The Obama administration’s “keep your policy” fix could jolt the individual health market, but is not enough to kill it.
Patient Protection and Affordable Care Act risk-management programs should keep the individual commercial health insurance market viable, even if some younger, healthier people keep non-PPACA policies and older, sicker people buy compliant plans.
RAND Corp. analysts Evan Saltzman and Christine Eibner make that case in a new analysis of proposals for helping consumers affected by policy cancellations.
Major PPACA underwriting and benefit design took effect Jan. 1. Many carriers were going to cancel non-PPACA policies this year, and some states were going to require them to cancel the non-PPACA policies, in an effort to create a level playing field in the individual market.
In December, the Obama administration responded to complaints about policy cancellations by encouraging regulators and carriers to let consumers keep existing non-compliant policies another year.
In Congress, some lawmakers have proposed requiring carriers to extend non-compliant policies, and other lawmakers have proposed letting carriers continue selling them to anyone.
The administration’s policy cancellation fix is much cheaper for the federal government than the alternatives, the RAND analysts report.
The administration policy fix would cost just $600 million, while a mandatory extension would cost $1.1 billion, and letting non-compliant plans continue would cost $5.2 billion, the analysts estimate.
The administration proposal could cut enrollment in ordinary health plans that comply with PPACA by about 4 percent.
The mandatory non-compliant plan extension would cut enrollment 8.5 percent, and allowing non-compliant plans would cut enrollment 26 percent.
When the analysts put the proposals through a forecasting model, none of the proposals led to a market-killing death spiral.
Even though the non-compliant plan buyers would be younger and healthier, the non-compliant plan buyers make up a small enough share of the whole market that losing them would not have much effect on plan premiums, the analysts say.