The Affordable Care Act's (ACA) insurance exchange market is beginning to stabilize and could improve over time if there are no drastic changes to the law, according to a Standard & Poor's (S&P) report released Friday
The report comes as Republican lawmakers are seeking to repeal and replace the ACA. GOP policymakers have claimed the ACA's exchange markets are in a so-called "death spiral" as insurers recently have scaled back their participation in the exchanges, citing financial losses on exchange plans.
Report: Exchange market is improving
For the report, S&P analysts reviewed the financial performance of 32 Blue Cross insurers that sell exchange plans in a total of nearly three dozen states. The analysts found that many of the insurers saw a significant reduction in their financial losses on exchange plans last year and could break even on the plans this year. Further, the insurers could profit on the plans in 2018, according to the report.
The report stated that the ACA exchange market is not in a death spiral, adding, "If the market continues unaffected, with a few fixes rather than an overhaul, we expect 2018, or [year five] of the ACA individual market, to be one of gradual improvement with more insurers reporting positive (albeit low single-digit) margins."
However, the report warned that uncertainty about Republicans' efforts to repeal and replace the ACA, as well as uncertainly about whether the Trump administration will continue to fund the ACA's cost-sharing subsidies, could inhibit improvement in the exchange market.
Are the ACA exchanges really in a death spiral? We asked the experts
S&P stated that in light of that uncertainty, insurers might increase exchange plan premiums for the 2018 coverage year as a way to mitigate any potential financial risks associated with potential changes to the law. "If insurers are uneasy regarding the future of the market, they may have to decide between adding an 'uncertainty buffer' to their pricing or—worst case—exiting the exchanges altogether," the report stated.
Democrats say report shows GOP should stop trying to repeal ACA
Democratic lawmakers cited the report as evidence that Republicans should stop seeking to replace the ACA. Rep. Frank Pallone (D-N.J.) said the report "confirms that the [ACA] is on stable ground, but it warns that Republicans' efforts to sabotage the law could impede that stability."
KFF analysis: Exchange plan premiums will rise if Trump admin does not fund cost-sharing subsidies
In related news, the Kaiser Family Foundation in an analysis released Thursday predicted that insurers likely would increase premiums for exchange plans if the administration chooses to stop funding the ACA's cost-sharing subsidies, The Hill reports.
The Department of the Treasury's payments to insurers for cost-sharing reductions under the ACA seek to help low-income consumers pay for out-of-pocket costs such as coinsurance, copayments, and deductibles. House Republicans have sued the executive branch for providing the subsidies, which lawmakers say were never authorized by Congress. Insurers have said the subsidies are essential to stabilizing the exchange markets.
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The administration has not yet indicated whether it will continue making cost-sharing payments to insurers, but House Speaker Paul Ryan (R-Wis.) late last month said the administration will make the payments while the lawsuit continues.
According to the analysis, the average premium for a benchmark silver exchange plan would have to increase by approximately 19 percent in order for insurers to make up for the funding they would lose if the administration discontinues the cost-sharing payments. According to the analysis, the increase could vary from about 9 percent in North Dakota to about 27 percent in Mississippi.
Premiums for exchange plans sold in states that did not expand Medicaid—which typically receive higher amounts of cost-sharing payments—likely would see larger increases, at about 21 percent, than plans sold in Medicaid expansion states, which likely would see premium increases of about 15 percent (Sullivan, The Hill, 4/7; Abelson, New York Times, 4/7; Hellmann, The Hill, 4/7; Sullivan, The Hill, 3/30; Kaiser Family Foundation analysis, 4/6).
What does health care reform beyond the ACA look like? Join us on May 2nd
Stuart Clark, Managing Director
The first part of the Health Care Advisory Board’s latest “State of the Union” explores what the Trump administration and GOP-controlled Congress will mean for the future of coverage expansion, payment reform, and federal entitlement programs.
The presentation provides an objective analysis of the next era of health care reform, unpacking the potential futures of Medicare, Medicaid, and the private insurance market—and what those changes would mean for provider strategy. The presentation also includes a detailed assessment of the accomplishments, shortcomings, and unintended consequences of the Obama-era reforms.