3 Reasons Why Health Insurance Companies are Opting Out of the ACA
If you Google “turmoil” and “healthcare,” you quickly see that the U.S. healthcare landscape has experienced turbulence in the past. For instance, an article from this month is juxtaposed against one from nearly two decades ago in the top two spots.
But as the latest ACA enrollment period comes to a close, a story dominating headlines has been health insurance companies opting out of Affordable Care Act (ACA) marketplaces. Let’s take a look at what’s happening—and why.
▶ The Exodus of Health Insurance Companies from ACA Marketplaces
Since health insurance companies began offering plans through the federal and state marketplaces in 2014, the national average of participating insurers has moved up from five to six—but that’s not the whole story.
In fact, deeper analysis conducted by the Kaiser Family Foundation finds that nearly a third of the nation’s counties will likely have only one insurer offering health plans on the ACA’s exchanges next year. The Kaiser Family Foundation admits that their findings aren’t set in stone since not all 2017 data is available. However, the writing is on the wall.
This year, insurers Aetna, Humana and UnitedHealth Group all announced plans to scale back participation in the exchanges. The KFF analysis shows that insurance companies opting out of the Affordable Care Act will have a major impact for many healthcare consumers. Based on the available data:
The number of enrollees with three or more options for insurers will decline from 85 percent in 2016 to 62 percent.
Meanwhile, the number of enrollees with only a single option will likely increase from 2 percent to 19 percent.
In addition, 31 percent of counties will have a single option, up from 7 percent in 2016.
These changes will disproportionately impact rural and southern states. Nevada, South Carolina, Utah, West Virginia and Wyoming exchanges likely will have only a single option for 100 percent of counties. Alabama, Alaska, Arizona, Florida, Mississippi, Missouri, North Carolina, Oklahoma and Tennessee will also see the number of single option counties climb dramatically.
▶ Insurance Companies Cite Multiple Reasons for Opting Out
What’s behind the exodus from ACA marketplaces? Several reasons stand out.
1. Enrollment numbers have not met expectations.
U.S. News cites the Congressional Budget Office’s projection of 24 million enrollees by 2016, noting that “In reality, the latest sign-ups have totaled only 11.1 million.” Some have attributed this to the fact that many employers continued to offer health insurance—when some predicted the opposite when the ACA passed—enabling 6 million people to remain on employer-provided plans. That still leaves a 7 million person gap in projected versus actual marketplace enrollees.
2. The “shared responsibility” payment isn’t working.
The penalty has gradually risen in the past three years, but it’s not motivating individuals to buy insurance. One uninsured individual told KHN that she’s willing to pay the penalty because the most affordable plan available to her costs $250 a month. Another one said, “We should not be forced to buy health insurance.” Instead, he pays out of pocket for the health services he needs, shopping around for the best price.
The $695 per person fee fails as an incentive when individuals consider monthly premiums—even when subsidized—combined with potentially high out-of-pocket costs will likely exceed the penalty.
3. The sick opted in, but the healthy haven’t.
As Paul Ginsburg, director of the Center for Health Policy at the Brookings Institution, remarks in U.S. News, “Fewer employers dropping coverage is part of the story, but it also appears that healthier and unsubsidized consumers, particularly among the so-called young invincibles, are not buying coverage at the rates expected, leading to lower uptake in the individual market than the Congressional Budget Office projected.”
As a result, health insurers found themselves covering more individuals with chronic conditions, but few of the young, healthy individuals they need to balance the costs out. Aetna CEO Mark Bertolini notes that “Providing affordable, high-quality health care options to consumers is not possible without a balanced risk pool.”
Current uncertainty about the fate of the ACA under the new administration did not stop people from signing up on the exchanges. In fact, more than 100,000 people signed up for coverage the day after the election, possibly believing that having coverage could be important if another solution replaces the ACA.
But health insurance companies opting out of the Affordable Care Act may want to consider some alternatives, such as improving their reach among the young invincibles and putting together programs that inspire healthier behaviors among their sicker members.
Insurers have not offered a value proposition
that is meaningful and relevant to many of the remaining uninsured.
Psychographic segmentation can help insurers along the path to more effective communications by providing insights into what makes consumers tick—their beliefs, attitudes and motivations when it comes to health and wellness. Insurers have not offered a value proposition that is meaningful and relevant to many of the remaining uninsured. By deeply understanding these healthcare consumers’ priorities, motivations and unarticulated needs, insurers can position their products in a way that resonates with relevance and urgency.
By delivering more relevant information, health insurers can boost their enrollment and retention numbers, while also encouraging their members to more actively pursue health. Will this solve the issue of the uninsured 100 percent? No, but it could be a missing piece in the puzzle and could persuade many consumers that health insurance is right for them. And that would be an advantage regardless of what the future holds.