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Obamacare's marketplaces may be stable, but they aren't exactly thriving. So the big question becomes: What can be done to make them better?
Two states you probably don't think much about — well, one state, Vermont, plus the District of Columbia — have implemented a policy that could point the way for some of their peers: requiring all individual plans to be sold through their Obamacare marketplaces.
Remember: There are still technically two individual markets. One is Obamacare's exchanges. That's where you have to buy insurance if you want to use the law's tax credits that lower the premiums you pay for your coverage. About 12 million people bought their insurance that way in 2016.
But the other market is what's called off-exchange. You can't use Obamacare's financial assistance this way; instead, you work directly with the insurer or through a broker rather than the exchange website. Because no financial assistance is available, the off-exchange market is mostly limited to people with higher incomes. About 7 million people buy their insurance off-exchange, according to estimates from the Department of Health and Human Services.
We don't know much about these off-exchange markets, which are still generally required to adhere to Obamacare's rules. But here's what we do know: Insurers will sometimes sell a plan only off the exchange.
From Health Affairs: More than 25 percent of individual plans nationwide were sold exclusively off the exchange.
So clearly, plans are catering intentionally to this market, where customers tend to buy either higher-end plans, which have higher premiums, or plans with more cost sharing. In either case, you're better able to afford it if you have a higher income — and the more money you make, the healthier you're likely to be.
All of this explains why DC and Vermont are doing what they're doing. They have required that all individual plans be sold through their exchanges. They have eliminated their off-exchange markets. That has helped shore up their markets, their officials argue, by preventing insurers from playing "selection games" by catering their offerings to attract only the off-exchange (healthier) market.
"You as an insurance company, if you're clever, can identify who are likely to be the high risks and the low risks," Henry Aaron, a senior fellow at Brookings who sits on the DC exchange's board, told me. "If you can elect to sell in only one of the places, then you're going to fish in the lake with a lot of fish.
In other words: When you have two markets, plans can choose to play only in the one where they are going to do better business. Which also leaves the other market with fewer options.
It was also a matter of survival for DC and Vermont, two of the smallest states. Without combining the two markets, their exchange market might have been too small to function. But that doesn't mean the same principle can't apply elsewhere.
A few experts I consulted agreed with Aaron and the DC exchange's calculus. (Aaron has argued, as he did in this op-ed for the Washington Post, that the concept could help bolster other Obamacare markets.)
As Joel Ario, who used to oversee the exchanges for the Obama administration and now works at Manatt, told me: "I think the main positive is whenever you have two separate markets, it sets up the potential for gaming."
"It’s better policy," he said. "There’s really not a fundamental policy objective that’s accomplished by having the bifurcation we now have."
The other way to achieve it, Ario pointed out, would be to allow people to use tax credits on and off the exchange. Some larger states could go in that direction; for smaller states, the DC model might make more sense.
Either way, uniting the markets could help solidify them and ensure the most vulnerable people have plan options. It would prevent plans from dropping out of the exchange market while continuing to offer coverage in the higher-yield off-exchange market.
But that might be easier said than done. There are some dicey politics to consider.
For people who used to buy off the exchange, Aaron said, they would now benefit from the side-by-side shopping that the exchange provides. That's the sales pitch to those people.
But Insurers are also going to argue that the government is getting between people and their health plans. You can probably hear the arguments now. Aaron said they experienced this in DC as the idea was being discussed.
The companies also must invest in computer systems that can connect with the exchange.
This isn't a silver bullet. It's not likely to solve all of the Obamacare market's problems on its own. But it's a relatively simple step, with the experience of a couple of states behind it, that experts think could help.
Chart of the Day
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The ever-growing health care industry: Here's another way of looking at health care's importance to the American economy: One in nine people work in the industry, which is up significantly from the turn of the century. Read more from Kaiser Health News.
Kliff's Notes
With research help from Caitlin Davis
- "Hoyer not insisting on ObamaCare subsidies in spending bill": “ObamaCare subsidies to help low-income patients do not need to be a part of a 2017 spending package, Rep. Steny Hoyer (D-Md.) said Tuesday, muddling the message from House Democrats as leaders from both parties negotiate legislation to prevent a government shutdown.” —Mike Lillis, the Hill
- "Centene expects to sell ACA plans in 2018": “Michael Neidorff, CEO of health insurance company Centene, told investors Tuesday during a first-quarter earnings call that he doesn't think the Affordable Care Act's cost-sharing subsidies will get eliminated and that he expects to stay in the exchanges next year. Anthem is one of the most important ACA health insurers right now, but Centene holds a lot of power as well. Centene had 1.2 million ACA exchange members as of March 31 (or about 10% of the individual market). “ —Bob Herman, Axios
- "HHS, States Move To Help Insurers Defray Costs Of Sickest Patients": “Two states — Alaska and Minnesota — that have seen double-digit increases in ACA plan premiums this year have already moved to implement reinsurance policies, and Oklahoma is making plans to seek federal approval to set up a program. The Idaho legislature also recently passed a health care reinsurance law, and Maine is considering taking similar action.” —Steven Findlay, Kaiser Health News
Analysis and longer reads:
- "As MACRA Implementation Proceeds, Changes Are Needed": “Physicians and their staff currently spend, on average, 785.2 hours ($40,069 per physician) annually simply tracking and reporting quality measures for Medicare, Medicaid, and private health insurers. In spite of the substantial time diverted from patient care and the money ($15.4 billion — roughly the amount of government spending each year on graduate medical education) that could be used for other purposes, most physicians feel that the current measures do not help them improve the care they provide.” —John O’Shea, Health Affairs Blog
"Here's who is spending the most on health care lobbying": “Drug companies dug deep into their lobbying piggy banks in President Trump's first quarter, but they weren't the only health care companies or trade groups that increased their budgets in Washington. Here's a list of the top 25 spenders and how much they budgeted for health care lobbying, based on an Axios review of the Senate lobbying database.” —Bob Herman, Axios
