Medical Costs for ACA Enrollees Flat in 2015

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By Sara Hansard

Aug. 11 — Medical costs for people enrolled in Affordable Care Act plans were essentially unchanged in 2015 compared with 2014 even as costs in the broader insurance market continued to rise, the HHS reported Aug. 11.

States with the highest enrollment growth saw significant reductions in per-enrollee medical costs, the Department of Health and Human Services said. “These findings suggest a year-over-year improvement in the ACA individual risk pool, with the Marketplace gaining healthier, lower-cost consumers as it grew,” the agency said in a release.

As insurers such as UnitedHealth Group, Aetna and Humana have retreated from the ACA marketplaces due to heavy plan losses, the high medical costs for sick enrollees have become a more vexing problem. The Obama administration plans to try to attract more young adults to the marketplaces in the sign-up period for 2017, which runs from Nov. 1 through Jan. 31, 2017 (120 HCDR, 6/22/16).

‘Not an Analysis of Issuer Finances.'

The report “is not an analysis of issuer finances,” Aviva Aron-Dine, senior counselor to the secretary at the HHS, said in a telephone briefing with reporters Aug. 11. “While a risk pool that is getting stronger does not guarantee issuer profitability, it is a very encouraging sign for the overall health of the marketplace as it continues to mature and continues to grow,” she said.

A number of studies have found that many issuers priced below costs in 2014 due to inexperience in the new marketplaces and a desire to be competitive, Aron-Dine said. Due to insurer efforts to recoup marketplace losses and the end of the ACA's reinsurance program after 2016, marketplace premium requests for 2017 have risen higher than in 2016 and 2015.

Premiums for the second-lowest silver-tier plans, on which federal subsidies are based, will increase by an average of 9 percent in 2017, compared with a 4.4 percent increase in 2016 and a 2 percent increase in 2015, according to a July 28 analysis by the Kaiser Family Foundation. On March 31 about 11.1 million people were enrolled in the ACA marketplaces.

Marketplace Costs Flat; Broader Market Rose

The HHS report found that per member per month costs in the ACA marketplaces fell slightly by 0.1 percent in 2015 compared with 2014, Aron-Dine said. That is contrast to per enrollee cost growth in private health insurance of 3 percent over the same period and 4 percent growth in average premiums for employer coverage, she said.

The report is based on medical claims data used to calculate 2015 payments for the ACA's reinsurance and risk adjustment programs that protect insurers who cover sicker enrollees (127 HCDR, 7/1/16).

States that had above-average growth in enrollment had an above-average drop in costs, Aron-Dine said. In the 10 states with the highest enrollment growth, per member per month costs fell by an average of 5 percent, she said.

The cost data were “a little bit surprising,” Deep Banerjee, director of financial services ratings at S&P Global, told Bloomberg BNA Aug. 11. Insurer losses for the marketplace plans seemed to indicate that claims were increasing, he said.

“That indicates that a much bigger reason for the losses that the insurance companies are having is their under-pricing and not necessarily that the claims trend in the actual market is skyrocketing,” Banerjee said.

Claims Higher Than Expected Initially

Even though the risk pool in the ACA marketplaces appears to be improving, “actual claims may have been higher than what was expected” initially, Cori Uccello, senior health fellow at the American Academy of Actuaries, told Bloomberg BNA Aug. 11.

After 2018, when many transitional plans that don't comply with ACA requirements must end, healthier people who have kept the so-called grandmother plans may enroll in the ACA marketplace plans, Uccello said. “Bringing them in could improve the risk profile even more.”

The flat claims cost growth in the marketplaces “does suggest that the exchange risk pool has improved,” Mark Rouck, senior director at Fitch Ratings who covers health insurance, told Bloomberg BNA Aug. 11.

“To the extent that this report suggests flat costs or stability in the market, that would help from a pricing perspective” for insurers, Rouck said. “Insurers need to be able to project these costs and price the product in order to get a return.”

To contact the reporter on this story: Sara Hansard in Washington at shansard@bna.com

To contact the editor responsible for this story: Kendra Casey Plank at kcasey@bna.com

For More Information

“Changes in ACA Individual Market Costs from 2014-2015: Near-Zero Growth Suggests an Improving Risk Pool” is at https://www.cms.gov/CCIIO/Resources/Forms-Reports-and-Other-Resources/Downloads/Final-Risk-Pool-Analysis-8_11_16.pdf.

“Analysis of 2017 Premium Changes and Insurer Participation in the Affordable Care Act’s Health Insurance Marketplaces” is at http://kff.org/health-reform/issue-brief/analysis-of-2017-premium-changes-and-insurer-participation-in-the-affordable-care-acts-health-insurance-marketplaces/.

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