Wednesday, June 8, 2016

From Trump v. Clinton to ACA Participation, the Rest of 2016 Puts Insurers on Edge

By Patrick Connole - June 6, 2016

If you were in charge of a U.S. health insurer, what issue would make you lose sleep as you peer ahead to the rest of 2016 and into next year?

When a pair of consultants and a noted lawyer were asked that question, they produced a list of challenges for health insurers that amounted to a virtual gauntlet for carriers. These issues extended from the political uncertainty with the November elections on the horizon to the nuts and bolts issue of how well will Affordable Care Act (ACA) exchanges function as open enrollment for 2017 begins in a short few months and a lot in between.

Dan Schuyler and Sean Mullin, both senior directors at Leavitt Partners, LLC, said top priorities for the remainder of the year start with the fact many state individual marketplaces will require significant increases in premiums to make up for the higher-than-anticipated costs for members who have signed up for coverage since 2014. They say the inclination of regulators to allow higher rate increases in addition to consumers’ willingness to pay higher premiums will dictate the level of competition and health of the market.

From that point, they expect ACA marketplace enrollment to continue to struggle in part due to the difficultly of attracting and enrolling young and healthy individuals in marketplace coverage. “For the young and healthy, the lack of robust subsidies and high plan costs (premiums and deductibles) does not provide a compelling economic incentive to purchase a health plan,” Schuyler and Mullin say. “Issuers are also constrained by the essential health benefits, and they need the flexibility to design health plan products that appeal to the specific benefit needs across all enrollment demographics.”

Lurking as well is the seemingly consistent threat of high prescription drug prices. The Leavitt consultants say high-cost pharma continues to drive a larger share of overall medical cost inflation. Both government and commercial payers also continue to be surprised by significant in-year increases in specialty Rx costs that were not baked into premium rates at the beginning of the year. Without further limitations on in-year price changes, further government regulations may be necessary, Schuyler and Mullin say.

And if ACA issues and drug prices were not enough, there is the outgrowth of more providers leaping into the health plan business. And increased self-funding in the group market, particularly among smaller groups, may leave the fully insured group market with higher costs and lower margins for carriers, they add.

Another voice in the health plan world brings up the elephant and the donkey in the room: the elections. Thomas Scully, former CMS administrator during the George W. Bush administration and current senior counsel for the law firm Alston & Bird LLP, says even though he is not sure anything of great substance will happen if Donald Trump wins in November, the mere threat of his promises to repeal the ACA “will crater the health plan markets.”

Scully adds that he doubts repeal will pass Congress, but the stock market prices for publicly traded insurers will be “ugly” in November and December if the Republican triumphs.

So, there you have it. A potential President Trump, dwindling numbers on ACA markets, soaring drug prices and providers turning into insurers — which of these is a true problem for health insurers in the near term, and which will wash away with the next day’s headlines?

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