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The state of exchanges and how to improve it

Oct 05 2016

As public exchanges head into their fourth open enrollment period, they face various challenges, according to a study by Avalere Health. A number of possible solutions, however, could make the public exchange market more viable for the future.

The study, published in October 2016 and funded by Aetna, details the issues that contributed to the exit or scale-back of participation in the public exchange market. Some of these issues include enrollment instability and the fact that the enrolled population consists of older adults, which is disproportionate to the eligible population.

Expanding enrollment

The number of members enrolled is significantly lower than what officials estimated. In 2011, the Congressional Budget Office (CBO) projected the public exchanges would enroll 22 million individuals by 2016. By the end of 2016, however, enrollment is projected to be 10.1 million, according to Avalere.

The CBO also projected there would be a peak of 24 million members in 2021, but Avalere estimates the peak will be about 15 million in the same year.

Officials estimated 22 million people would be enrolled in the public exchanges by 2016. Enrollment for 2016 is projected to be 10.1 million

To increase enrollment, Avalere recommends increasing the penalty for not enrolling. The current penalty, the study states, may be “too low to effectively attract enrollment.” Increasing the individual mandate penalty amount for future years could deter people from opting to pay the penalty instead of enrolling. The Internal Revenue Services (IRS) could also better ensure individuals granted an exemption are qualified.

Recognizing the fact that individuals may be more inclined to pay the penalty than enrolling, Avalere believes increasing subsidies and offering incentives to promote premium affordability can increase enrollment numbers. For example, restructuring the subsidy allocation so subsidies for individuals between 300 and 400 percent above the federal poverty level are reduced would result in a higher subsidy for individuals at lower incomes — making premiums more affordable.

In 2016, 85 percent of individuals enrolled received premium subsidies

A late penalty could also be implemented, which would be added to a person’s monthly premium. The study also states reducing coverage for initial months can be a form of late penalty.

Aside from increasing fees, membership numbers can be increased by making health insurance a requirement for public programs, such as obtaining a driver’s license.

Attracting millennials

The majority of members are older adults, lower-income and in poorer health. People who are at least 55 years old make up 26 percent of exchange enrollees, according to the Avalere study.

50 percent of the potential exchange population is under 35, but only 37 percent of 2016 enrollees are in that age group

To increase membership, specifically among younger people, the age rating bands could be adjusted, as well as the introduction of a copper plan.

Changing the age rating bands lowers premiums for younger individuals, but would also raise premiums for older members. A copper plan would be lower cost and could be more attractive to younger and healthier enrollees, the study states.

The Avalere study also suggests modifying the catastrophic plan to include additional benefits, such as vision, to meet young consumers’ needs.

Improving consumer experience

The exchange population is more likely to move between insurance markets, which make it difficult for insurance companies to understand members. Improving the consumer experience could result in members staying enrolled for the long term.

About one-third of exchange enrollees had to switch providers because they were not in-network

The consumer experience could also be improved by streamlining the process to make it easier for enrollment and mitigate back-and-forth interaction with exchange platforms.

Giving consumers necessary tools, such as searchable formularies, provider networks and out-of-pocket cost tools, to help them choose the correct plan could help with satisfaction, according to the study.

The future

It’s noted within the Avalere study that the possible solutions are meant to improve the stability of the public exchange market for 2017.

Changes affecting 2018 and beyond will likely be addressed by larger, and broader, solutions in the future, according to the study.