Last week the U.S. Department of Health and Human Services (DHHS) released evaluations of key performance indicators of the Affordable Care Act (ACA). These reviews looked at how the ACA created health insurance co-operatives were performing and if the ACA-created federal health insurance marketplaces were fostering competition and thus lower premiums.
First, under the ACA the DHHS loaned funds to private, nonprofits for the creation of Consumer Operated and Oriented Plans (CO-OPs) in as many states it could until the start-up money ran out. These CO-OPs by law had never offered health insurance before. South Carolina was one of the 23 states that had CO-OPs established.
The purpose of the CO-OPS was to make sure that consumers had a little more competition for their insurance needs than otherwise might be available in some areas of the country. We’ll look at how this increased competition played out below.
But CO-OPs were given loans, not grants, and the government expects that in time these CO-OPs will pay back the loans. So the DHHS Office of Inspector General looked at the first year performance of all 23 CO-OPs to see how financially healthy each was and made recommendations for any that were underperforming.
As any insurance carrier will tell you, it’s tough to start an insurance company from scratch. The CO-OPs had to make their best guess about enrollment, claims and premiums to charge. So it is not surprising that as of December 31, 2014, exactly half of the CO-OPs missed their enrollment projections for their first year of operations. All but one of the CO-OPs ended the year with a net loss of revenue.
Now the good news.
South Carolina’s CO-OP, Consumers’ Choice Health Plan, enrolled 238% more people that it had projected. Only four other states did better in exceeding their estimates. Plus, Consumers’ Choice had the second lowest net revenue loss of all the CO-OPs.
With all the unknowns that Consumers’ Choice faced in starting the CO-OP, it is amazing that it was only $3.8 million in the red after the first 12 months. I challenge anyone to find any other health insurance company start-up ever performing that well in its first year prior to 2014. Consumers’ Choice and almost all the other CO-OPs projected being in the black by the end of 2016. The Office of the Inspector General has made recommendations to promote this outcome.
Now, have the ACA federal Marketplaces operating in states increased choices for consumers and has that contributed to lower premiums? The answer is yes and yes.
Here are a few conclusions from the DHHS assessment of the Marketplaces’ impact between 2014 and 2015:
- 86% of individuals using the federal Marketplaces had at least 3 insurer choices in 2015 compared to only 70% in 2014.
- On average premium increases from 2014 to 2015 was only 2%. (Compare that to the double digit increases in the 90s and 2000s.)
- Premium growth from 2014 to 2015 in counties with at least one more insurer in the Marketplace was 8.4% lower than in counties that didn’t have any additional insurers.
The Marketplaces and the CO-OPs are doing their jobs. They promote more insurance policy choices for consumers and thus competition which keeps premiums lower. The free market actually does work in healthcare when there is real transparency in cost and services.
The feds will have to watch the CO-OPs to make sure they eventually can pay back their government loans. But South Carolina should be proud of our CO-OP and our federal Marketplace. The ACA might not be perfect, but these two parts are working well for the consumers.