Federal Actions Cause Further Erosion of Individual Market Stability

The Texas Health Insurance Marketplace and the individual market more broadly became less stable in 2017 as some high-profile insurers exited the market and others increased rates. Premiums for the “benchmark” plan (the second-lowest cost silver plan) in the Marketplace increased 11.7 percent in 2017 in Texas and 21.3 percent nationally. Studies have pointed to 2017 changes as a possible one-time market correction. For example, Standard and Poor’s and the Kaiser Family Foundation found that insurers nationwide improved their individual market financial performance in 2016, putting them on track to break even or make a profit in 2017. Texas’ largest insurer credited its 2017 first quarter profits to “the turnaround” in its individual market
business between 2016 and 2017. Now, however, increasing profitability alone may not be sufficient to generate market stability, given the substantial new uncertainties introduced after the 2017 change in administration.
The new Trump administration has sabotaged the Marketplace through both action and inaction, which has sown deep uncertainty for insurers in the individual market.  Statements from insurers show that uncertainty around two key Trump-administration policy choices is driving rate increases and potential market exits: (1) relaxed enforcement of the individual mandate, which serves to encourage participation by healthier enrollees, and (2) unanswered questions about whether the federal government will make good on “cost-sharing reduction” payments (subsidies that lower deductibles and copays for the lowest-income Marketplace enrollees) due to insurers.  A new analysis estimates that two-thirds of 2018 rate increases will be due directly to the uncertainty caused by these two choices.  The analysis shows that, on average, rates would be expected to increase by 8-11 percent for 2018, absent uncertainty around the individual mandate and payments for cost-sharing reductions.  With these Trump-administration actions figured in, however, rates are expected to climb 28-40 percent on average.
Congress’ efforts to repeal the ACA is adding to the uncertainty for insurers. The House-passed version of ACA repeal would cause big disruptions in the individual market in the short-term.  According to the CBO, individual market premiums would climb 15-20 percent and enrollment would shrink by 23 percent in 2018.  With possible ACA repeal on the table, it is impossible for insurers to know how to price their 2018 products.  The Senate’s widely-criticized tactic of keeping its bill secret in an unprecedented fashion is likely only adding to uncertainty, and with it, placing upward pressure on rates.
With all of its flaws, the Marketplace in 2017 included at least one insurer in every county in the U.S.  In 2018, there could be as many as 47 counties with no insurer at all.  This count is fluid and may change when insurer decisions on 2018 plans and rates are filed on June 21.  Texas is not expected to be among the states with “bald spots”—counties with no options in the Marketplace—but Texans will not escape unscathed.  We already know that eight small insurers in Texas (covering 4 percent of the market) decided to completely withdraw from the individual market in Texas for 2018, a move that prevents the insurers from resuming sales of individual market policies for 5 years.  In 2017, only one insurer took the dramatic step of completely withdrawing from the entire individual market, though five more exited the Marketplace.
Uncertainty being sown at the federal level is hurting consumers in Texas. The companies that have announced plans to stop selling insurance to Texans not covered through their jobs for 2018 cover a small share of the market, but we may not yet know the full extent of how uncertainty caused by federal actions will weaken the Texas market.

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