixes will be forthcoming. It appears easier to use this as yet another excuse as to why the ACA is a failure.