Individual Policies On and Off the Exchanges

The health reform law created health insurance exchanges as a method of facilitating individuals being able to purchase health insurance at a supposedly reasonable price.  Subsidies that are available for low-income persons also can only be used for coverage bought on an exchange.  But insurers are not precluded from continuing to sell individual insurance policies outside the exchanges and several continue to do so.  A Commonwealth Fund brief examines policies and premiums sold on and off the health insurance exchanges.   (CF Brief)   In total in 2014, 15.3 million people had reform-law compliant individual coverage, and 73% of that coverage was purchased through an exchange.  For 2015, there were 15 million covered persons, 80% of whom purchased from an exchange, and in 2016, there were 15.4 million covered people, 83% of whom got that coverage from an exchange.  So two things stand out: the first is that individual enrollment is quite flat and the second is that the individual market outside of the exchanges is drying up.

According to Commonwealth’s analysis; comparing the “projected” medical loss ratios for insurers who sell exclusively on the exchanges versus those who sell exclusively off it indicates that those selling on the exchange are willing to accept slightly higher loss ratios and slightly lower profits.  Not sure what the point of that is, particularly since it doesn’t deal with actual financial results and it doesn’t reflect actual enrollment.  In addition, for 2016, the authors find that off-exchange plans had slightly higher premium increases, partly because exchange plans were using more limited network designs, which can limit medical cost growth, and enrollment growth in 2016 was all in these plans, as it actually declined in more open network plans.  The report also notes that there is little indication that insurers pursue different types of consumers for on or off-exchange plans; in fact the reform law makes it hard to do that.  More rich-benefit plans are purchased off-exchange, but that makes sense since all those consumers are not eligible for subsidies and likely have more income to afford richer benefit designs.  The brief doesn’t deal with 2017, when there clearly will be some radical changes, as we see very significant premium increases.  And we will see if the continued deterioration in off-exchange plan enrollment continues.