Sens. Lamar Alexander, R-Tenn., and Patty Murray, D-Wash., recently created a bipartisan bill to improve health insurance markets. The deal allocates funds for cost-sharing reductions, which reduce out-of-pocket costs for low-income beneficiaries.
The senators’ bill is a welcome step to stabilizing the individual markets. The administration previously announced its intention to slash funds for cost-sharing reductions. That action, though, would skyrocket premiums for low-income beneficiaries and price some out of coverage, further eroding the individual market.
Continuing cost-sharing reduction payments is a critical step. But our country needs more legislative action to reform the individual insurance markets. Without it, premiums will continue to soar and Americans will have even fewer options for coverage than they do now.
The individual market is unstable mainly because it lacks enough young, healthy enrollees paying premiums to offset the claim costs of older, sicker enrollees. Actuaries project millennials must comprise 40 percent of the individual market pool if rates are to be stable.
But only 28 percent of enrollees are 34 or younger. Consequently, health insurers have struggled. Anthem lost $374 million selling such policies in 2016. Many insurers are responding to these losses by reducing or eliminating agent commissions or pulling out of the individual market altogether. Nearly 40 percent of those that sold plans in 2017 won’t do so next year.
Insurers that are sticking around have raised premiums drastically — in 2017, by an average of 25 percent. This year premiums could increase even more. Insurers in Connecticut and Delaware are requesting rate hikes of nearly 34 percent.
This is unsustainable. Repeated hikes discourage healthy people from enrolling. Only sick people with high medical bills would find these plans attractive. Insurers would have to boost premiums further to cover their costs. That would cause even more healthy people to drop coverage. Eventually, the individual market will collapse.
Congress could prevent these price increases and lower premiums by eliminating the Health Insurance Tax. This sales tax on health plans is expected to increase premiums by $158 for individual plans and $188 for large group insurance in 2018. Congress already suspended HIT for one year in 2017. Lawmakers would be wise to eliminate it completely.
Lower premiums would make plans more attractive — particularly for young, healthy Americans who previously went without health insurance. The more people in the individual market, the easier it is for insurers to accurately project overall costs — and avoid the need for massive rate hikes from year to year.
Congress could also give states more funding and flexibility to enact their own reforms. For instance, Alaska previously implemented a $55 million “reinsurance” program for high-cost enrollees. Essentially, the state helped pay claims for extremely sick enrollees. That reduced the financial burden on insurers and enabled them to lower overall premiums by 24 percent.
While states should have the flexibility to innovate on health reform, Congress should establish safeguards to promote positive outcomes and maintain a functioning employer-based coverage system that protects businesses and individuals.
Several regulatory changes could help stabilize the individual market, too. The administration can start by easing the enrollment process. In addition, cracking down on the abuse of “special enrollment periods” would enable insurers to better predict claims costs — and reduce the need for premium hikes. The individual market is unsustainable. Lawmakers must act now to protect the millions of Americans faced with rising premiums, fewer choices, and uncertainty due to the instability of the individual market.
Janet Trautwein is CEO of the National Association of Health Underwriters.