CMS Cites Rising Premiums, 'Death Spiral' in Push for Cheaper Plans

Effectuated enrollment was about 3% higher this year than last year, with 10.6 million people paying their first-month premiums.

In a statement released Monday with three reports on the individual health insurance market, the Centers for Medicare & Medicaid Services bemoaned the way middle-income Americans and the federal government are being squeezed.

Rising premiums have reduced the number of affordable coverage options for some consumers and increased the cost of premium subsidies for the government. That reality, the agency argued, highlights the need for CMS to move forward with plans to allow more affordable coverage alternatives.

"These reports show that the high price plans on the individual market are unaffordable and forcing unsubsidized middle class consumers to drop coverage," CMS Administrator Seema Verma said in the statement.

One of the three reports, "Trends in Subsidized and Unsubsidized Individual Health Insurance Market Enrollment," which was identified as new this year, noted a significant drop in enrollment among consumers who don't qualify for advance premium tax credit (APTC) subsidies.

Between 2016 and 2017, when premiums increased 21%, average monthly enrollment in individual market plans decreased 10%, according to the report. That included a 3% decline in APTC-subsidized enrollment and an "alarming" 20% decline in unsubsidized enrollment, CMS said, noting that this occurred while the Obama administration's rules and rates were still in effect.

Open enrollment for 2017 coverage ran from November 2016 through January 2017, bridging the gap between Donald Trump's election as president—in which his campaign's promise to repeal and replace the Affordable Care Act featured prominently—and his inauguration.

The CMS statement noted that certain states have seen especially large drops in enrollment among residents who don't qualify for APTC subsidies.

"The unsubsidized portion of some state individual markets have clearly entered a death spiral, with unsubsidized enrollment dropping by more than a third in 14 states, including an astonishing 73% decline in Arizona," the agency said.

Only six states saw an increase in the number of unsubsidized enrollees between 2016 and 2017, according to the CMS data. All of them were single-digit increases.

Lower-Cost Options

The conclusion CMS reached aligns with the Trump administration's push for short-term limited duration (STLD) options and association health plans (AHP)—alternatives that are cheaper than ACA-compliant plans because they offer skimpier coverage than ACA-compliant plans.

Since these lower-cost options are especially attractive to healthier consumers, expanding access to STLD plans and AHPs would leave sicker beneficiaries behind, ultimately increasing premiums by an estimated 2-3% for other small-group and nongroup plans, according to a report published in May by the Congressional Budget Office.

But skimpy health plans aren't the only Trump administration policy that CBO projected would increase health insurance premiums. In a report last August, CBO and the Joint Committee on Taxation said ending cost-sharing reduction (CSR) payments to insurers would increase silver-plan premiums in 2018 by about 20% above the previous baseline.

The reports CMS released Monday seem to confirm the sequence of events CBO had predicted:

• CSR payments discontinued. The acting secretary of Health and Human Services halted CSR payments last October, according to the effectuated enrollment snapshot CMS published Monday. Even so, the ACA still requires insurers to provide reduced cost-sharing to eligible consumers.
   
• CBO predicted higher premiums and subsidies would ensue. In addition to predicting a 20% increase in silver-plan premiums in 2018, the CBO estimated last August that the federal government would wind up paying more in federal subsidies for health insurance in the nongroup market because both the number of people receiving subsidies and the average amount of subsidy per person would increase.
   
• CMS reported higher premiums and subsidies ensued. In its statement Monday, CMS said the average monthly premium for coverage purchased through the exchanges rose 27% this year and that federal premium subsidies increased 39%, from $373 in 2017 to $520 in 2018.
   

The CMS statement suggested Obama administration rules and rates were to blame for a 20% drop in unsubsidized enrollment in late 2016, and it credited the Trump administration for taking "immediate steps" in 2017 to improve the exchanges and stabilize the market.

The statement made no mention of the halted CSR payments, and a CMS spokesperson did not respond when asked whether CMS disputes CBO's projection.

The Trump administration's decision to end CSR payments is far from the only political move to weaken the ACA, of course, as Sam Baker wrote for Axios. Some provisions that had been planned for the Obama administration's signature healthcare law never passed, and CBO seems to have overestimated enrollment.

The three reports CMS released Monday are as follows:

• Early 2018 Effectuated Enrollment Snapshot
• Exchange Trends Report
• Trends in Subsidized and Unsubsidized Enrollment (new this year)

Although fewer people signed up for 2018 coverage through state and federal exchanges than they did for 2017, more people effectuated their coverage (by paying their first-month premiums) this year than they did last year, according to the enrollment snapshot.

Of the 11.8 million people who made 2018 plan selections during open enrollment on the exchanges, about 91% of them, or 10.6 million people, had effectuated coverage as of March 15, 2018. That's about 3% higher than the 10.3 million people who had effectuated coverage as of March 15, 2017.

Customer satisfaction rose from 85% last year to 90% this year, an all-time high, according to the exchange trends report.