Open enrollment for health coverage under the Affordable Care Act begins in a few months. And for many, navigating the provider exchange can be a daunting task.
So, what exactly is the exchange and how does it work?
When the Affordable Care Act, commonly referred to as the ACA or Obamacare, was passed in 2010, it included a provision for the creation of exchanges in each state. The exchange is basically a marketplace for all eligible insurance plans offered in that state. In southwestern Pennsylvania, for 2016, that included UPMC, Highmark, Aetna and UnitedHealthcare.
However, many states opted out of running their own exchanges and in those cases, the task has fallen to the federal government for nearly half of the country.
Determining coverage starts months before open enrollment in November. It begins when the federal government publishes an 80-plus-page document outlining the minimum requirements a plan needs to offer to be listed on the exchange.
“They are very, very long and very weedy and detailed as far as all the changes and the nuances that are different from one year to the next,” said Nancy O’Connor, regional administrator of the Centers for Medicare and Medicaid Services.
To have a plan included on any of the exchanges, an insurer must provide 10 essential benefits such as prescription drug coverage, emergency services and maternity care.
Rates, Subsidies and Risk
Based on those requirements, each plan begins to set premiums by consulting with actuaries to estimate what it will cost to offer that level of benefit to the average man, woman or child in the region.
The ACA also allows insurance companies to offer as many as five gradients of each policy based mostly on out-of-pocket costs. Those sub-categories of coverage are defined by the ACA as Platinum, Gold, Silver, Bronze and Catastrophic. After a subscriber meets their deductible, a bronze plan covers 60 percent of covered medical expenses, a silver plan covers 70 percent, gold 80 percent and a platinum plan covers 90 percent of covered medical expenses.
Catastrophic plans are not available to all individuals and the coverage they can offer will vary, but will be less than a bronze plan. Deductibles are not regulated by Obamacare.
Complicating matters, the federal government also provides subsidies for low-income consumers, imposes tax penalties for those who opt out of health insurance, offers limited enrollment periods and accounts for things called “risk corridors” and “risk adjustments.”
Depending on who actually signs up for an insurance company’s plan, the insurance company could get money from the federal government at the end of the year to compensate for higher-than-average payouts or the company could be charged by the federal government for lower-than-expected claims.
“We’re looking at medical loss ratio ultimately,” O’Connor said. “We’re looking at the claim that the insurance companies are paying and all of the data are being put into different formulas.”
O’Connor said she thinks the formulas work in order to distribute risk evenly among the insurance providers.
Though Affordable Care Act proponents have said the formulas have helped cut down on risk, some insurance companies have said it’s not enough.
A separate law prohibits the federal government from using any funds not generated by the Affordable Care Act to pay for the program. And at the end of 2014, there wasn’t enough money to pay the companies that went into the red.
Pittsburgh-based Highmark Health recently sued the federal government, claiming that in 2014, the government’s formula calculated that the health plan should receive $220 million. However, Highmark only received $28 million because the pool ran out of money.
According to America’s Health Insurance Plans, similar scenarios played out across the country.
“The shortfall in the risk corridor payments really, I think, made a lot of companies reevaluate whether they could remain in the market given the losses that they face,” AHIP Spokesperson Clare Crusing said.
That has prompted concerns that there will be few options for those wanting to purchase coverage on the exchanges come open enrollment time in November.
Though some see health care providers moving in and out of the exchanges as a negative, Trans America Center for Health Studies Executive Director Hector De La Torre said it happens all the time in the commercial insurance markets. But without any government programs tracking those movements, the changes largely go unnoticed.
That said, a mass exodus of carriers this year could indicate instabilities in the system’s structure.
To make the Affordable Care Act live up to the “affordable” part of its name, it needs young, healthy individuals that rarely see the doctor to sign up and pay for insurance in numbers large enough to offset the payouts for sicker individuals who see the doctor far more often and generally enroll at higher rates.
But it’s not happening, according to De La Torre. And Crusing said that imbalance is creating “a death spiral scenario.”
To encourage healthy Americans to purchase coverage, the ACA includes a tax on anyone without insurance. But for many, the tax is not high enough to incentivize them to spring for insurance.
For instance, a single 25-year-old in Pennsylvania earning the state’s 2015 median income of approximately $53,000 a year would be taxed about $111 a month for not having insurance. But the cheapest coverage option available in Allegheny County is more than $111 a month.
The ACA also uses the tax code to incentivize low-income individuals who don't qualify for Medicaid, to get insurance by providing subsidies for their care.
Subsidies are provided on a sliding scale based on age, income, family size and the cost of the average silver plan being offered in your region. For a family of four earning $53,000 with two 25-year-old adults and two children, the ACA would offer a subsidy of approximately $170 a month to help pay for the average $312 monthly insurance plan premium.
De La Torre said the ACA has exceeded its goal of enrolling 10 to 11 million Americans, but it’s falling short when it comes to enrolling the working poor.
“They, for the most part, have never had health insurance, so they don’t know how it works,” De La Torre said. “Many of them don’t know, either the mandate or that there are subsidies in these exchanges. So it’s a tougher group to reach out to and it requires more education. A TV commercial is not going to do it for them. They need personal, whether it’s on the phone or face-to-face, communication to explain to them how all this works.”
O’Connor agreed that education is key.
“If you’ve never had health insurance in your life you don’t know what a deductible is, you don’t understand paying your premiums every single month,” O’Connor said.
She added that understanding the “appropriate” way to access healthcare and use insurance coverage is another factor that will help the program’s sustainability.
“If your kid has an ear infection, you don’t go to the ER for that ear infection,” O’Connor said. “You need to establish a relationship with a primary care provider.”
Not Worth It For Some States
In some states, there are so few people purchasing policies from the exchange that insurance companies are pulling out of the system because it’s too much work to go through the process of evaluating the thick document and building a plan for so few new clients.
In a few states, including Alabama and Alaska, only one provider remains in the exchange.
Crusing also said that building products for the commercial market is not the same as building one for the exchanges.
“There is very limited flexibility for plans to use some of the tools that they do have to make coverage more affordable,” Crusing said. “And what is concerning are attempts at the state and federal level to add greater restrictions or more requirements on plans.”
For private insurers, those tools may include not offering some of the coverage areas mandated through Obamacare, such as maternity or pediatric services.
One new requirement being discussed in some states and giving AHIP concern, is forcing plans to offer a “wide network” of providers.
In general, the more doctors and facilities covered as “in network,” the more expensive it is to operate the plan. However, if a network is so narrow that the only doctor specializing in your ailment is hours away by car, De La Torre said he wondered if that is truly offering coverage.
“Consumers don’t know about this. They assume it’s a health insurance company and they can go wherever they want,” De La Torre said. “Well, they can. It just costs them more. Well, that’s not real access. Who is going to hop in their car or on a bus to get to Philadelphia to visit their oncologist? That’s not adequate.”
Defining what constitutes an “adequate” or “wide” network could prove to be difficult. What seems like a reasonable distance to travel to see an in-network specialist in the Pittsburgh region differs from north central Pennsylvania and even more so in someplace like the buttes of Montana.
The Centers for Medicare and Medicaid continues to "work very closely with the issuers who are offering products on the marketplace to find out what is working, what isn’t working, what are their challenges," O'Connor said. "We are always trying to tweak things and change things so that we can sustain the marketplace long term.”
Open enrollment begins in November. Depending on which party is in power come January, there could be more changes coming before the next 80-page document defining minimum coverage in 2018 is released by the feds.
Health care coverage on 90.5 WESA is made possible in part by a grant from the Jewish Healthcare Foundation.