June 10, 2016
Sara R. Collins
S. R. Collins, Consumer Experiences in the ACA Marketplaces, Marketplace Stability, and Remaining Challenges to Covering the Uninsured, Invited testimony, U.S. House of Representatives, Committee on Energy and Commerce, Subcommittee on Health, Hearing on “Advancing Patient Solutions of Lower Costs and Better Care,” June 10, 2016.
Thank you, Mr. Chairman, members of the Committee, for this invitation to testify today on the Advancing Patient Solutions of Lower Costs and Better Care. Three years after the Affordable Care Act’s major health insurance expansions went into effect, 12.7 million people are estimated to have coverage through the marketplaces and 15 million more through Medicaid. There are 20 million fewer people uninsured since the law went into effect in 2010. Yet there remains considerable controversy over how well these reforms are working for consumers and whether the marketplaces are stable and competitive. The bills under discussion in this hearing are aimed at addressing some concerns that have been raised about the marketplaces and how consumers are using their plans. In this testimony, I review current evidence about the experiences of consumers in marketplace plans and Medicaid, the competitiveness and stability of the marketplaces, and ongoing implementation challenges. I also examine three of the proposed bills and their potential implications.
CONSUMER EXPERIENCES IN THE MARKETPLACE PLANS AND MEDICAID
- The Coverage Expansions Are Improving Americans’ Access to Health Care
- The Commonwealth Fund ACA Tracking Survey February–April 2016 finds that majorities of people enrolled in either marketplace plans or Medicaid who have used their plans report they would not have been able to access or afford this care prior to getting their new insurance.
- The ability of adults with marketplace plans and Medicaid to find doctors and get appointments is similar to that of U.S. insured adults overall.
- Majorities of marketplace or Medicaid enrollees are satisfied with their insurance.
- The early effects of the coverage expansions are also evident in nationwide declines in out-of-pocket spending growth, cost-related problems getting care, and medical bill problems.
- Implementation Challenges Remain
- While the uninsured rate has fallen significantly among working-age adults, wide differences persist between lower- and higher-income adults.
- This difference is driven in part by the fact that 19 states did not expand their Medicaid programs, as well as dwindling resources for and legislative barriers to outreach and enrollment in many states.
- Affordability remains a key issue for enrollees across the income spectrum.
- Increases in the size and proliferation of deductibles in marketplace and employer plans may create more underinsured people.
PREMIUMS AND MARKETPLACE STABILITY IN 2017
News reports about double-digit 2017 premium requests by several insurers and UnitedHealth Group’s decision to pull out of several state marketplaces next year have raised concerns about the ongoing stability of the marketplaces. There are several reasons why these developments don’t portend disaster for the marketplaces.
- Most Marketplace Enrollees Won’t Pay Double-Digit Premium Increases in 2017
- Insurers’ premium requests will be reviewed by state regulators and will be adjusted or even rejected in some states.
- 83 percent of marketplace enrollees receive tax credits to help pay their premiums; most of the increases will be absorbed by those credits, so most people won’t pay much more next year than they paid this year.
- Marketplace shoppers are highly price-sensitive and will likely not buy the higher-cost plans.
- At the end of the open enrollment period, people who received tax credits experienced average premium increase of only 4 percent.
- The Marketplaces Are Competitive and Creating Value for Consumers
- The marketplaces are promoting price competition among insurers.
- Recent research finds that projected premium increases in 2016 were lower for health plans sold inside the marketplaces than for those sold by carriers exclusively outside the marketplaces.
- The concern that UnitedHealth Group’s departure from several marketplaces next year is a harbinger of more exits by insurers is overstated.
- Insurer participation in the marketplaces was relatively stable between 2015 and 2016.
- A recent review of first-quarter earnings calls by publicly traded insurers selling plans in the marketplaces suggest that most of these carriers remain committed to the marketplace in 2017.
- Many carriers report opportunities for growth; while the composition of risk pools remains in flux, there is variation across carriers, with some reporting healthier-than-expected pools.
- Risk Pools Remain in Flux, But ACA Premium Stabilization Programs Are Working
- Analyses of the risk-adjustment program have concluded that the program is working by transferring funds from insurers with lower-cost enrollees to insurers with enrollees who are sicker and have higher costs.
- While there is room for improvement, the program appears to be fulfilling its intended objective of encouraging insurers to compete on value rather than risk.
- The temporary reinsurance program is estimated to have lowered marketplace premiums by 10 percent to 14 percent in 2014, 6 percent to 11 percent in 2015, and by a smaller amount in 2016 as it phases out.
- The complete phase-out of that program this year will almost certainly lead carriers to adjust their rates upward to accommodate the loss.
- Ongoing Need for Ensuring Stability of the Marketplaces over Time
- The ongoing stability of the marketplaces and reasonable premium growth over time will continue to be dependent on covering the remaining uninsured and encouraging people to enroll in marketplace plans or Medicaid when they experience coverage gaps.
- States will need resources to provide needed outreach to those who remain unaware of or reluctant to visit the marketplaces.
- Affordability of health plans and health care for modest-income consumers will also be critical.
DISCUSSION OF PROPOSED BILLS
Three bills under discussion in this hearing are aimed at addressing recent concerns about the marketplaces.
- Proposed Bill: Changing Permissible Age Variation in Health Insurance Premium Rates
- The proposed bill would increase the amount that carriers could charge older adults from three times to five times that of younger people.
- The proposal also appears to provide an option for states to determine their own limits.
- RAND researchers previously modeled a change in the ACA age band from 3:1 to 5:1.
- They found that while more—mostly younger—people would become insured under 5:1 rate banding, it would come with a price tag of $9.3 billion in additional federal spending and a loss of insurance coverage for 400,000 older people.
- The researchers estimate that the higher limits would increase annual premiums for the average benchmark silver plan for a 64-year-old from about $8,500 under current limits to $10,600 under the 5:1 rate bands, while lowering those for a 21-year-old from $2,800 to $2,100.
- Proposed Bill: Requirement of Verification for Eligibility for Enrollment During Special Enrollment Periods
- The Urban Institute estimates that 33.5 million people are eligible for SEPs each year— the vast majority because of job loss, but only 15 percent use them.
- The Centers for Medicare and Medicaid Services (CMS) has made adjustments to the special enrollment periods (SEPs), including a new confirmation process for SEPs that requires documentation to verify eligibility.
- People can still enroll in coverage while the verification process is being conducted, but there are deadlines for submission that trigger loss of eligibility or coverage if missed.
- CMS is also adding an adjustment factor for partial-year enrollees to the risk-adjustment program for the 2017 plan year.
- The proposed bill would require the Secretary to institute a verification process for SEPs, but people requesting a SEP would not be allowed to enroll in coverage until they have submitted documentation.
- Tighter verification standards could lead to even lower enrollment through the SEPs.
- Only the most motivated people eligible for SEPs—that is, those who are the most in need of health care—might enroll, leading to less healthy risk pools.
- Given these potential adverse outcomes, it might be prudent to assess the effects of the new CMS verification process before imposing more restrictive requirements on those potentially eligible for them.
- Proposed Bill: To Better Align the Grace Period Required for Nonpayment of Premiums
- Recognizing that people with modest incomes might struggle in some months to pay their premiums, the law allows a three-month grace period for someone who fails to pay their premium in a given month.
- While some have suggested that people use the grace periods to game the system and get free coverage, the rules governing them are restrictive and aimed at discouraging such behavior.
- The proposed bill reduces the ACA grace period for marketplace enrollees from three months to one month.
- Such a policy change could mean a loss of enrollment in the marketplaces among enrollees of modest means and an increase in the number of people who are uninsured or have gaps in their coverage.
- The policy change would seem to also favor those who are most motivated to retain their coverage— those in poorer health.
- Overall, the insurance provisions of the Affordable Care Act have been successful in achieving a number of goals, including substantial declines in the number of uninsured Americans and improved access to care.
- The marketplaces are competitive and appear to be producing value for consumers.
- But challenges remain:
- lack of Medicaid expansion in 19 states
- need for ongoing efforts to reach uninsured people who are eligible for enrollment in Medicaid and marketplace plans
- ensuring that consumers in marketplace plans and Medicaid have insurance that is affordable and designed with incentives and protections that encourage timely access to high-value health care
- ensuring the stability of the marketplaces and reasonable growth in premiums over time.
It is encouraging that the Committee is considering ways to improve the marketplaces. In the end, the fundamental purpose of the marketplaces is to provide coverage to those who lack health insurance and thus cannot get needed care, and are currently suffering unnecessarily as a result.
Read the full testimony.