In 2017, insurers were leaving the individual marketplaces in such droves that states had to scramble to prevent some residents from losing all their plan options and one third of counties had only one insurer choice. Headlines of big name insurers choosing to pull out of state exchanges were seen regularly in the spring and summer of 2017, all while the efforts by Congressional Republicans to repeal the law were in full force. 2017 marked the fifth open enrollment period since the law had been enacted, but the first full one under the Trump administration. One metric of the resilience of the Affordable Care Act (ACA) is the level of insurer participation in the individual market, and in 2017, things were looking grim.
Three years later, large payers including Centene, Cigna, and UnitedHealth Group have all announced plans to expand their presence in the individual marketplaces of hundreds of counties across the country. Smaller insurers including Oscar and Bright Health have made similar announcements about expansion. So why, in the midst of a pandemic, economic recession, a Supreme Court case that could overturn the ACA, and rising uninsured rates are insurers flocking back to the individual marketplace?
A Sicker-than-expected Risk Pool, Policy Uncertainty Drove Insurer Exits in 2017
By 2017, many insurers had experienced significant losses in the individual market. Nationwide, insurers selling in the individual market lost $2.5 billion in 2014 alone. The following year was little better. Competitive pressures and the ACA’s risk corridor program had given many insurers an incentive to set premiums lower than they otherwise might. A GOP-led Congress kneecapped the risk corridor program in 2014, meaning insurers received only 12.6 percent of what they were owed. (On April 27, 2020, the Supreme Court ruled that insurers are, in fact, entitled to more than $12 billion from the government in unpaid risk corridor funds). Although by 2016 some insurers were beginning to find their financial footing, these emerging signs of stability collided with a perfect storm of policy uncertainty. In the wake of the 2016 election, insurers experienced months of congressional efforts to repeal the ACA, executive branch threats (ultimately realized) to cut of the cost-sharing reduction subsidies, as well as other administrative actions to undermine the law. These circumstances drove many to leave the market or significantly reduce their footprint.
Uncertainty about the ACA has not gone away in 2020. Efforts to repeal the law moved to the Supreme Court and with the recent death of Justice Ruth Bader Ginsburg, the chances of the court striking down the law have been heightened. The Trump Administration continues to impose harm to the ACA, and such efforts are likely to continue if granted a second term. Yet the insurers named above appear to be jumping back into the individual market.
Insurers are Betting on Greater Policy, Market Stability
In their filings with state insurance regulators, many insurers are predicting a slight worsening of the risk pool for 2021. But most are implementing only modest premium increases or even in some cases decreases. What gives?
Insurers may be finding comfort in the rising evidence that the repeal of the penalty associated with the individual mandate has had a limited impact on enrollment. Overall, the enrollment in the subsidized market of the exchanges has remained stable. Insurers also know that the COVID-19 pandemic will only accelerate the decline in the number of employers offering health insurance, leading to potential growth in the ACA marketplaces. It also appears that regardless of who is elected in November, insurers are anticipating greater policy stability moving forward. Several carriers noted that while they have seen disruption under Trump, the marketplaces have still survived and will likely remain largely unchanged even if he is reelected. If Biden is elected, insurers may be banking that a public option, which would compete directly with them on the exchanges, will face an uphill battle, just as it did in the original fight for the ACA.
The increasing numbers of insurers shifting back to the individual marketplaces was a trend that began before the pandemic and likely would have continued without it. After six years of managing this population under the ACA marketplaces, it appears that insurers have finally figured out how to effectively price for the risk of this particular population. Insurers now have an easier time rate setting and designing networks and benefits to manage risk more effectively.
Consumers will Enjoy Greater Choice Amidst a Supreme Court Challenge
As all eyes move to the ACA litigation in front of the Supreme Court on November 10, the ACA marketplace will be entering its eighth open enrollment period. Many new and returning consumers will be enjoying more plan options than ever before with premiums that are relatively stable. The marketplaces have survived a legislative repeal effort, outreach funding cuts, the expansion of short-term plans, and a global pandemic. However, the nomination of Judge Amy Coney Barrett to the Supreme Court has raised new alarms for ACA advocates. As the marketplaces finally find stability, the reality is that the law is still at risk and those opposed to it may finally have what it takes to end the ACA as we know it.