At the Margins

Year 2 of the exchanges begins tomorrow. Here's what we learned from Year 1.


There are lots of questions surrounding what’s going to happen with the Affordable Care Act’s insurance exchanges. Will the Supreme Court upend insurance subsidies? Will CMS hit its sign-up projections?

And most relevantly, what will happen when the exchanges open for business on Saturday?

Those are all things we’re watching closely on the Daily Briefing, the Advisory Board’s flagship newsletter. (I’m the executive editor.) They're also major issues being tracked in the Health Care Advisory Board's ongoing meeting series, which I recently attended.

As we prepare for the ACA marketplaces’ second enrollment period, here are some lessons from the first.

1. Aggregate numbers lined up with expectations.

The CBO had projected about 7 million sign-ups in the first enrollment period—a goal that seemed unlikely after an infamously slow and glitch-plagued start. But about 8 million people ended up enrolling by this spring, thanks to a late surge; there were nearly 4 million sign-ups after March 1 alone.

(Given attrition across 2014, the total number of sign-ups has fallen back to about 7.1 million.)

The mix of enrollees was older than expected; health officials had projected that about 40% of enrollees would be between ages 18 and 34. But the final mix was closer to 28%.

Why it matters: For the average provider, there was probably little difference between whether the exchanges nationally netted 5 million, or 6 million, or 7 million sign-ups last year. But insurance companies had made investments in planning, infrastructure, and technology contingent on sign-up projections, and missing the goal would've been more damaging to them.

2. Consumers gravitated toward leaner plans.

Roughly 20% of exchange enrollees picked picked Bronze plans, the cheapest available on the marketplaces, and about two-thirds of individuals selected Silver plans.

And within the metal tiers, price was the most important factor linked to an individual's choice, perhaps unsurprisingly. More than 40% of consumers picked the lowest-cost plan, and 21% selected the second-lowest cost plan.

Why it matters: Thinner plans with high out-of-pocket costs might discourage patients from seeking some necessary care—and at the same time, puts providers at risk for bad debt. And price-sensitive patients are also more likely to shop around for lower-cost options.

3. Premium sensitivity helped foster growth of narrow networks.

When designing plans for the exchanges, insurers essentially made the trade between affordability and choice, concluding that consumers would rather have lower-priced options than broad networks.

As a result, payers continued a trend that we've seen beyond the ACA: They chose to leave many providers out of their marketplace plans.

For example, Anthem BlueCross BlueShield limited the number of network specialists available in its exchange plans; compared to the leading PPO plan across nine states, the company’s bronze plans included just 62% of the OB/GYNs and 48% of the cardiologists. And more than two-thirds of the plans available on the exchange in major urban markets were deemed "narrow" (they excluded 30% of the 20 largest hospitals) or "ultra-narrow" (they excluded 70% of the 20 largest hospitals).

Why it matters: The insurers' strategy to tamp down prices was successful; about one-quarter of the premium reductions ended up being attributable to networks narrowing. But the strategy could contribute to the reshaping of network referral patterns.

Q&A: Where providers stand with narrow networks—and where they're going

4. Proper risk pricing is still essential.

Given these broader industry patterns, like the role of price-sensitive consumers, the case of PreferredOne, in Minnesota, was an interesting one to watch. The insurer offered the lowest priced Silver plan premiums in the nation, and was rewarded for it; the company won massive market share on the Minnesota exchange, seeing its portion of the individual market jump from 2% in 2012 to 58% in 2014.

But the insurer announced earlier this year that it would be exiting the exchange in this coming enrollment period.

"Continuing to provide this coverage through MNsure is not sustainable," the CEO of PreferredOne said in a statement.

Why it matters: There are real questions over whether the ultra-low premium options will be viable in the long term, not just for payers but for providers that agree to the terms, too.

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