The Society of Actuaries Marks a Decade of the Affordable Care Act with New Research

Research includes compressive historical analysis of state-level data

SCHAUMBURG, Ill., March 21, 2020 – To recognize the tenth anniversary of the passage of the Affordable Care Act (ACA), the Society of Actuaries (SOA) released new research, authored by Milliman, with actuarial insight and key learnings from the past decade of the landmark legislation.  This is the first project stemming from the SOA’s new Health Care Cost Trends Strategic Research Program, which will build on existing analysis, and produce new research that focuses on the forces that shape health care cost and utilization, and the changes over time.

The SOA’s report, “Fifty States, Fifty Stories: A Decade of Health Reform Under the ACA,” analyzed publicly available data on the individual state marketplaces from 2013 to 2020, including inputs from the Centers for Medicare and Medicaid Services, the Robert Wood Johnson Foundation, the U.S. Census Bureau and Milliman. The research revealed the following key observations:

1. The uninsured rate declined since the passage of the ACA, but the means by which the reduction was achieved differs from original projections. The national uninsured rate for individuals under the age of 65 declined from 17 percent in 2013 to 10.7 percent in 2018. However, the reduction was primarily achieved through Medicaid expansion (58 million enrollee increase within this timeframe), as opposed to insurance exchange enrollment (an additional 10 million enrollees within the timeframe).
2. State decisions to expand Medicaid are strongly correlated with larger reductions in uninsured rates, however, non-expansion states also achieved reductions. The median reduction in the uninsured rate was 43 percent among expansion states, compared to 26 percent across non-expansion states.
3. Premium price was a key consideration for consumers shopping for coverage on the insurance exchanges. Because of the ACA subsidy structure and the household income distribution of exchange enrollees, even insurers new to the individual health insurance market were able to capture significant market share if they offered competitive premium rates.
4. Carrier competition in the exchanges and individual market profitability was consistent with the underwriting cycle. As initial financial results from the insurance exchanges were realized, the number of insurers exiting markets at the end of 2015 was slightly higher than the number of market entrants. However, as insurers’ financial margins swung from significant losses in 2014 through 2016 to profitability in 2017 and 2018 (associated with premium rate increases described below), insurer exchange participation began to rebound for the 2019 and 2020 coverage years.
5. Initial exchange premium rates were not sustainable. The low and relatively stable premiums in 2014 and 2015 compared to later years can be largely attributed to the competitive market dynamics and anticipated risk corridor protections, along with the transitional reinsurance program that covered approximately $8 billion in reimbursable claims for the 2014 and 2015 plan years.
6. Significant premium rate increases were associated with poor financial experience, decreases in competition and policy uncertainty. The average lowest premium rate for on-exchange silver plans was $255 in 2014, compared to $435 in 2020. Many rate increases were tied to policy shifts, including a 19 percent increase for the lowest premium silver plans in 2017 during the “repeal and replace” era, and a 34 percent average increase for these plans in 2018 due to the elimination of direct funding for cost sharing reduction (CSR) subsidies by the federal government and the corresponding “silver loading” to allow for CSR funding through insurer premium rates.
7. With a few exceptions, insurers’ financial results at the state level were consistent with national trends. The insurance industry’s aggregate financial results for the individual market were poor in 2014 to 2015, with improvement starting in 2016. The defunding of the risk corridor program was a major contributor to insurers’ losses at both the state and national level within this timeframe.
8. Subsidized exchange consumers experienced lower out-of-pocket premium costs as premium rates increased in 2017 and 2018, while non-subsidized individual market enrollment has decreased substantially. Unsubsidized enrollment from paying policyholders declined from approximately seven million in 2016 to just under four million in 2018. At the same time, on-exchange enrollment from paying policyholders remained relatively stable, with stunted growth attributed to reductions in the non-subsidy eligible population enrolled in the exchanges.
9. Premiums plateaued in 2018 and 2019 with growth in the number of states implementing Section 1332 State Innovation Waivers and improvements in insurer financials. Twelve states successfully applied for a Section 1332 waiver to implement a state-based reinsurance program that is supported, in part, by federal pass-through funding. Two states, New Jersey and Rhode Island, also implemented state-based insurance coverage mandates to assist in the funding of the reinsurance program.
10. While state 1332 waiver efforts have focused on improving affordability and reducing the uninsured rate for the population with income above 400 percent Federal Poverty Level (FPL), the vast majority of the approximately 30 million uninsured persons in the U.S. have income below 250 percent FPL. Uninsured persons with household income above 400 percent FPL account for less than 15 percent of uninsured persons. Therefore, even if state-based reinsurance programs were successful in maintaining or increasing individual market insurance participation, the programs are unlikely to have a material impact on the overall uninsured rate.  
11. Medicaid-focused insurers achieved the largest market share gains in the individual health insurance market. In 2017, Medicaid expansion provided approximately 14 million more insured lives. However, in the individual market, enrollment growth in the exchanges has been offset by enrollment declines outside the exchanges, with net growth from 2013 to 2019 estimated at just over 2 million average monthly members.

“Actuaries have been on the frontlines helping payers, providers and government stakeholders understand the financial risks of the ACA for the past decade,” said Dale Hall, FSA, CERA, MAAA, CFA, Managing Director of Research with the SOA. “One of our most striking observations is how frequently, and quickly, this industry adapts to change, whether in the form of policy shifts, a modified risk pool or new payment model. The SOA is committed to continuing to educate the actuarial profession as the health landscape evolves, which will in turn aid industry stakeholders as they continue to navigate these shifts.”

In addition to this analysis, the SOA will also be releasing a collection of essays with members’ observations from their experience assessing the risks associated with the ACA over the past ten years. This will include insight into the cost of health care in the U.S., an overview of the insurance subsidy structure, analysis into the sustainability of the exchanges, observations on Medicaid, and a summary of the overall impact of the ACA. These essays will be published on SOA.org in the coming weeks.

For additional information, including the full research report, please visit “Fifty States, Fifty Stories: A Decade of Health Reform Under the ACA”

About the Society of Actuaries

With roots dating back to 1889, the Society of Actuaries (SOA) is the world’s largest actuarial professional organization with more than 31,000 actuaries as members. Through research and education, the SOA's mission is to advance actuarial knowledge and to enhance the ability of actuaries to provide expert advice and relevant solutions for financial, business and societal challenges. The SOA's vision is for actuaries to be the leading professionals in the measurement and management of risk.