Anthem’s Ohio Withdrawal Makes Consequences of Marketplace Sabotage Even Starker

For months, insurers, providers, business leaders, state regulators, governors, and experts have warned that uncertainty around whether the federal government would continue making cost-sharing reduction (CSR) payments to insurers wouldn’t just lead insurers to raise prices, it would cause some to leave the Affordable Care Act (ACA) marketplace altogether. With Anthem’s decision to exit Ohio’s marketplace, that prediction has become a stark reality.

Under the ACA, insurers must offer plans with lower deductibles and copays (i.e., cost sharing reductions or CSRs) to lower-income consumers; the federal government then reimburses them for the roughly $7 billion annual cost. The Trump Administration has repeatedly threatened to withhold these CSR payments, and Congressional Republicans opted not to include language locking them in as part of the final 2017 appropriations bill.

Six weeks ago, Anthem – a major insurer in marketplaces around the country – warned that its continued marketplace participation for 2018 depended on getting more certainty about CSRs. On its April 26 earnings call, Anthem’s CFO noted that the marketplace business was going well, commenting: “I just want to be clear that the individual business is doing markedly better than it did last year.” But its CEO warned the same day: “We are notifying our states that if we do not have certainty that CSRs will be funded for 2018 by early June, we will need to evaluate appropriate adjustments to our filing" — adjustments that could include resubmitting higher rates "or exiting certain individual ACA-compliant markets altogether” (emphasis added).

It’s now early June, the Administration and Congress haven’t provided any longer-term certainty around CSRs, and the Administration won’t even commit to making CSR payments this month. As Office of Management and Budget Director Mulvaney told Congress on May 25, the Administration “made no commitments to the payments that are due in June and… we are considering all the options on whether or not we would make those payments.” So Anthem made good on its warning in Ohio, while letting insurance regulators in other states know that it remains undecided about its participation. In announcing its departure from Ohio’s market, Anthem cited an “increasing lack of overall predictability [that] simply does not provide a sustainable path forward to provide affordable plan choices for consumers,” and it pointed specifically to the uncertainty around CSRs as an impetus for its decision.

Despite this strong evidence that Anthem’s withdrawal is due to the Administration’s threats, House Speaker Paul Ryan has already pointed to Anthem’s decision as a reason to pass the House ACA repeal bill. But ironically, the evidence is mounting that – were it not for threats around CSRs and other administrative sabotage (as well as the uncertainty created by the House bill itself) – state marketplaces around the country would be poised for greater stability and success next year.

• Insurers are on a firmer financial footing. Insurers nationwide improved their individual market financial performance in 2016, putting them on track to break even or make a profit this year, and major insurers operating in Illinois, Montana, New Mexico, Oklahoma, and Texas; Alabama, Alaska, Arizona, North Carolina, South Carolina, Wyoming; and Tennessee have already reported further improvement in early 2017.
• Insurers’ gains should translate into more price stability and competition for consumers. As Standard & Poor concluded from its analysis of improved financial performance for Blue Cross Blue Shield plans in 2016, “if it remains business as usual, we expect 2018 premiums to increase at a far lower clip than in 2017.”
• Where insurers have submitted two sets of proposed rate increases – with and without CSR-related uncertainty – the latter increases are indeed far below last year’s. Insurers in North Carolina and Pennsylvania have said their rate increases would be about one third or less of last year’s, if they had certainty that the Administration would continue paying CSRs and enforcing the ACA’s individual mandate.

But continued uncertainty around CSRs won’t just reverse this progress, it could mean that – for the first time ever – some consumers would have no coverage options through the ACA marketplaces. That’s because the Administration’s threats around CSRs – and the President’s repeated comments that he would prefer not to pay them – don’t just threaten some $7 billion per year in reimbursements. They show that the Administration will use every tool at its disposal to obstruct the marketplaces. Even insurers who are currently succeeding in these marketplaces may not want to risk continuing to participate in a market where the President wants them to fail.

There’s still time for the Administration to reverse course, or for Congress to act to provide certainty around CSRs. But with final rate filings due in August, that window of opportunity is rapidly closing. Soon, the Administration and Congressional Republicans will need to make a final decision. Are they really willing to put coverage at risk for up to 12 million people, in the hopes that doing so will help pave the way for a bill that takes coverage away from 23 million?