Understand Health Care Market Uncertainties: Outlook for 2017

October 31, 2016

When government officials and insurers open the next open enrollment season for the Affordable Care Act (ACA) coverage in a few days’ time, they’ll do so against a background of uncertainty over the longevity of the ACA and the future of U.S. health care. Soon, voters will decide their next president along with Senate and House representatives — plus candidates in state general elections. Polarity increases as varying opinions emerge about what is best for the health care industry, U.S. citizens and the economy in general.

Election outcomes, which in many respects are still too close to call, will likely have significant impacts on national and state health care policies in 2017 and beyond.

But no doubt they will also reflect ACA exchange turbulence from recent months, in which several big insurers withdrew or severely restricted their presences after reporting significant losses.

Narrower networks

For example, it’s likely that when enrollment opens, we’ll see much narrower 2017 health plan offerings and more Health Maintenance Organizations (HMO) or exclusive provider networks (EPO), meaning fewer health care provider options for consumers.

At the same time, the proportion of HMO plans is likely to increase in the battle to control costs and more effectively monitor claims, as some narrower networks are built around providers who have agreed to restricted fee schedules. In 2016, the proportion of HMOs accounted for 52% of plans on public exchanges versus 41% last year, according to the Blue Cross Association.

And, while noting that insurer participation information in the ACA exchanges will not become public until shortly before enrollment, according to the Kaiser Family Foundation, the overall number of insurer participants is likely to decrease in 2017. In particular, more enrollees will find they have fewer choices than in previous years with only 62% having a selection of three or more insurers compared with 85% this year. Of the remainder, 31% of counties may have only a single insurer.

More key issues

Although presidential candidate attitudes toward ACA Exchanges are at the core of health care policies, several other important health care issues exist, including Medicare and Medicaid program coverage as well as drug pricing. The issue of pharmaceutical prices has come into sharp focus and may tu out to be a catalyst for the new electorate to seek initiatives to control escalating drugs costs.

The two main presidential candidates’ party positions on health-coverage-related issues include:

Hillary Clinton supports building on the ACA. She’s also in favor of giving Health and Human Services the power to block or modify “unreasonable” health insurance premium rate increases. She supports Medicaid expansion to all states and favors a Medicare “public option” that would allow people 55 and older to “buy” into the Medicare program. In addition, Clinton favors giving Medicare the right to negotiate drug prices and her prescription drug policy would also give the government a broad role in overseeing drug prices, including monitoring sharp cost increases, specifically targeting price hikes on medicines that have been on the market for quite a while. Clinton’s plan would require health insurance plans to limit monthly out-of-pocket spending for covered drugs.

Donald Trump calls for repealing the ACA. He promotes health care based on “free market principles,” doing away with the individual mandate tax penalty, and supports allowing health insurance to be sold across state lines. He also originally proposed providing the ability to deduct health care premiums entirely from an individual’s income tax as well as allowing prescription drugs to be imported for sale from overseas but seems to be backing away from that position.

Trump offers limited details on changes for Medicare and Medicaid, but has suggested he wouldn’t change Medicare. He’s also offered support for Health Savings Accounts and allowing Medicare to negotiate drug prices. Regarding Medicaid, he supports making that a state-sponsored block-grant program.

Congress perspective

For Congress, the focus — at least in the short term — will be on either modifying or replacing the ACA.

In June, Republican House Speaker Paul Ryan unveiled plans to replace “Obamacare” with health savings accounts and allow the sale of health plans across state borders. He also wants to halt the expansion of Medicaid and increase Medicare qualification age to 67.

Democrats, on the other hand, are likely to want to adjust the ACA, expand its scope and reduce patient out-of-pocket costs. Overall, they’re likely to push for an increase in health care spending.

A key question is, if in the event of widespread GOP victories, whether it would even be possible to dismantle the ACA. Even Kaiser Family Foundation President Drew Altman doesn’t see the Affordable Care Act being repealed, according to a CNBC article.

State worries

At state level, perhaps the biggest issues after the election are going to be control of premiums, especially for ACA-mandated policies, as well as providing more insurance choices for consumers. After a couple relatively quiet years, insurers in some states lodged applications for premium increases. Blue Cross Blue Shield is requesting approximately 60% increases in premiums in Texas and Tennessee for 2017.

This burden will likely fall on middle-income consumers since lower-income consumers benefit from Medicaid and subsidies. If more big insurers are faced with more significant losses, additional companies are bound to withdraw from or restrict their presences in the marketplace. If that momentum is sustained into future years, it’ll add further pressures for a more significant overhaul of the health care system.

One hope is that the shared responsibility payment (SRP), which imposes penalties on the uninsured and which has ratcheted from an estimated $150 in 2014 to as much as an estimated $969 this year, will encourage more younger, healthier people to sign up, thus producing a positive premium flow to meet the costs of older, unhealthier participants.

What happens in the next few months — who dominates in the elections, how many people sign up for ACA exchanges and the battle to control escalating care and prescription costs — will set insurers on paths of change not only in 2017 but for some years to come.

Contact the experts at PartnerRe.

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