There is good news and bad news on the ACA Open Enrollment front. One million more Americans are expected to enroll in federal or state exchange plans in 2017, which is good news for 2 reasons. On the other hand, news that health insurance premiums are skyrocketing and more enrollees are receiving federal subsidies constitute the bad news. Read on to get the details and background behind both the good and bad news.  

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ACA Open Enrollment: Good News and Bad News

Tue Nov 1, 2016

The U.S. Department of Health & Human Services (HHS) recently reported Affordable Care Act good news and bad news in connection with open enrollment for 2017.

Open enrollment for those who wish to sign up for health plans available on ACA exchange marketplaces starts November 1 and continues until December 15 for coverages that will commence on January 1, 2017.

First the good news: HHS secretary Sylvia Burwell announced October 19 that 13.8 million Americans are expected to select plans on state or federal exchanges for 2017, an increase of 1.1 million over the 12.7 million marketplace selections at the end of open enrollment in 2016.

HHS further estimates that of the 13.8 million that select plans for 2017, “effectuated” or paid-for enrollment will average 11.4 million over the course of 2017—an increase of 900,000 above the 10.5 million who were enrolled in exchange plans in the middle of 2016.

If these numbers hold up it would be very good news indeed for two reasons:

One, there has been growing concern that exchange enrollment would decline in 2017 as insurance issuers exit the marketplaces and premium increases accelerate.  With a new president and a new Congress taking office in January, 2017 will be a make or break year for the ACA—and a slide in total enrollment would undermine the healthcare reform law.

Two, according to HHS, nearly 8 in 10 marketplace enrollees can find a health plan that costs $100 or less in premiums per month, after taking into account their premium tax credit subsidies.

In sum, HHS expects ACA exchange enrollment to grow by almost 1 million in 2017 and says premiums will be affordable for the vast majority of enrollees.

Now the bad news: The first piece of bad news is that premiums for exchange coverage are skyrocketing. According to HHS’s own projections, “Across the (39) states using the platform, the median increase in the second-lowest cost silver plan premium is 16 percent, while the average increase is 25 percent.” (Italics added)

That the average premium increase over 2016 is 25 percent is potentially calamitous for the Affordable Care Act. Not only is the increase triple the increases for 2016, but a few states, California, for example, are experiencing relatively modest increases—single digit in some cases. This means that other states will face enormous increases—more than 100 percent in Arizona, 70 percent in Oklahoma and around 60 percent in Minnesota and Tennessee.

Why are premiums exploding? HHS puts it succinctly: “Issuers are adjusting their premiums to bring them in line with costs.” In other words, enrollees’ medical claims costs are running far ahead of 2016 premium revenues and insurers are losing money. Aetna alone says it has lost $430 million on its exchange business. Their choice is either to quit the exchanges, as UnitedHealth, Aetna and others plan to do, or jack up premiums in hopes of balancing their books.

But there’s more bad news: HHS estimates that 84 percent of ACA marketplace enrollees who selected a plan during open enrollment for 2016 received premium tax credits to help pay for coverage.

In other words, the main reason that 8 in 10 enrollees can find a plan for $100 or less per month, even as exchange premiums go through the roof, is that 84 percent of enrollees get government subsidies that make the premiums affordable.

Why is this bad news? Because ACA exchanges are mainly enrolling households who qualify for premium tax credit subsidies to help pay premiums. Uninsured Americans who earn too much to be eligible for subsidies find premiums for ACA coverage too expensive—and getting much more expensive in 2017. And these are the very people that ACA must attract to avoid the “death spiral” that threatens the viability of the law itself.

Taking the good news and the bad news together what happens next? For one, exchange enrollment needs to at least double from present levels. CBO predicted back in 2010 that 20 million people would be enrolled by now, not 11.4. It’s the only way to balance claims costs and premium revenue and make private insurance sustainable.

Second, premiums need to stabilize. One more year of 25 percent average increases in premiums and the ACA could become like Medicaid—government subsidized coverage with narrow networks of participating hospitals and physicians.

Third, in 2017 the new president and the new Congress must find a way to work together to rescue the Affordable Care Act. Democrats need to accept that the 2010 law has serious flaws that need fixing; Republicans need to accept that ACA has extended health coverage to over 10 million previously uninsured Americans and the U.S. government cannot renege on that commitment. Action will become even more urgent if open enrollment sign-ups fall short of HHS forecasts—numbers that will be available as soon as January.

By all means Republicans and Democrats should have a vigorous debate over the ideas that have been floated during the election—the so-called “public option,” more generous subsidies, tougher penalties for those who don’t have coverage, tighter eligibility rules, repeal of the Cadillac Tax, scaling back the individual and employer mandates, etc.

But after the debate, and notwithstanding the bitter partisan presidential campaign, Democrats and Republicans, on Capitol Hill and in the White House, need to find a compromise to save health insurance coverage for millions of Americans. After six years of political division over the Affordable Care Act, it’s time for Washington DC to bring the country together on healthcare reform.