This column was published as a Wall Street Journal Think Tank column on October 26, 2016.
The announcement and subsequent flurry of news reports about big premium increases and fewer plan choices in 2017 for the HealthCare.gov marketplace plans was expected. So was the response. President Barack Obama said last week that problems in the marketplaces are “growing pains.” Critics on the right have said the ACA is in a “death spiral.” There is a lot to say about this year’s premium increases and no lack of people saying things.
What has not been said, however, is that the key moment for the marketplaces is not the start of this open-enrollment season on Nov. 1 or this round of premium increases but next spring and summer, when state regulators begin to see proposed premiums for next year’s open-enrollment season and we learn whether the marketplaces have stabilized.
Benchmark premium increases in the ACA marketplaces have varied widely; for example, there was a 145% increase in Phoenix and a 4% decrease in Indianapolis. In such disparate states as California and Florida the marketplaces are generally working well, but in many marketplaces premiums will rise sharply in 2017. Most of the 10.5 million marketplace enrollees receive premium subsidies and are shielded from the increases. But about 1.5 million of them and consumers who buy their own insurance outside the marketplaces–estimated to be about 7 million Americans–bear the full brunt of the increases.
Many state regulators who permitted large premium increases for next year did so primarily to enable premiums to catch up to the risk profile of the populations enrolling in plans, which is sicker than the typical pool. The regulators’ hope is that those increases, coupled with stable or modestly increasing enrollment, would solidify the marketplaces and return premium increases to much more moderate levels moving forward. Insurers submit proposed rates in the spring; this will be the initial signal of whether the marketplaces are stabilizing. Quarterly earnings reports to shareholders from the major insurance companies active in the marketplaces may also signal whether they are seeing rates come into alignment with their costs as well as their level of interest in participating in the marketplaces moving forward.
It’s a fair bet that the picture will improve, but it’s hard to predict to what extent, and there is likely to be continued variation in premium increases and plan choice around the country; the ACA is, in effect, 50 different ACAs. The health-care agenda is broader than the ACA, but the next president (of either party) and Congress will be watching these developments closely. A Clinton administration would prepare administrative and legislative actions. If the marketplaces continue to have problems, the administration and Congress would face decisions about which ACA marketplace “fixes” to propose and how to move them through Congress without unwanted compromises in health or other areas, or getting bogged down in a partisan fight about the ACA.