The ACA in Wisconsin: What’s Next for Premiums, Insurance Markets, and Consumers?

by Donna Friedsam

(Note: This post has been updated to reflect the change in health plan coverage of counties in Wisconsin and nationally as of the end of August)

The longstanding effort by Congressional Republicans to repeal the Affordable Care Act (ACA, also known as Obamacare) recently failed in the Senate, leaving uncertainty about what comes next. Is Obamacare collapsing? What can residents of Wisconsin expect going forward?

The ACA debate stands on differing views about the role of government relative to the private sector, the federal government relative to states, and competing economic theories. These concerns deserve legitimate study and debate.

But ACA supporters and detractors view the ACA experience thus far very differently. ACA supporters focus on the substantial gains in insurance coverage, lower premiums and cost-sharing for low-income consumers due to federal subsidies, and consumer protections for people with pre-existing conditions and others. Detractors focus on rising insurance premiums and deductibles, the withdrawal of some insurance carriers from the market, and fewer insurance benefit design choices due to uniform standards and regulation.

What, in fact, has been the Wisconsin experience with the ACA?  How stable are Wisconsin insurance markets now? And are Wisconsin residents losing coverage options?

Enrollment Trends: Wisconsin

The number of Wisconsin residents seeking coverage through the ACA continued to grow from 239,034 in 2016 Wisconsin residents selecting ACA plans through to 242,863 in 2017. Of this group, about 81% (197,538 persons) receive federal subsidies reducing the price of their premiums, with an average federal subsidy of $399 per month.  As well, about 51% (124,073) of Wisconsin consumers who selected ACA plans had incomes low enough to qualify for cost-sharing reductions (CSRs), which reduced out-of-pocket deductibles and co-payments.

From 2013 to 2015, before and after the start of the ACA, the combination of ACA insurance coverage and expansions in private employer-sponsored insurance coverage have led to a 38% reduction in the number of uninsured individuals in Wisconsin.  Wisconsin’s market for individual insurance has become heavily invested in the ACA.  As of December 31, 2016, a total of 274,279, residents purchase coverage through Wisconsin’s individual market in Wisconsin, 85% with ACA compliant plans.  In 2016 about 224,208 plans were purchased “on-exchange” through the ACA Marketplace, of which 85% received federal subsidies to make those purchases.

Health Insurance Marketplace

Molina recently announced its departure from Wisconsin’s ACA marketplace, in which it had offered plans in 30 counties.  This follows earlier exits by other national carriers Anthem, Aetna, Humana, and UnitedHealthcare in Wisconsin and other states. This has fueled assertions that Obamacare is collapsing.

In fact, Wisconsin continues to be among the nation’s most competitive insurance markets, while other states have fewer participating carriers. At this point, 12 carriers have filed in Wisconsin to offer ACA plans for 2018. Medica announced a substantial expansion in Wisconsin. The remaining carriers participating in the Wisconsin ACA marketplace are state-based insurance companies with strong connections to the local delivery system. They continue to see a strong market in Wisconsin.

Geographic coverage by insurance carriers remains in flux until the final deadline for insurers to finalize participation in the ACA marketplaces this fall. Earlier this summer it appeared that one Wisconsin county (Menominee) stood at risk of being without an ACA carrier offering plans and over 40 counties nationally stood at such risk. At this point, these counties have carriers planning to offer coverage, and now all counties nationally have at least one ACA carrier offering coverage.  This is good news, although challenges still remain.

It is important that counties have affordable coverage options, and this process is dynamic. Centene, one of the largest national carriers in the ACA and Medicaid markets, recently announced higher-than-expected second-quarter profits, and a planned major expansion into new markets for the coming year. Counties with only a single carrier, however, may not gain other options for coverage, as these same markets generally suffered from a lack of insurance choices even before the ACA.  Many such counties lack insurers under Medicare Advantage as well, and rural areas in particular often live with limited choice in many businesses and services.

Premium Increases

Premiums for individual market coverage have increased 93% in Wisconsin between 2013-2017. Several factors contribute to this increase. First, before considering market dynamics, a note about the comparison: Pricing includes substantial differences between pre-ACA and post-ACA coverage: Individual market coverage before 2014 often did not cover various services such for maternity or mental health and substance use disorders, or for prescription drugs. Policies included annual limits in coverage, and people with preexisting conditions could be denied coverage.

Premiums for plans sold on the ACA Marketplaces have increased substantially in the past year, reflecting the program’s struggle to attract healthier, younger enrollees to purchase coverage and balance out the risk pool.  Some Obamacare design elements contribute to this, and could be adjusted through federal legislation. For example, the ACA limits age rate variation by a ratio of 3:1, which holds down premiums for older people while raising premiums for younger people. A 5:1 ratio may better attract younger enrolees while maintaining participation by older enrollees who have high degree of attachment to health insurance purchase.

Prior to 2018, the large premium increases that occurred may have been a time-limited correction for morbidity risk, payment shortfalls in the risk corridor program, and the end of the ACA reinsurance program.  Insurers had been subject to various rule changes and political decisions at the federal and state level that compromised the risk pool after premiums had been set. These include grandfathered and extended transitional (“like it, keep it”) plans, such that healthier people hold non-compliant plans outside of the ACA pool, choosing to keep relatively low-cost policies with fewer benefits. Generally, insurance pools became less profitable in states, including Wisconsin, that allowed ACA non-compliant plans to continue. As well, Congress blocked insurance carriers’ full risk corridor payments, most recently paying insurance carriers only 12.6% of the requested payments, leaving carriers with a $2.5 billion shortfall.  Other concerns have been addressed, such as tightening Special Enrollment Periods procedures to prevent short-term entry and exit from the market depending on health needs.

However, in 2018, the uncertain policy environment has become a significant driver of premium increases and market stability. Virtually all of Wisconsin’s carriers, in their rate filings with federal officials requesting premium increases, cite the continuing uncertainty of the policy environment.

The ACA requires insurance carriers to provide cost-sharing reductions (CSRs) to enrollees who qualify, and the federal government’s continued payment for CSRs remains uncertain.  If the federal government ceases to pay, the carriers will make up this lost revenue by raising premiums.  The Congressional Budget Office reports that ending CSRs would cause premiums for silver level plans to increase 20% in 2018.

The federal treasury will end up paying the costs of these premium increases, as the ACA’s federal premium subsidies depend on enrollees income, limiting the amount an enrollee is expected to spend on monthly premiums. The people who do not qualify for federal premium subsidies, who buy ACA-compliant plans on- of off- the ACA exchange, could find insurance that much less affordable.

Independent actuarial consultants recently reported that two-thirds of the 2018 rate increases will be due to the uncertainty surrounding continued funding of the CSRs and whether relaxation of the individual mandate will affect enrollment and risk pools.  Standard and Poor’s  and others emphasized the need to clarify the CSR subsidy, enrollment outreach, and enforcement of special enrollment periods and the individual mandate : Defunding the CSRs could deter insurer participation in the market and cause insurers to raise premiums.

What’s next

Twelve of Wisconsin’s major health care provider and business organizations joined together in a letter earlier this summer stating their shared concerns about Senate plans to repeal and replace Obamacare. The Wisconsin Hospital Association again later called on Congress to fully fund CSRs and immediately act to stabilize the insurance markets and preserve coverage in Wisconsin. Insurance market stability and premium prices remain of significant concern in Wisconsin and nationally.

Insurance industry leaders, the American Academy of Actuaries, and others have reviewed and recommended various elements for stabilizing the individual insurance market. Next steps could come from Congress, either through a renewal of efforts by Congressional Republicans to repeal and replace the law, or from a bipartisan group working together to consider ways to strengthen the individual market.

Next steps could also come from the executive branch, which holds responsibility for implementing current law. Lacking action from Congress, the Trump Administration can decide to withhold the CSRs, cut back on outreach, enrollment and advertising, and stop enforcing the enrollment mandate. The Trump Administration maintains significant power to stabilize insurance prices and either strengthen or weaken the individual health insurance market.

Open enrollment for 2018 coverage runs November 1 through December 15, 2017, an enrollment period half the length of last year’s. This change itself presents a new challenge to renew policies for existing ACA covered residents while also trying to reach the state’s remaining 320,000 uninsured residents. Decisions being made today by federal officials, with input from our state leaders, will determine the outcome.