With enrollment deadline extensions and the option to extend non-compliant policies into 2014, insurers have expressed significant concern that Affordable Care Act exchanges will be inundated by sicker people who will be a drain on already narrow profit margins.
In an effort to quell some of those fears, the Obama administration announced several policy considerations that it believes will stabilize the market and reassure participating carriers. Two health underwriters and experts on high risk pools say the proposals may have the desired effect, but it’s too early to say for sure.
Additionally, the underwriters added that whether the proposals are adopted or not, the end cost will be filtered down to taxpayers.
Under the proposed changes, the government would lower the threshold for reimbursement to carriers paying out expensive medical claims. Currently, the government will pay 80% of claims larger than $60,000 in 2014. Under the new rules, the threshold would be lowered to $45,000.
Dan Heffley, regional special master of legislation with the National Association of Health Underwriters, said it’s too early to tell if these measures will be sufficiently effective to stabilize 2015 premiums and ensure carriers remain solvent.
“Only the insurers know what their threshold is,” he said. “What it comes down to is, where are they experience most of their costs? Is it at that $45,000 level or is it at a higher level or a lower level? That’s going to be key to find out.”
Based on past experiences with government involvement in healthcare, including funding of the Pre-Existing Condition Insurance Plan, Heffley said he is unsure whether the measures go far enough.
“Is it going to be enough?” he asked. “The PCIP—they allocated so much money for it and it wound up closing its doors a year early with about a third of the volume it expected. They’ve got a tendency to underestimate what the costs will be.”
Nevertheless, Heffley said he is “cautiously optimistic” regarding the proposed changes.
So is Kelly Fristoe, president of the Texas Association of Health Underwriters.
“There’s a component and a factor there that will keep premiums from escalating where they would have otherwise,” he said.
However, Fristoe expressed concern that the costs associated with lowering the reimbursement threshold would ultimately be passed onto policyholders and taxpayers.
“If they’re going to be willing to assist insurance companies, okay, that’s great, but it’s still going to be money that’s yanked out of the taxpayers’ pockets,” he said. “Why don’t they charge people more money and get it that way—through premiums? [This is] a more of an indirect way of doing it so it doesn’t appear that it’s the consumer in the end that is bearing those costs.”
Heffley said that regardless of the outcome of the policy, he is encouraged that the government is starting to acknowledge the “undue pressures” it has placed on the insurance industry.
“The administration finally realizes it can’t be like Captain Picard on Star Trek and say ‘Make it so,’ and have it work,” he said. “There’s a lot more involved and this is really putting pressure on insurance companies.”
The White House is accepting public comment on the proposed policy changes through December before making final decisions.