On August 11, 2016, the Department of Health and Human Services Centers for Medicare & Medicaid Services (CMS) released the first data on how the Affordable Care Act’s individual market risk pool evolved between 2014 and 2015.The report shows that per-enrollee medical costs in the ACA individual market were essentially unchanged in 2015, even as costs in the broader insurance market continued to rise. Moreover, the states with the highest enrollment growth saw significant reductions in per-enrollee medical costs. These findings suggest a year-over-year improvement in the ACA individual risk pool, with the Marketplace gaining healthier, lower-cost consumers as it grew.
The strength of the individual market risk pool has been closely watched by observers and participants, since a broader mix of enrollees reduces costs and helps keep coverage affordable for consumers. Experts expected the ACA risk pool to improve over time as enrollment grew, and the new data suggest this occurred in 2015.
A risk pool that is getting stronger over time does assure that the Marketplace is well positioned for the long run. As the Marketplace continues to mature and grow, it will continue to be a place where insurers want to do business and where consumers are able to find affordable coverage that meets their needs.
“The Affordable Care Act has expanded access to coverage for millions of Americans by reforming the individual market,” said Secretary Sylvia M. Burwell. “Today’s news shows the continuing strength of the Marketplace as a source of affordable health coverage for millions of Americans.”
According to the report, per-member-per-month claims in the individual market were essentially unchanged from 2014 to 2015, falling by 0.1 percent. Indicators of per-member cost growth in the broader private insurance market (such as employer coverage and Medicare) rose by 3 to 6 percent in 2015.
Support for the conclusion that increased enrollment improved the risk pool comes from the report’s finding that states experiencing higher-than-average 2015 enrollment increases also saw greater-than-average reductions in per-member per-month costs. For example, in the 10 states with the highest enrollment growth, per-member per-months claims costs fell by an average of 5 percent. This report includes maps showing state-level cost and enrollment growth in 2015. The analysis is based on data that include all enrollees who are part of the ACA’s individual market risk pool, the large majority of whom enroll through the Health Insurance Marketplace.
The data show that premium increases in 2015, which averaged two percent, would have been sufficient, on average, to keep pace with claims costs, because of the exceptionally slow growth in per-enrollee claims. However, the increases would not have been sufficient to make up 2014 gaps between prices and costs or to accommodate the partial phasedown of the transitional reinsurance program.
In addition to shedding light on developments though 2015, the new data are encouraging for the long-term health of the Marketplace. Nearly all states saw continued enrollment growth in 2016, suggesting continued risk pool improvement for the Marketplace going forward. Moreover, these new data predate important steps HHS has taken in the past six months to further strengthen the risk pool. These steps include implementing new processes to prevent misuse of Special Enrollment Periods, reducing the number of consumers losing coverage or financial assistance due to data-matching issues, helping consumers who turn 65 move from the Marketplace to Medicare, and proposing to curb abuses of short-term plans.
Going into the next Open Enrollment, the CMS will also be strengthening outreach, especially to young adults, by introducing new communications with people who paid the individual responsibility penalty, facilitating 26-year-olds’ transitions from their parents’ plans to Marketplace coverage, and undertaking even more timely and targeted email and other campaigns. With these new actions in 2016, as well as the expiration of remaining transitional policies by the end of 2017, the CMS expects that the Marketplace risk pool will continue to grow and improve going forward.
See the HHS Announcement
Also see the HHS Report