Affordable Care Act: Health plans

Affordable Care Act: Impact on health plansMany health plans are struggling financially because not enough people have enrolled for insurance coverage under the Affordable Care Act (ACA), and those people that have enrolled are higher utilizers of healthcare that projected. This prohibits insurance companies from broadening their risk pool, leading to a dramatic increase in premiums across the country. Currently, some health plans have abandoned the ACA marketplace, leaving patients with fewer coverage options.

While many factors contribute to the successes and failures of the ACA, there are several key issues that will be addressed or modified by whatever the Trump administration will implement in 2017. These factors include measures affecting the individual mandate, government subsidies and involvement in the marketplace, as well as Medicaid.

“The decisions of these key tenets of the ACA will shape the financial viability of the health plans serving ACA or its successor enrollees,” said David Tyler, principal in Grant Thornton’s National Advisory Services practice. “Any combination of these decisions can help or hurt health plans, which is why an agile, nimble approach to what comes out of Washington will be critical.”

The elimination of the individual mandate has received a lot of attention. The mandate requires patients to have health insurance and applies a tax penalty to those who fail to enroll. If those two provisions are removed, the number of people enrolled in ACA plans will drop. Those that would opt out are disproportionately the younger, healthier populations, leaving plans with an even more challenging pool of enrollees than they have today.

In addition to the individual mandate, another matter of discussion relates to government subsidies and whether to keep, eliminate or reduce them. In 2016, roughly 84% of all ACA enrollees received some sort of significant federal payment support. Maintaining government assistance for these ACA enrollees is seen as critical to maintaining participation levels.

The federal government has been further involved in the marketplace through the ACA provision called “risk corridor payments,” in which the federal government would make certain payments to insurers as part of their compensation, based on the risk profile of their enrollees. But Congress decided that the risk corridor program must be revenue neutral. Hence, payments ground to a halt, resulting in losses for insurers. Continuation, elimination or adjustment of this payment policy will greatly impact health plans.

Finally, keeping, reducing or modifying Medicaid expansion will likely have a material impact on those plans that operate in state Medicaid markets. Combined with the possibility of block grants, watching the state Medicaid market and responding in a timely fashion will be key.