Health Care

Health Insurers Are Hedging their Bets

YOUNGSTOWN, Ohio — Health insurance professionals say they’re as much in the dark about what changes will be made to the Affordable Care Act and the impact as consumers, and it’s anybody’s guess when, if any, overhaul will pass Congress.

“At this point, insurance companies don’t know how to price the product,” says J.B. Silvers, professor of health finance at the Weatherhead School of Management at Case Western Reserve University. The deadline for these companies to file their individual and small-group major medical plan rates in Ohio was June 5. “In California, companies have been told to file two sets of premiums because we don’t know what’s going to happen.”

The U.S. House of Representatives passed a replacement bill to the Affordable Care Act – commonly known as Obamacare – May 4. The new bill, the American Health Care Act, guts many of the Obamacare provisions. Among the changes are removing the penalties on health insurance mandates and rolling back Medicaid expansion. The bill would give states more control over health care policy as well.

The bill has moved to the Senate where the Republican majority is writing its own measure that would keeps some of Obamacare’s elements intact and phase out other provisions. The snag is the Republicans can’t reach agreement among themselves and the Democrats are opposed to any change.

So the longer Congress debates the issue, the more uncertainty results in the exchange marketplace, Silvers says. “All this delay will damage the exchange markets tremendously,” he says, “and the exchanges will just fade away.”

The Affordable Care Act set up exchanges so consumers could shop online for the best health care plans.

Insurance providers in Ohio, for example, have dropped out of the exchanges entirely. The most recent one is Anthem Blue Cross and Blue Shield, which announced June 7 that it would no longer offer plans through the exchange in Ohio. That leaves Medical Mutual, CareSource and Molina Health Care as the three remaining providers on the state exchange.

To complicate matters further, President Donald Trump has not announced whether the federal government will allocate subsidies to offset the costs of the exchange plans, a move that Silvers says sows even more confusion in the market. Should the cost-sharing program end, health insurance rates are likely to skyrocket.

“The uncertainty will cause rates to rise,” Silvers states. He cites a recent study by the Kaiser Family Foundation, which found that should the subsidies be unfunded, companies on the exchange could raise premiums as much as 20%.

Still, many insurers are optimistic that the Senate will come up with a plan that will gradually introduce changes to Obamacare and ease the transition.

“We’re cautiously optimistic,” says Josh White, president of Tartan Insurance in Boardman. “It takes a while for the industry to change.”

What has helped the industry – especially for businesses – is that those plans grandmothered in before Obamacare passed – that is, the plans in place after the act passed but before it took effect in 2014 – are still honored under the law. “A lot of groups haven’t changed carriers, so you can keep those benefits,” he says.

The level of uncertainty has made it difficult for brokers to provide answers to their clients because so much is in flux. “If you ask any broker – they have no idea right now. Everyone is looking for clarification on everything,” White says.

And, although Trump signed an executive order instructing agencies to be more lenient in enforcing Obamacare penalties on those who remain uninsured, White says it’s still risky for businesses not in compliance to skirt the law.

“Legally, it didn’t do anything,” White says of Trump’s executive order. “The White House is ordering it not to be really enforced. But they [uninsured businesses] still face what’s on the books, so there could be a legal mess down the road.”

Despite this uncertainty, consumers shouldn’t expect too many changes in the health care system until 2019, observes Ray Kashmiry, president of R. Kashmiry and Associates, Boardman. “Nothing will happen for 2018,” he says. Although premiums could rise, so would government subsidies. So the out-of-pocket costs shouldn’t be much different next year, he says.

What has changed is that fewer carriers remain on the exchange, which reduces the availability of hospitals and physicians across their networks.

What will happen in 2019 is another matter entirely, Kashmiry says. The Senate bill that results will most likely be a major revision of the House bill. The conference committee to resolve the differences in the bills will see some GOP lawmakers willing to keep some of the tax provisions of Obamacare intact.

Should rates rise to the point most people can’t afford, it would remove them from the marketplace. “We’ll go back to when 30 million people were out of it,” Kashmiry says. “For us, the impact is for those we have covered now. If the rates are too high and they can’t afford it, then we lose them as a client.”

For individuals on the exchange, the quality of the plans has fallen and the rate of those who can meet their deductibles is also reduced, says John Woods of Insurance Navigators Agency of Warren and spokesman for the Western Reserve Association of Health Underwriters. “It’s dropped like a rock, and Anthem pulling out of the exchange is not a good thing,” he says.

For 2018, consumers won’t see major changes in programs such as the Medicaid plans expanded under Obamacare, Medicare or other plans, Woods says. And don’t expect major changes to Medicare programs in 2019, he adds. “They’re the most consistent voting bloc,” he says of Medicare recipients.

As for employers, Anthem leaving the exchange isn’t likely to affect small businesses for another year-and-a-half, Woods says. They have other insurance options to explore that could dramatically lower their health care costs.

Self-funded insurance plans, for example, are options employers are considering amid the uncertainty in the market, Woods says. These plans come with risks in that they contain higher deductibles the company is responsible for. However, the financial return could be considerable.

“I have a group of 23 people and they’re on their third plan like this,” Woods says. “It saved the employer $50,000 in the first year, and another $50,000 the second year,” he notes. “Self-funding could be scary, but there are ways you can smooth it out.”

In this company’s case, the savings were based on the group being healthy, Woods says. By the end of the third year, one member ended up in the hospital. The policy was renegotiated with no rate increase, but required the company to pay the first $50,000 in deductibles.

“The employer was willing to take this on, because with the savings, the worst-case scenario is that he ends up paying the same amount he did before this plan started,” he says. “There are solid options out there for businesses.”

Published by The Business Journal, Youngstown, Ohio.