Will the individual insurance marketplaces created by the Affordable Care Act live or die in 2018?

The political debate in Washington over the fate of the ACA and a federal lawsuit targeting healthcare subsidies could upend the current system. That has left some insurers with little guidance to plan for the near-term—including whether to even participate in some state and federal exchanges where people buy individual insurance.

That could leave consumers with fewer choices or none at all in some parts of the U.S., especially where competition is already thin and has gotten worse over time.

“Numerous issues currently exist with the marketplace that, unless addressed, put our participation in the marketplace at risk,” says J. Mario Molina, M.D., CEO of Molina Healthcare, which sells insurance on exchanges in nine states, including California, Florida, and Texas.

This is the time of year when insurers set rates and create coverage plans so they can meet a June deadline under the ACA. They need clarity now to properly assess future risk, experts say. 

“If insurers don’t know the rules of the game, many will likely throw up their hands and decide not to play,” says Michael Miller, director of strategic policy at Community Catalyst, a nonprofit health advocacy organization.

Currently, one in three counties has just one insurer in the local market, significantly less choice than the one in 14 counted last year, according to the nonpartisan Kaiser Family Foundation. And five states have a single insurer: Alabama, Alaska, Oklahoma, South Carolina, and Wyoming.

Uncertainty has dogged insurers and consumers for months as GOP leaders in Congress tried to pass legislation to repeal and replace the ACA. That effort collapsed a week ago, though some House Republicans say they will revive legislation again.

Congress’s two-week spring recess begins April 10. No date has been set for any new debate.

In addition to watching the legislative debate, insurers are waiting for the outcome of a federal lawsuit that could determine whether Congress funds $9 billion in cost-sharing subsidies that help more than 6 million low-income Americans afford insurance under the current healthcare law.

The Trump administration might decide not to defend the cost-sharing program in court. A ruling against the constitutionality of the subsidy system, which is the backbone of the Affordable Care Act, could do serious damage to former President Barack Obama's signature healthcare legislation.

“Insurance companies are looking for ways to stay in the market. But those cost-sharing subsidies are critical,” says Kristine Grow, a senior vice president at America’s Health Insurance Plans (AHIP), an insurance-industry group. If the subsidies don't survive, Grow says some insurers are likely to pull out of the market, or “costs will go up for consumers.”

Uncertainty for Insurers and Consumers

Some consumers are already worried about the potential for fewer choices and rising costs if there are major changes to the ACA or a complete repeal. In a recent nationally representative CR Consumer Voices Survey, 55 percent of the respondents said they weren't sure they or their loved ones could afford insurance for quality healthcare.

"If the administration aims to destroy the individual market, it is easy to do so," says Betsy Imholz, special projects director for Consumers Union, the policy arm of Consumer Reports. "Curbing the cost-sharing subsidies would be one severe blow that could cause insurers to withdraw from the market.”

There are plenty of worries for insurers, including regulatory actions that could undermine the ACA and consumer confusion about potential changes that could discourage them from buying insurance on the exchanges.

There’s a great deal at stake for consumers. They could see double-digit increases in premium prices in 2018 on top of steep hikes this year.

If insurers withdraw, rural areas, which already have less competition, will be hit the hardest. People might not be able to get coverage or will turn to non-ACA plans with less comprehensive coverage.

“The Administration needs to take clear steps to protect consumers' coverage and stabilize the individual market,” Imholz says.  

Companies Under Pressure

Some smaller players in the individual market have already dialed back. UnitedHealth Group and Aetna pared back their exchange participation in 2017, citing financial reasons. And earlier this year, Humana said it wouldn’t participate in the exchanges in 2018.

Because of Humana’s withdrawal, 16 counties in Tennessee have no insurer for 2018. Oklahoma’s insurance commissioner, John Doak, warned last week that the state’s only insurer—Blue Cross and Blue Shield of Oklahoma—was preparing to withdraw from the exchanges.

Of course, there are many markets that have a lot of competition and saw more moderate premium increases for 2017. In California, which has 11 insurers, premiums went up 8% for 2017. Wisconsin, which has 15 insurers, and Ohio, with 11, saw premiums rise an average 16% and 2%, respectively, for 2017.

The subsidies are a big deal because insurers are required by the ACA to provide financial help to eligible consumers by lowering the fees they charge. Without the federal reimbursement for those costs, health-policy experts say that many companies will either stop selling insurance on the ACA exchanges or raise premiums that are already high.

Premiums for the most popular silver plans offered on the ACA exchanges have jumped an average 17% this year from 2016. Monthly premiums could spike 20% to 30% if payments ended, according to a report by the Department of Health and Human Services (HHS).

And the fallout won’t be uniform. If the cost-sharing subsidies aren’t funded, the impact will vary from state to state and county to county, says Timothy Jost, a health-policy expert and professor emeritus at the Washington and Lee School of Law. More rural and sparsely populated areas, with few insurers, will suffer the most, Jost says.

Insurers are on a tight deadline to make a decision. If they want to sell on the exchanges, they must file initial premium rate proposals no later than June 21. Deadlines for many of the 12 states that run their own exchanges are even earlier. In Oregon, for example, rate filings are due in early May. 

3 Factors That Could Drive Out Insurers

Here are three questions insurers want answers to:

Will the cost-sharing program be funded? The Trump administration isn’t saying, at least not yet. When Tom Price, Secretary of Health and Human Services, testified before the House Appropriations committee Wednesday, he said he couldn’t comment on the subsidies because HHS is the target of the lawsuit House Republicans brought against the Obama administration. The suit charges that using federal money to fund the program was illegal.

Last year a court ruled in the House’s favor, but the Obama administration appealed the decision. All of that was put on hold when the Trump administration took office. If it drops the appeal, the funding would cease unless Congress takes action, which is uncertain given the Republicans' vow to dismantle the ACA. We may get a clue soon; parties on both sides of the case must update their status with the appeals court May 22.

The case could continue to drag on but if HHS supports the subsidies, that will send a strong signal that the Trump administration intends to support the ACA and ease longer-term worries.

Will the individual mandate be enforced? Under the ACA, most people must buy health insurance or pay a penalty ($695 per adult and $347.50 per child under 18, but no more than 2.5 percent of their gross income). The administration could decide not to enforce the fine.

The Trump administration has already signaled that it might not. Following an executive order signed by President Donald Trump in January, the IRS reversed its practice of rejecting the tax return of someone who didn’t check the box confirming health coverage or fill out the form to pay a penalty. People who don’t have insurance still owe the penalty, but the IRS isn’t going to hold up their return if they don’t provide the information.

If there effectively isn’t a fine, many healthy people will probably drop out of the marketplace exchanges, leaving sicker, more costly people in and causing premiums to rise, says Craig Obey, deputy executive director of Families USA, a nonprofit focused on consumer healthcare issues.

Will people be encouraged to enroll? Attracting more younger and healthier people to sign up for coverage is another way to stabilize the insurance markets and persuade nervous insurers to continue selling, says Grow from AHIP.

The Obama administration made a big effort to get people to sign up and was on track for record enrollment for 2017. But when the Trump administration took office in January, enrollment dropped off after HHS pulled advertising urging people to sign up before open enrollment ended Jan. 31. That was a critical time because enrollment usually spikes as the deadline nears.

“If the administration doesn’t signal it will do the necessary work to get people enrolled, that creates more uncertainty for insurers,” Obey says.

How to Find Affordable Quality Insurance

Where does that leave consumers who want to buy ACA insurance? Here’s what to do as the landscape shifts:

  • Don’t miss out. About 85% of the 11 million people enrolled in ACA plans get tax credits that can lower premium costs significantly. The average premium before tax credits for the lowest-cost silver plan is $433 for 2017, but with tax credits, monthly premiums average as little as $75. Yet half of uninsured adults aren’t even aware that they can get financial assistance to buy plans on the exchanges, according to a Commonwealth Fund report. Many people are missing out, according to a 2016 report from HHS. It found that about 2.5 million people who could have received tax credits didn’t because they didn't buy health insurance plans from federal and state healthcare exchanges. Of that 2.5 million, 1.1 million people could have also got help paying for out-of-pocket costs through the cost-sharing subsidies. “For now, the ACA is the law of the land,” Jost says. “Make sure you take advantage of everything available to you.”

  • Shop strategically. Be aware that you can qualify for tax credits only if you enroll in a marketplace policy and that you can get cost-sharing help only in a silver plan. Don’t automatically re-enroll in the same plan if you had one in 2017. Tax credits can be used for any exchange plan but are tied to the lowest-cost silver plan in your area, and that can change every year. If you’re in a state served by a marketplace with no insurer for 2018, you can go off-exchange and buy insurance on the private market from a broker or directly from an insurance company. Note that a private plan may have a low premium but coverage that's not as comprehensive. If you get a plan that doesn’t meet mandated coverage requirements by the ACA, you'll be subject to the IRS fine.

  • Pay attention to deadlines. HHS has proposed shortening the open-enrollment period for 2018 coverage to sign up for an ACA plan, to start Nov. 1 and run through Dec. 15, 2017. For this year, it ran until Jan. 31. The dates for 2018 haven't been finalized, though, so watch closely to ensure that you don't miss the open-enrollment deadlines this fall.