With the new year comes new and exciting research studies. In January, researchers in Health Affairs and with the Urban Institute and Kaiser Family Foundation examined the root of high health care spending in the US, the effects of eliminating the individual mandate penalty in California, insurer participation in the individual market, and characteristics of the uninsured population across the country.
Anderson, G., et al. It’s Still the Prices, Stupid: Why the US Spends So Much on Health Care, and a Tribute to Uwe Reinhardt. Health Affairs; January 1, 2019. In 2003, a group of researchers argued that the significant difference in health spending between the US and other counties belonging to the Organization for Economic Cooperation and Development (OECD) was mostly due to higher prices for health care goods and services. The same group of authors, as a tribute to the late Dr. Uwe Reinhardt, revisited the 2003 article using the same OECD health statistics to see if their findings stand up today.
What It Finds
- The title gives away the topline finding: it’s still the prices. Despite a number of health policy reforms between 2003-16, researchers found that the price of health care remains the primary reason why the US greatly outspends all other OECD countries.
- While the US outspends other OECD countries by a large margin, it ranks lower on several key measures of health care resources, such as the number physicians and hospital beds per capita. This indicates that the US’s comparatively higher spending on health care does not translate to greater consumption, suggesting that the logical reason behind the country’s greater expenditures is a higher price for goods and services.
- Since the 2003 study was published, a larger gap has developed between what public insurers pay and what private insurers pay in the US due to federal policy in the public sector. The authors therefore recommend focusing policy solutions on prices in the private sector.
Why It Matters
The US far outspends other similarly industrialized countries on health care, but earns lower scores in quality and mortality rates. As voters make their concerns about high health care costs known, and policymakers work to address the issue, it’s critical to understand the root causes of cost growth. Proposals that attempt to lower costs by reducing the value of coverage (such as short-term health plans) or shifting more risk to consumers (such as through health reimbursement accounts) suggest that many policymakers either aren’t aware of those root causes or are unwilling to make the tough political choices required to tackle them.
Fung, V., et al. Potential Effects of Eliminating the Individual Mandate Penalty in California. Health Affairs; January 1, 2019. The Tax Cuts and Jobs Act of 2017 reduced the penalty for noncompliance with the Affordable Care Act’s (ACA) individual mandate to $0, beginning this year. Researchers surveyed California individual market enrollees in 2017 to gauge the potential impact of this policy change.
What It Finds
- Nineteen percent of those surveyed reported that they would not have purchased coverage in the absence of an individual mandate penalty.
- If the 19 percent of respondents who would forgo coverage left the risk pool, researchers estimated consequential 4-7 percent premium increases in the individual market.
- The Latino community, lower income residents, residents with lower education levels, and those who have been uninsured for at least one year were more likely to respond that they would go without health insurance after the elimination of the penalty than other communities.
- Given the California marketplace’s significant investments in open enrollment, diverse mix of payers offering marketplace coverage, and additional consumer protections, researchers believe other states will feel more of an impact from the new policy.
Why It Matters
The ACA established a three-legged stool to expand access to affordable and comprehensive coverage. In addition to banning discrimination based on health status and subsidizing coverage, the federal law established a requirement to maintain comprehensive coverage in order to ensure a well-balanced risk pool. With the ACA’s individual mandate rendered toothless, states must assess if and how the federal policy change will disrupt their market, and take steps to mitigate the damage. Some states may consider a state-based individual mandate in the vein of New Jersey, the District of Columbia, and Massachusetts. Studies like this one help give state and federal policymakers an idea of the increased erosion and adverse selection likely to occur in the individual market in the absence of a federal mandate penalty.
Holahan, J. What’s Behind 2018 and 2019 Marketplace Insurer Participation and Pricing Decisions? Urban Institute; January 24, 2019. Insurers retreated from the ACA’s marketplaces across the country for the 2018 plan year. This left several states facing the possibility of bare counties, and led to skyrocketing premiums. Researchers at the Urban Institute analyzed the trends from 2018 and 2019 Open Enrollment periods (OE) to identify the driving forces behind these market dynamics.
What it Finds
- Federal policy changes in 2017, such as cutting off cost-sharing reduction payments to insurers, were the primary reason for lower insurer participation on the ACA’s marketplaces during the 2018 plan year, along with uncertainty and subsequent financial risk.
- After insurer participation dropped significantly in 2018, insurers began to feel that the risks they faced on the ACA’s marketplaces were manageable, which led to more market entrances in 2019.
- While premiums rose dramatically in 2018, the overcorrection for the various policy changes in 2017 started to balance out, leading to, on average, much smaller rate increases in 2019.
- There is a trend of plans moving toward narrower provider networks, with BlueCross BlueShield health maintenance organizations (HMOs) and Medicaid insurers dominating most markets, with the exception of rural areas where narrow provider networks are harder to establish and maintain.
- The expansion of non-ACA-compliant plans like short-term limited duration insurance impacted some marketplaces in 2018, but stakeholders believe the effects will be felt more in 2019 and beyond.
Why it Matters
In order to attract competition on the ACA’s marketplaces, states need to understand what motivates insurer participation as well as what drives market exits. Now that the individual market appears to be stabilizing despite the uncertainty in 2017, states can begin focusing on policies that help maintain their current insurer participation while attracting new market players, such as state-based reinsurance.
Garfield, R. The Uninsured and the ACA: A Primer. Kaiser Family Foundation; January 25, 2019. After an all-time low uninsured rate of 10 percent in 2016, the US is beginning to reverse progress, reaching at a 10.2 percent uninsured rate among the nonelderly in 2017. Researchers at the Kaiser Family Foundation took a closer look at the remaining nonelderly uninsured to gauge the impact of current health policies as well as the gaps they leave.
What it Finds
- Fifty-five percent of the currently uninsured are eligible for financial assistance through Medicaid or federal subsidies available on the ACA’s insurance marketplace.
- Over three-quarters of the uninsured population have at least one full-time worker in their family, with another 10 percent having at least on part-time worker.
- People of color are disproportionately represented in the uninsured population: 18.9 percent of the Latino population and 11.1 percent of the black population are uninsured, compared to 7.3 percent of the white population.
- Forty-five percent of the uninsured cite cost as the main barrier to coverage.
Why it Matters
The ACA made great strides in increasing access to comprehensive, affordable health insurance, reducing the uninsured rate to a historic low. Despite this progress, coverage rates have started to slide; 2017 and 2018 saw a number of federal policy changes such as cutting off cost-sharing reduction payments, the elimination of the federal individual mandate penalty, proposed expansion of the public charge rule, the expansion of non-ACA-compliant plans, and drastic cuts to federal funding for enrollment outreach. Taken together, these policy changes quickly dampened enrollment, at minimum, in the individual market, Medicaid, and CHIP. Uninsurance and underinsurance can cause late-stage disease diagnoses, higher out-of-pocket costs, and increased financial instability. Policymakers should consider the very real impact of recent federal actions on the health and wellbeing of hundreds of thousands of Americans, and try to fill in the gaps left by the monumental health law rather than widening them.