Uncertain Future for the Affordable Care Act Leads Insurers to Rethink Participation, Prices

By Sabrina Corlette, Kevin Lucia, Justin Giovannelli and Dania Palanker

The Affordable Care Act (ACA) is facing an uncertain future, with a new President and Congress committed to its repeal. Upcoming policy debates could have a dramatic impact on the individual health insurance market, especially the ACA’s marketplaces. While millions of people depend on the ACA’s marketplaces for their coverage, there is no legal requirement for private insurance companies to participate.

We recently reached out to executives with 13 insurance companies participating in the marketplaces in 28 states and asked how they would respond to different potential scenarios for ACA repeal. We document our findings from those interviews in a new report for the Urban Institute, funded by the Robert Wood Johnson Foundation.

Although the insurance companies we spoke to were very different, and included large, for-profit carriers operating across multiple states, regional non-profits, former Medicaid-only plans, and integrated, provider-sponsored plans, most had the same responses to our questions.

  • An immediate repeal of the individual mandate won’t lead insurers to exit the market in 2017, in part because of their contractual obligation to remain. However, insurers reported they would “seriously consider” a market withdrawal in 2018 if the mandate is repealed without an effective replacement. Insurers reported that at a minimum, their premiums would need to increase in 2018 to reflect the likelihood of a sicker risk pool.
  • A “repeal and delay” strategy without a concurrent replacement for the ACA would destabilize the individual market. Although insurers saw value in a buffer period to adjust to a new regulatory structure and educate consumers about changes, they perceived “significant” downside risk in remaining in the marketplaces while the details of an ACA replacement are in doubt. There was no consensus among insurers about how long a transition period should be, but most estimated that the task of adapting to a new regulatory framework would take multiple years.
  • The elimination of cost-sharing reduction payments in 2017 would cause insurers significant financial harm. Most insurers believed they would be forced to exit the marketplaces or the entire individual market as quickly as state and federal law would allow; other insurers indicated they would try to implement a mid-year premium increase.

Insurers generally were confident that, if policymakers enacted concrete replacement policies and provided the industry sufficient time to implement them, they could manage a transition to a new regulatory regime. However, many of the repeal and replace scenarios currently being debated by Congress and the new President would likely result in a de-stabilization of the individual market, with fewer choices for consumers and higher prices.

You can read the full issue brief here.

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