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HHS Proposed Changes Could Reduce ACA Coverage and Increase Premiums

Summary

New analysis from Avalere finds that exchange plan sign-ups could decline by 1.1 million, while premiums could increase by 6.3%, by 2025 should HHS finalize recently proposed changes to auto-reenrollment in the exchange and the calculation of tax credit subsidies.

In its annual Notice of Benefit and Payment Parameters (NBPP) for the 2020 plan year, HHS seeks comment on revising or eliminating automatic reenrollment for some exchange enrollees beginning in 2021. Today, individuals who are enrolled in coverage and do not actively select a new plan for the upcoming plan year are auto-reenrolled into the same or similar plan for the upcoming plan year. In 2019, 1.8 million enrollees, or just over 20% of federal exchange enrollees, were automatically enrolled.

HHS also proposes to change the methodology used to calculate the income threshold growth that determines enrollee eligibility for premium subsidies, the beneficiary maximum out-of-pocket (MOOP) limit, and the maximum amount employers can charge for their employer-sponsored coverage for it to still be considered affordable.

To understand the potential impact of these changes, Avalere modeled the effects of 4 policy scenarios on enrollment and premiums in the individual market: 1) maintaining current policy; 2) eliminating exchange auto-reenrollment, starting 2021; 3) changing the premium adjustment percentage, starting 2020; and 4) eliminating auto-reenrollment and changing the premium adjustment percentage, starting in 2020 and 2021, respectively.

Potential Impact on Enrollment

Avalere projects the elimination of auto-reenrollment in 2021 would reduce the number of enrollees in the individual market by 1 million by 2025. Changing the premium adjustment calculation in 2020 is projected to lead to 100,000 fewer enrollees by 2025 compared to current policy. Combined, the 2 policies could lead to approximately 1.1M fewer enrollees in the individual market by 2025, when compared to current policy.

“Eliminating auto-reenrollment in the exchanges will lead to lower enrollment and more uninsured patients,” said Chris Sloan, associate principal at Avalere. “While most exchange enrollees actively choose their insurance each year, over 20% rely on auto-reenrollments to maintain coverage.”

Table 1: Changes in Total Individual Market Enrollment, 2020-2025

Potential Impact on Premiums

The proposed policy changes are also expected to increase the average risk in the market, thereby increasing premiums. This is due to healthier, more price-sensitive individuals exiting the market because of the premium calculation change and/or individuals effectively dropping out of the market by not actively selecting a plan.

Eliminating auto-reenrollment alone is projected to increase premiums by 5.7% by 2025. The change in premium tax credit calculations is expected to lead to a 0.6% increase in premiums because healthy people would be expected to exit the market. Combined, the policies are projected to lead to premiums that are 6.3% higher than they would be under current policy.

“Requiring exchange enrollees to take an additional step to sign up for coverage may lead to a less balanced risk pool,” said Elizabeth Carpenter, practice director at Avalere. “For individuals who remain in the market, premiums are likely to increase.”

Table 2: Changes in Average Individual Market Premiums, 2020-2025

Funding for this research was provided by America’s Health Insurance Plans. Avalere maintained full editorial control.

Methodology

To conduct the analysis, Avalere used its proprietary individual market enrollment model to project future impacts of the elimination of auto-reenrollment in the individual market and the change in the premium adjustment calculation. The model relies on publicly available data provided by the Centers for Medicare & Medicaid Services, Assistant Secretary for Planning and Evaluation, and American Community Survey (ACS) demographics information. Additionally, Avalere uses its proprietary MORE2 Registry® to estimate the underlying risk of the population to project future premium increases and enrollee purchasing behavior in light of premium increases or decreases.

To estimate the baseline number of automatic renewals, Avalere applied the percentage of automatic renewals from the 2018 Marketplace Open Enrollment Period State-Level Public Use Files, which includes both states served by a Healthcare.gov platform and state-based exchanges (SBEs), to the total number of renewals in the January 3 Final Weekly Enrollment Snapshot for the 2019 Enrollment Period, projected forward through 2025. Avalere utilized data from the December 2013 CHIPRA Mandated Evaluation of Express Lane Eligibility: Final Findings report on the Louisiana Express Lane Eligibility (ELE) automatic renewal system for its Medicaid and CHIP populations from 2010–2012 as an analogue to estimate total loss in coverage due to the elimination of automatic enrollment. Avalere used the 19%-point difference in enrollment after 12 months as the base assumption.

Importantly, Avalere’s proprietary individual market enrollment model is based on effectuated enrollment throughout the year, not plan selections prior to effectuation of coverage. As such, some portion of the decline sign-ups through auto-reenrollments is expected to come from those individuals who would have already not effectuated coverage due to non-payment of the first month’s premium. Avalere assumed that the drop from plan selections to effectuated enrollment is evenly distributed among sign-ups (new enrollees, reenrollees, and auto-reenrollees). Importantly, if a higher proportion of auto-reenrollees do not pay their first month’s premium payment, then this analysis may overstate the impact of the elimination of auto-reenrollment. Similarly, if a high proportion of auto-reenrollees pay their first month’s premium payment, compared to other avenues of enrollment, this analysis may understate the impact of the elimination of auto-reenrollment.

To estimate the impact of the change to the premium adjustment percentage and subsequent income contribution requirement from 8.18% (based on employer-sponsored insurance premiums continued) to 8.39% (based on private health insurance premiums, excluding Medigap and property and casualty insurance), Avalere used the HHS impact analysis from the proposed NBPP for the 2020 plan year to determine the expected differences in premiums for subsidized enrollees.

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