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Commentary: Health Insurance Exchanges In Their Current Form Are Unsustainable

Key findings

  • The Patient Protection and Affordable Care Act (Obamacare) created health insurance exchanges as a key strategy for providing coverage to more Americans
  • Early problems included insurance companies' narrow provider networks and high premiums that discouraged healthy adults from joining coverage pools
  • Recent federal government policy changes have undermined the viability of the exchanges
  • The exchanges are unsustainable in the long term because subsidies are unreasonably costly to taxpayers, and out-of-pocket costs for consumers who don't qualify for subsidies are unacceptably high

In 2010, almost 50 million Americans completely lacked medical insurance. When legislators drafted the Patient Protection and Affordable Care Act (ACA, also called "Obamacare"), their top goal was to expand insurance coverage.

To address this goal, the drafters chose two strategies to:

  1. Expand eligibility for Medicaid by redefining who qualifies
  2. Create health insurance "exchanges," or online marketplaces

Exchanges were designed for the millions of Americans who do not have employer-based coverage, such as those who run small businesses and do not qualify for Medicare or Medicaid.

But in a commentary in the Journal of NeuroInterventional Surgery, physicians at Massachusetts General Hospital including Joshua A. Hirsch, MD, vice chair of procedural services and senior affiliate research fellow at the Neiman Policy Institute, Thabele Leslie-Mazwi, MD, specialist in neuroendovascular and neurocritical care, and David A. Rosman MD, MBA, associate director of business development, Mass General Imaging, caution that exchanges have become unsustainable. The two major political parties differ about the solutions, they say, but physicians should watch for significant changes in health insurance legislation.

The Exchange Marketplace

Decades before the ACA, smaller businesses were banding together to negotiate better terms with insurers by relying on the power of a large group.

The ACA aimed to expand on this concept by providing bigger customer pools to insurance companies and more options to consumers. If a person or family lacks coverage, they could then visit their state's website, see side-by-side comparisons of various health plans and purchase the one best suited to them. They can also see whether they are eligible for payment assistance: Taxpayers subsidize people with a household income between 133% and 400% of the federal poverty line have part of their premium subsidized when they buy a plan on an exchange.

The exchange marketplace opened in October 2013, and certain problems became apparent early on. Legislators had counted on enough healthy young adults buying plans to offset the cost of sick enrollees, but insurers tended to set high premiums that discouraged many of these potential plan members.

Another problem was the narrow provider networks that companies allow. Narrow provider networks are manifesting throughout the country as "surprise billing" stories in the lay media.

The Republican party would acknowledge that their position has generally been hostile to the ACA. This became more relevant after the election of November 2016.

The Trump administration made policy changes that undermined the viability of the exchanges:

  • Eliminated federal reimbursements to insurance companies for the cost-sharing reductions the ACA requires them to pay to low-income people who buy insurance through the exchanges
  • Decreased the open enrollment window, the time at the end of each year when people can buy a plan through an exchange, from 90 to 45 days
  • Reduced the advertising budget for publicizing the open enrollment window by 90%
  • Cut the number of navigators who help people purchase a plan on an exchange by 42%

In addition, Congress repealed the individual mandate in the Tax Cuts and Jobs Act, which required people to either buy insurance or pay a penalty. With the mandate gone, fewer healthy people are buying insurance through the exchanges.

Given the smaller pools of customers, some insurers have raised premiums dramatically since the ACA was launched. In some parts of the country, there have been triple-digit rate increases.

Therefore, for Americans who do not qualify for a subsidy, the cost of buying health insurance on an exchange can be prohibitive, and enrollment is diminishing.

Meanwhile, another trend is developing. More insurance companies are offering exchange-related plans. Dr. Hirsch's group speculates that the multiyear rate increases have stabilized insurers' losses on the exchanges, since taxpayers cover the brunt of the cost through the federal government subsidies.

According to the nonpartisan Congressional Budget Office, it is now cheaper, on average, to enroll an American in Medicaid than it is to subsidize their private insurance. This discrepancy is expected to worsen as an effect of the recent policy changes.

Dr. Hirsch's group believes subsidies for premiums on the exchanges are unreasonably expensive for the U.S. taxpayer, and the out-of-pocket costs for consumers who don't qualify for subsidies are unacceptably high. They conclude that the exchange marketplace is unsustainable in the long term without transformative efforts.

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