You are on page 1of 16

EstimatingtheEffectsoftheConsumerFreedom

AmendmentontheIndividualMarket

July15,2017

PRELIMINARYDRAFT
OverviewandMethodology

Inresponsetoarequestfortechnicalassistance,wemodeledtheimpactofallowingthesaleofnonACA
compliantplansalongsideACAcompliantplansintheindividualmarket,whilestillmaintainingtheconsumer
choiceprovisionsofSection1312(c)(1)ofthePatientProtectionandAffordableCareAct.NonACAcompliant
planssoldinplanyear2019orlatermayalsobereferredtoasConsumerFreedomPlansthroughoutthis
document.
AnalternatescenarioabsenttherequirementsofSection1312(c)(1)ofthePatientProtectionandAffordableCare
Actisalsoincluded.
Inbothscenarios,itisassumedthatanadequatenumberofissuersofferatleastonebronze,silver,andgold
qualifiedhealthplan,andthatallstatesin2020permitallcarrierstoofferhealthinsuranceplanswithalower
actuarialvalueandfewerrequiredbenefitswithoutimposingstricterrequirementsandpremiumratingrules.
Wedividedthenationwideuninsuredandindividualmarketpopulationsintodemographiccells(basedonage,
income,andhealthrisk)andtheirinsurancestatus(uninsured,insuredinACAcompliantplan,insuredinannon
compliantplan).
Usingproprietaryelasticityestimates,themodelcomparescurrentyearandprioryearpremiumcostsfor
individualsineachage/income/riskcategory,todeterminethenumberofindividualschoosingtopurchase,
maintain,ordropcoverage,orremainuninsured.
Arangeofcoverage,premiumrate,andfederaloutlayestimatesweredevelopedbetweentwoscenarioshigh
total/nonACAenrollmentandlowtotal/nonACAenrollment forboththecurrentlawandtheConsumer
FreedomAmendment.
Thehighenrollmentscenarioassumesgreaterpricesensitivity,moreenrollmentinnonACAplanspriorto2017,10%fewer
claimsasaresultofloosenedEHBrequirements,and$10Binannualfederalfundingusedasreinsuranceeachyearfrom2020
2026.
Thelowenrollmentscenarioassumeslowerpricesensitivity,halfthepre2017nonACAenrollment,5%fewerclaims,andno
federalfunding.
Afulllistofassumptionsandlimitationsofourapproachisdescribedintheendnotes.

PRELIMINARYDRAFT
TotalEnrollment SingleRiskPool
18

17

16
MillionsofCoveredLives

15

CurrentLawHigh

14 CurrentLawLow
ConsumerFreedomAmdtHigh
ConsumerFreedomAmdtLow
13

12

11

PRELIMINARYDRAFT

10
2017 2018 2019 2020 2021 2022 2023 2024
FederalOutlays:
APTC,CSRs,andSection301Funding SingleRiskPool
80

75

70

65

60
$Billions

CurrentLawHigh

55 CurrentLawLow
ConsumerFreedomAmdtHigh

50 ConsumerFreedomAmdtLow

45

40

35

PRELIMINARYDRAFT
30
2017 2018 2019 2020 2021 2022 2023 2024
IndividualMarketEnrollment:
ACACompliantvsNonACACompliantPlans SingleRiskPool
18

16.1 16.1
16
14.8 14.8 14.8
14.4
14 1.6
2.6 2.3 5.1
3.8 6.7
12
MillionsofCoveredLives

10

NonACACompliant
8 ACACompliant

13.2
6 12.2 12.4
10.9 10.6
9.4
4

0
2017 2017 2020 2020 2024 2024
Low High Low High Low High

PRELIMINARYDRAFT
IndividualMarketMonthlyPremiums
900 SilverACACompliantvsNonACACompliantPlans SingleRiskPool
$845

800 LowScenario HighScenario


$770

700

$635

600
$570

500 $490

$430

400 $380
$370
$360 $360
$330

300 $290

$240
$230

200

100
2017SilverACA 2020 2020 2020 2024 2024 2024
Compliant CurrentLaw SilverACACompliant NonACACompliant CurrentLaw SilverACACompliant NonACACompliant
EnrollmentWeighted EnrollmentWeighted
Average PRELIMINARYDRAFT Average
Scenariopremiumsareforage40anddonotincludepremium assistanceunderthecurrentlaworConsumerFreedomAmendment.Enrollmentweightedaveragecontainsallages.
IndividualMarketEnrollment:
DemographicMixofNonACACompliantPlans SingleRiskPool
IndividualMarketEnrollmentbyrisk IndividualMarketEnrollmentbyage IndividualMarketEnrollmentbyFPL

40 40 40
HighRisk Over50 Over400%FPL
MediumRisk 30to50 34% 200400%FPL 34%
35 34% 35 35
LowRisk Under30 Under200%FPL
3
30 30 30

10
25 25 23% 25 23%
23% 20
1 3
20 17% 20 17% 20 17%
34 7
15 3 15 15 14
5
3 10
10 21 10
22 10
5
12
13
5 11 5 5
6 7
7
1 1 2
0 0 0
2017 2020 2024 2017 2020 2024 2017 2020 2024

Totalsmaydifferbecauseofrounding

PRELIMINARYDRAFT
IndividualMarketEnrollment:
DemographicMixofACAcompliantPlans SingleRiskPool

IndividualMarketEnrollmentbyrisk IndividualMarketEnrollmentbyage IndividualMarketEnrollmentbyFPL

90 HighRisk 90 90
Over50 Over400%FPL
83% 83% 83%
MediumRisk 200400%FPL
77% 77% 30to50 77%
80 80 80
LowRisk Under200%FPL
Under30
19
70 66% 70 66% 70 24 66%
21 29
22
60 60 30 60
16 16
22
50 50 31 50
17
28
40 40 27 40 27
22
25
30 30 30

48 22
20 39 20 20
31 28 28
25 27
10 10 22 10
13
0 0 0
2017 2020 2024 2017 2020 2024 2017 2020 2024

Totalsmaydifferbecauseofrounding

PRELIMINARYDRAFT
TotalEnrollment TwoRiskPools

18

17
MillionsofCoveredLives

16

CurrentLawHigh

15 CurrentLawLow
ConsumerFreedomAmdtHigh
ConsumerFreedomAmdtLow

14

13

12
2017 2018 2019 2020 2021 2022 2023 2024
PRELIMINARYDRAFT
FederalOutlays
APTC,CSRs,andSection301Funding TwoRiskPools
90

80

70

CurrentLawHigh
$Billions

60 CurrentLawLow
ConsumerFreedomAmdtHigh
ConsumerFreedomAmdtLow

50

40

PRELIMINARYDRAFT
30
2017 2018 2019 2020 2021 2022 2023 2024
IndividualMarketEnrollment:
ACACompliantvsNonACACompliant TwoRiskPools
18
16.7 16.6
15.8
15.9
16
14.8 14.8

14 1.6
2.6
5.5 6.9
MillionsofCoveredLives

12 7.4 8.6

10

NonACACompliant
8 ACACompliant

13.2
6 12.2
10.4
9.7
4 8.4 8

0
2017 2017 2020 2020 2024 2024
Low High Low High Low High
PRELIMINARYDRAFT
IndividualMarketMonthlyPremiums
SilverACACompliantvsNonACACompliant TwoRiskPools

$845

$770 LowScenario HighScenario

$660
$635

$590
$570

$430

$370
$360 $360

$210
$200 $200
$190

2017SilverACA 2020 2020 2020 2024 2024 2024


Compliant CurrentLaw SilverACACompliant NonACACompliant CurrentLaw SilverACACompliant NonACACompliant
EnrollmentWeighted EnrollmentWeighted
PRELIMINARYDRAFT
Average Average
Scenariopremiumsareforage40anddonotincludepremium assistanceunderthecurrentlaworConsumerFreedomAmendment.Enrollmentweightedaveragecontainsallages.
IndividualMarketEnrollment:
DemographicMixofNonACACompliantPlans TwoRiskPools

IndividualMarketEnrollmentbyrisk IndividualMarketEnrollmentbyage IndividualMarketEnrollmentbyFPL

60 60 60
HighRisk Over50 Over400%FPL
MediumRisk 30to50 200400%FPL
LowRisk Under30 49% Under200%FPL
50 49% 50 50 49%

6 8
40 40 40
34%
34% 34%
14 28
2
30 30 4 30

9 19
20 17% 42 20 17% 20 17%
3 31 5
3 27
10 17
10 10 5 20 10
12
11
7 6
1 2 3
0 0 0
2017 2020 2024 2017 2020 2024 2017 2020 2024

Totalsmaydifferbecauseofrounding

PRELIMINARYDRAFT
IndividualMarketEnrollment:
DemographicMixofACACompliantPlans TwoRiskPools

IndividualMarketEnrollmentbyrisk IndividualMarketEnrollmentbyage IndividualMarketEnrollmentbyFPL

90 HighRisk 90 90
Over50 Over400%FPL
83% 83% 83%
MediumRisk 200400%FPL
30to50
80 80 80
LowRisk Under200%FPL
Under30
19 66% 66% 66%
70 70 70 24
29
60 60 60
51% 51% 17 51%
16 20
50 50 28 50
8
28
40 21 40 27 25 40
23
16
18
30 30 30
22
48 11
20 20 20
18
30 31
27 27 26
10 19 10 10
16
9
0 0 0
2017 2020 2024 2017 2020 2024 2017 2020 2024

Totalsmaydifferbecauseofrounding

PRELIMINARYDRAFT
Assumptions&Limitations
Therangeofassumptionsbehindthemodeledscenariosassumeallofthedetailsbelowaretrueforthemodeltohold.
RulesgoverningtheACAmarketremainunchangedexceptforonesexplicitlylistedbelow
Inthisscenario,itisassumedthatanadequatenumberofissuersofferatleastonebronze,silver,andgoldqualifiedhealth
plan,andthatallstatesin2020permitallcarrierstoofferhealthinsuranceplanswithaloweractuarialvalueandfewer
requiredbenefitswithoutimposingstricterrequirementsandpremiumratingrules.
InyearspriortotheopensaleofnonACAplans(20172019),a15%lapseratefornonACAplansisused
RangeoflivesonnonACAplansin2017isestimatedtobe2 3M
Modelingisnationwideandassumesallstateshavea5:1agecurve,bothforACAandnonACAplans
Nochangeinpopulationgrowth,economicgrowth,ormedicaltrend
Priceelasticityisdeterminedbasedoncombinationsofrisk,age,andincome
Probabilityofenrolleesswitchingbetweenplansisrangedandbasedonacomparisonofoutofpocket&premiumcost
differencebetweenanonACAplanandACAbronzeplanwithhighertotalcostdifferentialsleadingtohigherratesof
switching
NonACAplandesignedwitha$12Kdeductibleand$12Kmaximumoutofpocketlimit

OverallAssumptions
HealthstatusratingusedfornonACAplansbeginningin2020inbothscenarios
Federallevel policychangeinplacetoallowforopensaleofnonACAplans,withallstatesadoptingthischangeandcarriers
inallmarketsofferingnonACAplans
RatingoccursinasingleriskpoolwithoutriskadjustmentbetweennonACAplans

PRELIMINARYDRAFT
Assumptions&Limitations
SingleRiskPoolAssumptions
Hightotal/nonACAenrollmentscenario:
HigherpricesensitivityintotalcostcomparisonbetweenACAandnonACAplans,leadingtohigherratesofswitching
100%enrollmentretentionofenrolleeswholapsenonACAcoveragefrom20172019
Higher2017startingpointofnonACAenrollment
10%lowerclaimsinnonACAplansduetoEHBreductions
$10Binadditionalfederalfundingusedasreinsuranceineachyear20202026
Lowtotal/nonQHPenrollmentscenario
LowerpricesensitivityintotalcostcomparisonbetweenACAandnonACAplans,leadingtolowerratesofswitching
50%enrollmentretentionofenrolleeswholapsenonACAcoveragefrom20172019
Lower2017startingpointofnonACAenrollment
5%lowerclaimsinnonACAplansduetoEHBreductions
Noadditionalfederalfundingusedasreinsuranceineachyear20202026
DoubleRiskPoolAssumptions
FederallevelpolicychangeinplacetoallowforopensaleofnonACAplans,withallstatesadoptingthischangeandcarriers
inallmarketsofferingnonACAplans
Ratingoccursinseparateriskpools(oneforACAplansandanotherfornonACAplans)
Lowenrollmentandhighenrollment:sameasthesingleriskpoolscenario

PRELIMINARYDRAFT