While the White House agreed last week to make short-term payments on a key Affordable Care Act subsidy for the month of August, ongoing uncertainty around the long-term health of the individual exchanges could impact employers.
President Trump, who has been sharply critical of the Affordable Care Act, has previously threatened to let Obamacare “implode.” As part of that effort, the Trump administration indicated that it could stop paying cost-sharing reduction payments, billions of dollars in subsidies paid to insurers to help reduce their out-of-pocket costs for low-income plan holders. While the administration said on Aug. 16 that it would make the payments this month, the future of the program — including the fate of payments due this fall — remains unclear.
Changes to the individual markets do not impact employer-sponsored plans directly, but employers groups argue that trouble on the exchanges could affect employers of all sizes.
“Employers need and want a robust individual market to complement the employer-based system,” says Brian Marcotte, president and chief executive at the National Business Group on Health.
And while the August payment represents a step in the right direction, they note that more must be done to stabilize the system.
“Making the August CSR payment was critical, but it is also critical to reduce the uncertainty around future financing as well,” says Michael Thompson, president and chief executive of the National Alliance of Healthcare Purchaser Coalitions. “The market will not operate effectively and optimally if the rules of participation are unclear or constantly changing or being challenged. Hopefully this is a down payment on future commitments to help stabilize this market.”
With the individual markets in limbo, insurers are starting to think twice about staying involved in statewide exchanges. Major insurer Anthem has announced in recent weeks that it would pull out or reduce its presence in a handful of states. Other insurers, including Aetna and Molina Healthcare have also announced exits from certain markets around the country, fueling increased uncertainty around the state of the individual exchanges going forward.
Lawmakers are slated to take up the issue when they return from the August recess after Labor Day. Insurers face a series of deadlines in September regarding their 2018 participation in the individual exchanges.
A coalition of eight employer groups, including the American Benefits Council, the U.S. Chamber of Commerce and the Society for Human Resource Management, sent an Aug. 17 letter to members of Congress in support of continuing the subsidy payments.
“Continued uncertainty surrounding CSR payments will have a negative impact on millions of
people in the individual market, which could shift significant costs to employers and other
private-sector payers as well as the federal government,” the letter said. “Employer-provided health benefits remain the largest source of coverage today, though affordability issues challenge these benefits as well, especially in the small group insurance market.”
The magnitude of any cost increases to employers is difficult to estimate clearly at this time, observers say, though they could take several forms. Insurers could raise their prices across the board to compensate for a lack of revenue if cost-sharing reduction payments are halted, potentially driving up costs for employers and others in the system over time.
“Insurers that provide coverage to employer-sponsored plans and those who also provide coverage on the marketplace could hike up costs for premiums on employer plans, because those are a sure thing,” says Chatrane Birbal, senior adviser for government relations at the SHRM.
Marcotte says that insurance premium increases for employers stabilized at around 5% to 6% per year following the passage of the ACA, down from 8% to 12% in the years prior to the law’s passage. He adds that a weakening of the system, in which more individuals become uninsured, could drive those costs upward once more.
Experts add that a decline in the availability of individual plans could put renewed market pressure on some employers to offer care to a greater portion of workers, including those working part-time. Covering additional workers would likely spur additional costs for employers as well.
“Employers, particularly employers who have lower wage or transitory workforce, want to see a stable individual market so that they aren’t pressured to continue to grow the populations that they are providing coverage to,” Thompson says.
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