Thursday, October 27, 2016

25% premium hikes "just a flesh wound," say some Democrats

As the steep premium hikes in the individual market for health insurance have become official and specific, some progressives are comforting themselves with the thought that the market's 8-9 million unsubsidized enrollees constitute just 3% of the U.S. population. That's a silly frame.

If the ACA marketplace and larger individual market were firing on all burners, according to Kaiser Family Foundation estimates*, it would serve 27.4 million people, slightly more than half of them subsidized. That's about 60% of the population the ACA was designed to serve most directly b two means:  the Medicaid expansion (envisioned to newly insure about 17 million) and reform/subsidization of the individual market. A core purpose of the law was make the individual market accessible and affordable to all who needed it. That was always going to include 8-10 million people who don't qualify for subsidies -- not all of whom earn over 400% FPL (some have an employer's offer of insurance that they find unaffordable, though the law doesn't deem it so).

About a fifth of the law's current direct "beneficiaries" are unprotected from premium hikes averaging 25% overall and 22% in benchmark silver plans, the best measure of what those seeking decent insurance will be forced to pay. In some states, average increases are far worse -- 45% in Illinois, 57% in Arizona and Minnesota, 76% in Oklahoma. Note that two of those states are blue states, committed to making the law work. If hikes at this year's levels are more than a one-year correction, they're unsustainable.

A recent Brookings study claims that even with this year's premium spikes, individual market premiums are lower now than they would have been had the ACA not been enacted. That study compares mean premiums, though, not median. In the pre-ACA market, according to a 2009 AHIP survey, about a third of enrollees paid higher than average premiums because they were deemed to have a preexisting condition, and another 13% of would-be enrollees were shut out of the market entirely.

Perhaps it's fair to guesstimate, on that basis, that a third to half of current unsubsidized individual market customers have better access to insurance now than they would have if there were no ACA. That would still suggest perhaps 5-6 million people whom the law is hurting right now, compared to perhaps 24 million direct beneficiaries of Medicaid and subsidized marketplace coverage.

Perhaps that measure is too crude and includes faulty assumptions. For one thing, a healthy beneficiary of medical underwriting in one year can always be a victim of it in the next. The same is true of those who found their insurance affordable and satisfactory, though it may have been mined with exclusions and other now-illegal coverage limitations.

But still, I think "5 million hurt, 24 million helped" by the law's main coverage provisions may be a reasonable current scorecard..

Democrats need to face up to the fact that the individual market is undersized and unstable because they shorted the subsidies, as was plain to many when the law was being drafted. Hillary Clinton wants to fix that. How she can do so with at least one house of Congress controlled by Republicans is hard to imagine.  The market will have to be shored up to the extent possible by other means -- improved risk adjustment, HHS encouragement of state innovation waivers,  blue state self-funded subsidy boosters, the phase-out of grandfathered and grandmothered noncompliant plans, improved HHS outreach -- and limp along, until the next Democratic majority in Congress.

Update, 10/30: I'm surprised to see NY economics writer David Leonhardt, whose work I admire and whose recent joining of the Times op-ed roster is cause for cheer, apparently omitting the 7-plus million off-marketplace enrollees from his damage assessment of this year's individual market premium hikes:
First, some context: The 260 million or so Americans who receive health insurance through their employer, Medicare or Medicaid (including through Obamacare’s Medicaid expansion) are unaffected by the prices increases. The increases instead apply to the 10 million people who buy coverage on one of the private-insurance exchanges established by the law. Even among those 10 million, the vast majority receives government subsidies that will largely or partly cancel out the price increase.
* In the chart reached by this link, Kaiser's estimate that the ACA marketplace has reached about 40% of potential enrollees is a bit misleading, because it counts enrollees in ACA-compliant plans purchased off-marketplace as still "potential." Add them in, and the market is at about 70% capacity. In a more meaningful measure, Kaiser estimates that 64% of potentially subsidy-eligible enrollees have in fact enrolled -- though subsequent attrition has knocked that figure down to about 60%.

1 comment:

  1. It was hard to determine average premiums in the old individual market, partly because the carriers were so sneaky.They would bring out a new Preferred One series, and it would be profitable for about 3 years until the underwriting wore off. Then they would bring out a Preferred Two series, and healthy people could move to it. The old series became a closed block of business and premiums skyrocketed.
    That was a predatory market, but the ACA has not cured the one year at a time mentality.