Health insurance exchange issues

The health insurance exchanges were created under the Affordable Care Act (ACA), also known as Obamacare, to serve as a platform where individuals without employer-sponsored insurance could browse and purchase plans. The intent was to have all the insurers publish their plans in one place to make it easier to buy health insurance and encourage lower prices with insurer competition.

The law also provided for health insurance co-ops to compete with larger insurers on the exchanges. Twenty-three co-ops were created under the law. By September 2017, four remained in operation, the others having been deemed insolvent by state regulators and closed. Insurers nationwide also requested large premium increases for 2017, which they said were necessary to continue to pay medical claims for a group of enrollees who were unhealthier than expected. In 2017, insurers Humana and Aetna announced intentions to fully exit all state health insurance exchanges in 2018 due to financial losses and regulatory uncertainty surrounding the cost-sharing reduction payments. These events led some to question the stability and sustainability of the exchanges, while others argued that the events were part of an adjustment period as insurers learned the new individual market.

This page aims to track events related to these issues as they unfold. The first tab on this page provides a summary of these issues and the debate surrounding them. Click through the other three tabs to read more about these issues in detail. For a general overview of the exchanges and how they work, click here.

Summary

Co-ops

Twenty-three co-ops were established with federal loans under the Affordable Care Act. Many were in a precarious financial position after their first year. Policy analysts primarily attributed these early financial struggles to premiums that were set too low, benefits that were too generous, and enrollment that grew too quickly. For many co-ops, low premiums and generous benefits had "attracted a sicker mix of enrollees than other plans," according to the Commonwealth Fund.

The co-ops were adversely impacted by two federal programs included in the ACA that were intended to stabilize the insurance market: temporary risk corridors and permanent risk adjustment. On October 1, 2015, the Centers for Medicare and Medicaid Services (CMS) announced that through the risk corridor program, it would pay out 12.6 percent of the funds that unprofitable insurers had requested to cover losses. CMS could not make more than 12.6 percent of requested payments because Congress required the program to be budget-neutral and too few insurers made enough money to pay into the program. As a result, by the end of 2015, about half of the 23 co-ops had closed.

On June 30, 2016, the CMS released information on who would owe money and who would receive money through the risk adjustment program for the 2015 plan year. Nine of the remaining co-ops owed money to the program, and four subsequently closed. As of September 2017, four co-ops remained in operation.

Insurer exits

In addition to the co-ops, two-thirds of insurers participating in the exchanges were unprofitable in 2014—the first year of operation—according to the Commonwealth Fund. As a result, during mid-2016, three of the five major nationwide health insurance companies announced intentions to roll back their participation on the exchanges: UnitedHealthcare, Humana, and Aetna. Due to these exits and other exits of smaller statewide insurers, consulting firm Avalere found that about 36 percent of ACA markets would have one carrier offering plans in 2017. As of October 6, 2016, five states expected to have only one insurer offering plans on their exchanges in 2017: Alabama, Alaska, Oklahoma, South Carolina, and Wyoming. In 2017, insurers Humana and Aetna announced intentions to fully exit all state health insurance exchanges in 2018 due to financial losses and regulatory uncertainty.

One explanation for the exits is that the group of enrollees who purchased health plans through the exchanges was less healthy, older, and smaller than expected, which is known as adverse selection (too many sick people and too few healthy people enrolling). Although the Affordable Care Act contained provisions intended to mitigate the effects of adverse selection, some say these measures did not work as well as expected. Without a sufficient proportion of young, healthy individuals contributing premium dollars to the insurance pool, insurers wound up paying out more in medical claims than they received in premium revenue.

Some have also speculated that insurers initially priced their premiums too low in order to get an edge on the competition and therefore lost money on claims payouts. Additionally, until earlier in 2016, individuals were able to sign up for health insurance outside of the open enrollment period on the federal exchange, Healthcare.gov, due to a life change, like marriage, without providing proof of the event. Insurers said this policy was being abused by individuals waiting until they were sick to sign up, which distorted the risk pool and led to losses. The government announced in February 2016 that it would revise the policy to begin requiring proof for some of the life events qualifying an individual for special enrollment. In 2017, the federal government began requiring proof for all life events that trigger eligibility for a special enrollment period.

Premium increases

In mid-2016, the insurers remaining on the exchanges filed their premium rate requests for 2017 with state insurance departments. Data analyst and blogger Charles Gaba estimated that nationwide, insurers selling plans in the individual market requested an average 24.6 percent rate increase. This figure includes premiums for plans sold both on and off the exchanges. On October 25, 2016, the U.S. Department of Health and Human Services announced that in the 38 states using the Healthcare.gov platform, premium rates for benchmark plans would rise by an average of 25 percent in 2017. These increases have been attributed to rising medical costs, the end of the transitional reinsurance program, and a pool of enrollees who were unhealthier than expected.

Some people saw these increases as part of a larger trend where premiums will continue to experience upward pressure into the future. The Congressional Budget Office predicted in a February 2016 report that premiums for non-group insurance would increase by 8 percent each year between 2016 and 2018, and 5 percent each year through 2025, growing by a cumulative 60 percent. The CBO report also stated that higher premiums would impact federal spending on the tax credits that are provided to low-income individuals to purchase insurance through the exchanges. The tax credits are only available through the exchanges, so individuals who make too much money to qualify for the tax credit or who purchase insurance off the exchanges bear the full cost of the premium increases, which can take up a substantial portion of income for middle-class Americans. Large premium increases may also make insurance coverage less attractive to the young and healthy people needed to balance the composition of plan enrollees, leaving only enrollees that require costly care.

Others said that the 2017 increases reflected a one-time correction. Insurers that initially underpriced their premiums had more data on the pool of enrollees and the increases simply marked the appropriate price for covering these enrollees. They said that 2017 prices also reflected the anticipated end of the reinsurance program, a one-time occurrence. Additionally, they argued that premium increases are not problematic because they are blunted for consumers by the tax credits and that by shopping around for a different plan, consumers can offset any increases in plan prices.

Cost-sharing reduction payments

The Affordable Care Act (ACA) required insurers participating in the health insurance exchanges to offer low-income consumers reductions in their cost-sharing burden. Cost sharing refers to the division of payments for healthcare services between insurers and the individuals they cover. Premiums, copayments, and deductibles are all forms of cost sharing.

The law intended to reimburse insurers for these reductions in cost sharing. The reimbursements were estimated to total $7.35 billion in 2017. However, the reimbursements were the center of a lawsuit initiated by the House of Representatives in 2014 that alleged the executive branch has been making the payments without an express appropriation from Congress, in violation of the Constitution.

When Trump was inaugurated, his administration took responsibility for defending the reimbursements in court, raising the potential that the administration would drop the lawsuit, which would discontinue the cost-sharing reimbursements to insurers. However, insurers would still be required by the law to provide the discounts to consumers. In 2017, the Trump administration has been making decisions month-to-month on whether to pay out the reimbursements. Insurers and industry leaders said that the uncertainty surrounding the cost-sharing reduction reimbursements and the lawsuit have impeded their ability to make decisions for 2018 and resulted in higher premiums for 2018 than they would have set otherwise.

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Co-op closures and lawsuits

Background

Co-ops and exchanges

The Affordable Care Act (ACA), also known as Obamacare, contained two provisions aimed at bolstering competition in the individual health insurance market and keeping premiums down:

1. One provision created health insurance exchanges where any consumer could browse and purchase plans online, by phone, or in person. Those who purchase plans on the exchanges and do not receive affordable coverage elsewhere could receive federal subsidies to help pay monthly premiums. The idea was to make it easier to buy health insurance and encourage lower prices with insurer competition.
2. The other provision provided federal loans for the start-up of co-op insurance companies, nonprofit organizations in which insured members also serve on the controlling board in order to act as a voice for enrollees. They were created with the intent to inject competition into the health insurance market by offering more choices.

Premium stabilization programs

The ACA also outlined three federal programs that were meant to stabilize the exchanges during their first few years in operation and prevent premiums from rising too quickly as the individual insurance market adjusted to the law:

• Permanent risk adjustment required insurers selling individual and small group plans (both on and off the exchanges) with relatively lower risk to make payments to individual and small group insurers with relatively higher risk. The program was meant to stabilize the market by spreading financial risk. This program did not have an expiration date.
• Temporary risk corridors limited the losses and profits of insurers in the reformed individual market by requiring insurers who made fewer medical claims payments to make payments to the federal government. Insurers with higher than expected medical claims received payments. The program was meant to protect against insurers setting inaccurate premiums for the coming plan years. This program expired in 2017.
• Transitional reinsurance required most health insurers to pay a fee to the federal government based on their enrollment figures for a plan year. The fee went toward payments to insurers on the individual market that covered high-cost individuals. The program was meant to keep premiums low by offsetting the cost of care for individuals with complex conditions. This program was set to expire in 2016.

Insurers nationwide, especially the co-ops established under the ACA, had trouble with the risk corridors in particular. Adverse selection—the phenomenon of sick individuals being more likely to enroll in health insurance than healthy individuals—became prominent in the market. Too few insurers were profitable enough to pay into the program, which Congress specified must be budget-neutral. As a result, unprofitable insurers did not receive the payments they expected to receive through the risk corridor program.

The risk adjustment program was also criticized for the methodology used to calculate payments, with small insurers saying they were harmed by the program because their pools of enrollees were more likely to be skewed toward lower-risk, meaning they would have to pay into the program. The Centers for Medicare and Medicaid Services, which was tasked with administering the three programs, held a conference in March 2016 to discuss potential improvements to the risk adjustment program. The agency said that overall, the program was working as intended, finding that insurers with high-cost claims and a greater number of claims were more likely to receive risk adjustment payments.

Impact of premium stabilization programs on co-ops

To view a timeline of the events described in this section, click here.

Twenty-three co-ops were ultimately established under the ACA. Though the co-ops received federal start-up and solvency loans, many were in a precarious financial position after their first year, with all but one operating at a loss. Four co-ops were shuttered by the end of September 2015, and two years later, four remained in operation.

Status of co-ops as of September 2017
State	Co-op	Status	Loan amount
Arizona	Meritus Health Partners	Closed	$93,313,233
Colorado	Colorado HealthOP	Closed	$72,335,129
Connecticut	HealthyCT	Closing	$127,980,768
Illinois	Land of Lincoln Health	Closed	$160,154,812
Iowa/Nebraska	CoOportunity Health	Closed	$145,312,100
Kentucky	Kentucky Health Care Cooperative	Closed	$146,494,772
Louisiana	Louisiana Health Cooperative Inc.	Closed	$65,790,660
Maine	Community Health Options	Operational	$132,316,124
Maryland	Evergreen Health Cooperative Inc.	Closed	$65,450,900
Massachusetts/New Hampshire	Minuteman Health Inc.	Closed	$156,442,995
Michigan	Consumers Mutual Insurance of Michigan	Closed	$71,534,300
Montana/Idaho	Mountain Health Cooperative	Operational	$85,019,688
Nevada	Nevada Health Cooperative	Closed	$65,925,396
New Jersey	Health Republic Insurance of New Jersey	Closing	$109,074,550
New Mexico	New Mexico Health Connections	Operational	$77,317,782
New York	Health Republic Insurance of New York	Closed	$265,133,000
Ohio	InHealth Mutual	Closing	$129,225,604
Oregon	Health Republic Insurance of Oregon	Closed	$60,648,505
Oregon	Oregon Health CO-OP	Closed	$56,656,900
South Carolina	Consumer's Choice Health Insurance Company	Closed	$87,578,208
Tennessee	Community Health Alliance	Closed	$73,306,700
Utah	Arches Mutual Insurance Company	Closed	$89,650,303
Wisconsin	Common Ground Healthcare Cooperative	Operational	$107,739,354
Sources: HealthInsurance.org, "CO-OP health plans: patients' interests first" Centers for Medicare and Medicaid Services, "Loan Program Helps Support Customer-Driven Non-Profit Health Insurers"

Risk corridors

On October 1, 2015, the Centers for Medicare and Medicaid Services (CMS) announced that insurers nationwide would receive just 12.6 percent of requested payments through the risk corridors program. Overall, profitable insurers had paid $362 million into the program, while unprofitable insurers had requested $2.87 billion in payments. By law, CMS could only pay out the amount they had received under the program and could not use funds from other sources to make payments. While all types of insurers nationwide were affected, most of the co-ops in particular had been relying on the risk corridor payments to remain solvent, and eight more closed following the announcement.

The 12 failed co-ops had received over $1 billion in federal loans. Individuals who had purchased insurance through these co-ops lost their coverage and had to choose new plans through the health insurance exchanges. Of the remaining co-ops, only one set up in Maine was operating with a positive net income in 2015, thus raising the possibility that more co-ops would continue to close. A U.S. Senate investigations panel found that the loans were unlikely to be recovered and that the co-ops still owed "a substantial amount of money" to doctors and hospitals. A 13th co-op closed in May 2016.

Risk adjustment

On June 30, 2016, the CMS released information on who would owe money and who would receive money through the risk adjustment program for the 2015 plan year. Nine of the 10 remaining co-ops owed money to the program. While some of the co-ops had begun to achieve profitability in the first quarter of 2016, the announcement caused their governing boards and state regulators to reassess their financial positions. Four more co-ops began the process of shutting down as a result of payments owed through risk adjustment, since their ability to pay out medical claims was now jeopardized. As of October 31, 2016, six co-ops remained in operation.

For more information on the co-ops and why they closed, click here.

Lawsuits

At least seven insurers filed lawsuits against the federal government, five for not paying out the full amount of risk-corridor payments and one against the methodology of the risk adjustment program. One insurer filed two separate lawsuits against both programs.

The risk corridor payments were intended to stabilize insurers during the implementation of the Affordable Care Act, but last year, the Centers for Medicare and Medicaid Services (CMS) announced that insurers would only be receiving 12.6 percent of the requested payments for the 2014 plan year. Many insurers had counted on the payments when calculating their premiums, and the co-ops in particular needed the payments to remain financially solvent. Eight subsequently closed at the end of the year. Three other co-ops closed after the CMS announced that they owed millions of dollars to the federal government through risk adjustment.

• February 24, 2016
  

Health Republic Insurance of Oregon, one of the 12 failed co-ops established under the Affordable Care Act, filed a class-action lawsuit against the federal government for failing to provide the risk corridor payments promised to insurers by the law. The lawsuit claimed that insurers were owed $5 billion in payments and damages by the federal government and that "[t]he money could have helped it and others stay open."

• May 18, 2016
  

A second insurer, Highmark, Inc., filed a lawsuit against the Obama administration over funds owed to it through the risk corridor program. The company claimed that it was still owed $220 million to offset its losses in 2014.

• June 1, 2016
  

Moda Health Plans filed a lawsuit against the federal government challenging the risk corridor program. The insurer claimed that the government owed it $180 million under the program, money it had not paid out. The suit argued that by not paying out the funds, the federal government caused the company to undergo "nearly-fatal fiscal problems." Moda's CEO said that the company would have been more cautious about entering the ACA's exchange business had it known the payments would not be made in full.

On February 9, 2017, U.S. Court of Federal Claims Judge Thomas Wheeler ruled that the federal government "made a promise in the risk corridors program that it has yet to fulfill" and was obligated to pay $214 million to Moda Health.

• June 2, 2016
  

Blue Cross and Blue Shield of North Carolina filed a lawsuit against the Obama administration over its failure to pay out the full amount of risk corridor payments requested by insurers. The company filed a complaint in the United States Court of Federal Claims arguing that it was owed $129 million under the program, plus legal fees and interest. The complaint asserted that the federal government broke the law and violated its contract with the insurer when it did not make the payments.

On April 20, 2017, U.S. Court of Federal Claims Judge Lydia Kay Griggsby dismissed the insurer's lawsuit, ruling that the law did not include a deadline for the federal government to make the risk corridor payments and that the payments could still be made in the future.

• June 13, 2016
  

Evergreen Health Cooperative, Maryland's ACA co-op, filed a lawsuit against the federal government challenging the permanent risk adjustment program. The lawsuit argued that the program's methodology for determining payments and receipts under the program disadvantages smaller companies while larger, more established companies are favored. Evergreen called for payments under the program to be phased in or delayed temporarily. The co-op says the federal government determined it owed between $18 million and $22 million through risk adjustment, a quarter of its 2015 revenue. Paying the fee could reduce its reserves by half, putting its finances in a precarious position and preventing it from achieving profitability in 2016, the co-op said. According to the co-op's CEO, CareFirst BlueCross BlueShield, the largest insurer in Maryland, was slated to receive the bulk of risk adjustment payments.

On January 18, 2017, Evergreen Health signed an agreement with federal regulators to convert from a nonprofit co-op to a for-profit insurer. As part of the deal, Evergreen Health agreed to drop its lawsuit against the risk adjustment program.

• June 23, 2016
  

Land of Lincoln Health, Illinois' ACA co-op, filed a lawsuit against the federal government challenging the risk corridor program. The insurer claimed the government owed it $70 million under the program, money it had not paid out. The suit argued that by failing to make the risk corridor payments, the government put the company under "severe financial distress" and violated the law. The co-op ultimately closed in July 2016.

On November 10, 2016, the U.S. Court of Federal Claims dismissed the suit, ruling that the way the risk corridors program is outlined in the Affordable Care Act is non-binding.

• July 31, 2016
  

Minuteman Health, a co-op operating in Massachusetts and New Hampshire, filed a lawsuit against the federal government over the risk adjustment program. The lawsuit argued that the methodology used to calculate payments and receipts under the program was illegal and penalized small insurers with lower premiums. The suit named Centers for Medicaid and Medicare Services administrator Andrew Slavitt, Health and Human Services Secretary Sylvia Burwell, and their respective departments as defendants. Under the risk adjustment program, Minuteman would have to pay $16 million, while Blue Cross Blue Shield of Massachusetts, the largest commercial health insurer in the state, was slated to receive $40 million.

• November 2, 2016
  

Minuteman Health filed a second lawsuit against the federal government over the risk corridor program. The company argued that the government owed it $5.5 million under the program, money it had not paid out. Minuteman's counsel released a statement saying, "One minute the federal government is promising to fulfill its requirements under the risk corridor statute. Then the government changes its mind and says it won't."

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• January 26, 2017
  

Molina Healthcare filed a lawsuit against the federal government, claiming the government owed it $52 million under the risk corridor program. A statement from Molina said, "Although we are reluctant to sue our government partners, we have participated in the (Affordable Care Act) marketplaces in good faith, with the understanding that the United States would honor its commitments."

On August 4, 2017, a Federal Claims Court judge ruled in favor of Molina, finding that the federal government was "liable for its breach of a statutory and contractual obligation" in failing to make the payments.

Insurer exits

Summary of insurer exits

In 2016, three of the five major nationwide health insurers announced intentions to scale back their health plan offerings on the health insurance exchanges in 2017:

• UnitedHealthcare announced on April 19, 2016, that in 2017 it would continue offering plans in three states out of the 34 states where it sold plans in 2016. It expected to lose nearly $1 billion on exchange plans in 2016.
• Humana announced on July 21, 2016, that in 2017 it would continue offering plans in 11 states out of the 19 states where it sold plans in 2016. It expected to lose $384 million on exchange health plans in 2016.
• Aetna announced on August 15, 2016, that in 2017 it would continue offering plans in four states out of the 19 states where it sold plans in 2016. It expected to lose $300 million on exchange health plans in 2016.

On October 25, 2016, the U.S. Department of Health and Human Services released a report finding that within the 38 states that use the Healthcare.gov platform, 15 new insurers would offer plans on the exchanges in 2017, while 83 would be withdrawing. Most of these withdrawals were due to the exits of UnitedHealthcare and Aetna, the department found.

In 2017, Humana and Aetna announced they would exit the exchanges completely in 2018.

Nationwide

Aetna

On August 2, 2016, Aetna, one of the five major nationwide health insurance companies, announced it would not be expanding its business on the Affordable Care Act (ACA) health insurance exchanges in 2017 as originally planned. The company also stated it would be reevaluating its presence on the exchanges. The announcement came as the health insurer revealed it expected a $300 million loss on the exchanges for 2016.

On August 15, 2016, Aetna announced its decision to exit the ACA exchange market in 15 states in 2017. The insurer planned to continue operating on the health insurance exchanges of just four states. Aetna said its decision was based on losses of $200 million during the first half of 2016, which the company expected to rise to over $300 million by the end of the year. Aetna's exit from the exchanges nearly left Pinal County, Arizona without any ACA insurance offerings in 2017, which would have been the first time such a situation has occurred in any state since the exchanges opened in 2014. State regulators convinced Blue Cross Blue Shield of Arizona to offer plans in the county.

Following the announcement, a letter from Aetna CEO Mark Bertolini to the U.S. Department of Justice (DOJ) was obtained and subsequently released by The Huffington Post. The letter was in response to a DOJ inquiry regarding Aetna's proposed merger with Humana, which was under review by the DOJ. The DOJ had asked how a decision either way on the merger would affect Aetna's business on the ACA exchanges. Bertolini responded that if the merger were approved, Aetna would be in a better financial position to continue and expand its exchange business. On the other hand, if the merger were blocked, Aetna would need to reduce its exchange business or leave the exchanges entirely in order to stem losses. The release of the letter fueled speculation that Aetna's pullout from several exchanges was in retaliation to the DOJ's decision to block its merger with Humana.

In May 2017, Aetna announced it would not sell individual health plans on any state insurance exchanges in 2018 due to financial losses and regulatory uncertainty. The insurer lost $450 million on its exchange plans in 2016 and expected to lose $200 million in 2017.

Humana
On July 21, 2016, Humana announced it would be pulling out of eight statewide Affordable Care Act markets, remaining in 11 states compared to 19 in 2016. On a local level, the insurer planned to offer individual plans in just 156 counties, down from the 1,351 counties it serviced in 2016. The insurer expected to lose a total of $384 million on ACA exchange plans in 2016. Humana was the second major insurer to announce a reduction in its presence in the ACA markets. Humana did not disclose in which states it would continue to sell plans.

In February 2017, Humana announced it would not sell individual health plans on any state insurance exchanges in 2018. It did not disclose its 2016 losses in ACA markets nor its expected losses for 2017.

UnitedHealthcare

On April 19, 2016, UnitedHealthcare, the largest health insurer in the country, announced that, due to heavy anticipated losses, it would be pulling out of most of the 34 state-based health insurance exchanges. The company said it would continue to operate in only a few states, but did not identify which ones. The company said it lost $450 million in 2015 and expected to lose $650 million in 2016 in its exchange business, for a total of nearly $1 billion in losses. The effect of the company pulling out of the healthcare exchanges was debated, with some saying the effect could be significant, particularly in rural areas, and others saying the effect would be more modest and that other insurers would not follow suit.

On May 31, 2016, UnitedHealthcare announced that it would continue offering individual health plans on ACA exchanges in just three states in 2017. The announcement disclosed that it would continue to offer plans on exchanges in Nevada, New York, and Virginia, while a subsidiary would maintain a limited presence on exchanges in Georgia, Illinois, and Florida.

Anthem
On June 6, 2017, Anthem announced it would not offer plans on the health exchange in Ohio in 2018. Anthem cited instability in the market and uncertainty surrounding cost-sharing reduction payments as the reason for its exit. The move would leave 18 of Ohio's 88 counties without any insurer offering ACA plans, potentially impacting 10,500 people that purchased exchange plans in 2017.

On July 26, 2017, Anthem said it may exit more states in 2018 if it didn't receive a guarantee that the cost-sharing reduction reimbursements would continue to be funded.

Statewide

Arizona
Hospital chain Iasis Healthcare said it would be pulling its managed care insurance plans off the health insurance exchange in Arizona in 2017. CEO Carl Whitmer said the decision was made due to the "instability" of the exchange and "uncertainty and lack of funding of government premium stabilization programs." The company's medical loss ratio had risen to nearly 96 percent, meaning that 96 cents of every dollar of premium revenue was spent on medical costs. The company also reported an $8 million dollar loss on its exchange plans.

Indiana
Indiana University Health Plans, part of the IU Health system, announced it would be withdrawing from the state's Affordable Care Act exchange in 2017. The company said it would continue to sell individual plans on the exchange, but the 27,000 people who purchased an IU Health plan through the exchange would need to find new coverage during open enrollment in fall 2017. In a press release, IU Health Plans President James Parker said the decision was "necessary to adapt to new market dynamics and potential federal responses to withdrawals by many companies nationally from the federally facilitated marketplace." Indiana has a federally facilitated exchange, meaning the federal government manages it through Healthcare.gov.

Iowa
In 2014, Iowa's co-op, CoOpportunity Health, was liquidated due to financial losses. Two years later, in 2016, United Healthcare announced it would not offer health plans on the state exchange in Iowa in 2017. In spring 2017, Wellmark, Wellmark Health Plan, and Aenta announced they would exit the exchange completely in 2018, leaving two insurers offering exchange plans, although they had not committed to offering plans in 2018.

In June 2017, Iowa released a proposal that state officials planned to submit to federal health officials to waive or modify some of the rules governing how the Affordable Care Act works in the state. If approved, the proposal would completely close the state's health insurance exchange and instead provide tax credits for individuals to purchase insurance in the off-exchange individual market. Iowa would develop a standard health plan and require each insurer participating in the individual market to offer only the standard health plan, with the exception of grandfathered and transitional plans. The proposal would also alter the tax credits provided to consumers—the credits would still be issued on a sliding scale based on age and income, but there would be a greater number of age and income categories than under ACA rules. Eligibility for tax credits would also not be capped at 400 percent of the poverty level, as it is under the ACA. The proposal would also create a program that reimburses insurers for high-cost enrollees.

In its proposal, Iowa stated that it expected no insurance carriers to offer coverage on the state's exchange in 2018 and that federal officials should consider the proposal an emergency stopgap measure to ensure the 72,000 individuals enrolled in exchange plans continue to have insurance. If federal officials approve the proposal, it would be the most significant modification of ACA rules implemented by a state to date.

On June 19, 2017, health insurer Medica said it would remain in Iowa's market in 2018 with a premium increase of 43 percent. Health regulators in the state continued to pursue the emergency stopgap measure, with public comments scheduled to be accepted through August 14, 2017.

On August 22, Iowa submitted the formal waiver request to federal health officials. The request stated that Medica's premium increase would actually amount to 56 percent for 2018. It also stated that the measure was not intended to be a long-term solution. In an interview, Iowa's insurance commissioner Doug Ommen stated, "Congress needs to fix it [the ACA] or send flexibility back to the states."

Profitable insurers

While other insurers experienced losses on the exchanges, the following insurers said they had been making a profit. Many of these insurers, particularly Centene Corp. and Molina Healthcare, had extensive prior experience with providing private insurance to low-income individuals through Medicaid, unlike UnitedHealthcare and Humana.

• Kaiser Permanente stated the company had made a "slight margin" of profit on the plans it offered through the health insurance exchanges.
• Centene Corp. stated that the company was "achieving margins at the higher end of our targeted range" on plans it offered through the health insurance exchanges.
• Molina Healthcare was reported to have been making a profit on its exchange health plans.
• Blue Cross and Blue Shield of Florida reported a $471 million profit in 2015 on the plans it offered through the health insurance exchange.

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Premium increases

Premium increases for 2017

Since the implementation of the Affordable Care Act's major provisions in 2014, including the opening of the health insurance exchanges, reports of annual premium increases began circulating widely in the media. According to PolitiFact Florida, initial premium increases in the individual market were expected by healthcare policy experts for the following reasons:

• The requirement that health plans offer a minimum set of benefits, many of which weren't offered prior to the law
• Two policies known as guaranteed issue and community rating preventing denial of coverage to individuals with pre-existing conditions and prohibiting differing premium rates based on prior conditions and other observable characteristics, such as gender
• New regulations on medical loss ratios requiring insurers to spend 80 percent to 85 percent of premium revenue on customer claims

On October 25, 2016, the U.S. Department of Health and Human Services released a report finding that in the 38 states using the Healthcare.gov platform, premiums for benchmark plans would rise by an average of 25 percent in 2017. The highest increase was in Arizona, where premiums for benchmark plans were to rise by 116 percent. Such premiums were slated to fall by 3 percent in Indiana.

In spring 2016, as the premium rate filing process for 2017 began, reports of high premium increases began to emerge and generate further media attention. Rate requests for 2017 were required to be submitted by August 1. By law, state regulators were required to review requested premium rates and either approve them or make adjustments. According to Charles Gaba, a data analyst who operated the website ACAsignups.net, as of November 25, 2016, states had approved an average 24.9 percent premium rate increase nationwide for 2017. The increases ranged from a high in Oklahoma of 76 percent to a low in Rhode Island and North Dakota of 1.3 percent.

According to an issue brief from the American Academy of Actuaries, the primary drivers behind the 2017 rate increases included the following:

• Rising health costs, particularly increases in the price of prescription drugs
• The end of the Affordable Care Act's transitional reinsurance program, which provided payments to insurers to cover high-cost individuals through the exchanges
• A pool of enrollees that was smaller and sicker, and therefore more costly, than expected

The map below displays data from ACAsignups.net about average premium increases in the individual market in 2017.

Alaska

On June 3, 2016, the Alaska Legislature approved a bill to send $55 million to a high-risk pool for health insurance plans in the state's individual market covering high-risk individuals. Funding for the measure was to come from a fee assessed on most insurance policies in the state, including those outside of the healthcare industry, such as auto and life insurance.

Alaska had just one insurance company serving its entire individual market. Although the premium rate increases approved by the state were higher than in other states—in the range of 30 percent each year, compared to an average of 10 percent or lower nationwide—insurers had requested even larger increases that were rejected. As a result, the three other insurance companies had left the market since 2013. The intent of the bill was to discourage the remaining insurer, Premera, from raising its rates in 2017 or leaving the market entirely. According to the journal Health Affairs:

“

In the first half of 2015, Premera had $45 million in claims for its 8,500 insureds, but $11 million of that came from just 37 cases. Covering these high-cost cases could dramatically reduce the premium increases that Premera will have to request for 2017 and may attract other insurers into the market.

”

Health plans on Alaska's health insurance exchange also had the highest premiums in the country, averaging at $863 per month, compared to $396 nationwide. These issues were attributed to the state's small population, which had too few healthy individuals paying into the system to balance the costs of those with chronic and complex conditions. The price of healthcare in the state was also higher than in other states.

After the state approved funding the high-risk pool, Premera requested a premium rate increase of 10 percent, far lower than its increases in prior years.

California

On July 19, 2016, Covered California, the state's health insurance exchange, announced average approved premium increases of 13.2 percent for 2017. The increase was the largest since the exchange opened in 2014; in each of the previous two years, rates had increased at an average of 4 percent. Executive director Peter Lee stated that the primary reason for the increase was the coming end of two federal programs intended to stabilize premiums. These programs, temporary risk corridors and transitional reinsurance, were established to help insurers adjust to the new market dynamics during the first few years of the Affordable Care Act's major provisions that went into effect in 2014, such as the requirement that all individuals acquire health insurance.

Other factors included rising prescription drug costs and the enrollment of "substantially sicker" consumers outside of regular open enrollment periods. Lee specifically stated the increases were not due to insurer profits. The new rates came with increased pressure on the state government to act on reining in medical and prescription drug costs.

The 13.2 percent increase slated for 2017 in California was still lower than the average of 26.4 percent that insurers have requested nationwide.

Minnesota

On September 30, 2016, Minnesota Commerce Commissioner Mike Rothman announced that insurance premiums for plans sold on the individual market—on and off the state exchange—would increase by at least an average of 50 percent in 2017. The highest rate increase was an average of 67 percent. Additionally, most plans in the state were allowed to limit the number of enrollees they would accept during open enrollment in fall 2016. Rothman stated that these measures were necessary to prevent insurers from leaving the individual market altogether.

Rothman said several factors played into the individual market's problems. Insurers initially priced their premium rates too low after the Affordable Care Act's major reforms went into effect and struggled in subsequent years to set appropriate rates. Additionally, he said, the individual market was small and made up of "a disproportionate number of people with high-cost health problems." Other contributing factors included the end of federal risk-spreading programs in 2017 and rising medical prices.

In his statement, Rothman also pushed state lawmakers to act to reform the market, emphasizing that the measures were "temporary solutions for this year" and that premiums might continue to rise in 2017:

“	The dramatic rate increases facing Minnesotans who purchase their own health insurance is unsustainable and unfair. The rate review process is limited in its ability to address the market dynamics underlying these trends and developments. As a result, there is an urgent need for reform.	”
—Minnesota Department of Commerce

Tennessee

On August 9, 2016, the Tennessee Department of Commerce and Insurance (TDCI) decided to allow insurers in the state to refile their 2017 premium rate requests for plans sold on the state's health insurance exchange. Humana and Cigna, two of the major health insurers in the state, filed premium increases of 23 and 29 percent, respectively, in June, but later said that their requested increases were too small to cover anticipated medical costs. Kevin Walters, spokesman for the department, said the primary reason for the decision was to prevent more insurers from exiting the state's exchange. UnitedHealthcare announced earlier this year that it would not be selling plans on Tennessee’s exchange in 2017, and the state’s ACA co-op, Community Health Alliance, folded in 2015. Tennessee was the second state to allow insurers to refile their rate requests, after Arizona did so when five insurers in the state announced plans to exit or scale back their presence on the state's exchange.

Insurers in Tennessee had until August 12 to refile their rate requests. The rate requests of the two insurers nearly doubled. Humana's revised request was for a 44.3 percent increase, while Cigna asked for a 46.3 percent increase. BlueCross BlueShield of Tennessee, the state's largest insurer, did not revise its rates; it had already been asking for an increase of 62 percent. The insurers said the large increases were necessary to recoup the losses they've incurred due to the poor health of enrollees. The TDCI reviewed the rate requests and insurers' justifications before determining how much of an increase to grant.

On August 23, 2016, Julie Mix McPeak, commissioner of the TDCI, characterized the state's health insurance exchange as "very near collapse." The statement came after McPeak approved the requested premium rate increases for all three of the insurers in the state to prevent them from exiting the exchange. BlueCross BlueShield of Tennessee, the only insurer selling plans statewide, also stated that it was "keeping all of our options open" regarding its 2017 participation after estimating its three-year losses would amount to $500 million by the end of 2016.

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Cost-sharing subsidies

Background

The Affordable Care Act (ACA) required insurers participating in the health insurance exchanges to offer low-income consumers reductions in their cost-sharing burden. Cost sharing refers to the division of payments for healthcare services between insurers and the individuals they cover. Premiums, copayments, and deductibles are all forms of cost sharing. Under the ACA, individuals earning between 100 percent and 250 percent of the federal poverty level are eligible for a reduction in their share of these costs, paying as little as 6 percent of a plan's costs, compared to 30 percent under a standard silver-level plan.

The law intended to reimburse insurers for these reductions in cost sharing. The reimbursements were estimated to total $7.35 billion in 2017. However, the reimbursements were the center of a lawsuit initiated by the House of Representatives in 2014 that alleges the executive branch has been making the payments without an express appropriation from Congress, in violation of the Constitution.

After President Donald Trump was inaugurated, his administration took responsibility for defending the cost-sharing reimbursements in court, leading to uncertainty regarding their future. While the administration committed to paying the reimbursements in the short term, it has not made a long-term commitment and could decide to drop the lawsuit in the future, effectively ending the payments.

Impact on insurers

If the Trump administration dropped the lawsuit, insurers would still be required by the law to provide the discounts to consumers, which could result in insurers raising their premiums or dropping out of the ACA markets altogether. In 2017, the Trump administration has been making decisions month-to-month on whether to pay out the reimbursements. America's Health Insurance Plans, a trade association representing private health plans, stated that without a long-term commitment to fund and pay the cost-sharing payment reimbursements, some plans would leave the market while others would raise their premiums.

On May 25, 2017, Blue Cross Blue Shield of North Carolina filed its 2018 rate request with North Carolina's insurance commissioner, asking for a 23 percent increase. The insurer specifically stated that were it not for the uncertainty regarding cost-sharing reimbursements, its rate increase request would have been 8.8 percent. Insurers in Pennsylvania requested an average rate increase of 8.8 percent for individual plans and 6.6 percent for small group plans. These rates were not final, and the state's insurance regulators said the rate increases would be 23.3 percent on average if the individual mandate was repealed and 20.3 percent if cost-sharing reduction reimbursements were not paid. If both provisions were repealed, the rate increase would be 36.3 percent.

In addition, on June 6, 2017, Anthem announced it would not offer plans on the health exchange in Ohio in 2018. Anthem cited instability in the market and uncertainty surrounding cost-sharing reduction payments as the reason for its exit. The move would leave 18 of Ohio's 88 counties without any insurer offering ACA plans, potentially impacting 10,500 people that purchased exchange plans in 2017.

Recent news

The link below is to the most recent stories in a Google news search for the terms Health insurance exchanges. These results are automatically generated from Google. Ballotpedia does not curate or endorse these articles.

Health insurance exchange issues - Google News

See also

• 

  Health insurance exchanges

• 

  Co-op

• 

  Effect of the Affordable Care Act in the United States

Footnotes

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