Policies to strengthen nongroup insurance markets could fix ACA problems

Enrollment and stability in the nongroup insurance market continues to be threatened by the uncertainty of support for the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148). Faced with the concerns in this environment, the Robert Wood Johnson Foundation and Urban Institute issued a report, Stabilizing and Strengthening Nongroup Markets, expressing the opinion that “[t]argeted policies could fix the ACA’s problems without sacrificing its gains in coverage, affordability, and access to care.” The report identifies policies that would stabilize the nongroup insurance markets, encourage insurer participation, improve affordability, and rein in premium growth. Some policies would be implemented immediately and others would be implemented in the long term; however, solving the problems will take significant political action.

“Strategies that increase the buying power of enrollees and increase enrollment would make participation more attractive to insurers.” To strengthen ACA marketplaces, the report suggested that policymakers learn from the Medicare Advantage and Medicare Part D markets that successfully compete with the traditional Medicare program.

The current climate

The report pointed out that neither Congress nor the Trump Administration has committed to paying cost-sharing reductions, and the administration signaled it does not intend to enforce the individual mandate penalties. Open enrollment periods have been shortened and federal outreach and enrollment funds will be cut 40 percent in the Navigator program, while the ACA advertising effort will be cut 90 percent. In addition, HHS will limit access to healthcare.gov every week during the 2018 open enrollment period. Such actions will reduce coverage.

Short-term commitments

According to the report, the federal government must commit to (1) reimbursing insurers on an ongoing basis for cost-sharing reductions; (2) enforcing the individual mandate penalties; (3) increasing funding for outreach and enrollment assistance; and (4) permanently reinstating a government-funded reinsurance for nongroup markets.

Long-term commitments

Long-term recommendations addressed in the report include strengthening marketplaces, expanding coverage, reducing premiums and cost-sharing requirements, and encouraging the broadest range of insurers to participate. In addition, the federal government should permit states to expand Medicaid, eliminate non-ACA-compliant nongroup insurance products, and reverse current administrative decisions that hinder enrollment. The report noted that the lack of insurer competition is associated with higher benchmark premiums because it eliminates insurer negotiating leverage.

The report suggests that improving affordability would increase coverage, reduce the number of people uninsured, and bring more healthy enrollees into the insurance pool, lowering average premiums. Other long term policy recommendations include providing additional financial assistance to lower premiums and cost-sharing requirements for nongroup coverage, attaching premium tax credits to gold rather than silver plans lowering out-of-pocket costs for all enrollees receiving tax credits, and increasing cost-sharing subsidies for people with lower incomes.

Additional policies

To strengthen the nongroup insurance market, the report described three additional policies:

1. Benchmark premiums. Changing the way benchmark premiums are calculated affects the size of nongroup premium tax credits allowing people to choose from more plans without additional premium contributions.
2. Capping payment rates. Payment rates charged to nongroup insurers by health care providers could be capped, making it easier for insurers to enter new marketplaces and counteracting provider monopolies.
3. Standardize insurance options sold in the nongroup market. Standardizing the insurance options sold in the nongroup market could reduce the complexity of the enrollment process, improving comparability and facilitating price competition.

According to the report, “nongroup insurance markets must become larger, less expensive for consumers in both premiums and out-of-pocket costs, and less financially risky for insurers.”

Despite dire predictions, ACA serves as economic stimulus

There is no evidence that the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148) has had a negative impact on economic growth or jobs or that the ACA has undermined full-time employment, all effects that opponents of health reform warned about, according to a report by The Commonwealth Fund. Evidence actually indicates that the law has served as an economic stimulus by freeing up private and public resources for investment in jobs and production capacity.

Dire economic predictions

In 2010, when the ACA was enacted, policymakers were still dealing with the effects of the most severe recession since the Great Depression. Some worried that undertaking such a large-scale expansion of health insurance coverage, including the establishment of new requirements for health benefits provided by employers, would hinder job growth and economic recovery. However, The Commonwealth Fund report shows that since 2010, the U.S. economy has been growing slowly but steadily, with the gross domestic product (GDP) growing by 21 percent through 2015. Adjusted for inflation, gross private domestic investment through 2015 has grown faster than the GDP, paving the way for continued growth.

Job growth

The U.S. economy has gained nearly 14 million private sector jobs over five years, with full-time work accounting for all of the net gain. Currently, there are 5 million more people working now than during the peak level prior to the recession, and the unemployment rate has fallen. Jobs are growing faster than in any year since the 1990s. On a state and local level, job growth has improved state tax revenues.

Health care spending

Per-person private and public health care spending has slowed for the past five years. Reforms under the ACA related to Medicare have likely contributed to the slowdown in health care spending, thanks to the tightening of provider payment rates and the introduction of incentives to reduce unnecessary costs. The accrued savings in health care spending relative to pre-ACA projections of growth are substantial, and Medicare alone is projected to spend $1 trillion less between 2010 and 2020.

Looking forward

Without targeted efforts to sustain the growth of the past five years, market forces, such as rising drug costs and higher prices resulting from provider and insurer consolidation, have the potential to reduce positive trends. If such efforts are not made, the U.S. may find itself on a path where costs increase faster than the economy and people’s incomes, undermining the ACA’s goal of health care and insurance affordability.