Whither the off-exchange individual market? Tea leaves in New Jersey

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One open question created by the American Rescue Plan Act's boost to ACA marketplace subsidies is the extent to which off-exchange enrollment in ACA-compliant plans has migrated to the exchanges. A related question is how many people who would have been ineligible for subsidies and uninsured pre-ARPA (or insured in noncompliant plans) were drawn into the exchanges.

New Jersey, one of the few states that tracks off-exchange enrollment on a quarterly basis and has a large off-exchange enrollment cohort, will eventually provide an interesting sampling. Unfortunately, the off-exchange tally is at present only complete through Q4 2020. But the state's on-exchange enrollment reports provide some hints, explored below. 

Unsubsidized? Buy bronze (probably)

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In a post yesterday, David Anderson clarified something I understood only vaguely: once a health plan enrollee meets her deductible, her incurred costs will reach the plan's annual out-of-pocket (OOP) maximum much more slowly in a plan with a high actuarial value (say, a plan covering 80% of costs) than in a low-AV plan (covering 60% of costs).

The ACA requires plans to cap enrollees' annual OOP costs at no more than $7,900. Most plans at all metal levels have OOP caps over $5,000, with the exception of silver plans enhanced by strong Cost Sharing Reduction CSR) subsidies available to low income enrollees.  By the standards of the U.S.'s peer countries, that's a grotesque amount of risk for an average person to assume, but that's the world we Americans have made ourselves.

Anderson plots the rate at which an enrollee's total incurred medical costs will hit the maximum allowable OOP max in  bronze, silver, and gold plans with these features:

Did the Trump administration just open a back door to to a massive "Medicare" buy-in?

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The Trump administration has potentially shaken up American health insurance markets by finalizing a new rule allowing employers of all sizes to fund employees' health insurance premiums in the individual market in lieu of offering them access to an employee-sponsored group health plans. They can do this by funding Health Reimbursement Arrangements (HRAs), currently used for medical expenses excluding premiums for individual market plans, to fund individual market premiums to any level they choose -- e.g., to roughly the percentage of premiums they currently contribute to group health plans.

Many healthcare scholars and stakeholders worry that the alternative will be particularly attractive to employers with older, sicker employees, or that large employers will find ways to send sicker employees to the individual market. As a defense against that, the rule stipulates that a given employee group (sliced various ways, e.g., part-time vs. full time) can't be offered a choice between a group health plan and the individual market -- the employer must offer either/or. The rule also suggests (pdf pg 9) that the narrow provider networks prevalent in the individual market would be more attractive to healthier than to sicker populations -- and presumably, such preferences would influence the choices employers offer.

The administration forecasts that over ten years, about 11 million people will access HRAs to enroll in individual market coverage, while the number of people covered in employer-sponsored plans will drop by about 7 million (current ESI enrollment is about 150 million). The impact on the individual market would be major, but on the employer group health market, relatively modest.

But the HRA rule potentially cracks the door for a future Democratic Congress and president to vastly expand access to public insurance within the current Affordable Care Act structure. Suppose the next Congress, enabled by a Democratic president, injects into the ACA marketplace a national public option, paying Medicare rates to providers or some adjusted version of them, and requiring providers who accept Medicare to accept the public option?

NHIS puts individual market angst in perspective

The Kaiser Family Foundation reports that individual market enrollment dropped by about 2 million from the first quarter of 2017 to the first quarter of 2018. Medicaid/CHIP enrollment is down by about 1 million in the same period, to 73.8 million in April of this year (preliminary count*).

Together those reported drops, if accurate, would account for about 1% of the U.S. population under age 65.  Yet according to the preliminary results of the National Health Interview Survey (NHIS) for the first quarter of 2018, released this week, the uninsured population has not changed significantly since 2017.  In fact, the percentage of the total population that is uninsured has downticked from 9.1% to 8.8%, and among the under-65 population from 10.7% to 10.3%, though those changes are not deemed statistically significant.

Steep enrollment drops in New Jersey's individual market

ACA marketplace enrollment was down 7% in New Jersey as of the end of open enrollment, according to CMS. That's a somewhat steeper drop than the 4% national average and the 5% average among states using HealthCare.gov, but in range.

This week the state Department of Banking and Insurance (DOBI) released first-quarter enrollment results for the entire individual market, off-exchange as well as on-. It shows more severe drops on both fronts -- particularly off-exchange:


New Jersey suffered an average weighted premium increase of 22% in 2018, with steeper increases for market hegemon Horizon Blue Cross. As I noted recently, unsubsidized enrollees didn't get any benefit from silver loading, as there were no discounted silver plans available off-exchange. Unsubsidized enrollees basically had four choices: eat huge premium increases, downshift to bronze, switch to narrow network AmeriHealth, or drop out.

It appears that a significant number of unsubsidized enrollees made that last choice. Off-exchange enrollment was down not only compared to the first quarter of 2017, but compared to the last quarter, when enrollment is at low ebb (overall enrollment is up 6% since Q4 2017, but down 11% since Q1).

Off-exchange enrollment stats are hard to come by, but steep enrollment drops are to be expected.  Matt Fiedler of the Brookings Institute estimated last fall that premium hikes averaging 20.5% nationally in 2017 were likely to reduce overall unsubsidized enrollment by 12.3%. New Jersey's numbers would seem in line with that estimate.

A few notes and question marks regarding both off- and on-exchange enrollment:

Inflation that tracks your march to death

As the ACA-compliant individual market shuddered under a second consecutive round of premium hikes averaging well north of 20% in 2018, I took in an earful of stories from people in their fifties and sixties who were paying full freight, partly recounted here.

One thing that struck me somewhere along the way is the impact of the personal inflation hit induced simply by aging. In the best of markets, late-middle-agers will pay 4-5% more in many years simply for getting a year older. That's a turbo-charge to double-digit hikes for everyone (particularly for couples).

David Anderson, who may do a more analytical post about this, was kind enough to pull an ACA age rating chart for me. I begin at age 45,  just before price increases accelerate. This is for one bronze plan in Arizona:

The marketplace isn't all roses for the subsidized, either

Sam Baker has an insightful take on the bifurcation of the individual market between the subsidized and the unsubsidized, exacerbated by Trump. I want to offer a caveat, though.

Of the fallout from Trump's cutoff of Cost Sharing Reduction (CSR) reimbursement -- premium spikes for the unsubsidized, bronze and gold bargains for some subsidized -- Baker writes:

All of this has compressed the ACA's benefits. The law was initially designed to move a lot of people into the same system, in which even the people who didn't get a subsidy would benefit from a competitive marketplace to shop for coverage.

Instead, we're ending up in a place where the poorest consumers can get even cheaper coverage than the ACA intended, especially if they choose less comprehensive care, while wealthier consumers increasingly don't have much incentive to get covered at all. Those trends will only grow more pronounced if Republicans successfully repeal the individual mandate in their tax bill, leaving the law with only its carrot, and no stick.

There's nothing inaccurate here. But in general discourse if not here, the perceived bonanza for the subsidized stemming from inflated subsidies may be somewhat overstated.

Halfway back to the future in the individual market for health insurance

The ACA-compliant individual market for health insurance is at a mid-point between Trump sabotage that's been executed and Trump sabotage that's threatened. At present, the market remains viable for most subsidized prospective enrollees -- and even accidentally improved for a good number of them via discounts for bronze and gold plans. It's largely dysfunctional for the unsubsidized, however, after two years of average premium hikes in excess of 20%.

The main (though by no means only) act of sabotage in 2017 was Trump's long-running threat -- executed in October -- to cut off federal reimbursement that the federal government is legally obligated to pay insurers for providing Cost Sharing Reduction (CSR) payments to qualifying enrollees. Stiffed by Trump, insurers had to boost premiums to cover the cost of CSR. That in itself accounted for nearly half of this year's 29% average premium hike, according to Charles Gaba.

The next sabotage threat is individual mandate repeal, coupled with pending administrative action to empower a non-ACA-compliant market of medically underwritten, loosely regulated plans. -- which currently do not satisfy the mandate. Those measures in combination will trigger a fresh wave of premium hikes in the ACA-compliant market by draining its risk pool. Many if not most of the 6-7 million current unsubsidized enrollees in ACA-compliant plans will probably be driven perforce into the unregulated market if this next round of sabotage is fully implemented.

We are already halfway there, I suspect.  Recently I spotlighted the choice facing a 58 year-old in Pottsville, PA who's ineligible for subsidies -- that is, with an income over $47,520 for an individual or $64,080 for a couple. For this person

Senate Republicans may outspend the ACA on individual market subsidies -- at Medicaid's expense

While Republican senators working on ACA repeal will doubtless screw up the individual market for health insurance, they are not planning to spend less money on it. All of their spending cuts -- needed to pay for tax cuts -- will come out of Medicaid's hide. Since the Medicaid expansion they're planning to repeal is a roaring success, they're following the House in diverting everyone's attention with emotionally fraught questions about individual market structure.

According to Vox's Dylan Scott, Senate Republicans are near agreement on the basic outline of their Medicaid cuts -- they will roll back the expansion over more or less years and impose per capita caps on all Medicaid spending, as Ryan's AHCA does. As for the individual market:

There’s broad agreement to increase the money the House bill would spend subsidizing Americans who buy insurance on the individual market. That increase would probably improve, at least somewhat, the Congressional Budget Office’s projection that the House bill would cause 23 million fewer Americans to have health insurance a decade from now.

In fact, any improvement to the AHCA individual market design and funding will improve CBO's uninsured estimate for the AHCA only marginally. In CBO's forecast, the individual market will insure only two million fewer people under the AHCA than under current law ten years from now (though enrollees will be wealthier, younger and more skimpily covered, and most of the roughly 7 million ACA enrollees with incomes under 200% FPL will likely be priced out).

AHCA Reduces Federal Spending on Private Health Insurance by....4%

[originally posted May 30]  The Republican bill rejiggers subsidies for the individual market but barely reduces them on net. Almost all the real cuts are in Medicaid     

Hours before House Republicans introduced the American Health Care Act, their ACA partial repeal/replace bill, on March 6, former CMS director Andy Slavitt tweeted:

When #ACA replacement bill is out, don't get distracted by exchanges.

The big issue is dramatic cuts in Medicaid to pay for huge tax cuts.

— Andy Slavitt (@ASlavitt) March 6, 2017

That remains true. In fact, it's truer than has been fully recognized.

The basic math of the AHCA, according to the Congressional Budget Office (CBO), is a $992 billion* reduction in federal revenue over ten years, offset by a $1.1 trillion reduction in spending on health insurance benefits. Most of that spending cut is in Medicaid, reduced by $834 billion over ten years, according to the updated CBO analysis released on May 24.

The rest of the spending reduction ostensibly comes from cuts in subsidies to private insurance. But that reduction is largely illusory -- - because two of the major tax cuts included in the AHCA subsidize privately purchased health insurance and medical care.

The Kaiser misunderstanding

The Kaiser Family Foundation has a useful measure of how close to capacity the ACA marketplace is operating. Well, check that...Kaiser has two measures, and one has generated some confusion for some time.

The more useful measure is a national and state-by-state estimate of  Marketplace Enrollees Receiving Financial Assistance as a Share of the Subsidy-Eligible Population. For this, Kaiser combines analysis of enrollment data provided by CMS with Census data on income and insurance status. Importantly, Kaiser accounts for people whose income would qualify them for subsidies but who are disqualified by an offer of employer insurance, as well as people disqualified by immigration status.

As of  March 31, 2016*,  Kaiser estimated that 64% of those eligible for premium subsidies nationally were enrolled. State scores ranged from 92% in Florida, which has developed a culture of enrollment, with plenty of assistance available and advertised, to 31% in Colorado.** Kaiser estimated last October that 5.3 million of the uninsured were eligible for marketplace subsidies.

"Where the hell are you?"

For the three or four people who may be wondering why I haven't blogged for a near a week: I've been taking testimony, so to speak, from a bunch of people who are buying unsubsidized health insurance in the individual market -- but who, thanks to pre-existing conditions, are more or less grateful for what they can get and worried about what the future may hold.

Some are members of of a political advocacy group here in North Jersey, whose tales I'm collecting for a story bank; others from Georgia Maine and Michigan as well as Jersey, have recounted their experiences for an article I hope to place elsewhere. In age they range from 20s to 60s. Because of their pre-existing conditions, or their propensities as people aware of risk, or their political sympathies, or all of the above, all are people who value insurance at its actual cost.

Virtually all of those who have been in the marketplace (or individual market) for some years have suffered premium increases, and out-of-pocket increases, and narrowing of networks, and in some cases, narrowing of choices. The collective picture of how the market's changed from 2014 to this year isn't pretty. And yet all are sensible of what the market was like, or will be like, without guaranteed issue and mandated comprehensive benefits.

The other subsidy for those who buy their own health insurance

Troubled by the high price of unsubsidized health insurance in the individual market, I have wondered for some time what percentage of those who buy their own insurance without benefit of subsidy are self employed and so claim the self-employed health insurance tax deduction.

I needn't have speculated. Back in October, a google search quickly brought me to detailed estimates provided by the IRS. I've written up the upshot over at healthinsurance.org:

In 2014, 4.2 million tax filers took the self-employed health insurance deduction, deducting a total of $28.1 billion from taxable income, according to a yearly estimate published by the IRS. That comes out to about $6,700 per filer, which indicates that a significant number are deducting premiums for more than one person. $6700 is a bit less than what a pair of 40 year-olds would pay for the average silver-level plan offered in the ACA marketplace 2014.

A mantra for Democrats in ACA 'replace' negotiation: "Save Medicaid First"

There's a lot of speculation just now over whether Democrats in the Senate will work with Republicans to pass an ACA replacement after swift repeal. While repeal can substantively be done with just 51 votes via reconciliation, a replacement bill would require 60 votes, and hence eight Democrats. Per Politico:

Twenty-five Democrats are on the ballot in 2018, including 10 in states that Donald Trump just won. The GOP is betting that many or most in the latter group will be under irresistible pressure to back an Obamacare replacement, if the alternative is leaving millions of people in the lurch without insurance.

Greg Sargent responds that if Republicans put forward a plan that covers far fewer people that the ACA (as expected), Democrats can counter that  "they will only support a more generous replacement plan that covers a lot more people than the GOP replacement would.

It seems to me that the major barrier to bipartisan cooperation is the Medicaid expansion. The Medicaid rolls have increased by 16 million since 2013. By Charles Gaba's estimate (updating Kaiser's), 12.3 million new enrollees were rendered eligible by the ACA, which makes Medicaid available to adults with incomes up to 138% of the Federal Poverty Level in states that opt to implement the expansion (as 31 plus DC have done to date).

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.

Chipping away at the uninsured: What about those who can't afford employer-sponsored insurance?

Last week, I explored  why HHS's estimate that 9 million of the uninsured may be eligible for ACA marketplace tax credits is so much larger than the Kaiser Family Foundation's estimate of 5.4 million. In brief, the chief differences seem to be a) Kaiser takes into account those among the uninsured who have an offer of insurance from an employer, most of whom are probably ineligible for tax credits, and b) Kaiser also estimates and excludes those with incomes in the 250-400% FPL range who are "potentially" tax credit eligible but in fact ineligible because the unsubsidized premium for the benchmark silver plan in their area is deemed affordable by ACA criteria (i.e., costs under 8-10% of income).

Today, Kaiser updated its 2015 estimates, published in January 2016, of various categories of uninsured. The first thing to note is that the pool has shrunk: Kaiser now estimates 27.2 million nonelderly uninsured in 2016, down from 32.3 million in 2015. Next, the estimated percentage of uninsured who are eligible for financial assistance -- either Medicaid or marketplace subsidies -- is down from 49% to 43%.

That's due in large part to Medicaid enrollment: The estimate of uninsured people eligible for Medicaid is down from 8.9 million in 2015 to 6.4 million at present. But the estimate of the uninsured who are eligible from marketplace tax credits is also down, from 7.0 million in 2015 to 5.3 million now (an estimate Kaiser had already published, with minimal difference, earlier this year, and which I cited in the prior post).

As the ACA marketplace and the larger individual market with which it shares a risk pool wobble this fall, a key question is how close to capacity those linked markets are. Kaiser's new estimates suggest that not only has the pool of uninsured and potentially subsidizable marketplace candidates shrunk, but so has the pool of those who earn too much to qualify for subsidies yet remain uninsured -- from 3.7 million in 2015 to 3.0 million this year. (One thing to watch this year is whether premium spikes reverse that progress among the unsubsidized.)

Put the two together, and the pool of uninsured who might buy health insurance in the individual market has shrunk from 10.7 million to 8.7 million.

Are 2.5 million off-exchange health plan enrollees subsidy-eligible?

A recent HHS ASPE* analysis of the ACA marketplace and the uninsured found that an estimated 2.5 million people currently enrolled in health plans bought in the off-exchange individual market are potentially eligible for premium subsidies in the ACA marketplace. That is, 2.5 million people may have foregone subsidies by buying off-exchange or may be eligible for them in 2017. That's a pretty eye-popping number -- indicating that 70% of those currently enrolled in the individual market (on- and off-exchange) are subsidy-eligible.

HHS further estimated that 9 million of the uninsured are potentially eligible for subsidies in the ACA marketplace, and that a total of 20.9 million people are subsidy-eligible -- more than double the 9.4 million enrolled in subsidized marketplace plans as of March 31 of this year. Those estimates are markedly different from those of the Kaiser Family Foundation, which estimates that 5.4 million of the uninsured are potentially subsidy-eligible, and pegs the total subsidy-eligible population at 14.9 million.

The HHS analysis is based on different survey data than the Kaiser estimate: HHS uses the National Health Interview Survey (NHIS) while Kaiser relies on the Current Population Survey (CPS). But HHS's higher estimates may stem in large part from two more fundamental differences.

Brookings bombshell: ACA lowered premiums, subsidies aside. Some caveats....

In a rigorous study of health insurance premiums in the individual market pre- and post-ACA, the Brookings Institution's Loren Adler and Paul Ginsburg come to a startling conclusion: in 2014, the year the ACA marketplace launched, average premiums were 10-21% lower than in 2013 -- leaving aside the subsidies accessed by over 80% of marketplace enrollees. Further: even accounting for the steep increases coming into effect in 2017, premiums will remain lower than they would have been if the ACA had not become law.

Based on CBO estimates and  projections of premiums from 2009 and later years, and data from the Medical Expenditure Panel Survey (MEPS), Adler and Ginsburg conclude:

According to our analysis, average premiums for the second-lowest cost silver-level (SLS) marketplace plan in 2014, which serves as a benchmark for ACA subsidies, were between 10 and 21 percent lower than average individual market premiums in 2013, before the ACA, even while providing enrollees with significantly richer coverage and a broader set of benefits. Silver-level ACA plans cover roughly 17 percent more of an enrollee’s health expenses than pre-ACA plans did, on average. In essence, then, consumers received more coverage at a lower price.

Health insurance in the U.S. is deteriorating, Kaiser survey indicates (to me)

[UPDATED, 5:15 p.m.: part of the drop in enrollees' ratings of their plans in 2016 may be due to who's buying the plans rather than what's on offer. See note at bottom.]

The Kaiser Family Foundation released its latest survey of enrollees in the individual market for health insurance today, which also includes some data on enrollees in employer-sponsored insurance (ESI). While majorities still report themselves satisfied with their health plans, the results suggest that health insurance is deteriorating, in ESI as well as in the individual market.

The comparisons provided with results from 2015 and 2014 tell a simple story. Deductibles and cost-sharing are on the rise, so people have more trouble paying their bills, are more often surprised by what their plans don't cover, more often go without needed care, and are therefore less satisfied with their plans. This is all true in employer-sponsored insurance as well as in the individual market, though satisfaction in ESI starts from a higher baseline.*

Data on deductibles brings the overall picture into focus. In the individual market as a whole, more enrollees in low deductible plans report themselves satisfied than those with high deductibles (74% vs. 59% ). The percentage of enrollees in high deductible plans is rising (49%, compared to 36% in 2015 ), and the percentage of those dissatisfied with their plans is also rising (31%, up from 20% in 2015 and 2016). The rise in high deductible plans is proportionate to the drop in reported satisfaction: 66% of all enrollees in ACA-compliant plans report themselves satisfied this year, compared to 74% in 2015.

How many Americans who buy their own insurance are unsubsidized?

One further footnote on the McKinsey & Co. report on the state of the post-ACA individual market for health insurance, discussed in my prior post.

McKinsey opines that the market is unlikely to enter a death spiral because ACA premium subsidies insulate most participants from premium hikes. The report estimates that 69% of current enrollees are subsidized. That strikes me as at least slightly exaggerated.

Kaiser, in its 2015 survey of non-group enrollees on- and of-exchange, found that just under half were subsidized -- or about 59% if you exclude those in grandfathered and grandmothered pre-ACA plans, which are a different risk pool (McKinsey's "methods" note indicates that they include enrollees in non-compliant plans in their estimate of off-exchange enrollees, though they may also assume that some of those in noncompliant plans are in subsidy range)*. UPDATE 5/20: Kaiser's 2016 individual market survey results, reported today, find that 64% of individual market enrollees are now in marketplace plans. 83% of marketplace enrollees are subsidized, suggesting that 53% of the individual market is subsidized.

The off-exchange market is something of a black box, so it's not surprising that estimates would differ. Also, Kaiser's estimate is from 2015, and the ACA marketplace grew modestly this year. Still, on McKinsey's own terms, I think their estimate is a bit inflated.  Here's its basis: