Fixing the ACA Marketplaces: Carrots and Sticks

By Jill Zorn 

PrintThis is the fourth in a series of blogs on possible solutions to problems faced by Affordable Care Act (ACA) marketplaces.

Previous blogs in the series put recent doom and gloom pronouncements about the marketplaces in context, addressed the political challenges all possible ACA fixes face, and discussed the revival of the public option as one possible solution.

Other possible ideas for improving the functioning of the marketplaces can be broken down into either carrot or stick approaches that generally fall into two categories:

  • Carrots or sticks to get more young and healthy people to buy coverage
  • Carrots or sticks to keep insurers competing in the marketplaces

In either case, marketplaces will be larger, so there are sufficient premium dollars available to cover the costs of people when they get sick.  And the marketplaces, at least in most parts of the country, will have a sufficient number of competitors to help keep the cost of premiums down.

Get more people, particularly young and healthy people, to enroll

Carrots

  • Make it easier to enroll, particularly for millennials, by conducting better outreach, developing on-line tools, recruiting colleges and other partners to become more involved
  • Raise income limits so more people qualify for subsidies
  • Raise eligibility limits for Cost Sharing Reductions (CSR), the extra financial help lower income marketplace users receive above and beyond premium subsidies, that helps with out-of-pocket costs like co-pays and deductibles.

Sticks

  • Assess penalties if people enroll late, providing an incentive for them to enroll as soon as they are eligible

Change insurance regulations to keep carriers in the marketplaces

Carrots 

Note:  these policy ideas are designed to protect insurers from the risk of having too many sick customers and not enough healthy customers

  • Tighten special enrollment periods – these are the times when people are allowed to enroll outside of the annual open enrollment periods – to make sure that people don’t wait to enroll until they are sick
  • Shore up the special programs in the ACA that are designed to protect insurers if they end up serving a far sicker population than they anticipated.  Collectively, these programs, known as “the three Rs”, have generally not worked as well as planned and some are also in the process of phasing out.
  • Allow insurers to offer narrower networks of only lower cost, but supposedly high quality providers. (Note:  these narrow network plans can be controversial.  One reason insurers may like them is that they can scare away sicker patients who need a wider choice of providers.)

Sticks

  • Make the individual market bigger, and therefore more protected from risk, by requiring all individual insurance policies to be offered only through the marketplace, as is done in the District of Columbia and Vermont.
  • Allow government to use its negotiating power to require participation in the exchanges if the insurer is:
    • Doing business in the state
    • Contracting for Medicaid or Medicare

This last idea is related to the public option, in that it allows government to use the full force of its negotiating power, and uses that power to promote competition.  Here’s how Michael Hiltzik, a columnist for the LA Times, wrote about it, just after Aetna had announced they were pulling out of most marketplaces across the country:

We’ve mentioned before that the government isn’t entirely powerless to goad big insurers like Aetna into greater participation in the ACA exchanges. Among other things, the companies make money hand over fist by serving Medicaid expansions in many states and in Medicare managed-care plans. Why not tie their access to those lucrative markets to sticking with the exchanges until they’re finally stabilized?


To learn more:

Stabilizing the Affordable Care Act Marketplaces: Lessons from Medicare

Sabrina Corlette & Jack Hoadley, Georgetown University’s Center on Health Insurance Reforms blog  August 16, 2016.  To read the full report, go here

How Do You Fix A Marketplace That Is ‘Too Big To Fail’?

Katherine Hempstead, Huffington Post, August 18, 2016

ACA Marketplaces: Stressed but Fixable

Sara R. Collins & David Blumenthal, Commonwealth Fund, August 24, 2016

The Affordable Care Act Is Not In Crisis – But it Could Be Better

Ezekiel Emanuel & Topher Spiro, Washington Post, August 22, 2016

Obamacare Marketplaces are in Trouble. What Can Be Done?

Reed Abelson & Margot Sanger-Katz, The Upshot / New York Times, August 29, 2016

It’s Time for the Government to Play Hardball with Those Whining Obamacare Insurers, Michael Hiltzik, LA Times, August 9, 2016

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