Indiana Challenging the Affordable Care Act

Indiana has joined 19 other states in a coalition to challenge the constitutionality of the Affordable Care Act (ACA).   The suit was filed in federal court in Texas and is led by Texas and Wisconsin.

December 2017 the tax bill was signed into law which eliminated the individual mandates financial penalties staring in 2019. Without the tax penalty, it is being argued that the ACA will fail.

The reality is the ACA has already failed from controlling health care cost and health insurance premiums. The ACA did accomplish one of it’s goals by expanding Medicaid coverage, where Indiana has seen HIP 2.0 go from 60 members to over 400K.

The Indiana health insurance market has transformed under the ACA. The Individual market has two insurance companies offering coverage. (Caresource & Ambetter) The medical community has already started to limit the amount of patient from these providers. This has caused serious disruption in care for Hoosiers in need of a high level of medical services.

We have witnessed most carriers withdraw from the Indiana individual and small group markets. Humana, UnitedHealthcare, IU, MDwise, Assurant, & Anthem have all exited the individual markets. These companies had large losses in the individual market and had challenges working with the government. Under the Obama administration, there was a huge reluctance to admit the ACA had any problems. There was also an inconsistency in the interpretations of the rules of the ACA. Under the Trump administration, it was made clear the failures of the ACA were beyond repair.

The ACA is already in a death spiral that is called adverse selection. The ACA failed to control the cost of care through multiple ideas like the Accountable Care Organizations (ACO). There was also a failure to deliver the original estimated amounts of members to the insurance pools. The unintended consequences of the Medicaid expansion, was one of the leading reason of lack of enrollments. Indiana is a perfect example, it was ordinally predict that we would have 900K Hoosiers insured through the marketplace. 2017 enrollment numbers, were less than 160K and to make matter worse, half of those members would drop off by mid-year. Medicaid & Chip membership is over 1.4 million for Indiana which has had a huge impact on market place enrollments. When Insurance companies developed products based on a pool of 900K and the reality was just 18% of that, it led to large insurance losses.

Unless you are receiving Medicaid benefits, the ACA has failed. It will be interesting to see if the law is overturned. If the law is not overturned, Indiana along with 20 other states, will see health insurance products that are offered that do not meet the requirements of the ACA.

Recently, we have seen the development of short term health insurance that offers a 12-month term. These policies do not meet that ACA requirements and can result in a tax penalty. Here is the reality, the short-term policy cost 65% less than an ACA policy. If your income is over the 400% of Federal Poverty Level and you don’t receive tax credits, on a family of four that could represent a saving of $10K a year. The tax penalty could be 2.5% of household income, which could result in a $9,000 penalty. If you are healthy and willing to take risk, this insurance solution could appeal to you.

For 2019, the tax penalty will be removed, there will be a huge migration to the short-term policy market. With no tax penalty, saving $10K will appeal to most middle-class families. This will have a huge negative impact on the ACA market because this will represent the low risk members exiting the marketing and will result in high premiums. (Adverse Selection). 2018 is really the last year for the ACA in the current form.

The small group health markets have also seen the development of group health plans outside of the ACA. These are the partially self-funded or full funded group health plans. These are plans that underwrite for ongoing health conditions. They have started to pick up tracking in 2018. This will have adverse impact on the small group ACA rates. Again, the good risk is leaving the pool.

The 20 states that are challenging the ACA may be correct in doing so. For the Hoosiers/employers that pay the full cost of the premiums, something must change, or this segment of the population will go uninsured. For the Hoosiers that are receiving Medicaid or assistance with health insurance, these programs need to continue. Otherwise this segment of the population will go uninsured.

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