ACA enrollment brings Catch-22 for insurers, confusion for customers

Nov. 1 marks the beginning of the Affordable Care Act (ACA) exchanges’ open enrollment period. Customers can expect some sticker shock with the most popular plans’ premiums rising by an average of 34 percent. Insurers, in turn, can expect fewer customers.

Ahead of the open enrollment period, S&P Global Ratings predicted between 10.6 million and 11.4 million people would sign up for coverage this year, a drop in enrollment of between 7 and 13 percent. Its 2017 estimates were generally more accurate than more optimistic projections from the Obama administration.

For insurers, it’s a Catch-22: They’ll have to keep pricing premiums “for a higher-morbidity marketplace,” thanks to a lack of enrollment growth, S&P said, but enrollment may not rise unless premiums go down. The report did not, however, change its assessment that the exchanges are stabilizing.

“Most insurers have gradually adjusted their product pricing and network design to bring them more in line with the morbidity and size of the individual market,” S&P said. “Our previously stated expectation is that insurers, on average, will get close to break-even for this market segment in 2017 and reach their target profitability in 2018. We are maintaining that forecast for now.”

Complicating matters will be “increased political risk” around the ACA which will affect insurers’ financial performance this year. While 2018 rates reflected the possibility of cost-sharing reduction subsidies, or CSRs, being cut off (resulting in additional hikes of 7.1 to 38 percent), most 2017 rates didn’t price for the CSRs being cancelled for any part of the current year, which will have a negative impact on insurers’ fourth quarter earnings.

The majority of 2018 exchange customers will be re-enrollees, with 85 percent of them likely shielded against the rate hikes by the ACA’s premium support subsidies. The number of new customers, however, will be lower than in prior years, according to the S&P forecast, along with lower enrollment from the returning enrollees who don’t receive any subsidies for the premiums and thus have to bear the full cost of the hikes.

Besides the shock of the increased premiums, a few new quirks may confuse customers in this year’s open enrollment period. For one, they’ll have less time to choose plans than ever, with the Trump administration cutting open enrollment in half with a Dec. 15 end date. In previous years, customers had until the end of January to select coverage which would have begun in March.

Customers may not know about those changes, as HHS cut its advertising budget for the ACA exchanges by 90 percent. If they seek help for sign up for coverage, it may not be as readily available, since funding for navigators was also cut.

Adding to the confusion is customers may have heard far more about the attempts to repeal the law—none of which passed Congress—than about the open enrollment changes.

“Consumers are unclear whether the marketplaces still exist, whether they still have an obligation to get coverage, whether the mandate exists, whether they can get financial assistance,” Kelley Turek, a policy analyst at America’s Health Insurance Plans, told the New York Times. “Our message is: Come back. The marketplaces are still here.”

At least some customers may get a pleasant surprise: insurance coverage with no premium. A Kaiser Family Foundation study found that in 1,540 counties in the U.S., a 40-year-old who makes $25,000 annually would receive a subsidy which covers the entire premium for the lowest-cost bronze-level plan. Because the premium support subsidies are tied to the cost of the second-lowest cost silver plan—many of which saw steep increases due to the uncertainty surrounding CSRs—the Kaiser study found many subsidy-eligible customers will pay less for their plans compared to their 2017 coverage.