10 Fixes to the Individual Market Revisited

Eighteen months ago, I shared 10 “Thoughts on Revising the ACA.” We’re nearly halfway through the first term of the Trump Administration now, and while much has changed in healthcare policy, much has remained the same as well.

As we prepare for another year of individual market open enrollment at HealthSherpa, I thought it would be valuable to take a look back at those revision ideas and see what has changed, what hasn’t, and where we go from here. In what follows, you’ll see my original thoughts in italics and some updates following each.

IMPROVE THE RISK POOL

1. Change the cap on the premium multiple from 3x to 6x. Currently a 64 yr old cannot pay more than 3 times the premium of a 21 yr old. Before the ACA, the market set that multiple as high as 11 times. Going from 3x to 6x would incentivize more young people to sign up, improving the risk pool and lowering premiums.

While such a change in policy would not be popular on its face and, given the continued rising prices in the individual market, could have a detrimental impact on high-income individuals over 55 in particular, it’s still a change worth pursuing. For the vast majority of older Americans, those increases would be offset by increased eligibility of ACA subsidies since the subsidies work as a percentage of total income. Finding a solution for those who would not qualify for offsetting subsidies would be worthwhile endeavor in order to lower rates to encourage more participation at the younger end of the individual spectrum, thereby making the risk pool as a whole more stable and leading to more overall health coverage in the U.S.

2. Get rid of SHOP, the small business program that isn’t working, and let small businesses help employees pay for coverage on the individual exchanges. This would improve the risk pool by adding a group of generally healthy people (lowering premiums), and could save small businesses money. Note that the 21st Century Cures Act addresses this in part by permitting small employers to utilize FSAs.

3. Go a step further than 21st Century Cures Act and let large employers subsidize coverage on the public exchanges. Many large employers don’t want to deal with managing their own health insurance plans — allowing them to subsidize public exchange coverage instead would improve the risk pool (lowering premiums) and could lead to large employers helping more of their employees get coverage (e.g. part-timers).

Not only do we continue to support this idea but we think that the Trump Administration has put in motion what we mention in No. 3, laying the groundwork for a broader transformation that would eliminate the value proposition for SHOP exchanges by shifting more employees of businesses to employer-subsidized (via health reimbursement accounts, or HRAs), individual coverage. I wrote about that transformation with Shandon Fowler.

4. Require people to either maintain continuous coverage or wait 3 months after signing up for non-preventative care if they sign up outside open enrollment. This would reduce the big hit that the insurers are currently taking on people who wait until they get sick to sign up.

The pattern of “non-effectuation” (i.e. people who sign up for coverage and then don’t make premium payments) has remained relatively consistent year-over-year, which points to some predictability in patterns of coverage and non-coverage. With that predictability comes the ability among carriers and regulators to manage the churn.

Conversely, by zeroing out the Individual Mandate penalty, it is believed but yet to be seen if the individuals waiting until they’re sick to get coverage becomes a bigger problem for health insurers or also holds steady. Either way, there were some efforts to bring back the continuous coverage clause as part of repeal and replace efforts last year, but they went down with the rest of the effort. Again, limiting coverage for those who need it is not a perfect solution and may prove unpopular among consumer advocates. But in the commercial healthcare system, with health-based risk underwriting (i.e. pre-existing condition rating) rightfully removed, not accounting for some kind of deterrent on individuals only joining the system when they need something leads to carriers opting out of the market over concerns of not being able to manage their risk pool well enough to make money.

More recently, a potentially major decision by the Trump Administration to discontinue risk corridor payments might further raise rates and drive carriers out of the individual market. While the impacts vary from state to state, the risk corridor payment problem is not new. Payments were made at very low percentages (low double-digits) under the Obama Administration, which led to numerous lawsuits. It’s not good news that the Trump Administration is cutting off the remaining funding but most carriers still providing coverage in the individual market have found ways to manage their risk and turn a profit (with the help of “silver plan loading”) without relying upon the risk corridor payments. The decision will almost certainly raise premiums again but consumers will largely be shielded from these increased by silver loading and subsidy calculations, which the HHS has said will not change this year.

FIX THE MEDICAID GAP

5. Move the threshold for receiving subsidies down from 100% to 0% of the federal poverty level (FPL). Also create a new cost-sharing reduction (CSR) tier for these people. Having insurance isn’t very useful if you can’t afford your copay, and CSR addresses that. These two changes take care of people who can’t get coverage because their state didn’t expand Medicaid.

The changes in these policy areas have been numerous and surprising. Several states have expanded Medicaid under the current FPL structure. Other states have pursued policies to reverse Medicaid expansion made by previous state-level administrations, mainly by adding work requirements. The first such proposal, by Kentucky, was recently struck down by a federal judge. But the bottom line is that while expansion still seems to be the slow and steady trend, removing the gap in coverage has not and will not be addressed in the near term (read: before the 2020 election).

Regarding CSR payments, the Trump Administration appears to have removed that fix as a consideration in its decision to stop paying the CSR to carriers, which of course led to higher rates last year and this year, along with the birth of the silver-loading strategy.

MAKE THINGS SIMPLER & CHEAPER

6. Combine the public exchanges into a single, federal platform. State exchanges have proved expensive and are slow to innovate.

The issue for state-based exchanges has always been scale and funding. Over a couple of years, they can be managed. Over longer periods, they have to raise their rates enough to cover their costs, which contributes to the cost issues plaguing the industry and the individual market in particular. If they don’t raise costs, they are simply maintaining, which limits their ability to plan and budget for innovation. That innovation is critical as it is the only way to bring operating costs down while improving their ability to connect residents of their states with quality, affordable coverage.

By having state exchanges operating in parallel with healthcare.gov, an inconsistent experience for consumers and a convoluted management and administration process for payers is allowed to grow greater. Medicaid is a prime example, where there are great inconsistencies from state to state. The past 18 months has only made the issue of “two Americas” more prominent and detrimental for consumers. There is a better way, and it is what we recommend in No. 9 below.

7. Make the annual enrollment period run for the month of your birth instead of a fixed period every year. The current three-month window doesn’t work because people wait until the last minute to sign up, which creates huge call, email and web traffic volume spikes. This is difficult and expensive to manage. Some policy wonks have suggested a single open enrollment period when the law changes —that would be an operational nightmare and wouldn’t work.

We maintain that going with a birthdate-based enrollment period would be the most operationally consistent and manageable approach because it would spread enrollment and administration across the entire year as opposed to concentrating it over a compressed time period. However, we acknowledge that there are numerous procedures in place, both in individual and employer-based coverage, that are built around “open enrollment,” which provides its own brand of predictability.

We recommend two changes to make for a smoother annual cycle. First, align individual enrollment period and off-cycle enrollment rules with those of Medicare/Medicare Advantage. This market has birthdate-based initial enrollment that defaults to an annual, three-month renewal period. That period is the last quarter of the year, which is the same timeframe as the individual ACA enrollment period (and most employer-based OE periods). If we don’t shift to birthdate-based renewal, then we recommend shifting enrollment to align with the IRS income tax return deadlines. Since the ACA individual subsidies are actually tax credits, considering coverage at the same time as working on your tax return would give you a better financial picture and also provide you with more alignment on any changes in income status that would impact your subsidy eligibility. Granted, the tax period itself is for the previous 12 months ended December 31, but the end of the year is stressful enough without adding OE to the list.

8. Fold the Navigator program into existing agent/broker licensing initiatives and strengthen the mandatory code of conduct required of agents & brokers. This is likely to happen by default as Navigator funding will dry up, but some legislative cleanup will be needed to permit Navigators to receive compensation from insurers, and an effort should be made to migrate committed Navigator organizations to a more traditional broker-type model.

Our perspective has shifted significantly in the past year and a half as a result of direct contact with Navigators and exposure to the work that they do. While we still support strengthening the code of conduct for agents and brokers but we don’t believe that it makes sense to fold the Navigator program into those initiatives. Navigators have a unique and critical role in helping at-risk, difficult-to-reach populations. They should be supported in that work, and they should get much more significant public funding for that effort than they’re slated to get this year. We also still believe that relaxing restrictions on them and the sources of their funding could be beneficial, as they could engage in public-private partnerships that expand their reach and the tools available to them.

9. Make Healthcare.gov an open data platform where private companies can build Turbotax-like experiences on top of a common government infrastructure. This allows for innovative, channel-specific platforms that expand the reach of the exchanges, improving both consumer access and the risk pool.

As noted in No. 6 above, having a half-state-based, half-federal system is disjointed and leads to inconsistencies in experience, administration and service, among other things. The individual market would benefit immensely by providing a meaningful data and IT infrastructure that enables third parties (yes, like HealthSherpa) to connect individuals with quality, affordable coverage in meaningful ways. TurboTax provides a great model, but so too does Medicare Advantage, which has Medicare.gov but sees most of its sales enabled through private third parties that must adhere to the Medicare Marketing Guidelines.

10. Get rid of the nickname, “Obamacare” (and don't call the next revision "Trumpcare" or "Ryancare"). Those are far too politically charged terms for health reform, which is vitally important and historically has had broad bipartisan support.

We still maintain, and plan to speak more about in the coming months, that semantics matter in healthcare reform. Americans have been told for years now to pick sides in the healthcare reform debate. We believe that there are bipartisan approaches that can and should be explored for the benefit of all. Whether you believe that healthcare is a right or a privilege, there is no debate that all of us will be impacted by healthcare at some point in our lives. We’re in it together, and words matter. Let’s choose our words wisely and seek solutions together, for the betterment of all.