Timothy Jost: The Affordable Care Act health insurance marketplaces are indeed experiencing a rough spell
But they continue to offer affordable health coverage to millions of Americans, he says
Editor’s Note: Timothy Jost is emeritus professor of law at Washington and Lee University. He is currently the Rockingham County (Virginia) Democratic committee chair. The opinions expressed in this commentary are solely those of the author.
On November 1, the Affordable Care Act health insurance marketplaces will open for their fourth open enrollment period. On Monday, Healthcare.gov, the federal marketplace serving 39 states, pulled back the curtains to allow consumers to window shop for 2017 plans.
As it did so, the Department of Health and Human Services (HHS) issued a report analyzing the premiums consumers will have to pay for 2017 marketplace coverage and the coverage choices they will have available.
The HHS report documents what has already been widely reported – that after two years of moderate premium increases (2% for 2015 and 7.5% for 2016) premiums are going up sharply for 2017. Across the 39 states using the HealthCare.gov platform, the median second-lowest cost silver plan, which sets the benchmark for premium tax credits, will increase 16%, while the average increase looking only at states on the federal exchange is 25%.
Opinion columnists and politicians will undoubtedly seize on the report as further evidence that the Affordable Care Act is a failure. But a deeper dig reveals a different story.
First, while these increases are eye-catching, insurers generally underpriced their plans when the marketplaces opened in 2014, and the current increases simply bring the premiums up to the level predicted when Congress debated the Affordable Care Act in 2009.
According to the report, Congressional Budget Office projections from 2009 suggested average 2017 premiums of $5,538; HHS is projecting average premiums of $5,586. Indeed, premiums in many states are still below the cost of employer coverage.
Second, premium increases vary sharply from state to state. While in seven states premiums are increasing more than 50%, in 10 states premium increases are 7% or less. Meanwhile, some of the states with the largest premium increases had the lowest premiums to begin with. And there is something states can do to lower their premium increases – all of the states with increases at 7% or below have expanded Medicaid, while four of the states with the highest premium increases have not yet done so.
Third, the report notes that most marketplace enrollees – likely about 85% – will receive premium tax credits that will substantially reduce their premiums. Almost three quarters of marketplace enrollees will be able to find a plan for $75 per month or less after the application of premium tax credits. The cost of plans for many people with premium tax credits will be virtually identical to last year’s cost.
Of course, individuals who are not eligible for premium tax credits because their income is too high, and consumers who purchase coverage outside of the marketplaces, will have to bear the full weight of the premium increases. But as many as 2.5 million consumers purchasing coverage outside of the marketplaces would in fact be eligible for premium tax credits if they would purchase through the marketplaces. Many others qualify for tax subsidies for their health coverage because they are self-employed.
Fourth, it pays to shop. Seventy-six percent of marketplace enrollees can find a lower-cost plan in the 2017 marketplace than their 2016 plan in the same metal level by marketplace shopping. If all returning consumers chose the lowest-cost plan available in their current metal level, average premiums would fall $28 or 20% from 2016 premium levels, taking premium tax credits into account.
Fifth, as has been widely reported, there will be fewer insurers in the marketplaces this year. But 79% of consumers in HealthCare.gov states will still have a choice of two or more insurers and 56% three or more.
Finally, lack of choice of insurers does not mean lack of health plan choice. South Carolina has only one insurer left, but it offers on average per county 25 plans. Wyoming’s one insurer offers on average 28 plans. On average, consumers in HealthCare.gov states can choose from 30 different plans (down from 47 in 2016), an average of 10 plans per insurer. By contrast, 83% of employers offer only one type of plan, and many employers offer only one plan with one insurer.
The marketplaces are indeed experiencing a rough spell. But they continue to offer affordable health coverage to millions of Americans, many of whom would simply have been unable to find any coverage before the Affordable Care Act because of their health or economic status. Beyond the headlines, the HHS report documents that, in fact, the marketplaces are doing their job.