Friday, February 07, 2020

The year after: Does reinsurance boost marketplace enrollment?

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I have written on various occasions about a Catch-22 that bedevils state governments trying to improve affordability and boost enrollment in their ACA marketplaces: reductions in premiums for unsubsidized enrollees tend to raise premiums for subsidized enrollees. Because premium subsidies are designed so that enrollees pay a fixed percentage of income for the benchmark  plan, premium increases also increase subsidies — and tend to increase the  "spread" between the benchmark plan and cheaper plans, creating discounts. Premium reductions reduce those spreads and discounts.

States face this Catch-22 when considering reinsurance programs, for which federal funding is available. By reimbursing insurers for costs incurred by their most expensive enrollees, reinsurance reduces premiums by predictable amounts, averaging 20% in the first year of implementation as of 2019, according to Avalere Health. That helps unsubsidized enrollees but sometimes hurts the subsidized.

By 2018, states faced intense pressure to help the unsubsidized. A federal reinsurance program helped control premiums nationally in the marketplace's first three years of operation, 2014-2016. When the program sunset in 2017, premiums skyrocketed, as they did in 2018 (other factors included insurers' initial underpricing in a new market, which was manifest by 2017, and political turmoil in advance of the 2018 enrollment season). From 2016 to 2018, average benchmark premiums increased by an average of 61%.  By 2019, unsubsidized enrollment in ACA-compliant plans was down about 50% from 2016.

Let's take a look at how enrollment fared in ten of the twelve states that have stood up reinsurance programs (as CMS has encouraged states to do) since 2018 (Rhode Island has not yet reported 2020 totals, and Maine's 2019 enrollment was affected by late implementation of the ACA Medicaid expansion).

Caveat: these enrollment totals are on-exchange only, and the bulk of unsubsidized enrollment occurs off-exchange. And of course, a host of other factors affect enrollment and price spreads, in particular the entry or exit of new insurers in a given market.  The impact of the reinsurance programs in each state varies quite a bit, and the degree to which they reduce premiums compared to what they would have been absent the program is quite different from the degree to which they reduce premiums compared to the previous year.

All that said...here is what enrollment looked like in 10 states in the first year in which a reinsurance program affected premiums, compared to enrollment a year prior. The far right column compares the multi-year change as of 2020 since the year before the reinsurance was operative (and so is blank if the program was launched for 2020 ).

Enrollment Change after reinsurance program enactment – on-exchange only

State
Year implemented
Enrollment change in year implemented
Multi-year
enrollment change
Alaska
2018
-4%
 -7%
Colorado
2020
-2%

Delaware
2020
+4%

Maine
2019
NA
NA
Maryland
2019
+2%
+ 3%
Minnesota
2018
+5%
+ 7%
Montana
2020
-3%

New Jersey
2019
-7%
-10%
North Dakota
2020
 0%

Oregon
2018
 0%
  -6%
Rhode Island
2020
No info

Wisconsin
2019
-9%
-13%

Source: CMS State-level Public Use Files; Colorado Health Exchange press release

In the year in which reinsurance first affected premiums, on-exchange enrollment dropped in five states, rose in three, and was flat in two. In multi-year comparisons, on-exchange enrollment dropped in five states and rose in two.  Nationally, enrollment in 2020 was down about 6% from its 2016 peak as of the end of open enrollment, though improved retention throughout the year narrows that gap, at least as of early 2019. 

One possible proxy for off-exchange enrollment is unsubsidized enrollment on-exchange. That's a dicey proposition, though. Off-exchange enrollment is generally much larger than unsubsidized on-exchange enrollment. And since 2018, in many states discounts are available off-exchange that are not available on.  That said, here are the available comparisons. We don't yet have off-exchange breakouts for 2020.

Unsubsidized on-exchange enrollment after reinsurance program enactment
No data for 2020
State
Year implemented
Enrollment change in year implemented
Multi-year
enrollment change
Alaska
2018
-   4%
+16%
Maryland
2019
-   1%

Minnesota
2018
+18%
+25%
New Jersey
2019
-   1%

Oregon
2018
-   3%
-   8%
Wisconsin
2019
- 22%


Source: CMS State-level Public Use Files


Notes on two states that provide off-exchange enrollment figures:

Maryland reports total individual market enrollment, combining on- and off-exchange. Steep premium increases in 2016 (18%), 2017 (27%) and 2018 (44%) reduced total individual market enrollment 26% from 2016 to 2018, providing strong impetus for the reinsurance program that was put in place for 2019.  In that year, premiums dropped 13%, and the bleeding largely stopped: total enrollment was down 2.2%, with on-exchange enrollment (mostly subsidized) increasing 2%.

New Jersey also implemented a program in time to reduce premiums for 2019. To review the upshot of this post: Unsubsidized premiums in NJ in 2019 were about 9% lower on average than in 2018. For subsidized enrollees, bronze plan premiums rose about 10-20% and premiums for the cheapest silver plan (the benchmark plan in always the second cheapest silver) upticked more modestly. As of the end of open enrollment 2019, subsidized enrollment was down 7% year-over-year. Off-exchange, however, enrollment rose 3% as of the end of the first quarter (after a 14% drop from 2017-2018), while improved retention on-exchange reduced the 2018-2019 enrollment loss. By the second quarter of 2019 (New Jersey reports totals quarterly), total individual market enrollment was up slightly year-over-year.

I am frankly not confident that the comparisons above illuminate much -- except that reducing unsubsidized premiums is no easy ticket to boosting enrollment overall. Whether reinsurance is a good use of state funds -- leveraged by federal contributions -- depends on state conditions. Minnesota's market was reeling from enormous premium hikes in 2017 when the state implemented its reinsurance program, in tandem with a temporary state subsidy to the unsubsidized. The numbers above indicate that the program was successful. Maryland also really had to do something to stop huge premium hikes -- and succeeded in that goal. Ditto for Alaska. New Jersey's need was less acute -- the state had only one year of steep premium hikes, 2018 -- and results were a mixed bag, I think.

The potential benefits of reinsurance vary considerably by state, and need to be considered in light of alternatives such as adding state subsidies to federal for the already-subsidized and/or the unsubsidized, and/or taking regulatory action to boost the discounts generated by silver loading.


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