The Patient Protection and Affordable Care Act opened up the possibility of buying health insurance to millions of Americans who, for whatever reason, were uninsured before – to the tune of 8 million enrollees in PPACA health exchange plans as of early May.
However, some of those 8 million new policy owners were no doubt enrolled previously in a different plan, whether employer-based or individually bought.
Many of the largest health insurance carriers began offering plans on the state and federal health exchanges, but not all of them chose to provide an exchange option. And there’s a lot of uncertainty surrounding the effects of the PPACA exchanges on health insurance carriers that have traditionally offered stand-alone individual or family insurance plans. Are individuals and families still purchasing these plans directly from the health insurance carriers? What’s happening to the plan rates? And will health insurance carriers continue to offer individual or family plans?
For the past decade or so, about 10 to 15 million people each year have bought their own health insurance.
“They’re not the same people from year to year,” explains Adam Beck, assistant professor of health insurance, Huebner School, The American College. “So with 8 million enrollees, what we have now is an entire individual market that has been replaced in the past six months by what people call Obamacare. About 60 percent of that is through the online exchanges, and I think that proportion is going to grow.
“Off the exchanges, consumers looking to enroll in health insurance through the individual market were definitely experiencing rate increases after the requirements of PPACA took effect this year,” Beck adds. “Some increase was to be expected, but the 2014 rate hikes have been more noticeable because of the elimination of medical underwriting and the requirement to cover ten essential health benefits.”
What was really surprising, according to Beck, was the number of consumers who signed up for qualified health plans (plans incorporating certain essential health-benefit mandates from the PPACA) off the exchanges.
“Estimates put that number in the millions,” Beck says. “But very few people will be doing that in the future. Confidence in the exchange websites will grow; more people will be aware that they qualify for tax credits; and the individual market will be conducted almost exclusively through the online health exchanges.”
And Beck believes that, based on the new enrollment numbers, the evidence is good the rate of premium increases will slow, “Healthy, young people signed up on the exchanges, so we’re getting plans that insurers are pricing lower than they even expected.”
“With experienced carriers, I don’t think you’ll see a big jump in rates unless the carrier didn’t price things correctly,” says Susan L. Combs, PPACA, president, Combs & Co. “Most of them have priced themselves accordingly. We’ve actually been told by a carrier in the New York market that they’ll be seeing a decrease in their rates for the first quarter of 2015. The system entirely changed for so many states this year because they had to do away with underwriting based on health, so I don’t think you’ll ever see as big an increase as you’ll see this year unless you do not get the young, healthy people in the mix that all the carriers are planning on. They’re needed to basically be paying on the claims for the higher utilizers.
“Most of the carriers understand how the system works,” she adds. “It’s the newer carriers that don’t have any experience or history with claims that are going to be the ones with some significant increases, because they don’t have any history, and I think a lot of them were ‘buying’ the business.”
“It’s still unclear for next year whether or not the actuarial data will provide enough insight so that the cost structure will change,” notes Minda Wilson, founder, Affordable Healthcare Review. “We don’t know how many of these people are going to pay for their policies the whole year. We don’t know what the usage of these policies will be. We don’t know what deductibles are going to be, either. It’s not just the cost of the policy premium; you must consider the cost of the deductibles and the co-pays as well. There’s also uncertainty about who’s going to renew.
“The other thing that’s happening on the private market is people are starting to form organizations to buy collective health care,” she continues. “Private trade associations and other organizations are buying health care for their members, and people are signing up because it’s cheaper. The bottom line is that the exchange, going forward, is still going to have the most expensive policies because people with other, less expensive options are going to take those options.”
Frank Bird, vice president of MDS Consulting, doesn’t think the industry will see any large increases or decreases in the coming year.
“I think people are positioning themselves strategically for where they want to put their efforts,” Bird says. “The carriers are really looking for predictability, and there isn’t much of that in the exchanges right now.”
However, he thinks that over time, the rate of growth for insurance premiums will remain lower than in the past as the integration trend in health care continues.
“As more and more systems become integrated from a clinical and technical standpoint, they’ll apply managed-care principles across the board,” he says. “So you should see – even if it’s not negotiated rates – utilization going down a bit as more and more people are on managed-care plans, regardless of which provider they see.”
And he sees more attention paid to self-funded plans, too.
“It’s really every employer figuring out what’s most important,” he explains. “Is it cost? Return-to-work speed? A certain altruism about whether employees are happy? Everyone has to make that decision, and we have to get away from health care as a commodity.”
He also says the existence of the health insurance exchanges as a whole could lead to a more educated patient population – and that could help drive the national cost of health care down.
“The exchange is going to educate people,” he notes, “and once they’re educated, the offerings from health plans to support members are going to be broader. This is definitely going to change the game, and I think it’s a change for the good, because plans are going to have to focus on individuals, not just pricing.”
“If you empower involved brokers and agents, they will continue to play a significant role in helping people purchase health insurance policies,” says Beck, “but the platform will be almost exclusively online with the exchanges.
“I think there’s a natural concern that if you are a health insurance agent or broker that you’re going to go the way of a travel agent,” he continues. “But there is a significant difference between buying health insurance and buying a plane ticket. If you have complex health needs, you probably should still be talking with a broker who understands the plans and the networks. There are going to be significant opportunities for consulting in the future. Brokers will have a role in long-term strategic planning, setting up self-funded plans with employers; they’re going to be working with employers to set up wellness programs, some of which the PPACA incentivizes to manage their risks and reduce their costs.”