Sales of Plans Not Compliant With Obamacare Likely to Rise

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By Sara Hansard

Sales of health plans that don’t comply with Obamacare requirements are likely to increase in 2018 as premiums spike and fewer compliant plans are offered.

Buyers of noncompliant health insurance products sold by UnitedHealth Group Inc. and other insurers typically paid about half the average monthly premium as purchasers of plans that met Affordable Care Act requirements in 2017, eHealth Inc., the largest online individual health insurance broker, told Bloomberg BNA.

Premiums for 2018 haven’t been finalized, but in 2017 the typical cost of noncompliant health coverage for an individual is an average of $221 a month for individual coverage, 42 percent less than average ACA premiums of $378 a month, eHealth reported.

The people most likely to buy noncompliant plans, which often don’t cover pre-existing conditions, are healthy people, health policy analysts say. That puts still more pressure on prices in the ACA-compliant markets, where plans must cover sick people and provide comprehensive coverage.

Rate Increases of 28 to 40 Percent?

Insurers have until Sept. 5 to submit final premium requests for the ACA exchanges in 2018. But an Oliver Wyman analysis released in June said that uncertainty surrounding government funding for cost-sharing reduction payments to insurers to cover out-of-pocket costs for low-income people as well as questions over whether the Trump administration will enforce individual mandate penalties to buy coverage could lead payers to submit rate increases between 28 percent and 40 percent. Open enrollment is scheduled for Nov. 1 through Dec. 15.

Pricing Differences for Non-ACA-Compliant and ACA-Compliant Health Insurance

Under the ACA, people are exempt from the penalty for not having coverage if the lowest-priced ACA exchange plan costs more than about 8 percent of their annual household income. eHealth, which sells plans covering about 300,000 people, said in a June analysis that a 28 percent premium increase would mean that the lowest cost bronze plan, which covers about 60 percent of claims, would cost the average unsubsidized family of three $1,126 a month, which ACA guidelines deem unaffordable for families with household incomes below $166,245.

About half of eHealth’s customers make more than 400 percent of the federal poverty level, the maximum amount to qualify for the ACA’s tax credit subsidies, and an estimated 7 million to 8 million people nationwide are buying policies on the individual market without the benefit of the tax credits, Nate Purpura, vice president of communications, told Bloomberg BNA.

Noncompliant coverage typically doesn’t cover preexisting conditions, maternity care, mental health and substance abuse, and prescription drugs, and such coverage usually has dollar limits, Purpura said.

“We have not embraced selling these products, but we’re at a point now where we feel like it is in our customers’ best interests to get something,” he said.

For 2018, eHealth is planning to offer more packages of noncompliant products, such as short-term health plans that have a duration of three months, accident insurance, critical illness insurance, and dental and vision coverage, Purpura said. The Mountain View, Calif.-based company also is looking to add gap plans, which provide coverage up to the amount of deductibles, as well as preventive care, telemedicine services, and prescription discounts, he said.

In addition to UnitedHealth, major carriers that sell noncompliant plans include National General Accident & Health and LifeShield National Insurance Co., according to Shaun Greene, senior vice president and head of business operations at AgileHealthInsurance.com, which sells only noncompliant plans.

Sales of noncompliant plans are likely to rise in 2018 “simply because of what is going on in the ACA market,” Greene said.

`Not Really Health Insurance’

“People are looking for less expensive health care,” Dania Palanker, assistant research professor at Georgetown University’s Center on Health Insurance Reforms, told Bloomberg BNA Aug. 15.

However, many of the plans, such as short-term plans, “are not really health insurance. They cover such limited risks that they don’t provide options for people who have preexisting conditions,” which allows them to sell for less, she said.

“For some individuals it may be better than nothing,” Palanker said. “For other individuals, they may be better off putting that money in savings until they can afford a comprehensive plan.

Palanker was the lead author of a report published Aug. 9 on short-term health plans, which argued that those plans are “only viable for healthy people,” and that allowing the plans to be sold for longer than three months “will further siphon healthy individuals away from traditional health insurance.”

“You see some insurers leaning in on noncompliant plans because they believe that is ultimately where the Trump administration is going to go—the markets will be deregulated and that individuals will be free to choose skinnier plans as one of their options,” Dan Mendelson, president of health-care policy consulting firm Avalere Health, told Bloomberg BNA.

Noncompliant plans tend to be selected by healthier patients, which leaves compliant plans with fewer healthy people and raises their costs, Mendelson said.

Number of Issuers Declining

The number of issuers offering compliant plans in the individual market is likely to decline in 2018, making the problem of access to affordable compliant plans more difficult.

As of Aug. 15, following announcements that Centene Corp. will offer plans in Nevada and that Managed Health Services will offer plans in Indiana, only two counties in rural areas of Ohio and Wisconsin were at risk of having no ACA exchange insurer in 2018, according to the Kaiser Family Foundation.

However, the Centers for Medicare & Medicaid Services projected Aug. 16 that 1,486 counties—over 45 percent of counties nationwide—could have only one issuer in 2018, which could represent more than 2.7 million exchange participants.

“We are very concerned that millions of Americans have no choices as premiums rise and the availability of plans on the exchange continue to decrease,” CMS spokeswoman Alleigh Marre told Bloomberg BNA in an email Aug. 15. “Accordingly we are continuing to look for legislative and regulatory avenues to provide appropriate relief from the burdens of Obamacare.”

The National Association of Insurance Commissioners (NAIC) said in a July 12 comment letter to CMS that the Obama administration’s regulation shortening the duration of short-term plans from a year to three months should be repealed because it restricts coverage for consumers who may be between jobs or otherwise need short-term coverage.

But the NAIC’s comment “should not be construed as an endorsement of folks trying to get around the Affordable Care Act,” Maryland Insurance Commissioner Al Redmer Jr. told Bloomberg BNA Aug. 15.

“It’s a recognition that there are still folks periodically during the year who do not have access to the Affordable Care Act,” Redmer, who also is chairman of the NAIC’s health insurance and managed care committee, said.

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

Oliver Wyman's Analysis: Market Uncertainty Driving ACA Rate Increases is at http://health.oliverwyman.com/transform-care/2017/06/analysis_market_unc.html.

eHealth's report, Obamacare Premiums for 2018 Projected to Make Health Insurance Unaffordable for Many, eHealth Analysis Finds, is at http://news.ehealthinsurance.com/news/obamacare-premiums-for-2018-projected-to-make-health-insurance-unaffordable-for-many-ehealth-analysis-finds.

Kaiser Family Foundation's Aug. 15 update of 2018 exchange participation is at http://www.kff.org/interactive/counties-at-risk-of-having-no-insurer-on-the-marketplace-exchange-in-2018/.

CMS's 2018 Health Insurance Exchanges Issuer County Map is at https://www.cms.gov/CCIIO/Programs-and-Initiatives/Health-Insurance-Marketplaces/2018-Projected-Health-Insurance-Exchange-Coverage-Maps.html.

Short-Term Health Plans: Still Bad for Consumers and the Individual Market is at http://www.commonwealthfund.org/publications/blog/2017/aug/short-term-health-plans.

The NAIC's July 12 comment letter to CMS is at https://www.regulations.gov/document?D=CMS-2017-0078-1929.

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