Individual Market Losing Carriers—What Does it Mean for Group Plans?
In 2016, insurance carriers lost some $7.5 billion. While that rate has improved slightly since the Affordable Care Act was first signed into law, losses are still extremely high. In Texas, where the number of the uninsured is highest, the individual insurance market is seeing carriers drop out of the market at an alarming rate. As Houston healthcare consultants, we’ve watched the steady decline of carriers in Houston since the ACA took effect. The question is, how will this ultimately affect group insurance plans and what does it mean for the individual market?
Fewer Insurance Carriers—Why It Matters
On the surface, it might seem as though it doesn’t really matter that more insurance carriers are dropping out of the individual market. However, this development has the potential to undermine some of the ACA’s strongest features.
Customers, in general, prefer more options to compare and select from. A dwindling number of carriers means fewer choices for customers leading to less satisfaction and a sense of being “forced” into purchasing insurance. As Houston healthcare consultants, we’ve witnessed as this has caused confusion among customers who want to know what their options are. With fewer exchange options available, more people are being pushed off and into the hands of non-exchange insurance carriers.
The ACA was built on the premise of a strong network of insurance carriers. Without a strong marketplace, competition wouldn’t keep costs affordable—which was the entire point of the bill. As more and more insurers leave the individual insurance market, the costs have seen a significant rise.
The number of carriers on the exchange continues to decrease while premiums have grown more unaffordable. Not only are consumers left with fewer choices, those choices continue to grow more expensive as premium hikes are imposed each year (some jumping up as much as 18% from the previous year).
How Houston Has Been Affected
Texas has long been the face of ACA opposition. Former Gov. Rick Perry refused to expand Medicaid under the ACA, despite the federal government pledging to pay some $100 billion of the costs over the next decade.
When it comes to the exchange, the climate hasn’t changed much. Insurance carriers continue to leave Houston’s exchange networks. Currently, there are only three insurance carriers on the individual market in Houston. They include BlueCross and Blue Shield of Texas, Community Health Choice, and Molina Healthcare.
That number has dropped from seven individual market insurance carriers in 2016. Some of the major players who are dropping out of the market include Aetna (who has been pulling out of exchanges around the country), Humana, and Cigna.
As these insurers are leaving the market, they take their coverage options with them leaving thousands in the Houston area without affordable health care options.
Plan options have also changed. Carriers are required to maintain the minimum essential health benefits, but the rates of those plans continue to increase due to two or three carriers carrying the brunt of the burden. That burden, of course, is passed on to participating consumers.
Insurance Carrier Price Hikes
On the heels of this news, the remaining three insurance carriers in Houston have announced significant price hikes.
Community Health Choice has announced a 16 percent hike in premiums and has warned more may be needed. Blue Cross and Blue Shield of Texas hasn’t yet announced their premium hike, although some reports say they are seeking up to a 60 percent hike throughout the country.
Coupled with premium rate hikes we will also see a reduced number of plans overall. Insurance carriers are looking for ways to cut costs while staying on the exchange, and limiting plan options is one way to do it.
As companies struggle to stay on the exchange and scramble to deal with Congress’ overhaul of the ACA, consumers are caught in the crosshairs. Even those in Houston. Using Houston group health insurance brokers to select the ideal plan is a route most companies are now taking.
What Does This Mean For Group Plans?
Group plans are directly affected by any decision insurance carriers make. Just as rates increase on the individual market, so do they for group plans.
Ultimately, this will result in increased premiums for both employees and employers. Employers typically pay about 1 percent more (a bit over half) for employee insurance plans. As these rates rise, this will cost employers in a major way while employees continue to have support from their employer.
It could also change the way group plans are structured, particularly if a reversal of the ACA actually happens. Additionally, uninsured rates are likely to rise and costs for the federal government will increase.
What The Future of The Individual Market Carriers Looks Like
The future of the individual market carriers in Houston and around the nation is uncertain. Most of the carriers pulling out of the market are citing losses and chaos as the main culprits. Reversing this trend will not be easy.
Uncertainty isn’t good for any product, but especially so for insurance providers. However, if Congress can pass a new bill that transforms the market the results could be positive. Insurers may have greater flexibility to offer their products and plans, and consumers will have more options to choose from. This could produce a healthier marketplace in the long run.
In the short-term, uncertainty is likely to cause more insurance providers to drop out of the Houston exchange. For example, the Memorial Hermann Health System has opted to quit the individual insurance business in Houston.
The company has spent 3 years trying to master the exchange with nothing but losses to show for it. The company will continue to offer Medicare Advantage coverage options for businesses, but they are permanently leaving the individual marketplace. Some 66,000 plus people currently have those plans but will be unable to resign for them in 2018.
Additionally, consumers aren’t likely to get the affordable plans they were promised from Obamacare. Fewer options reduce competition leaving companies who stick with the exchange an opportunity to increase their premiums.
With no way to estimate who they’ll be covering, how sick policyholders will be, or what will come in the future insurers are left with little other option but to pull out of the individual market. Uncertainty is on the rise, and until the federal government can come to an agreement on what they’ll be offering consumers, it will continue.
How We Can Help
As group benefits consultants, we help both individuals and employers navigate the complex and confusing individual insurance market. We understand it’s nearly impossible to understand your options. And we want to help.
If you need assistance selecting the right employer sponsored health insurance plan in Houston, please contact our team. We are ready to give you the guidance you need to opt for the right plan.