On Nov. 1, millions of eligible people will begin enrolling in individual health plans sold over health insurance exchanges created by the Patient Protection and Affordable Care Act. Next year will be the fourth year that the exchanges, also known as health insurance marketplaces, will be in operation.
The ACA, signed into law in 2010, requires individuals to have health insurance. The requirement, also known as the “individual mandate,” went into effect Jan. 1, 2014. People who have no other source of health benefits can purchase individual health plans on their state exchanges or through a federal exchange set up by the government.
Individual states can run their own insurance exchanges. They can run them with financial support from the federal government. They can run them through a partnership with the federal government. Or they can just let the federal government do it for them. According to the latest data from the Kaiser Family Foundation, 13 states, including Minnesota, run their own insurance exchanges (kaiserf.am/10Wuicd).
Eligible people who are required to have health benefits face a tax penalty if they don’t have benefits. That penalty was $695 for an adult this year, up from $325 last year and $95 in 2014 (bit.ly/1NuYJLg). HHS has yet to announce the exact dollar amount of the penalty in 2017, but it is scheduled to be this year’s amount adjusted for inflation.
In this article, Twin Cities Business takes an explanatory, numerical look at the performance of the exchanges through five metrics:
Health plan enrollment
Health plan type and selection
Health plan issuers
Health plan premiums
Enrollee health status
Collectively, that trend data from the five metrics will provide a good indication of the changes coming for health insurance exchanges in 2017.
Health Insurance Exchange Enrollment
Enrollment in Minnesota rising faster than enrollment nationally.
Getting accurate, consistent and up-to-date figures on how many people bought individual health plans through state and federal health insurance exchanges is challenging. It’s not because of a dearth of data. It’s because of an overabundance of data.
How many people signed up for benefits, how many people selected a health plan and how many people actually bought coverage are different data points. They’re also data points that move around within a 14-month health insurance cycle that starts with open enrollment about two months before a full calendar year of health coverage.
The official scorekeeper of all things related to the state and federal health insurance exchanges is a branch of the U.S. Department of Health and Human Services called the Office of the Assistant Secretary for Planning and Evaluation, or ASPE (bit.ly/29ydRt8). ASPE itself, HHS or the Centers for Medicare & Medicaid Services (CMS), another branch of HHS, regularly release data on ACA-mandated health plan enrollment (go.cms.gov/1Gn8edX).
According to ASPE, nearly 12.7 million people across the U.S. selected and enrolled in a health plan through their state or federal insurance exchange this year (bit.ly/1LhfB9z). That’s up 8.5 percent from the nearly 11.7 million people who selected and enrolled in a health plan in 2015 (bit.ly/29lI0PB).
In Minnesota, 83,507 residents selected and enrolled in a plan through MNsure, the state’s insurance exchange, for this year, according to federal figures. That’s up nearly 40 percent from the 59,704 residents who did so last year.
However, selecting and enrolling in an exchange health plan is not the same as paying for benefits and having coverage. The federal government refers to the latter as “effectuated enrollment.” Effectuated enrollment is the number of people who have paid their premiums and have active coverage at a given point in time during the calendar year.
Nationally, the effectuated enrollment this year was about 11.1 million, up 8.8 percent from about 10.2 million in 2015, according to data released by the CMS (go.cms.gov/29fRfeF). In Minnesota, the effectuated enrollment in health plans through MNsure was 74,060 residents, up a whopping 59.3 percent from 46,481 last year, according to a state-by-state breakdown from the CMS.
Though representing just a fraction of the effectuated enrollment in exchange health plans nationwide, the number of eligible Minnesota residents who signed up and bought coverage this year rose nearly seven times faster than the number of eligible people across the entire country.
In its preliminary 2017 budget submitted to the state Legislature in March, MNsure conservatively estimated that it would add 15,000 effectuated enrollees to its roster next year (bit.ly/29nBiXs). That would represent an increase of more than 20 percent to the number of state residents who pay and receive health benefits through the exchange in 2017.
Health Insurance Exchange Plans
Health plan preferences of Minnesotans run counter to enrollees nationally.
Individuals who buy health insurance benefits through state and federal health insurance exchanges can pick qualified health plans in four categories: Bronze, silver, gold and platinum. (Catastrophic coverage plans also are available.) Each plan at each of the four levels comes with its own set of covered benefits, network providers, monthly premiums, deductibles and co-payments for enrollees.
No different from other forms of insurance, exchange health plans that offer more generous benefits generally cost more than health plans with less generous benefits.
The premiums for bronze-level plans, for example, are lower than the premiums for platinum-level plans because bronze-level plans cover only 60 percent of enrollees’ health care costs on average, compared with 90 percent by platinum-level plans, according to the HealthCare.gov website (bit.ly/1BQyBlB).
By far the most popular plans on the state exchanges nationally are silver-level plans. This year, 68 percent of the initial enrollees across the country selected silver-level health plans, according to federal figures released in March (bit.ly/1LhfB9z). A distant second were bronze-level plans (23 percent); gold-level plans (6 percent); platinum-level plans (2 percent); and catastrophic coverage plans (1 percent).
The percentage of silver-level plans initially selected by enrollees this year is up from 67 percent in 2015 and 65 percent in 2014.
Minnesota is the only state where enrollees demonstrated their strong preference for cheaper, bronze-level health plans over anything else available on a state or federal health insurance exchange.
Some 46 percent of the people who chose plans through MNsure this year selected bronze-level plans, according to data from HHS’ Office of the Assistant Secretary for Planning and Evaluation (see chart). That’s more than the 36 percent who picked silver-level plans and 17 percent who chose gold-level plans. Only 1 percent of enrollees in the state selected catastrophic coverage. No one went platinum.
The only other state where residents preferred bronze to silver this year was Colorado, and only by a slim margin—45 percent selected bronze-level plans, and 44 percent chose silver-level plans.
Health Insurance Exchange Issuers
The names may change, but the number of issuers and health plan choices continues to rise.
The exchange health plan selections by enrollees have been consistent over the first three years of the individual mandate, but how many choices they have and which insurance carriers they buy plans from can vary from year to year.
The number of carriers—“issuers” in marketplace parlance—and the types and numbers of qualified health plans they sell starts to take shape about six months before the start of a calendar-year insurance cycle. By that time, issuers have calculated their underwriting gain (or loss) from the previous year, have gotten a fix on how the current year is going financially and announce their decisions to stay in or drop out of a particular exchange the following year.
Despite the handwringing that occurs when a major carrier announces its exit from an exchange or multiple exchanges, the number of issuers and qualified health plans available to enrollees has been relatively stable over the first three years of the individual mandate.
In the 38 states that used the federal website to sign up enrollees this year, the total number of issuers rose by seven, to 238, from 231 in 2015, according to HHS’ Office of the Assistant Secretary for Planning and Evaluation. Thirty-five issuers exited state exchanges in 2016, but 40 others joined, for a net gain of five (in addition to two previously unrecorded issuers in Hawaii) (bit.ly/29nXTRf). The number of issuers in those same 38 states was 187 in 2014, the first year the exchanges were in operation.
The average number of issuers in the 38 states was 10 per state this year, up from nine last year and eight in 2014, according to the ASPE’s data.
As for qualified health plans, the average number of plans available to enrollees in the 38 states was 47 per state this year, down from 55 last year and 51 in 2014.
In Minnesota, the number of qualified health plans available to enrollees this year was 99—more than double the average in the 38 states using the federal exchange website, according to figures provided to Twin Cities Business by Shane Delaney, director of communications and marketing for MNsure, the state’s health insurance exchange. That’s up from 84 plans in 2015 and 60 plans in 2014.
Five issuers offered the 99 plans to residents through MNsure this year: UCare, HealthPartners, Medica, Blue Plus, and Blue Cross and Blue Shield of Minnesota. The state has had five issuers in each of the first three years of the exchange, though the roster has changed slightly, with PreferredOne exiting and Blue Plus entering in 2015. Fairview Health Services acquired all of PreferredOne, a former joint venture partner, in 2016 (bit.ly/29wBYva).
The number of available plans and the number of issuers in Minnesota likely will change again in 2017. In April, Fairview announced plans to acquire UCare (bit.ly/23oXnr7). In June, Blue Cross and Blue Shield of Minnesota announced that it was going to stop selling individual health insurance policies in 2017 with the exception of Blue Plus (bit.ly/29lMENx).
“Shifts and changes in health plan participation and market segments have contributed to a volatile individual market, where costs and prices have been escalating at unprecedented levels,” the state’s Blues plan said in a prepared statement. “Based on current medical claim trends, Blue Cross is projecting a total loss of more than $500 million in the individual segment over three years.”
Of the 103,000 individuals affected by the decision, about 13 percent, or about 13,390 people, got their individual policies through MNsure this year, according to Jim McManus, the Blues’ director of public relations. Consequently, if those people stay in the exchange in 2017, they will have to select a plan from another participating issuer in Minnesota.
Health Insurance Exchange Premiums
Prospect of double-digit rate increases is tempered by history of financial assistance to enrollees.
Of all the metrics used to measure the performance of state and federal insurance marketplaces, none is more closely watched than the premiums enrollees pay for coverage. Premiums put the “affordable” in the Patient Protection and Affordable Care Act.
But what’s affordable depends on who you are:
If premiums are too high, ACA supporters will complain that the program is locking out those who need benefits most. If they’re too low, ACA critics will complain that the program is being subsidized unfairly by taxpayers.
From an insurance carrier’s perspective, if premiums are too high, a plan may not attract enough healthy enrollees to create an actuarially sound risk pool. If premiums are too low, a plan may attract too many unhealthy enrollees to create an actuarially sound risk pool.
From an employee with employer-sponsored health benefits, the exchange premiums look like a steal. From an unemployed person who lost their employer-sponsored health benefits, the exchange premiums could be considered cost prohibitive.
Regardless of perspective, here are the numbers from HHS’ ASPE office: The average monthly premium for all health plans selected on the federal exchange this year was $396 for individual coverage. That includes all premiums for all bronze-, silver-, gold- and platinum-level plans. It does not include premiums for catastrophic coverage plans (bit.ly/1LhfB9z).
That average monthly premium for all health plans selected this year is up 8.8 percent from $364 in 2015, following a 5.2 percent increase last year from $346 in 2014 (See chart "Monthly Premiums For Health Plans").
By comparison, the average monthly premium for individual coverage through an employer-sponsored health plan was $521 in 2015, according to the latest available data from the Kaiser Family Foundation (kaiserf.am/1iKCViK).
Employees typically don’t pay 100 percent of their premiums, and most enrollees in exchange health plans don’t pay 100 percent of their premiums. For example, employees with employer-sponsored individual health plans paid an average of $89 per month for their benefits last year, according to the Kaiser Family Foundation, with their employers footing the $432 balance.
This year, of the nearly 11.1 million effectuated enrollees who bought plans through state and federal exchanges, nearly 9.4 million, or about 85 percent, qualified for and used an Advanced Premium Tax Credit, or APTC, to pay for the plan they selected, according to data from the Centers for Medicare & Medicaid Services. The average monthly APTC this year was $290, which drove the average monthly premium down for qualified enrollees to just $106, according to the ASPE.
In Minnesota, monthly premiums for the 99 health plans available to enrollees through the five issuers this year varied by individual or family coverage, age of enrollee and plan level, among other criteria. The monthly premium without premium assistance for an individual silver plan for a 40-year-old was $228, according to MNsure, the state’s health insurance exchange. That’s 26 percent more for the same plan last year and 48 percent more than in 2014.
Of the state’s 74,060 effectuated enrollees this year, 47,266, or nearly 64 percent, qualified for the APTC. With premium assistance, that individual silver plan for a 40-year-old resident was cheaper this year than it was two years ago. In 2014, it was $120. This year, it was $118.
Any fears over double-digit premium increases next year likely should be tempered by the fact that enrollees who least can afford coverage will continue to get financial assistance to buy health coverage.
In a May report, McKinsey analyzed carriers’ financial results from participating in state insurance marketplaces (bit.ly/1ssaBXu). The global consulting firm reached this conclusion despite finding that most insurers have lost money: “The individual market has little risk of entering a classic insurance ‘death spiral’ as long as the federal government continues to offer subsidies to those with incomes below 400 percent of the federal poverty level. Given the unique regulatory conditions of this market, the key determinants of its stability are not the traditional factors (risk and cost of care for this segment), but rather the ongoing subsidy payments.”
Health Insurance Exchange Enrollee Health Status
Whether the enrollee pool is getting sicker each year is a matter of opinion and much research.
Setting the right premiums is part actuarial science and part underwriting art for carriers selling health plans over state and federal health exchanges.
Underestimating the health status of potential enrollees can lead to underpricing policies and creating a large risk pool of unhealthy, high-cost customers. Overestimating the health status of potential enrollees can lead to overpricing policies and creating a small risk pool of unhealthy, high-cost customers.
Whether the millions of people who buy health plans are sicker than the general population and/or collectively getting sicker each year that the exchanges are in operation is a matter of ongoing debate and research.
In May 2015, researchers published a study in the journal Health Affairs that found that enrollees in marketplace health plans spent less on prescription medications overall but were more likely to take high-priced specialty medications than non-marketplace enrollees (bit.ly/29Q4yDK).
In March, the Blue Cross and Blue Shield Association foreshadowed—and perhaps attempted to provide political cover for—the anticipated exit of some Blues plans from certain exchanges in 2017. The BCBSA released a 10-page report that said members who bought individual coverage from Blues plans in 2014 and 2015 through and outside of state and federal exchanges were sicker, used more medical services and incurred higher medical costs than those who bought individual coverage previously or who were insured by a Blues plan through their employer (bit.ly/1LXR8X4).
In May, the Kaiser Family Foundation released the results of a survey of nearly 800 adults who bought individual ACA-compliant coverage from a state or federal health insurance exchange or from another source such as a private exchange from 2014 through 2016 (kaiserf.am/29jdoww). The percentage of respondents who characterized their health status as excellent, very good or good was consistent over that three-year period and consistent between those who bought plans over the state or federal exchanges or from another source (see chart "ACA Health Insurance Marketplace Health Status").
But in July, researchers from HHS’ Agency for Healthcare Research and Quality reported in Health Affairs that individuals with private health insurance obtained directly or through state or federal exchanges in 2014 were less healthy and had higher rates of chronic diseases than individuals with private health insurance obtained directly or through state or federal exchanges in 2013 (bit.ly/28ThJXO).
If age is a proxy for health status, then enrollees in health plans selected through MNsure may be sicker than enrollees nationally, incurring higher medical expenses and increasing carriers’ underwriting costs.
In Minnesota, 38 percent of the 83,507 who selected health plans through the exchange this year were age 55 to 64, according to data from HHS’ ASPE office (bit.ly/29jjAjX). That’s the largest percentage of enrollees in that age bracket in any state other than West Virginia, which also had 38 percent of its enrollees age 55 to 64. Nationally, that figure was 26 percent, according to the ASPE.
Older uninsured people buying cheaper health plans should be a red flag for issuers in Minnesota.
David Burda (twitter.com/@davidrburda, email@example.com) is editorial director, health care strategies, for MSP-C, where he serves as the chief health care content strategist and health care subject matter expert.