Trump Administration Rule Aims to Calm Insurers During Health-Law Limbo

By Stephanie Armour and
Anna Wilde Mathews
Updated Feb. 15, 2017 9:09 p.m. ET

Proposals seek to create more incentives for insurers who must decide by spring whether to offer plans on the Affordable Care Act’s individual exchanges

The Trump administration released a proposal Wednesday aimed at bolstering health-insurance exchanges, but it still left huge uncertainty for insurers that are weighing whether they will remain in the marketplaces next year.

The move comes even before Republicans decide on how to repeal and replace the Affordable Care Act. While it addressed a number of insurers’ requests, industry executives said it didn’t resolve all their concerns and stopped short of answering some of the most important questions surrounding the future of the health law’s exchanges. Most of those major issues will likely involve action by Congress—including the fate of ACA subsidies that help low-income consumers pay for premiums and reduce their out-of-pocket costs for care.

The proposal “is a step in the right direction,” said Alan Murray, chief executive of CareConnect, a New York insurer and a unit of Northwell Health. “It definitely doesn’t go far enough to stabilize the insurance markets.”

A new exodus of insurers from the exchanges in 2018, or large rate increases, could lead to upheaval for consumers and spur a political backlash against Republicans, who will have been in charge of federal health policy for nearly a year by then.

Already, before the administration released its proposal, Humana Inc. on Tuesday became the first major insurer to announce it will withdraw from the exchanges in 2018, exiting 11 state marketplaces. Other big companies, including Anthem Inc., Cigna Corp. and Aetna Inc. have said they would make decisions in coming months. In many states, insurers file their 2018 plans in the spring, though they typically can wait longer to make final decisions. Also, the Trump administration said it plans to push back federal deadlines for insurers’ filings.

On Wednesday, Molina Healthcare Inc., which had earlier done relatively well on the exchange business, said it ended up with a significant loss on the marketplaces for 2016 and it will re-evaluate its participation on a “state-by-state basis” for 2018.

The Republicans are now dealing with an issue that faced the Obama administration, which also struggled to shore up the exchanges. This year, several big insurers pulled back from the ACA marketplaces, citing losses, and parts of the country saw significant rate increases. Insurers said they faced higher-than-expected health costs, as people with medical conditions signed up for coverage but not enough healthy people enrolled to balance them out.

In 2017, 32% of U.S. counties have just one exchange insurer, up from 7% in 2016, according to the Kaiser Family Foundation.

The Trump administration’s proposed rule seeks to create more incentives and certainty for insurers. The rule would shorten the open-enrollment window, give states greater authority to review the adequacy of health-plan networks, and require eligibility verification for people buying insurance outside the official sign-up period. It would also give insurers greater latitude on the amount of health-care costs they cover on the exchange plans.

The proposal is a sharp reversal from the days after the election when President Donald Trump and Republicans vowed to rapidly strike down the law. Mr. Trump said recently an ACA replacement may not be completed until next year. Instead, the Trump administration hopes predictability and financial benefit provided by the new rule will entice insurers to stay on the exchanges for now.

The Trump administration proposed changes to the Affordable Care Act’s insurance exchanges Wednesday to appease insurers and prevent the exchanges from collapsing before Republicans release plans for a health law replacement. WSJ’s Stefanie Ilgenfritz and Tanya Rivero discuss.

“These are initial steps in advance of a broader effort to reverse the harmful effects of Obamacare, promote solutions to improve access to quality, affordable care, and ensure we have a health care system that best serves the needs of America,” said Health and Human Services Secretary Tom Price.

Democrats and consumer groups criticized the new proposal, which they said would curtail consumers’ flexibility and might hurt enrollment.

“If the administration is serious about strengthening the marketplace, they will reduce uncertainty and focus on keeping the marketplace stable and growing—not focus on changes that will raise deductibles, reduce access to physicians and put limitations on the ability for people to get coverage,” said Andy Slavitt, who served as acting administrator of the Centers for Medicare and Medicaid Services, which implements the health law, during the Obama administration.

Some insurers applauded the proposed rule as a good start on addressing industry concerns. Aetna Chief Executive Mark T. Bertolini, who said Wednesday that he expected some insurers to pull back from the marketplaces next year, leaving consumers in parts of the country without any exchange plans to buy, said the administration had “taken some good initial steps with the proposed regulation.” He said Aetna hasn’t yet made a decision about its 2018 participation.

Anthem’s CEO, Joseph R. Swedish, said the proposal “marks an important step toward stabilizing the individual market.”

However, insurers said the proposal didn’t touch on some of their biggest worries. In addition to the ACA’s subsidies, they want to know how Congress and the Trump administration will handle the individual mandate that requires most people to have insurance, and a health-law program that aims to even out risk among insurers. Some insurers also hope for a new program that could help defray the cost of the sickest exchange enrollees.

“There is still a great deal of uncertainty,” said Kirk Zimmer, executive vice president at Sanford Health Plan, which sells ACA policies in North and South Dakota. Currently, he said, Sanford is leaning toward participating in the same exchanges next year, but that plan could be derailed if there were “some significant announcement that we would consider negative to our interests.”

Companies also noted that one of the key things deciding their stance on exchanges for 2018 is far closer to home—their results in 2017. Indeed, in announcing its decision regarding 2018, Humana pointed to early signs that its ACA-plan enrollment for this year remained “unbalanced,” meaning it had too high a share of unhealthy people. That is the same fundamental problem that led to many of the exchange withdrawals this year.

The Trump administration proposal “will make changes to improve the risk of the population, but it won’t solve the issue,” said Joan Budden, chief executive of Priority Health, an insurer in Michigan. She said her company currently expected to offer ACA plans next year, but still needed more clarity around how the exchanges will look. The proposal was “helpful, but it’s not the whole enchilada, we need more,” she said.