More than 20 million Americans have gained health insurance coverage in recent years, but protecting those gains means taking steps to build a stronger, healthier market for individual insurance, one that has sufficient insurer participation and premium stability.
To that end, the AMA supports measures to maximize the number of people, including healthy Americans, who sign up for coverage on the individual market. Steps include requiring individuals to obtain health insurance coverage and providing tax credits to help low- and moderate-income patients afford that coverage. On the insurer side, risk-based subsidies can help ease the financial pressure posed by enrollees with high health care costs.
These three mechanisms help foster healthy insurance markets and are essential to maintaining coverage for the millions of Americans who have enrolled in health insurance exchange plans. The first component, designed to improve health insurance affordability, is the provision of tax credits or other subsidies to individuals and families to help make health insurance affordable. Individually selected and owned health insurance should be promoted by providing refundable and advanceable tax credits.
Such credits should be inversely related to income so that patients with the lowest incomes will receive the largest credits. Critically, tax credits or other subsidies must be large enough to enable people to actually afford health insurance. If patients cannot afford coverage, those who are relatively healthy will go without it, making the enrolled population costlier to insure. That leads to higher premiums and could push the market in the direction of a so-called health insurance death spiral.
There is an opportunity to help lower-income individuals and families who have access to employer-sponsored coverage that is unaffordable for them—a population that, if eligible for subsidies, potentially could purchase more affordable coverage on the individual market. Changes that could make this population eligible for subsidies to purchase coverage through the health insurance exchanges would also increase the number of people, including healthy ones, enrolling in coverage on the individual market.
Today, eligibility to receive premium tax credits to purchase exchange coverage is determined by income and whether individuals and families have access to affordable employer coverage. However, many families are not eligible for premium and cost-sharing subsidies to purchase coverage on the exchanges because of the “family glitch,” because determinations about the affordability of employer-sponsored coverage are based on the cost of employee-only coverage, ignoring the cost of family coverage. As a result, these lower-income families are ineligible for subsidies to purchase coverage on exchanges.
An estimated 10.5 million adults and children may fall within the family glitch, according to the Department of Health and Human Services’ Agency for Healthcare Research and Quality. In addition, employees should be eligible to receive subsidies to purchase exchange coverage if their employer-sponsored coverage is expensive enough to make them exempt from the individual mandate.
Another key part of a stabilization plan is encouraging people to take responsibility for obtaining health insurance. This policy is the most effective method to maximize coverage gains, as well as help ensure that healthy people enroll in coverage and stay covered. Sufficient enrollment of healthy people in the market is essential for ensuring that the financial risk of illness and health is spread across the entire individual insurance marketplace. Without a mandate, more healthy people are likely to forego health insurance coverage, based on previous experience.
Another major feature of a stable individual insurance marketplace is coverage of high-risk patients through direct, risk-based subsidies such as high-risk pools, risk adjustment and reinsurance.
Experts at the nonpartisan Kaiser Family Foundation helpfully summarized these difficult-to-grasp concepts in an August 2016 issue brief:
- Risk adjustment redistributes funds from plans with lower-risk enrollees to plans with higher-risk enrollees. This is intended to protect against adverse selection and risk selection in the individual and small-group markets inside and outside the exchanges by spreading financial risk across the markets.
- Risk corridors limit losses and gains outside of an allowable range. This is designed to stabilize premiums and protect against inaccurate premiums.
- Reinsurance provides payment to plans that enroll higher-cost individuals. This protects against premium increases in the individual market by offsetting the expenses of high-cost individuals.
As Kaiser’s experts note, “Premium increases are expected to be higher in 2017 in part due to the end of the reinsurance program.” That is why the AMA supports efforts that help insurers stay active in the individual market.
Fostering a healthier insurance market for individuals is just one of the objectives that will guide the AMA in its discussions regarding ongoing efforts to improve the nation’s health system. Read more about the Association's comprehensive vision for health-system reform, refined over more than two decades by the AMA House of Delegates, which is composed of representatives of more than 190 state and national specialty medical associations.
You can further explore the AMA’s health reform objectives at Patientsbeforepolitics.org, a new online platform designed to educate and engage patients and physicians on the current debate. The site makes it easy for patients and physicians to write their elected Congressional representatives and urge them to protect Americans’ access to quality care.
