The ACA Whirlwind: What Will We See When the Dust Settles?

June 23, 2014

2014 is a landmark year for the Patient Protection and Affordable Care Act (ACA): most of the working parts of the plan have gone into effect or are being implemented. Now, stakeholders are beginning to look closely at how these implementations will begin to affect healthcare access and costs. Although it is still early, information has begun to be available.

The most visible and highest-impact implementation is active enrollment through state- or federally run health insurance exchanges (HIEs), now called marketplaces. Currently, industry leaders and media are tracking enrollment and looking forward to seeing how the more strategic aspects of the ACA will begin to affect healthcare costs.

Enrollment picks up

After a rocky start in fall 2013, enrollment through these marketplaces saw a surge just before the April open enrollment deadline. To date, 8 million people have enrolled, which equates to 28% of those eligible. State-based marketplaces have seen the highest enrollments, although there has been wide variance from state to state.

That said, according to Robert Wood Johnson Foundation estimates, more than 70% of those eligible remain unenrolled. However, many factors influence the enrollment figures:

  • In many states, residents can purchase individual plans outside the marketplaces, thereby skewing enrollment numbers;
  • There is no distinction between enrollees who were previously uninsured and those who moved from a different plan;
  • Some who enrolled through the marketplaces had previously been insured through their employers and thus aren’t reflected among potential enrollees; and
  • Some who enrolled will fail to pay their premiums and so will be dropped from their plans; and
  • Some enrollees had their federal subsidy determined incorrectly and may be dropped from coverage.

A recent survey by McKinsey is shedding further light on the current state of the ACA. The survey finds that most new enrollees (83%) are paying their premiums, which is good news. Three-fourths of new enrollees had previously been insured, and the number of total enrollees who had previously been uninsured remains low at 22%.

This number is cause for great concern among insurers. So far, the marketplaces are reaching those people, but the process is slow. As the trade organization America’s Health Insurance Providers (AHIP) notes, a stable, high volume of enrollment is essential to keeping premium prices affordable.

Looking for the bigger picture: Can costs be contained?

Of course, premiums are just the tip of the cost iceberg. In recent months, much has been made of data that indicates a slowdown in the growth of overall spending on healthcare.

Figures from the Centers for Medicare and Medicaid Services (CMS) indicate that the annual increase in average per-capita healthcare spend has remained lower but steady over the past four years: In 2009, the average healthcare spend per person was $8,170, rising steadily to $8,915 in 2012. Those figures show expenditures growing at just under 3% per year, which is, indeed, a dramatic slowdown from the increases of 7-8% that we saw in the early 2000s.

But the ACA is not credited in large part for that slowdown. In an article in the joual Health Affairs, the CMS explained that the primary factors correlating with slower increases are the economic recession, patent expirations for several common high-cost drugs, and a reduction in Medicare payments to skilled nursing facilities.

As a result of these and other facts, precise evaluation of the cost containment from the ACA is impossible at this time. However, multiple research organizations acknowledge that it is the skyrocketing costs of medical care itself that drive higher premiums and limit both patient access to care and patient outcomes.

The strategy for containing healthcare costs is complex, involving a transition from volume-based payments to value-based purchasing, and reforms including pay-for-performance schemes, shared savings and loss models, bundled payments and case rates, and capitation. Ongoing research by AHIP and other organizations indicates that an accountable care model that incorporates reform at all levels has the potential to affect measurable cost containment and create a more sustainable system of healthcare delivery.

The ACA’s effects on healthcare costs over the next few years may be unknown, but one thing is certain: The inefficiencies and cost inflation produced in the current healthcare delivery system are unsustainable for the government, employers, and individuals.

PartnerRe can help you make sense of it all. Our solutions can help quantify, manage, and limit the risk of health insurance companies, HMOs and health plans, self-insured health plans, insurance exchange health plans, accountable care organizations, CO-OPs, integrated delivery systems, and at-risk provider groups and employers.

How will the Affordable Care Act affect your risk? Contact the experts at PartnerRe today — online or by phone at +1 415 354 1551 — to see how we can help.

Recent Articles

View More
Find a Contact