The state of health insurance: group plans and individual

After months of failed efforts by Congressional Republicans to eliminate the Affordable Care Act, President Trump in October stepped in with two sweeping changes that are reverberating throughout the health insurance system.

The main order he issued immediately eliminates subsidies that are paid to health insurers that participate in government-run exchanges to reduce deductibles and copays for lower-income customers buying individual and family policies.

While some pundits say the move will create chaos in the individual market, they differ on the likely fallout for group policies.

But Trump did sign two other orders that could have a direct effect on the group market over time, but not immediately:

• One would attempt to expand the use of health reimbursement accounts (HRAs), which employers could pay into so that employees can use those funds to purchase health coverage on the open market.
• The other would allow employers to band together to create “association” plans, which would offer plans that are not as comprehensive as dictated by the ACA.

Cost-sharing fallout

Nineteen states have already sued to challenge the cost-sharing reduction subsidies, saying the ACA does not appropriate funding for the subsidies and hence they are illegal. Without them, insurers will likely have to significantly increase their premiums or pull out of the health insurance exchanges.
While the order means many people purchasing plans on the individual market will see drastic rate hikes, the order doesn’t directly affect group plans.

The American Benefits Council, a national trade association based in Washington, D.C. that advocates for employer-sponsored benefit plans, said that the move to cut off the subsidies could spur some insurers to increase their fees for large employer plans in order to make up for the lost revenue in the individual market.

“Employers rely on a healthy and viable individual health insurance marketplace since an unstable market could result in further cost-shifting from health-care providers to large employer plans,” the council said in a prepared statement.

“Additionally, erosion of the ACA exchanges would make individual market coverage a less viable option for part-time workers, early retirees, and those who would otherwise elect to secure coverage through the individual market rather than sign up for, or remain on, COBRA,” it added.

But that sentiment is not universal.