#NASHPCONF18: State Policymakers Share Views on the Evolving Individual Insurance Markets

During NASHP’s 31st Annual State Health Policy Conference last week, experts and state officials assessed the dramatic sea changes that recent federal action has imposed on their individual health insurance markets, what they are doing to stabilize them, and what the future holds.

Below, NASHP summarizes what panelists said about the current state of their markets and how market segmentation – caused by the wider availability of short-term and association health plans — could impact state markets.

Making Waves: How Did the Market Get Here?

Adapted from Kaiser Family Foundation analysis of Mark Farrah Associates Health Coverage PortalTM, available at: https://www.kff.org/health-reform/issue-brief/individual-insurance-market-performance-in-2017/

The cost of coverage purchased through the individual market has been on the rise. Dania Palanker of the Georgetown Center on Health Insurance Reforms explained that several factors are driving these increases, including:

  • Increasing medical and prescription costs;
  • Improved data on enrollee utilization of services;
  • Adjustments related to the Administration’s elimination of cost-sharing reduction payments that helped reduce insurance costs for some exchange customers;
  • Insurer changes in plan benefit or network offerings; and
  • State and federal regulatory and policy changes.

Early reports on proposed 2019 rate filings indicate that rates are starting to stabilize. This is especially true in Pennsylvania, explained panelist Jessica Altman, Pennsylvania’s insurance commissioner, where the average increase is projected to be only 0.7 percent in 2019, with increased insurer offerings in most counties.

When examining premium increases, Pennsylvania’s Insurance Commissioner Jessica Altman explained it was important to understand how much pricing fluctuations can be attributed to:

● Prior underpricing of premiums;
● Consumers and insurers adjusting to coverage and the markets under the Affordable Care Act; and
● Underlying flaws in the state’s insurance markets.

Panelists suggested that lower 2019 rate increases are in part due to insurers’ improved abilities to calibrate market risk and adequate product design and pricing. According to panelist Weston Trexler, Actuary and Bureau Chief of Product Review at Idaho’s Department of Insurance, premiums have nearly tripled in Idaho since 2011, but some of this increase was an adjustment to ensure insurer solvency after early losses. Where the average medical loss ratio for Idaho’s insurers had been approximately 115 percent in the early years following Affordable Care Act (ACA) implementation (meaning insurers were spending 115 percent of all premiums on medical services) insurers have now returned to more sustainable margins. Altman also suggested that an extension of the federal reinsurance program (which ended in 2016) and reinforcement of the risk corridor program (which was weakened by federal requirements that the program remain budget neutral) could have brought more stability to markets.

Market Segmentation: What States Can Do

Several panelists commented on the effect of increasing market segmentation on their individual insurance markets, including proliferation of coverage alternatives that draw consumers out of the individual market. Segmentation will be exacerbated by the expansion of short-term and association health plans in states due to new federal action, and by the spread of health care sharing ministries in several states.

Most of these lower-cost, coverage alternatives do not have to cover certain, pre-existing conditions. These skimpy products are targeted at young and healthy populations. Collectively, these options are expected to pull individuals out of the overall individual market, shrinking and worsening the risk pool of that market, which leads to premium increases for those that remain. As Trexler noted, there are pros and cons to making these products available, but separating risk from the individual market will drive up rates for those who are not eligible for subsidies through health insurance marketplaces.

Altman noted that these options create choices, but not for everyone, especially those with pre-existing or chronic conditions. She added that these new insurance options may hurt consumers in the long run as segmented risk pools could lead to excessive cost growth in the individual market, with coverage becoming increasingly unaffordable if and when individuals eventually need more comprehensive coverage.

States have broad latitude to regulate these products and may consider a multitude of legislative or regulatory actions to limit their effects based on what is best for their markets. In regards to short-term plans, for example, Jane Beyer, senior health policy advisory to Washington State’s insurance commissioner, acknowledged a legitimate need for short-term plans when individuals need temporary coverage to cover them between coverage programs (such as when the individual is between jobs, or on the cusp of qualifying for Medicare). However, to ensure that these plans are only available as a temporary solution, Washington has proposed regulations to limit the term of short-term plans to three months and to prohibit renewability of these plans. Altman noted recent action that Pennsylvania’s insurance department has taken to spell out the tight restrictions the department will impose on the newly-expanded association health plans.

Several panelists acknowledged that these insurance alternatives were not new, and some have existed in their states for decades. However, they cautioned  these plans are being promoted as affordable alternatives to consumers, without clear mention of their limited coverage and financial protections. Panelists cited several actions states can take to mitigate these risks, including:

  • Requiring that these “thin” coverage alternatives meet coverage or consumer protection requirements similar to those required of ACA regulated individual market plans; and
  • Ensuring that consumers have adequate access to information about coverage alternatives, either by imposing transparency requirements (e.g., understandable explanations of benefit offerings and risks) on insurers and brokers who sell these plans, or by investing in state agency and local-community resources to help promote consumer education about these options.

Other panelists raised concerns about the growth of direct-to-provider payments (e.g., consumers paying providers directly for services, without insurance) in their markets. While providing an attractive alternative to consumers who can afford and are in need of only specific services, panelists noted this is also taking individuals out of their markets, especially in rural communities and communities with transient populations (e.g., ski towns in Colorado). Panelists had few strategies to address these arrangements, but reported they are monitoring trends to better understand their growth and impact on state markets.

Ultimately, state officials affirmed their commitment to ensure  that their consumers are not put in a position of having to choose between adequate coverage and affordability. Panelists shared a number of strategies to stabilize markets, fill coverage gaps and address affordability.

Next week, NASHP highlights more strategies that state officials shared during the session: State Efforts to Stabilize the Individual Market.