ACA – Dwindling, Succeeding, or Both?

With the constant legal battles regarding the Affordable Care Act and the imminent promise of more big name insurers dropping out of multiple exchanges, is the Affordable Care Act doomed for failure? Let’s take a look at the current state of the ACA.

The ACA to Date

The goal of the ACA is to provide insurance to tens of millions of uninsured Americans through state and federal marketplaces, with an estimated 20 million people projected to now have health coverage. However, there are really only about 10 million insured through the ACA to date, with 12 failed co-ops and big name insurers pulling out of multiple ACA markets. What happened?

Unexpected trends

To start, the adverse selection solution isn’t working as planned. The healthier 18-34 age range needs to make up around 40% of exchange memberships in order for there to be a stable insurance environment, and currently this percentage sits around 28%. Provisions built into the ACA, including tax penalties, are not pushing people towards purchasing insurance plans as they were supposed to, and it was not realistic to expect this penalty to be implemented without flaws. Last year, 976,000 households did not file a tax return, and 10% of all the returns filed had incorrect information. Plus, the penalty for an individual without health insurance is 2% of total household adjusted gross income, to a maximum of $975 the first year, and even with the risk of that increasing over time, paying $975 on a tax return is much cheaper than owning a health plan with high deductibles and monthly premiums. The young, healthy demographic will take the risk that they won’t get sick.

The unexpected high cost of those insured under the ACA are causing financial concerns throughout the industry. The larger the market share became and drove towards a monopoly being created, the more rates began to rise, reaching almost 24%. The government only paid 12.6 cents on every dollar spent by the insurance companies, causing companies to fall into debt, which then translates to a poor customer experience, and overall frustration with the ACA.

Big names leave the ACA

United HealthCare, the nation’s largest insurer, stopped selling individual plans on all but a few exchanges, stating their loss of about $1 billion on those exchanges as the primary cause. With Humana following suit and pulling out of multiple exchanges, it’s become evident that many insurers are struggling to manage their high-cost exchange population. Because of this, it wouldn’t surprise me to see the average rates for next year’s ACA plans rise by double digits. Especially since premiums starting out were much lower than originally expected.

So Did It Fail?

While everything up to this point is showcasing the negative aspects of the ACA, I would argue that this is all causing positive change. 20 major insurers, serving 4 million people, formed the Health Transformation Alliance, which collects data to obtain market power and therefore reduces the expected cost hikes in 2017. More data allows for a healthier member base and education on managing chronic diseases, which eventually will decrease rates even further. This only presents opportunities moving forward into the next open enrollment period.

Are you wondering how a Trump presidency will impact the ACA? We are too, and we have some thoughts about it. Thoughts on this?