Since 2014 the Affordable Care Act, also known as Obamacare, has assisted lower- and moderate-income people who buy insurance on their own on the individual market, providing premium subsidies and discounts on out-of-pocket expenses. Under the law, people who don’t carry compliant insurance face a penalty, the so-called individual mandate. Large employers who don’t offer insurance are also penalized.
Recent policy moves by President Trump appear to pose significant implications for the individual market and Obamacare.
The individual market in Tennessee was the subject of a talk delivered Tuesday, Nov. 14, in Light Hall by Tennessee Department of Commerce and Insurance Commissioner Julie Mix McPeak. Her talk, “Turmoil in Health Insurance Markets: What Can Be Done?” was sponsored by Vanderbilt’s Department of Health Policy.
As Obamacare came into effect, enrollment nationally in the individual market increased dramatically. Some insurers lost money with underpriced plans, having underestimated the extent of services that would be needed by the newly insured. Losses caused some insurers to exit the market, and as competition has dwindled many areas of the country have been left with only one insurer in the individual market.
Approximately 200,000 Tennesseans are Obamacare customers, which McPeak said accounts for 7 percent of the state’s insured market. Since 2014 not a single insurer has broken even participating in Obamacare in Tennessee, she said. Claims per Obamacare enrollee run high in the state, McPeak said, and this has contributed to decisions by insurers not to participate.
The state’s Obamacare insurers “can’t figure out how to price a product with the claims that they have encountered, and with the legal and regulatory uncertainty on top of it, it’s just not an attractive market for companies,” McPeak said.
The state is geographically partitioned into eight rating areas, or markets, and for 2018 six of them are served by only a single Obamacare carrier, leaving customers in 78 counties without a choice of insurer. According to McPeak, to gain efficiency and stem losses, the state’s remaining participating insurers tend to offer customers a relatively limited choice of providers. Consumers feel pinched, she said.
“People in Nashville are a perfect example. Look at how many times they’ve had to change plans year over year. We’re hearing, ‘My provider’s not on the list, my drugs aren’t on the formulary, I can’t continue my care at the hospital of my choosing,’” McPeak said.
Going into 2017, insurers across the nation raised premiums an average 22 percent for a standard Obamacare plan. Enrollment wasn’t markedly affected, with subsidies shielding most enrollees from these increases. For 2017 in Tennessee, Obamacare rates increased between 44 and 62 percent. According to McPeak, from 2014 to 2017 the state moved from the second lowest Obamacare rates in the country to the 35th lowest.
For lower-income Obamacare customers, insurers must discount deductibles and out-of-pocket costs, and last month the Trump administration stopped reimbursing insurers for these costs.
Most insurers had anticipated the move, pricing their 2018 plans accordingly. McPeak pointed out that ending those reimbursements will end up costing the federal government considerably more in premium subsidies.
Open enrollment began Nov. 1 and continues through Dec. 15. Going into 2018, approved premiums nationally have increased an average 37 percent for a standard plan. (Again, most enrollees are shielded from the increase) For 2018 in Tennessee, approved premium increases are between 21 and 42 percent.
An executive order signed last month by President Trump opens a door to less regulated, less expensive plans with fewer benefits. Final regulations are months away, but the move could ultimately siphon younger, healthier customers away from Obamacare, raising costs per enrollee and driving premiums yet higher.
McPeak said this order raises questions for Tennessee; during the Q&A she said movement of healthier customers in the state to less regulated plans will depend on whether the individual mandate is replaced.
McPeak was joined for a post-lecture discussion by Melinda Buntin, PhD, chair of the Department of Health Policy, and John Graves, PhD, assistant professor of Health Policy. Graves also preceded McPeak’s talk with a brief history of Obamacare.
