HHS Says 2017 ACA Plans Will Still Be Affordable Despite Insurer Exits

The Obama administration is fighting the notion that recent bad news for the Affordable Care Act marketplaces, including multiple insurers pulling out and reports of skyrocketing premium rates, will sink the exchanges.

HHS released an analysis Wednesday arguing that expected increases in premiums for 2017 plans in the ACA marketplaces will not make the plans unaffordable. The issue brief from HHS’ Office of the Assistant Secretary for Planning and Evaluation proposes a scenario in which all individual and small-group premiums increase by 25% in 2017 and finds that more than 70% of consumers could find coverage for $75 or less a month.

The analysis comes at a tumultuous time for the ACA. Aetna, Humana and UnitedHealth Group have all said they will drastically scale back participation in the plans. Oscar Insurance Corp., a tech-based startup funded by venture capital, also decided to exit markets in Texas and New Jersey. A recent analysis from the consulting firm Avalere found that almost 36% of the exchanges will have only one participating health insurer in 2017.

On Tuesday, the commissioner of the Tennessee Department of Commerce and Insurance said the state’s ACA exchange was “very near collapse” after approving premium rate increases ranging from 44.3% to 62%.

Democrats and Republicans have been keeping a close eye on premium increases for 2017 as participants will be dealing with the hike at about the same time as they head to the polls for the presidential election.

Republican nominee Donald Trump has frequently bashed the ACA and claimed the premium increases will be “catastrophic” and “like never before.” His Democratic rival Hillary Clinton has proposed a public plan option in the exchanges, particularly where competition is lacking.

A Kaiser Family Foundation analysis found that the average increase for silver plans in major cities where states have announced premium rates is about 9%. Several insurers have announced increases in the double digits, however.

The new HHS analysis posits that plans will be affordable regardless because consumers can shop around for the best deal and because tax credits to consumers will increase along with premium rates.

Of those enrolled in the marketplace in 2015 who re-enrolled in 2016, 43% switched plans and saved an average of $42 per month in premium costs, according to HHS.

“Because consumers are guaranteed the option to shop around each year during open enrollment, they have the opportunity to re-evaluate the full set of plans available in the market each year and select whatever plan best meets their need and budget,” the report states.

This is undercut, however, by the lower participation of insurers in 2017. The Avalere analysis found that seven states will have only one insurer in each of the ACA markets next year.

HHS also argues the premium subsidies, or tax credits, “play an important role in ensuring that health insurance coverage is affordable for consumers.” According to its data, 85% of 2016 marketplace plan selections in states using HealthCare.gov were with a tax credit. Also, when premiums rise faster than expected, more consumers qualify for and receive a tax credit. However, many middle-income people and families who don’t qualify for premium subsidies have found exchange coverage difficult to afford.

In a Commonwealth Fund blog also posted Wednesday, President Dr. David Blumenthal and Sara Collins, an analyst, agreed with the HHS contention that premium increases will mostly be absorbed by the tax credits and so “most people who enroll in marketplace plans this year will not pay much more than they did in 2015.”

They argue that insurance companies will have to make adjustments to compete in the post-ACA market. Meanwhile, the permanent risk-adjustment program has mostly been functioning as intended, and the risk pools appear to be improving, according to the Commonwealth Fund. Many insurance actuaries, however, contend that risk pools still vary too much by state and don’t have enough young, healthy people enrolled.

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