Tuesday, March 03, 2020

The ACA at 10: Resilient, yes, but...

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To mark the ACA's tenth anniversary, Sabrina Corlette, Linda Blumberg and Kevin Lucia - three of the nation's leading scholars and architects of healthcare policy -- have written a detailed and entertaining account of the tumultuous history of the ACA marketplace and its impact to date.

Strap in and relive the rough ride through grandmothered pre-ACA plans, the risk corridor massacre, the market correction of 2017, the repeal drive of 2018, the individual mandate repeal and promotion of the medically underwritten short-term market...and relative enrollment stability through it all.

The authors' conclusions are fair but, perhaps necessarily, oversimplify a bit. Let's take the catalog of successes one at a time.

▸ EXPANDED COVERAGE: The ACA expanded coverage to twenty million mostly lower-income people. Those who gained coverage had measurable improvements in their financial situation as well as in their ability to obtain needed care. Furthermore, people with preexisting health conditions were no longer “locked out” of the insurance market as a result of inaccessible, inadequate, or unaffordable offers of coverage (my emphasis).
There's a lacuna in that "furthermore," in that the vast bulk of the ACA coverage expansion was achieved through the expansion of Medicaid eligibility, in the 37 states plus D.C. that have chosen to date to participate. By early 2017, total Medicaid enrollment had increased by about 18 million, from a pre-ACA peak of 58 million to 75 million. Total enrollment has since contracted to 72 million.* In contrast, the Kaiser Family Foundation's estimate for total individual market enrollment in 2019, 13.7 million, is only about 3 million higher than the 2013 estimate.
▸ STABLE ENROLLMENT: The structure of the ACA’s financial subsidies have kept enrollment through the ACA’s Marketplaces relatively stable, in spite of policy changes that drove up pre-subsidy insurance prices. In turn, stable enrollment has helped maintain significant insurance company participation. Several insurers have expanded their areas of participation in recent years or announced their intention to do so. Insurers’ revenues are now meeting or exceeding the cost of covering their enrollees.
It's true that multiple political shocks and rounds of legislative and administrative sabotage have left on-exchange total enrollment within spitting distance of the 2016 peak, and perhaps all but level when improved retention since 2017 is taken into account (on-exchange enrollment in December 2018 exceeded that of December 2016, and effectuated enrollment in February 2019 was within 2% of the March 2016 effectuated peak). But that apparent stability masks a near-50% collapse in unsubsidized enrollment in ACA-compliant plans, from 6.7 million in Q1 2016 to an estimated 3.4 million in Q1 2019 (see the Kaiser link above). While Corlette et al. do cite a CMS report to the effect that "1.2 million unsubsidized people dropped their Marketplace coverage in 2018," that same report finds a drop of 2.5 million in unsubsidized enrollment from 2016 to 2018.  

In the same vein, while the authors report that premium increases "tended to be large" in 2017 and later cite a 29.7% increase in lowest-cost silver premiums in 2018, it's easy for a reader to miss the cumulative effect of two consecutive years of huge premium increases. According to the CMS report, average monthly premiums rose 21% in 2017 and 26% in 2018.  The Kaiser Family Foundation records a 61% increase in benchmark premiums from 2016 to 2018.
▸ FINANCIAL PERFORMANCE: Insurers posted strong financial performance in 2018 and 2019, on average. Furthermore, the ACA’s subsidy structure and the Marketplaces through which those subsidies flow have helped demonstrate that managed competition can drive down premiums and promote consumer choice, although long-standing challenges remain in less densely populated regions of the country.
It's true that after the upheavals of 2017 and 2018, premiums have remained basically flat and the contraction in insurer participation reversed somewhat in 2019 and 2020. In the ACA marketplace, however, increased competition often has mixed effects. First, reduced based premiums often mean increased premiums for subsidized enrollees. Because premium subsidies are designed so that enrollees pay a fixed percentage of income for the benchmark (second cheapest silver) plan, premium decreases also decrease subsidies — and tend to decrease the spread between the benchmark plan and cheaper plans, reducing discounts for the cheapest silver plan and bronze plans.

Reduced discounts would not loom so large if ACA subsidies were adequate to the task. But benchmark silver plans can cost up to 10% of income -- often, these days, for a plan with a deductible in the $5,000-6,000 range -- and many enrollees find the benchmark premium too rich for their blood. Further, new entrants in ACA markets are often cut-rate, narrow network Medicaid MCOs whose cheap offerings put the plans offered by established insurers out of reach for low income enrollees, as actuary Greg Fann has illustrated. New competition sometimes wipes out dramatic discounts created by silver loading**, the marketplace's felicitous adaptation to Trump's cutoff of direct reimbursement to insurers for the Cost Sharing Reduction subsidies they are obligated to provide to low income enrollees. (Coauthor Linda Blumberg forecast the silver loading bounty back in January 2016, when CSR reimbursement was under legal threat.)

The ACA pricing paradox -- lower unsubsidized premiums reducing discounts for the subsidized -- bedevils state reforms that the authors note among "potential solutions" -- state reinsurance programs and public options. On the one hand, the huge premium increases of 2017-2018 create a state imperative to provide some relief to the unsubsidized. But doing so can make the marketplace less affordable for the majority of enrollees who are subsidized (about 73% in 2019).

None of this is to suggest that the ACA has not reduced the ranks of the uninsured by more than a third, maintained a stable core of subsidized enrollment through extraordinary legislative and administrative assaults,  and proved a viable market for private insurers. But those achievements have been pretty severely stunted by the ACA's initial design flaws, heavily exacerbated by relentless Republican hostility. Like all major U.S. benefit extensions, the launch was implicitly premised on future adjustments and likely expansion of benefits. Republicans have blocked a host of obviously needed fixes while actively sabotaging the law as written. After ten years of sabotage, the survival of the law's core programs is something to rather wearily celebrate.

Related: States seeking to reduce their uninsured populations must resist a Catch-22


* Recent Medicaid enrollment reductions are most likely a combined result of increased red tape thrown up in red states, the zeroing out of the individual mandate, and increases in family wealth.

** Silver loading refers to concentrating the cost of CSR subsidies (directly reimbursed to insurers by the federal government as stipulated by the ACA until Trump stopped payment in October 2017) in the premiums of silver plans, since CSR is available only with silver plans. Since premium subsidies, designed so that the enrollee pays a fixed percentage of income, are set to a silver plan benchmark (the second cheapest silver plan), inflated silver premiums create discounts for subsidized buyers in bronze and gold plans.

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