Observations As ACA Open Enrollment Closes

As 2014 open enrollment comes to a close, core issues (listed below) associated with exchange implementation remain unsettled.

In particular, the long-term success of exchanges depends on factors that extend well beyond the number of people who enroll in 2014.

•    It is not just the size of the risk pool, but the quality of the risk pool. Initial enrollment shows young adults are participating at a lower rate than older adults, based on the age distribution of eligible individuals (age distribution is being used a proxy for health status). However, insurers likely priced products assuming some degree of imbalance in the risk pool for year one. For 2015, we expect that some insurers will need to raise prices if they experience worse-than-expected risk, whereas others are signaling that the age distribution aligns with the expectations they used to set premiums this year. Over time, it will be important to continue to improve the age mix of the risk pool to achieve long-term stability in the market.

•    National enrollment data obscure important local market variation. While national exchange applications will surpass 6 million, take-up has been uneven in markets across the country. California has outstanding enrollment numbers, but rural states like Mississippi and others continue to lag behind. Since insurers are making pricing and participation decisions at the market level, it is critical to examine state-level enrollment data in addition to the national numbers.

•    Most exchange enrollees will likely face significant cost sharing when they access care. As exchange enrollees transition from choosing a plan to accessing coverage, most consumers may be surprised to face significant cost sharing and may learn their doctors and pharmacies are considered out-of-network. The Centers for Medicaid and Medicare Services (CMS) is already taking steps to emphasize benefit transparency in the exchanges; however, expect the 2014 patient experience to potentially drive additional reforms.

•    Carriers are already making strategic decisions for next year. The application window for qualified health plans participating in the federally facilitated exchange in 2015 opens May 27, less than a month after the coverage effective date for people enrolling on March 31. Bottom line: carriers are making 2015 decisions about participation and premiums without the benefit of complete data on 2014 enrollment.

•    Individuals are not enrolled until they pay a premium. While more than 6 million people have chosen a plan on the exchange, it remains unclear how many have effectuated coverage by paying their first month’s premiums. Looking ahead, it will be critical for the risk pool that people who chose a plan initiate payment and remain enrolled over the course of a year.

•    State-based exchanges must decide how to approach 2015. The rocky exchange rollout left some states uncertain about the future of their exchanges. While few, if any, states appear poised to take on their own exchange in 2015, some existing state-based exchanges could turn to the federal government for additional support.

For more information about open enrollment, contact Caroline Pearson at CPearson@Avalere.com.