President Barack Obama’s administrative “fix” for the Affordable Care Act may solve some immediate political problems, but it will likely create other concerns by causing premiums for marketplace health plans to increase in 2015.
Because of a public outcry over plan cancellations, the president on Thursday said he will allow insurers to renew current policies in the individual and small group market next year, even though those plans don’t have the consumer protections and added benefits required by the Affordable Care Act.
People who currently have individual coverage had to undergo health screenings before they could get coverage, so they are generally in good health.
But health experts say Obama’s decision to give these typically healthy people – who are cheaper to insure – another year to move into marketplace coverage will keep them from offsetting the additional coverage costs of sicker people who are more likely to enroll in a plan through Obamacare in 2014.
Having more sick people in the marketplace in 2014 will cause premiums to rise in 2015, experts say.
“Clearly it will make the (2014 marketplace) risk pools sicker, because these people who have individual coverage now have to be healthier than average or their coverage wouldn’t have been sold to them,” said Paul Ginsburg, president of the nonpartisan Center for Studying Health System Change.
Insurers and state insurance commissioners ultimately will decide whether people can actually keep their current plans. But if large numbers do so, it could destabilize the insurance market and result in higher premiums.
“If now fewer younger and healthier people choose to purchase coverage in the exchange, premiums will increase and there will be fewer choices for consumers,” said Karen Ignagni, president and CEO of America’s Health Insurance Plans, the trade association for the health insurance industry.
Jim Donelon, president of the National Association of Insurance Commissioners and the Louisiana state insurance commissioner, agreed.
Donelon said in a statement that his group “has been clear from the beginning that allowing insurers to have different rules for different policies would be detrimental to the overall market and result in higher premiums.”
Insurance commissioners across the country are now weighing this sudden change to the Affordable Care Act.
In California, Insurance Commissioner Dave Jones said he will allow more than 1 million residents with terminating insurance plans to keep them through next year. In Kansas, Insurance Commissioner Sandy Praeger said she is studying the proposal and would discuss with state insurers the “meaning and impact” of the changes and how they “might be implemented.”
Kentucky will comply with the president’s request to allow insurers in the state the option of continuing their current policies, according to a statement released by the office of Gov. Steve Beshear; about 6 percent of Kentuckians will be affected.
Donelon also questioned how the president’s changes would translate into actual policy.
“In many states, cancellation notices have already gone out to policyholders and rates and plans have already been approved for 2014,” he said. “Changing the rules through administrative action at this late date creates uncertainty and may not address the underlying issues.”
Jonathan Gruber, an economist at the Massachusetts Institute of Technology who helped design the federal health law and Massachusetts’ universal health law, said insurers were “rightly mad” about the president’s sudden policy shift.
“They struck a deal where they would accept all comers at a fair price, but in return everyone would have to join the new market,” Gruber said an email.
He said the “toxic politics” resulting from the flawed government website and policy cancellations forced the president to act.
“What he did will cause some losses for insurers, but is unlikely to fundamentally destabilize the markets,” Gruber wrote. “It will probably result in higher prices in 2015, but not too much higher.”
The health law’s temporary “risk corridor program,” which runs from 2014 to 2016, will help mitigate the extra costs that insurance companies would incur if a disproportionate number of sicker people sign up for coverage in 2014.
Under the program, if an insurers’ benefit spending is less than 97 percent of its target estimate, it must pay the federal government a portion of the difference. But if the insurers’ costs are more than 103 percent of their targeted spending amount, the government pays the insurer a percentage of the difference. Doing so helps keep premium costs stable.
The Department of Health and Human Services is looking at ways modify the program’s rules so additional assistance can be provided to insurers who could see higher benefit spending because of the president’s announcement.