The Future of the Health Care Marketplaces

SARA COLLINS: The night before the final day for people to buy health insurance on HealthCare.gov, which is the federal marketplace, a federal district judge in Texas delivered a judgment that could have an impact on the health of all Americans. He said that the Affordable Care Act was invalid even though the Supreme Court has upheld the law twice.

SHANOOR SEERVAI: And he did this just hours before the market closed? Because people tend to leave things to the last minute, don’t we usually see a huge surge in enrollment right at the end?

SARA COLLINS: That is correct. The decision may have created some confusion in people’s minds, but all of the media coverage around the decision may have also drawn attention to the deadline and reminded people to enroll.

SHANOOR SEERVAI: Hi everyone, welcome to The Dose. I am Shanoor Seervai, and on this episode we are going to be talking about what is going on in the health insurance marketplaces. You just heard from Sara Collins, vice president for health care coverage and access at the Commonwealth Fund.

Sara, thanks for being on the show.

SARA COLLINS: It’s great to be with you.

Open Enrollment 2019: The Numbers

SHANOOR SEERVAI: We are recording this episode at the end of December just a day after we learned how many people bought health insurance on the federal marketplace. Sara, break the numbers down for us.

SARA COLLINS: So these are the number of people who enrolled through HealthCare.gov, again which is a federally operated website that people in 39 states use to buy their health insurance. Eleven states and the District of Columbia run their own marketplaces. Six of those states and the District of Columbia have extended their open enrollment deadlines to the end of the year and into January.

Enrollment was lagging in November and December but like past years, and you mentioned the surge. And in fact what we saw in the last week, the surge was actually bigger than it was in the prior year. Enrollment totaled 8.5 million through the HealthCare.gov marketplace, which is just slightly below last year’s total of about 8.8 million. It was down in most states, but actually higher than last year in five. But then some dramatic drops in Louisiana, Virginia, and West Virginia.

SHANOOR SEERVAI: So enrollment was higher in some states but lower in others. Why was it different this year?

SARA COLLINS: There are a lot of different factors at play. So in Virginia, for example, it was way down this year, but Virginia just extended eligibility for Medicaid so a lot of people probably went into Medicaid that might have otherwise gone into the marketplaces. Economic conditions are different in every state. So people may have gotten employer plans in some of these states where the economies are doing well. So it is really hard to know exactly why.

The other thing that does seem to matter, and I think what is notable about the states that run their own exchanges, the administration cut way back on advertising and enrollment assistance. And we know that makes a really big difference in whether people both go to the marketplace, and whether or not they complete the enrollment process. And so states that run their own marketplaces are very aggressive in those efforts.

SHANOOR SEERVAI: I did read that in states that rely on the federal marketplace, because there was almost no funding for navigator assistance, last year a lot of the navigator groups tried to cobble together and still do outreach. But this year a lot of them just said they couldn’t afford to.

SARA COLLINS: Yeah, so this year was a little different than last year. Last year we were right at the end of a big repeal-and-replace effort on the part of Republicans in Congress, and so that brought a lot of media attention to the Affordable Care Act. So there was a lot of actually free advertising around the open enrollment period beginning last year that we didn’t see this year. In fact, this year what we saw was a big focus of the media on the midterms right around the time the open enrollment period began. And in fact if you look at the numbers the biggest overall drop relative to the prior year was in that very first week.

SHANOOR SEERVAI: Okay, let’s back up a little bit. Would you say the reason enrollment in 2018 didn’t fall that much was because health care remained affordable?

SARA COLLINS: Yes. And I say that with a caveat. Premiums in 2018 in most states were lower or only marginally higher than they were in the previous year. But the other major factor in the affordability issue is that most people actually are eligible for tax credits that cover the cost of a large part of the cost of their care. And the tax credits are tied to their income, so if the premiums go up, they don’t see the increase.

SHANOOR SEERVAI: So on the one hand the tax credits helped, but on the other, this was the first year that the individual mandate penalty was repealed. So, the requirement to have health insurance goes away in 2019. Why did premiums stay low in spite of this?

SARA COLLINS: So I think the lower premiums that we saw this year are indicative of the market’s maturity. We’re multiple years now into the law and the new regulated market, and insurers also have confidence in people’s demand for health insurance. That is largely due to the tax credits.

The individual mandate penalty loss may also have been built in to insurer’s premiums the year before. So the year before we did see a big increase, there were a number of reasons for that that I won’t go into.

The individual mandate is important, but it is much less so than the tax credits that 85 to 90 percent of people are eligible for. All those pieces were necessary to make this a viable place for people to get coverage, but you had to make it affordable in order for the mandate to even be realistic.

SHANOOR SEERVAI: So on this point about affordability, we had a couple of listeners write in after the episode that we did on the individual mandate. And they both said that for people who are not eligible for these tax credits, insurance on the marketplace is really expensive or the plan that you can afford is cheap, but then you have a very high deductible. So what are those people supposed to do?

SARA COLLINS: That is a really important point. And people whose incomes are right over that threshold, 400 percent of poverty, to make them eligible for the tax credits, really do face affordability issues. So you hit basically a cliff, and if your income is over about $99,000 for a family of four, then you are going to probably be facing a premium that is pretty high relative to your income.

This is a relatively small group of people who are buying over that threshold, but it is an important group of people in terms of feeling pain from having to spend so much out of pocket. Congress could fix this very, very easily by simply lifting that cap. So making the tax credits eligible for people regardless of their income.

The Loosening of Restrictions on Non-ACA-Compliant Plans

SHANOOR SEERVAI: So we have talked about some of the issues that threw the market into flux this year. Like the repeal of the individual mandate penalty, and then the basically zeroing out of federal funding for advertising and enrollment assistance. But what were some of the other actions by the Trump administration that made the marketplaces different this year?

SARA COLLINS: The Trump administration’s loosening of restrictions on non-ACA-compliant plans, like short-term policies. So plans that don’t have to comply with the ACA’s requirement to cover preexisting conditions, for example, or not to rate people on the basis of their health, or cover things like maternity care. So the Trump administration is allowing states to allow those kinds of plans into their markets. And without the mandate penalty people are going to be able to buy them. And the concern is that a lot of people might actually be buying these plans not even knowing what they are. But the other risk is that it will draw healthier people out of the marketplaces, and it might lead to higher premiums as a result next year.

SHANOOR SEERVAI: So we are going to see young, healthy people who might think they don’t need a lot of coverage attracted to a cheaper plan rather than something that they could find in the market?

SARA COLLINS: Possibly. There is very little way to measure the number of plans that are in the markets across the states. We will see the evidence of it — obviously in the enrollment in the marketplaces, and potentially in the overall uninsured numbers. But it will be difficult to — to determine how many people actually have the plans. But that is the major risk, that people will buy plans that look good on paper and are really cheap because these plans have low premiums, and end up enrolling in them, and if they are a young, healthy adult they will be very attractive to an insurer because their costs are really low. But that young healthy adult could have an accident, or get very sick, and find themselves in a position where their coverage doesn’t do what they need it to do to ensure that they can recover well.

SHANOOR SEERVAI: Right, and some states have blocked the sale of these plans that don’t comply with the ACA. Which ones?

SARA COLLINS: So New Jersey, New York, California, Massachusetts all have outright bans on the sale of these plans. They are among the 22 states that have either banned or placed limits on these kinds of plans.

SHANOOR SEERVAI: And when we think about those tax subsidies that people get to buy plans on the marketplace, can you get a subsidy to buy a short-term plan?

SARA COLLINS: Right now, you cannot. But the administration this year, just this fall, changed the guidelines for the Affordable Care Act’s so-called 1332 Waiver Program. This program enabled states to do different things with their subsidies and their Medicaid expansion dollars. But the rule was that a state could make changes, but coverage would have to be the same as it would be under current law, and it would also have to be as affordable as it is under current law. The Trump administration really changed those guidelines this year. So one of the things that this new guidance allows states to do is to allow people to use their tax credits to buy short-term policies that don’t comply with the Affordable Care Act. So that is a major, major change. It won’t likely happen until 2020. There are significant legal challenges — it is not clear whether states doing this would even be legal.

SHANOOR SEERVAI: Right. Because I imagine that some states have banned them or placed limits on them because they don’t actually meet the requirements of the law.

SARA COLLINS: Right.

Texas v. Azar

SHANOOR SEERVAI: I wanted to move on to something else you talked about right at the beginning, that lawsuit in Texas. Can you explain to me what happened there?

SARA COLLINS: So in a truly shocking decision on December the 14th which is again the eve of the final day of the 2019 open enrollment period, Texas federal court judge Reed O’Connor ruled that the Affordable Care Act’s individual mandate was unconstitutional in the absence of a tax penalty, which Congress as we have talked about repealed in 2017. And because in his view the mandate is inseparable from the rest of the law, in his view the entire Affordable Care Act is therefore unconstitutional.

SHANOOR SEERVAI: So what would that mean, if the Affordable Care Act is unconstitutional?

SARA COLLINS: So based on the judge’s ruling, it wipes the Affordable Care Act off the books. Were it to be upheld the implications would truly be breathtaking. The ACA has transformed the health care system and its elimination would affect nearly every dimension of our health insurance system, health care system.

SHANOOR SEERVAI: What are all the gains we have seen from the Affordable Care Act?

SARA COLLINS: The law has restructured the individual and small-group markets, it has expanded and reformed the Medicaid program, it has reformed the Medicare program, and it has provided billions of dollars in federal funds to support all of these changes. States for their part have rewritten laws to incorporate the provisions of the Affordable Care Act, and insurers, hospitals, and physicians have invested substantial resources in adjusting to all these changes. More than 20 million people have gained coverage as a result of the law, and millions more are protected by the consumer provisions in the law. An abrupt elimination of the law would be truly, massively disruptive.

SHANOOR SEERVAI: What is going to happen next with this case?

SARA COLLINS: So attorneys general in California and 15 other states have intervened in the case over the past year already. And they are urging the judge to allow for an immediate appeal, and he will likely decide this near the end of the year. The appeal would likely go to the Fifth Circuit Court of Appeals which will very likely reverse a decision. If the Fifth Circuit Court doesn’t reverse the decision, the case would likely go on to the Supreme Court. But the Supreme Court would also very likely reverse the decision.

SHANOOR SEERVAI: So the problem is more in the short term that it has created this confusion?

SARA COLLINS: That is exactly right, and it creates confusion among individuals who are seeking to enroll or using their plans. But it also creates confusion among insurers, providers, for all of the reasons I just mentioned. And insurers, you have to think about what their timing is right now. So the open enrollment period for 2020, they have to submit their bids for participation in the marketplaces this spring some time. So if the case isn’t settled by then, it may affect people’s premiums, it may affect insurers’ decisions to participate.

SHANOOR SEERVAI: So this is interesting because you have said that the repeal of the mandate penalty probably didn’t have that big an impact on enrollment, but it has had this other impact in this case.

SARA COLLINS: You raise a very good point. So that is critical to the case. So the judge ruled that the plaintiffs have standing, because they are complaining that the mandate is a burden on them. But in fact the mandate is unenforceable.

SHANOOR SEERVAI: So we keep coming back to the mandate, even though as you said it is one part of a law that has in so many different ways changed the way that people access health care in this country. On the mandate though, some states have implemented their own. Which ones?

SARA COLLINS: So Massachusetts, New Jersey, and Vermont, and D.C., District of Columbia all have mandates in place.

SHANOOR SEERVAI: And do you think that is why people bought coverage?

SARA COLLINS: The evidence does show that has been important. But it hasn’t been as important as the subsidies.

SHANOOR SEERVAI: Why have states imposed their own mandates if what was more important were these subsidies?

SARA COLLINS: The strength of the mandate in addition to the subsidies can’t be denied. The marketplaces, the federal marketplaces can operate probably without it, but it would probably operate even better with one. So what I think is going to be interesting to see is how enrollment does differ in these states that have imposed individual mandates relative to the rest of the country where there isn’t a mandate in place.

SHANOOR SEERVAI: We’ve talked a lot today about all of the gains that we have made through the Affordable Care Act. And going into 2019, this is the year that Democratic candidates who want to run for president in 2020 will make their positions on health care clear. Health care was a very important issue for voters going into the midterms this year, a lot of polls said it was the most important issue. What positions can we expect to see Democrats coming out with on health care?

SARA COLLINS: We won’t see an effort to repeal the Affordable Care Act. The salience of the preexisting condition exclusion issue in the election could potentially trigger some bipartisan efforts around the ACA, including efforts to stabilize the marketplaces. Like reinsurance, that has bipartisan support.

SHANOOR SEERVAI: Can you explain what reinsurance is, please?

SARA COLLINS: What reinsurance does is it reimburses insurers for very high claims. And this was very important in the early years of the marketplaces because insurers didn’t know the risk pools. They didn’t know who was going to be enrolling. And so the fact that there was going to be a reinsurance program there meant that their premiums were set a lot lower. So that reinsurance program phased out after three years, and that was one reason why we did see a pretty big spike in premiums in 2017. So it would be a positive thing for most marketplaces to have a type of reinsurance reinstated, whether or not it is the whole federal program or a different kind of approach.

But it does protect people you mentioned, people who are over the threshold that makes them eligible for tax credits.

SHANOOR SEERVAI: Is that why it has bipartisan support?

SARA COLLINS: It does. It is one way of addressing the affordability problems in that group. Another way of course is to lift the threshold so that you are eligible for a subsidy no matter what your income is.

SHANOOR SEERVAI: If we suggest lifting the cap on eligibility for subsidies, just completely lifting it, or on some sort of sliding scale?

SARA COLLINS: Well, think about how the tax credit is structured. The amount of premium you pay is based on your income. So at 400 percent of poverty you can’t pay more than 9.6% of your income. So the tax credit pays the part that is between that amount and the premium. So as your income gets higher and higher there are going to be fewer and fewer people who are spending that much of their income. So it has a natural phase-out built into it. And what the analysis shows is that it has the effect of bringing healthier people into the market.

SHANOOR SEERVAI: People who are eligible for the tax credits end up paying an average toward their premium of $77 a month. So that’s actually pretty affordable for a lot of Americans.

SARA COLLINS: Right. And when we ask on our surveys how difficult it is for people to afford their premiums, what we find is that people with lower incomes have an easier time affording them than people with higher incomes. So people at the higher end of the income scale are paying more. So one policy option is to, a, lift the cap, but also make the tax credits themselves more generous.

SHANOOR SEERVAI: What else can Congress do besides working on this issue of tax credits?

SARA COLLINS: Just to think in terms of what the Affordable Care Act has accomplished in the marketplaces — Americans are in an indisputably better place than they were in 2009. But they can be in a much better place. Congress has the tools to make the necessary changes to the law, and all it needs is political will to come together on both sides of the aisle and do what is right for people. For their part, as you mentioned, the voters gave policymakers a pretty clear message that they want these coverage gains protected, particularly on preexisting condition protections. There are some small, relatively low-cost changes that Congress and the states could easily undertake that would reduce the number of people who are uninsured and improve the cost protection of their plans.

SHANOOR SEERVAI: Can you give me some examples of that?

SARA COLLINS: So first and foremost states could expand their Medicaid programs without restrictions that will limit enrollment. Extending the subsidies to more people, and we have talked about a couple different ways to do that. Lowering the cost-sharing that people face on these plans. We don’t need to throw out the law and start all over again. It would be obviously massively disruptive to do that.

Medicare for All and  “Medicare for More” Plans

SHANOOR SEERVAI: There are Democratic policymakers who are advocating for “Medicare for All” or some other such plan that drastically changes the way our system works. Do you think that we need solutions like that?

SARA COLLINS: So there are a number of proposals in Congress that would make some of the marginal changes that I have mentioned, and there are other bills that would add a Medicare-like plan to the marketplaces. And there are other bills that would extend that public plan option to all — to everyone regardless of how many insurers are in the marketplaces. And yet another bill would extend the option of a public plan to people in employer-based plans — so I characterize these plans as sort of “Medicare for more” plans, where there is a Medicare-like plan offered alongside the marketplace plans or employer based plans. So these are still bills that would build on the law that is in place by enhancing options for people. And then you get to the end of that spectrum, and you are at the Medicare for All proposals where Medicare would become the only option. But even that — and Senator Sanders’s bill is an example of that – that bill even has a pretty lengthy transition period. So there would have to be some kind of build-up to that, rather than just unraveling the law all at once.

SHANOOR SEERVAI: So to close, Sara, the next open enrollment period seems far away but it is going to come around soon enough. What are you most concerned about?

SARA COLLINS: So the enrollment numbers are important right now, and everyone is going to be tracking very closely — insurers in particular — whether or not as many people enroll in all of the states, what the total number is at the end of the open enrollment period. But the other measure that really matters is the number of people who pay their premiums and are enrolled about midway through the year. And last year what we found is that more people were actually enrolled or had paid their premiums last summer than in the year before. So that will be a key statistic to look for this summer, just in terms of how many people are actually enrolled in the plans.

But the Texas v. Azar decision will matter hugely obviously, and the timing of it will also matter a lot. So if it is resolved relatively quickly then it might not have much of an effect on insurers’ decision to participate in the marketplaces. But if that drags on through the summer it might have an effect on what insurers decide to price their plans at.

SHANOOR SEERVAI: All right, thanks for joining me on the show today.

SARA COLLINS: Thank you so much.

SHANOOR SEERVAI: That’s it for today’s show. We’ve been getting some great listener mail, so please keep it coming. Our email address is [email protected].