The individual mandate is gone in 2019. The short duration plan regulations dropped yesterday. Those plans will allow for underwriting, medical exclusions and plans that offer don’t offer the full array of required benefits. What will the 2019 individual market look like?
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.
Next year, those options change significantly. The individual mandate repeal and the proliferation of 364 day underwritten plans will pull a lot of good risk out of the current Qualified Health Plan (QHP) universe. This has major distributional consequences.
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 and women who do not intend to get pregnant next year and 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. Brokers will push these plans as the brokers are highly likely to get good commissions on these products.
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. We will see aggressive financial engineering to get chronically ill individuals into the subsidized income thresholds.
Insurers know how to price sick risk pools as long as they know to expect sick risk pools. Single insurer regions and states are probably more likely to increase as the risk of getting an unexpectedly sick risk pool declines if there is no competitor cherry picking the relatively 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 2019 individual market will have four parts:
- The Uninsured
- The Underwritten
- The Subsidized
- The SOL