Short-term Plans Could Force Added Pressure to ACA Exchanges, Will Any Risk-Pooling Be Adapted to the Exchanges in the Future?

A Closer Look at the Past and Future Use of High-Risk Pools in the Health Insurance Exchanges

There will be a potential rise of “short-term” plans in the coming years.(1) The source of this popularity will come particularly from small employers not able to afford the small group coverage in the exchanges and those hard-working people in the individual market that have incomes that do not qualify for the government subsidies (also the people that we should be rewarding rather than unintentionally hurting) that have been adversely affected by the increased rates in the exchanges. A multitude of factors has gone into these increased rates but the increases are primarily due to the required benefits offering, smaller than projected enrollment, and insurance companies taking advantage of the government subsidies population. Insurers have realized they can risk pricing out this small percentage of individuals in the open market not qualifying for subsidies and more than make up for it financially as the government picks up the majority of the increased premiums for those subsidy-qualifying members, keeping them in the exchange. The short-term plans follow a ruling by the current administration to reverse the previous administrations definition of short-term plans (primarily offered for those between jobs) from 90 days to 364 days. This essentially changes the “short-term” definition they are given to pure semantics and is compounded by offering a 36-month renewal on these plans further solidifying their enticement into the market. These plans are attractive for smaller employers or individuals through decreased premiums as a result of a slimmer benefit that does not have to comply with the essential health benefits of the ACA. As these slimmer benefit, short-term plans could take more individuals away from the exchanges further increasing premiums, I believe it’s time we review one of the MN legislatures pre-ACA decisions to eliminate our high-risk pool, the Minnesota Comprehensive Health Association (MCHA). (2)

The MCHA was written into law 1976 and used a health insurance industry tax (roughly 57% of total cost), manifesting in the form of premium increases for the rest of the commercially insured Minnesotans, to help fund health insurance for the roughly 30,000 sickest Minnesotans with pre-existing conditions that could not afford coverage in the open market. One of the reasons the health care insurance market is so complex is the small percentage of individuals that incur enormous costs, often times year-over-year costs, to the system. Other forms of insurance like car insurance, which is mandated by the way, do not face quite these issues especially when you combine it with the inelastic nature of an individual's healthcare demand and the lack of choices (price-wise, there is no 1990 Ford Taurus version of a knee replacement) for US consumers in the healthcare marketplace. These plans and issues will be hugely influenced by Washington and subsequently are very fluid, but having an understanding of their history and how the idea of risk-pooling might be adapted and utilized in the future is good information to know for all of us future leaders responsible for shaping health care policy.

The Minnesota State Department of Health posthumous review on the program outlines the increasing OOP burden on those patients and the likelihood of the unsustainable nature of the program. This is true as the program intended to allow those economically disadvantaged patients the capability to purchase insurance at a rate of 101-125% of that of competing insurance plans in the marketplace. I would also add that we reached a lack of sustainability in the Minnesota market place anyway last year in 2017 when the state authorized a $600 million reinsurance plan on the market place.(3) At least when the MCHA was around everyone else in the open market was able to have much more affordable premiums, encouraging enrollment. Given the history of high-risk pools and our current premium battle, moving forward exchanges might have to consider adding a high-risk pool option for all patients in the individual and small-group market with pre-existing conditions regardless of income level in an effort to entice healthier individuals into the exchanges which would broaden the sources of subsidy for premiums, cost sharing and uncovered claims, making the program sustainable. In “fixing” the system we would need the broadening of that original high-risk pool; the abolition of the MCHA in 2012 added pressure to the current exchange markets and its history should be used as a knowledge source and guide to co-opt a new risk management strategy in the exchanges.

As a final note I would also draw attention to the comments made about these short-term plans in that the “HHS notes that there is little evidence for short-term plans excluding hospitalization or emergency services, but it’s fairly common to see short-term plans that don’t cover preventive care, maternity care, outpatient prescriptions, or mental health/substance use treatment(1).” I may write another synopsis about the stop-loss market and how hospital administered or physician administered expensive drugs have lead to an increase in million-dollar claims and essentially forced these insurers to laser out high-claim patients and hammer premiums for the self-insured employer.(4) The small employer choosing to be self-insured may be further driven to these short-term plans in hopes of decreasing those expensive claims or receiving a more favorable premium to purchase stop-loss coverage. Will this be a market-moving factor towards short-term health plans? I have no idea, but another interesting weave in the fabric of the insurance market.

An update to the story and further reason for potential concerns in the individual and small group exchange market place is the return of association health plans (AHPs). The current administration, through an executive order and the US Dept of Labor, will once again allow small businesses, including self-employed workers/sole proprietors, to band together by geography or industry to obtain healthcare coverage as if they were a single large employer. (5) Now these plans are subject to the same criteria as the ACA in terms of pre-existing conditions, health status-based premiums, no lifetime caps, among other requirements. The tussel over the interpretation of this executive order by state regulators and lawsuits brought by individual states will limit the growth and expansion of these plans for the immediate future. Even with these hurdles, AHP’s are already popping up on the radar again. Nebraska Farm Bureau and Medica announced they were teaming up to offer a menu of association health plans in 2019 for individual farmers, ranchers and small agriculture-related businesses.(5) In August, three chambers of commerce in Nevada announced they would offer an association health plan through UnitedHealth Group that will aggregate small firms into one large-group plan.(6) The increased risk pooling and leverage generation from these associations allows for cheaper premiums for these groups/individuals which are more comparable to large employers. As I previously mentioned, a decent portion of individual and small businesses attracted to the AHP are those most likely to have dropped out of the ACA exchanges due to the increased premiums. In defense of the allowance for AHP’s, the Nebraska Department of Insurance states they aren't worried about AHPs drawing younger and healthier people out of the Affordable Care Act market and driving up premiums because the new plans will likely attract mostly consumers who already have dropped out of the ACA market due to high premiums. (6) Time will tell on the popularity of these associations as well.

I will also remind you that insurers are doing pretty dang well in the ACA marketplace profitability wise. Blue Cross Blue Shield combined decreased medical claims with the tax cut to produce $8.6 billion in profit through Q2 2018 and had ACA individual marketplaces profitable for nearly every Blues insurer. Now, non-for-profit insurance companies are supposed to report those profits and use them to lower premiums thus forcing for-profit insurers like UHC (~7.5 % of the DOW Jones) to lower their premiums as well, but insurance commissioners in many states have increased the allowed "reserves" these non-profits have been able to keep thus keeping the premiums relatively stable with the increased profits.

I thank anyone still reading to this point and will say this exercise was purely an opportunity for personal growth in synthesizing some of the conversations I have had and articles read as an opportunity to contextualize these concepts for a better understanding of our healthcare system.

References:

1. https://www.healthinsurance.org/so-long-to-limits-on-short-term-plans/
2. https://www.health.state.mn.us/divs/hpsc/hep/mchabrief.pdf
3. https://www.startribune.com/minnesota-senate-weighs-600-million-reinsurance-plan/416287954/
4. file:///C:/Users/user/Downloads/SunLifeInjectibles%20(1)%20(1).pdf
5. https://www.dol.gov/general/topic/association-health-plans
6. https://www.modernhealthcare.com/article/20180927/NEWS/180929912

A good look at those numbers showing the individuals receiving subsidies increasing while those without subsidies decreasing in the exchanges as a result of the averse selection in the premium game.