Individual insurance market possibilities for 2019

Given that it is extremely likely that the individual mandate will be repealed in the next couple of weeks and the rule making for limited duration plan extensions is slowly grinding forward, what will the individual market look like on January 1, 2019?

Right now for someone who has to either buy their insurance on the individual market or go uninsured, there are a couple of broad pathways. They can buy a subsidized or unsubsidized ACA plan, they can participate in a Health Sharing Ministry, get on a three month short term plan or go uninsured.

The individual health insurance market in 2019 will look very different. The Office of Management and Budget (OMB) are processing rules for association health plans and 364 day limited duration plan expansions. Those are plans that can underwrite people out of coverage and limit benefits. The lack of the individual mandate will also increase the price of the ACA community rated, guaranteed issue policies. So what happens?

People who qualify for significant Advanced Premium Tax Credits (APTC) and CSR assistance will most likely stay in the ACA market. There will be some leakage of healthier individuals who can pass medical underwriting and who receive some but not large APTC credits move to the non-regulated individual market. Insurers will have strong incentives to aggressively strategize their product offerings to maximize Silver Gaps and potential CSR based Silver-Loads to lower the absolute post-subsidy prices; this will minimize the loss of healthy subsidized buyers to lightly regulated plans.

Healthy people who make too much for APTC or otherwise don’t qualify for it can buy much cheaper coverage. Some of the coverage is good coverage, some is appropriate for the hit by a meteor/congrats you have cancer situations and some is junk. These individuals have had this choice to some degree already today as there are the Health Sharing Ministries but the options will be much broader and more aggressively sold.

So far we’ve talked about either subsidized individuals or healthy individuals. They’ll be okay or better off. The big problem are people who aren’t healthy and who make too much to qualify for the ACA subsidy pool. They are in trouble.

The average ACA premium will increase because the lack of an individual mandate will draw out some of the healthier and cheaper individuals from paying premiums. The average ACA premium will also increase as the underwritten plans can offer cheaper/better deals to the healthiest/youngest people who would still want to be insured even without the mandate. For subsidized buyers, they don’t feel the incremental rate increases. Non-subsidized buyers are not protected.

For non-subsidy eligible people with moderate risk, they might be able to get an underwritten plan at an up-rated premium that may be cheaper than an ACA plan without any subsidies. But for people with low risk but high guaranteed expenses such as individuals with metastatic cancers, hemophilia and cystic fibrosis, no underwritten plan will touch them with a thirty foot pole. Their application would be burned on the spot and the ashes placed on a rocket that will crash into the sun.

These individuals are being left out of what will be effectively a well subsidized and well funded high risk ACA pool and they are underwritten out of the market for healthy, non-subsidized individuals. These are the people who are at the most long run risk as the off-Exchange market segment will get proportionally far sicker and thus the entire ACA risk pool will get sicker, holding everything else constant, and thus more expensive.

I again am not too worried about entire states not having insurers for the ACA market. Insurers know how to price sick risk pools as long as they can expect sick risk pools. Single insurer regions and states are probably more likely to increase as the risk of getting a disproportionally sick risk pool declines when there is no competition that can cherry pick the comparatively healthy.

Smart insurers with years of claims data will be able to aggressively self-cherry pick low cost members who are likely to drop coverage and push them into lower premium underwritten plans. The outcome is a four section system of the individual market: the uninsured, the underwritten, the subsidized high cost risk pool for 100-400% FPL ACA plans and the truly SOL.

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