Executive summary

The Patient Protection and Affordable Care Act (ACA) introduced many changes to the individual health insurance market beginning in calendar year (CY) 2014, including new rating rules and federal financial assistance to purchase health insurance through the insurance marketplaces. It is important to understand the condition and stability of the individual health insurance market and how the ACA has affected its health insurance consumers.

To support this understanding, we have prepared our second annual profile of the individual health insurance market for each state along with the District of Columbia (DC). The profile summarizes insurer financials, marketplace enrollment¹, and federal assistance provided to households purchasing insurance coverage through the insurance marketplaces, incorporating recently released data from the 2018 open enrollment period² and early 2018 effectuated enrollment snapshot. ³ The table below summarizes our estimates of effectuated marketplace enrollment and associated federal financial assistance for the CY 2016 through CY 2018 time period. CY 2016 and CY 2017 information has been updated from last year’s report based on published data subsequent to the release of last year’s reports.

This information is vital to stakeholders for several reasons:

• Future legislation or administrative actions. While the pace of new healthcare reform legislation will likely slow in 2018 with the upcoming mid-term elections, data from the individual marketplace can be useful in informing future policy decisions both at the federal and state level. This data can enable stakeholders to better understand the population currently receiving assistance and the amount of assistance being provided.
• 1332 State Innovation Waiver (1332 Waiver). As of June 2018, four states have received approval for a 1332 Waiver.⁴ As part of the approval process, 1332 Waivers are required to provide coverage to at least as many individuals under current law while not increasing the federal deficit. Each state profile provides estimated federal expenditures on advanced premium tax credits (APTC) and cost-sharing reduction (CSR) subsidies along with the number of individuals receiving these subsidies from CY 2016 through CY 2018. On a national level, we estimate the sum of federal APTC expenditures will be over $50 billion in CY 2018.
  
  The information in our state profile reports can enable a state to better understand the funding and coverage requirements that must be adhered to under Section 1332 of the ACA. While this is just the first of many analyses needed to assess innovative healthcare strategies, we believe it provides a crucial data point for states interested in evaluating healthcare coverage options that could be made available to their residents.
  
  For Alaska, Minnesota, and Oregon, the respective state profiles also highlight the federal pass-through funding each state will receive from its approved 1332 Waiver related to state-based reinsurance programs. Collectively, these three states will receive $243 million in federal pass-through funding in 2018 as a result of reducing federal expenditures on APTCs.
• Marketplace enrollment trends. A key issue for insurers is the stability of the individual market risk pool. One important measure of risk pool stability is enrollment. Based on open enrollment data for CY 2018, we estimate the national number of average monthly insured individuals in the marketplace will increase from 9.8 million in CY 2017 to 9.9 million in CY 2018.
• While national marketplace selections decreased from 12.2 million in CY 2017⁴ to 11.8 million in CY 2018⁵, marketplace enrollment data for February 2018 suggests the percent of individuals effectuating coverage after plan selection has increased from CY 2017 to CY 2018.
• For the last three years, national marketplace enrollment has remained at or slightly below 10 million. With nearly 85% of marketplace enrollees receiving an APTC, many marketplace enrollees have not been exposed to significant premium rate increases that occurred during the last two years.
• However, as reported by the Centers for Medicare and Medicaid Services (CMS) in July 2018, non-APTC enrollment (the majority of which occurs outside the marketplaces) has experienced material declines, decreasing from 6.3 million in 2016 to 5.0 million in 2017.⁶ For state policymakers, awareness of the current health of the individual market risk pool is a key first step in understanding health insurers’ concerns and developing actions to stabilize the market.
• CSR termination. From CY 2014 through the first nine months of CY 2017, insurers received direct federal payments for the cost of providing CSR variants. However, effective October 2017, CSR payments were terminated by the federal government. For CY 2018 premium rate development, most states permitted insurers to build the effect of CSR payments being terminated by the federal government into premium rates. However, specific methodologies varied on a state by state basis.⁴ Each state profile highlights the CSR rate adjustment permitted for CY 2018.
  
  Based on analysis of CY 2017 versus CY 2018 marketplace open enrollment data for federally-facilitated marketplace states, there was a shift away from silver coverage for households with income between 100% and 250% of the federal poverty level (FPL). For example, in states where the cost of CSR subsidies was permitted to be loaded only onto silver qualified health plans (qualified health plans [QHPs], plans offered in the marketplace), the percent of enrollees in this income cohort selecting a silver plan decreased from 84.1% in 2017 to 77.0% in 2018. Approximately 5% of selections shifted to bronze coverage, while gold coverage saw a 2% market share increase. By increasing the cost of silver premiums, calculated APTC amounts also increased, making bronze and gold coverage less expensive in previous years for subsidy-eligible consumers. The increase in bronze selections may potentially increase bad debt for providers.
  
  The shift away from silver coverage is less pronounced in states that permitted CSR subsidies to be loaded onto both on and off-marketplace silver plans or other CSR loading methodologies (e.g., all metallic levels).

Methodology and assumptions

The information contained in this report and the 51 state market profiles was prepared through the use of publicly available data sources and estimates of effectuated marketplace enrollment. Effectuated marketplace enrollment includes the population that has made premium payments and is actively enrolled in a marketplace policy. Data underlying our analyses is based on information from CY 2016 through CY 2018

CY 2016 financial results

Financial results for CY 2016 were summarized through the use of annual Medical Loss Ratio Reporting Data (MLR Data), which was publicly released by the Center for Consumer Information and Insurance Oversight (CCIIO) within Centers for Medicare and Medicaid Services (CMS).⁸ Individual market financial information from the MLR Data is inclusive of marketplace enrollment, off exchange (marketplace) enrollment, and enrollment on transitional products. Further information related to CY 2016 insurer financial results can be found in our annual research report on the commercial health insurance market.⁹ Values contained in this report, as well as our individual market state profiles, reflect risk corridor shortfalls for CY 2016.¹⁰ Additional adjustments were made to the data for observed reporting issues or data variances relative to statutory financial statements.

Marketplace enrollment and subsidy value

CMS released effectuated enrollment summaries for the insurance marketplace on a national and state level for CY 2016¹¹, CY 2017, and February 2018.¹² Effectuated marketplace enrollment was provided separately for total marketplace enrollment, APTC enrollment, and CSR enrollment.

• APTC: Payments are made directly to the insurance company by the federal government on behalf of the qualifying members to make out-of-pocket premiums more affordable for lower-income households. The amount of the premium tax credit varies for each qualifying household based on its income relative to the FPL and the price of the second-lowest-cost silver plan (commonly known as the subsidy benchmark plan) that the household can purchase in the insurance marketplace. Qualifying households must have income between 100% and 400% of the FPL and must not be eligible for other sources of affordable minimum value coverage
• CSR: The ACA requires insurers participating in the individual insurance marketplace to automatically provide a reduced level of cost sharing to qualifying households. Reduced cost sharing takes the form of CSR variations of base silver plans on the marketplace. The CSR variants include reductions to cost sharing such as deductibles, copayments, coinsurance, and out-of-pocket maximums. The magnitude of the reduction to required plan cost sharing varies based on the income level of the qualifying households purchasing such coverage. Qualifying households must have income between 100% and 250%¹⁰ of the FPL and must not be eligible for other sources of affordable minimum value coverage.

The effectuated marketplace enrollment data also includes the average APTC on a national and state level for CY 2016, CY 2017, and February 2018. Additionally, we relied on CY 2016 through CY 2018 marketplace open enrollment report (OER) public use files.¹⁴ Through the use of this information, we applied effectuation seasonality factors (based on CY 2017 experience and adjusted for changes in open enrollment period length between CY 2017 and CY 2018) to February 2018 effectuated enrollment for the purpose of estimating effectuated enrollment in CY 2018 (for the average of all 12months) . While we believe our methodology for estimating average monthly effectuated enrollment is sound, actual values are certain to vary from our estimates to an unknown degree.

For CY 2016 through 2018, average monthly premium (for individuals receiving an APTC) were estimated through the use of the public use files for states using the federal marketplace. Due to inconsistent data sources across the three-year period, we have not illustrated monthly marketplace premiums for state-based exchanges that operated in 2018. For all states, it is certain that the actual effectuated monthly APTC amounts will vary from the estimates developed within each state profile.

CSR subsidy payments

CY 2016 CSR payments were sourced from the MLR Data. For Arkansas and New Hampshire, we adjusted the CSR payments reported in the MLR data for private Medicaid expansion enrollees. CSR payments for CY 2017 were estimated by trending CY 2016 CSR payments per 12-month effectuated enrollment period at a 10% annualized trend rate. This annual trend rate assumption was developed based on our review of medical trend assumptions underlying individual market insurer rate filings during this time period.

Data reliance

Publicly available data used in our analysis was reviewed for reasonableness and consistency. However, the data sources have not been audited. To the extent data items were not correctly reported, the values presented in this report and accompanying state profiles will need to be updated.