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To Understand How Consumers Are Faring in the Individual Health Insurance Markets, Watch the States

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Since passage of the Affordable Care Act (ACA), millions of Americans have gained access to comprehensive health coverage, driving the uninsured rate to historic lows. Many people continue to face difficulty affording coverage, however, including those with moderate incomes who nevertheless earn too much to qualify for federal premium subsidies. Though recent developments in Congress and actions by the Trump administration are likely to make it harder for individuals — particularly those who aren’t in perfect health — to afford adequate coverage, some states are taking action to safeguard their residents.

States on the Hot Seat

In December, Congress eliminated, effective in 2019, the tax penalty for individuals who can afford to maintain health insurance coverage but choose not to. It then failed to advance a bipartisan package of insurance market stabilization measures. The administration, meanwhile, has moved forward with plans to expand forms of coverage that don’t meet the ACA’s consumer protections. Recently, it further cut funding for marketplace enrollment assistance (down 84% since 2016), and suspended the operation of the ACA’s only permanent premium stabilization program. Even prior to these recent administrative moves, federal efforts were expected to drive many consumers who are currently healthy out of the market for comprehensive insurance, leaving behind a smaller, sicker risk pool. Those who remain in the ACA marketplaces will likely face higher premiums and fewer plan choices. Coverage gains, which appear to have receded in the last year as a result of other actions by the administration, are likely to diminish further.

Through both inaction and design, federal developments have put the onus on states to ensure access to affordable, adequate coverage. It’s a tall order, but states have options. Nearly half of states have begun to pursue individual insurance market stabilization strategies, such as establishing reinsurance programs, increasing oversight of the limited benefit plans touted by the administration, and creating financial incentives for individuals to maintain coverage. Today, we’re introducing an interactive map that will track these and other developments and describe key state policy choices likely to affect access to individual market coverage.

What Is Your State Doing to Affect Access to Adequate Health Insurance?

Alabama

Select a state on the map and an action above to learn what the individual insurance market stabilization strategies states may be pursuing.

Source: J. Giovannelli, K. Lucia, and S. Corlette, "To Understand How Consumers Are Faring in the Individual Health Insurance Markets, Watch the States," To the Point (blog), Commonwealth Fund, July 18, 2018.

Notes: Section 1332 of the ACA authorizes states to apply to waive specified provisions of the health law to facilitate state-specific programs for improving coverage. If a state's "innovation waiver" program is forecast to reduce federal spending, the state is entitled to have these savings passed through to it for purposes of implementing the program. The states identified in this table have secured, or are seeking, approval for innovation waivers that use these federal "pass-through" funds to partially finance the state's reinsurance program.

*Program funding and projected premium effects data are estimates and come from the states' Section 1332 waiver applications.

**For states with an approved waiver for which pass-through funding levels have been announced by the federal government, the federal share of program funding equals the federal pass-through funding for the year identified, as calculated by the federal government, divided by the total program funding, as estimated in the state's waiver application. For these states, the state share of funding equals the difference of total program funding and federal funding. For states with a pending waiver application, or with an approved application for which pass-through funding levels have not yet been announced, the respective funding shares are derived from information provided in the state's waiver application.

***State reinsurance programs typically are designed following one of two broad models. A "condition-specific" reinsurance program covers some or all of an insurer's claims costs that have been incurred by enrollees diagnosed with one more specified high-cost health conditions. An "attachment point" reinsurance program covers some or all of an insurer's claims costs that exceed a specified threshold, or attachment point, regardless of the type of claim.

Source: J. Giovannelli, K. Lucia, and S. Corlette, "To Understand How Consumers Are Faring in the Individual Health Insurance Markets, Watch the States," To the Point (blog), Commonwealth Fund, July 18, 2018.

Note: The ACA requires most individuals to maintain "minimum essential" health coverage or pay a tax penalty (the individual mandate). Recent changes in federal law, effective in 2019, reduce this tax penalty to $0, but do not repeal the underlying requirement to maintain coverage. This graphic identifies states that require residents to maintain adequate health coverage -- whether or not the state imposes a penalty on individuals who fail to do so -- notwithstanding the elimination of the federal tax penalty.

Source: J. Giovannelli, K. Lucia, and S. Corlette, "To Understand How Consumers Are Faring in the Individual Health Insurance Markets, Watch the States," To the Point (blog), Commonwealth Fund, July 18, 2018.

Note: The ACA provides federal subsidies to reduce the cost of individual market health insurance for eligible individuals. Premium tax credits are available to otherwise eligible individuals with household income between 100% and 400% of the federal poverty level (FPL) who enroll in coverage through an ACA marketplace, and cost-sharing subsidies are available to such individuals with incomes between 100% and 250% FPL who enroll in a silver tier plan. This graphic identifies states that make available separate, state-funded subsidies to defray the cost of ACA-compliant individual market health coverage: for example, an additional premium subsidy for individuals receiving federal premium tax credits, or a subsidy for individual market consumers whose incomes render them ineligible for federal coverage assistance.

Source: J. Giovannelli, K. Lucia, and S. Corlette, "To Understand How Consumers Are Faring in the Individual Health Insurance Markets, Watch the States," To the Point (blog), Commonwealth Fund, July 18, 2018.

Notes: Short-term policies are not subject to the federal consumer protections of the ACA. Under federal regulations finalized in August 2018, short-term policies may provide coverage for a period of 364 days and may be renewed, at the discretion of the insurance company, for up to 36 months. This table identifies states that, by limiting the maximum duration of short-term coverage to less than 364 days, or by applying state law consumer protections to such coverage, impose limitations on the sale of short-term plans than are more strict than those mandated under the default federal approach.

*These states prohibit short-term insurers from discriminating on the basis of an applicant's health status.

**A state is identified as having limited the initial contract duration of underwritten short-term coverage to less than 364 days if a short-term plan lasting longer than the specified duration would become subject to one or more of the following state consumer protections: guaranteed issue, guaranteed renewability, or required coverage of essential health benefits. Such states typically impose limitations on the renewal of short-term policies, but, in most cases, do not prohibit insurers from issuing multiple new short-term policies consecutively.

***A state is identified as having limited the total length of time a consumer may be enrolled in underwritten short-term coverage to less than 364 days if it prohibits the issuance of multiple short-term policies consecutively, closing a loophole that otherwise may permit continuous enrollment in such plans.

†Connecticut makes consecutive short-term policies subject to certain preexisting condition coverage requirements.

††Hawaii also prohibits the issuance of a short-term policy to an individual who was eligible to purchase coverage through the ACA marketplace during an open or special enrollment period in the previous calendar year.

Source: J. Giovannelli, K. Lucia, and S. Corlette, "To Understand How Consumers Are Faring in the Individual Health Insurance Markets, Watch the States," To the Point (blog), Commonwealth Fund, July 18, 2018.

Note: Federal regulations established a 45-day open enrollment period for 2018 coverage beginning on November 1, 2017 and ending on December 15, 2017. For 2019 coverage, the open enrollment window will again last 45 days, beginning on November 1, 2018 and ending on December 15, 2018. The 11 states (and the District of Columbia) that operate their own ACA marketplaces and use their own enrollment platforms have authority to modify the federally-specified enrollment dates, including by lengthening the duration of the sign-up period. By contrast, the 39 states that use Healthcare.gov for enrollment do not have such authority. This graphic identifies those states that extended the length of the 2018 open enrollment period beyond the 45-day federal default, or that plan to extend the duration of the 2019 enrollment period. While, as a formal matter, some of these states have provided for an extension by establishing a broadly available special enrollment period beginning on the day following the end of the federal default open enrollment window, the table identifies those states that, as a matter of practice, offer a continuous, broadly available enrollment period for next-year coverage than is longer than 45 days.

Source: J. Giovannelli, K. Lucia, and S. Corlette, "To Understand How Consumers Are Faring in the Individual Health Insurance Markets, Watch the States," To the Point (blog), Commonwealth Fund, July 18, 2018.

Note: This graphic identifies states that have adopted certain specific actions intended to promote a competitive ACA marketplace. In particular, only those states that: (1) have merged their individual and small-group markets; (2) require that all individual market coverage be sold through the ACA marketplace; or (3) leverage insurers’ participation in state public health insurance programs, such as Medicaid, or state insurance markets to encourage or require participation in the ACA marketplace. Other factors and state actions not identified here also may affect the competitiveness of a state's ACA marketplace.

Source: J. Giovannelli, K. Lucia, and S. Corlette, "To Understand How Consumers Are Faring in the Individual Health Insurance Markets, Watch the States," To the Point (blog), Commonwealth Fund, July 18, 2018.

Note: In states where transitional policies are allowed, insurers may choose whether to continue to offer such policies. In some states, transitional policies may no longer exist in the individual market, even though permitted under state law. Transitional policies are those that were issued following the ACA’s enactment in 2010 but before 2014. These policies, also known as “grandmothered plans,” are required to meet some, but not all, of the ACA’s individual market consumer protections.

Source: J. Giovannelli, K. Lucia, and S. Corlette, "To Understand How Consumers Are Faring in the Individual Health Insurance Markets, Watch the States," To the Point (blog), Commonwealth Fund, July 18, 2018.

* The table identifies states that have established rules exempting certain health coverage products from federal and state insurance regulation. These rules tend to encourage market segmentation and a deterioration of the ACA-compliant risk pool, thereby making comprehensive individual market coverage less affordable and accessible. States may have taken other actions that are likely to decrease access to affordable and adequate individual market coverage that are not identified in this table. For example, this table does not include state actions that may encourage the sale of, or broaden access to the following forms of coverage, which are not fully compliant with federal rules governing the individual market: short-term, limited duration insurance; association health plans that meet the definition of a large-group plan under federal law; transitional, or "grandmothered" health plans; or coverage arrangements offered by a health care sharing ministry.

Reducing Premiums with Reinsurance

Reinsurance is designed to limit premium increases by offsetting the cost to insurers of enrollees with high medical expenses. The ACA included a temporary federal reinsurance program that lowered premiums and stabilized markets during its operation (2014–2016). Recent federal legislation developed by Senators Lamar Alexander (R-Tenn.) and Patty Murray (D-Wash.) would have established a new, longer-term program, but the bill foundered.

States can create their own reinsurance programs, however, and have begun to do so on a bipartisan basis. Under the ACA’s section 1332 innovation waiver program, states may even draw on significant federal funding to support these efforts, though, critically, they must contribute state dollars to the program, too. Three states now operate reinsurance programs financed by federal waiver funding, which have resulted in lower premiums. At least four more — Maine, Maryland, New Jersey, and Wisconsin — are working to join them in 2019.

Regulating Skimpy Coverage

New regulations from the Trump administration are designed to encourage individuals to sign up for products that are exempt from ACA standards. Association health plans (AHPs) can skirt many consumer protections otherwise enjoyed by consumers in the individual market, including the requirement that plans cover a package of essential health benefits and the prohibition on premium surcharges based on gender or occupation. Short-term coverage is exempt from all ACA protections and can deny coverage, limit benefits, or charge more because of a preexisting condition. Because these products limit benefits and protections — the Congressional Budget Office assumes some plans will be so skimpy, they won’t constitute insurance at all — they generally have a cheaper upfront cost. They’re also far less attractive and accessible to individuals who believe they will need medical care and are likely to segment the risk pool, pushing up premiums and limiting choice, in the existing market.

While the administration’s actions are weakening federal requirements for these products, states may take a different approach. Three states prohibit short-term coverage from discriminating based on health status (in these states, short-term plans have chosen not to offer coverage at all). Five states seek to ensure such plans operate as a true short-term solution, by limiting the maximum time an individual may be enrolled in such coverage to less than 364 days. Similarly, states will have to decide whether and how to regulate the sale of AHPs, including by requiring them to comply with traditional insurance market rules and ACA consumer protections.

Carrots and Sticks

While the federal penalty for failing to stay insured will disappear next year, states have authority and good reason to create their own incentives for individuals to maintain coverage. States may extend help to those having difficulty affording coverage, by offering residents additional premium or cost-sharing subsidies. Massachusetts and Vermont offer such help and California is considering it. (Minnesota also provided a premium subsidy, in 2017, to residents not eligible for federal premium tax credits.)

States also may establish a penalty for going without coverage, a step that would produce a broader risk pool and reduce premiums. New Jersey recently joined Massachusetts by enacting state-level penalties for noncoverage; the District of Columbia is on the verge of doing so,  and Vermont has taken steps to do so by 2020.

Looking Forward

Federal developments are forcing state policymakers to confront a range of choices likely to substantially affect their residents’ access to affordable coverage. Some states are adopting strategies likely to mitigate recent disruptions and promote a broad and stable individual market; a few are pursuing policies likely to further segment their markets, at the expense of those who are or will become sick. In the many states yet to act, choices made by the federal government are likely to result in fewer options for affordable, comprehensive coverage and a decrease in the number of residents who are insured.

State Policies Affecting Access to Comprehensive Individual Market Health Insurance

Policy Area

Description

Premium stabilization programs

States may draw on federal and state dollars to establish reinsurance programs that reduce market volatility and moderate premiums.

Requirements to maintain adequate coverage

States may impose a financial penalty on individuals who can afford to maintain adequate health coverage but choose to be uninsured.

Financial assistance to improve coverage affordability

States may provide additional premium and cost-sharing assistance to consumers eligible for federal subsidies, or extend these benefits to those who don’t currently receive federal assistance.

Regulation of non-ACA-compliant coverage

States may establish additional oversight, above minimum federal requirements, for types of coverage, such as short-term and association health plans, that do not comply with the consumer protections of the ACA. Alternatively, states may attempt to encourage enrollment in these plans or in products exempted from insurance regulation by the state.

Open enrollment

States that have chosen to operate their own ACA marketplaces may facilitate enrollment in marketplace coverage by extending the annual open enrollment window beyond the minimum 45-day period set by federal rules.

Rules to promote marketplace competition

States may merge their individual and small-group markets, or require that all individual market coverage be sold through the ACA marketplace. States also may leverage insurers’ participation in public insurance programs or markets to encourage participation in the ACA marketplace.

Transitional policies

States may prohibit insurers from continuing to offer transitional (or “grandmothered”) coverage, which do not satisfy key ACA consumer protections.

Publication Details

Publication Date: July 18, 2018
Citation:

Justin Giovannelli, Kevin Lucia, and Sabrina Corlette, "To Understand How Consumers Are Faring in the Individual Health Insurance Markets, Watch the States," To the Point (blog), Commonwealth Fund, July 18, 2018.