The news that UnitedHealth Group is considering leaving the new health insurance marketplaces established under the Affordable Care Act (ACA) has prompted some concern about the their long-term viability. But United Health Group’s possible departure is not really the issue. The insurer was a minor player in the individual market before the ACA passed, and currently covers only about 5 percent of marketplace enrollees.
Rather, together with a few other developments, such as the failure of COOPs, the UnitedHealth Group announcement raised the fundamental question of whether the ACA marketplaces are enrolling sufficient numbers of people to ensure a well-balanced risk pool of healthy people and those with health problems. A pool where a majority of people have health problems could lead to higher premiums over time and destabilize marketplaces.
Current Stability of ACA Marketplaces
To put these concerns in perspective, a few points should be kept in mind. First, there is no evidence at the current time that the individual marketplaces are unstable. The most important sellers of health plans in the marketplaces, including Anthem and Aetna, have announced their intention to stay in ACA exchanges. On average, consumers can choose from five insurance carriers for 2016 coverage—the same number as 2015 and up from four in 2014.1 More than 80 percent of people enrolled in the marketplaces have premium subsidies calculated as a share of their income, which helps protect them from premium rate increases.2 In addition, new decision-support tools available through the federal and state marketplaces are giving consumers greater ability to compare plans and make informed decisions, which should increase the perceived value of the plans purchased, and make it more likely that people will complete the enrollment process.3
While premiums rose at a faster clip in 2016 than in 2015, rates are still increasing more slowly than individual market premiums rose before the reforms of the Affordable Care Act.4 Moreover, given the competition in the market, the U.S. Department of Health and Human Services estimates that more than 8 of 10 consumers can get a lower premium in the same metal level if they shop for a new plan.5 Last year, 23 percent of returning customers switched plans, which is much higher than rates of change in the employer group market and among seniors in the Medicare prescription drug program.6
A recent analysis of the individual market by Commonwealth Fund-supported researchers Mark Hall and Michael McCue also found no evidence that carriers face a sicker risk pool in the marketplaces than they do in the off-marketplace individual market.7 Indeed, the opposite may be true. Carriers are selling more generous plans outside the marketplaces and thus are likely attracting less healthy enrollees outside the ACA exchanges.
Surveys of marketplace enrollees by the Commonwealth Fund find widespread satisfaction with marketplace plans, regardless of age, income, or party affiliation.8 And on a national basis, marketplace enrollment among young people has been strong, and the health status of individuals resembles that of the general population. Young people have enrolled in smaller numbers in the marketplaces than older people, but one reason for this is that the majority of young adults who were uninsured prior to the Affordable Care Act had lower incomes, which has made them disproportionately eligible for Medicaid under the law’s expansion.9
Opportunities to Strengthen Marketplaces
A second general point to keep in mind is that several pending developments could strengthen the ACA marketplaces. One is the termination of the Obama administration policy instituted in 2013 that allowed states to let consumers keep health plans that did not meet ACA standards.10 Most states chose to extend the plans, which likely kept large numbers of healthy individuals out of marketplace risk pools. This policy will phase out by October 2017, and the result could be a significant influx of new, healthy enrollees into marketplace plans.
Another development that could strengthen the marketplaces is the increasing size of the penalties created by the ACA——from $95 per adult in 2014 to $695 in 2016—for individuals choosing not to buy health insurance. This change could push some people who have been on the fence to enroll.11
Finally major opportunities exist to increase enrollment in marketplaces and thereby diversify their risk pools. Twenty-nine million Americans remain uninsured, and many are unaware that they are eligible for substantial subsidies to purchase health insurance and to reduce cost-sharing under purchased plans. Both state and federal authorities are reaching out to uninsured groups to educate them about how to gain subsidized coverage under the ACA, and those efforts can be enhanced over time. Increased use of navigators and other sources of personalized assistance will be critical in these educational efforts. Commonwealth Fund studies show that when new consumers go to the marketplaces looking for insurance, personal assistance can be very powerful in helping them successfully enroll.
Going Forward
Though the UnitedHealth Group announcement is no cause for panic, it does emphasize the need to use every opportunity to make private insurance markets work effectively. One of the biggest remaining threats to the stability of the individual insurance markets—and indeed, to the financial health of all Americans—is the continuing erosion of the value of private insurance generally. In both the employer-sponsored sectors and in the marketplaces, deductibles and copayments have increased steadily over time.12 This raises questions about whether private health insurance will continue to be worth its increasing price to Americans with low and moderate incomes, regardless of where it is acquired. Preventing the devaluation of health insurance will require both innovation in benefit design and taming health care costs, which will demand basic reforms in our delivery system. That should be the next agenda for private leadership and public policy.
Notes
1Kelsey Avery, Mathias Gardner, Emily Gee, Elena Marchetti-Bowick, Audrey McDowell, & Aditi Sen, Health Plan Choice and Premiums in the 2016 Health Insurance Marketplace, Assistant Secretary for Planning and Evaluation, US Department of Health and Human Services.
2Centers for Medicare and Medicaid Services, June 30, 2015 Effectuated Enrollment Snapshot, September 8, 2015,
3 S. R. Collins, M. Gunja, M. M. Doty, and S. Beutel, To Enroll or Not to Enroll? Why Many Americans Have Gained Insurance Under the Affordable Care Act While Others Have Not, The Commonwealth Fund, September 2015.
4J. Gruber, Growth and Variability in Health Plan Premiums in the Individual Insurance Market Before the Affordable Care Act, The Commonwealth Fund, June 2014.
5 Kelsey Avery, Mathias Gardner, Emily Gee, Elena Marchetti-Bowick, Audrey McDowell, & Aditi Sen, Health Plan Choice and Premiums in the 2016 Health Insurance Marketplace, Assistant Secretary for Planning and Evaluation, US Department of Health and Human Services.
6 T. DeLeire and C. Marks, Consumer Decisions Regarding Health Plan Choices in the 2014 and 2015 Marketplaces, Department of Health and Human Services, Assistant Secretary for Planning and Evaluation, October 28, 2015.
7M. J. McCue and M. A. Hall, Comparing Individual Health Coverage On and Off the Affordable Care Act’s Insurance Exchanges, The Commonwealth Fund, August 2015.
8S. R. Collins, P. W. Rasmussen, M. M. Doty, and S. Beutel, Americans' Experiences with Marketplace and Medicaid Coverage—Findings from the Commonwealth Fund Affordable Care Act Tracking Survey, March–May 2015,The Commonwealth Fund, June 2015.
9 J. L. Nicholson, S. R. Collins, B. Mahato, E. Gould, C. Schoen, and S. D. Rustgi, Rite of Passage? Why Young Adults Become Uninsured and How New Policies Can Help, 2009 Update, The Commonwealth Fund, August 2009.
10K. W. Lucia, S. Corlette, and A. Williams, Some Health Insurers Canceling Noncompliant Policies, But Consumers Are More Informed of Coverage Options, The Commonwealth Fund Blog, Jan. 30, 2015.
11 S. R. Collins, M. Gunja, M. M. Doty, and S. Beutel, To Enroll or Not to Enroll? Why Many Americans Have Gained Insurance Under the Affordable Care Act While Others Have Not, The Commonwealth Fund, September 2015.
12S. R. Collins, P. W. Rasmussen, S. Beutel, and M. M. Doty, The Problem of Underinsurance and How Rising Deductibles Will Make It Worse—Findings from the Commonwealth Fund Biennial Health Insurance Survey, The Commonwealth Fund, May 2015.