Thursday, October 20, 2016

HHS projects no growth in individual market for health insurance in 2017

The salient point about HHS's enrollment projection for the ACA marketplace in 2017 is that it does not project any growth in the individual market as a whole.

The ASPE brief laying out the forecast projects 13.8 million enrollments in the ACA marketplace by the end of open enrollment 2017, an increase of 1.1 million over the end of the 2016 enrollment period. That estimate includes 1.1 million people expected to move from off-marketplace coverage into the marketplace -- a projection based on HHS's recent estimate that 2.5 million off-marketplace enrollees are potentially eligible for marketplace subsidies.

Since insurers' ACA-compliant off-marketplace plans share a risk pool with their on-marketplace plans, a total market that stays flat will not improve insurers' risk pools, except to the extent that those who come on-marketplace switch from pre-ACA grandfathered and grandmothered plans (as far as I can tell, the ASPE brief does not clarify whether some of the anticipated transfers will come from such plans, which are phasing out). Thus the individual market as a whole may not be any more attractive to insurers next year than this year, except to the extent that this year's price hikes cover last year's losses, or the pent-up demand for medical care on the part of previously uninsured marketplace enrollees starts to level off, or regulatory and risk adjustment changes have a positive effect.

On the other hand, as Kaiser's Cynthia Cox pointed out on Twitter, a transfer from off-marketplace to on-marketplace may reduce insurers' temptation to end their marketplace participation and sell off-marketplace only in some regions.

As I noted in a prior post, I'm somewhat skeptical of HHS's estimate that 2.5 million current off-marketplace individual market enrollees are "potentially" subsidy-eligible -- as the adverb implicitly acknowledges, a lot of the "potentially" eligible are not in fact eligible. The estimate does not take into account a) those with subsidy-eligible incomes who are disqualified by an employer's offer of insurance, and b) those with incomes under 400% who don't qualify because the unsubsidized benchmark plan in their area is deemed "affordable" -- i.e., its premium will cost the applicant less than 9.66% of income.

Still, if there's air in that projection, it doesn't mean that a forecast of 1.1 million crossovers is implausible. A significant number of current off-marketplace enrollees with incomes in the 250-400% FPL range who were ineligible for subsidies last year may be rendered subsidy-eligible by this year's premium hikes. Also, a fair number of pre-ACA, noncompliant plans should phase out this year. Again, it's not clear whether they're included in the estimate (I am seeking clarification).

As a footnote, according to a Mark Farrah Associates note on the individual market cited in the ASPE report, the individual market as a whole did  not grow last year:
It is interesting to note, although Marketplace reports indicate 4.9 million new members enrolled in 2016, year-over-year total individual market enrollment actually declined slightly by about 1%. Total individual market enrollment, based on carrier reports, had been 20.4 million a year ago in March 2015.
At the same time, the country's overall uninsurance rate did drop significantly in 2015. A few thoughts: 1) a surprising number of unsubsidized individual market customers are very low income; HHS estimates that 1.8 million out of 6.9 million have incomes that should put them in Medicaid range (below 100% FPL or 138% FPL). Continued growth in Medicaid enrollment may put downward pressure on the individual market (and late state Medicaid expansions on the ACA marketplace specifically). 2) Continued job market improvement may push some from individual market to ESI coverage (though Kaiser found ESI enrollment flat in the past year). 3) As non-ACA-compliant plans continue to phase out (there are currently probably 1-2 million enrollees), those who transition to the compliant market will probably improve the risk pool, as they are medically underwritten enrollees.

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