IMPORTANT: ACA-compliant plans have been subjected to adverse selection

Newly Enrolled Members in the Individual Health Insurance Market After Health Care Reform: The Experience from 2014 and 2015

BlueCross BlueShield, March 2016

This report is a comprehensive, in-depth study of medical claims among those enrolled in BCBS individual coverage before and after the ACA took effect.

Comparing the health status and use of medical services among those who enrolled in individual coverage before and after the ACA took effect, as well as those with employer-based health insurance, the study finds that:

•  Members who newly enrolled in BCBS individual health plans in 2014 and 2015 have higher rates of certain diseases such as hypertension, diabetes, depression, coronary artery disease, human immunodeficiency virus (HIV) and Hepatitis C than individuals who already had BCBS individual coverage.

•  Consumers who newly enrolled in BCBS individual health plans in 2014 and 2015 received significantly more medical services in their first year of coverage, on average, than those with BCBS individual plans prior to 2014 who maintained BCBS individual health coverage into 2015, as well as those with BCBS employer-based group health coverage.

•  The new enrollees used more medical services across all sites of care—including inpatient hospital admissions, outpatient visits, medical professional services, prescriptions filled and emergency room visits.

•  Medical costs associated with caring for the new individual market enrollees were, on average, 19 percent higher than employer-based group members in 2014 and 22 percent higher in 2015. For example, the average monthly medical spending was $559 for individual enrollees versus $457 for employer-based group members in 2015.



By Don McCanne, M.D.

Compared with members previously enrolled in BlueCross BlueShield plans, those enrolling after the Affordable Care Act (ACA) took effect have higher rates of certain diseases, use more medical services across all sites of care, and have higher medical costs associated with care - 22 percent higher in 2015. Adverse selection - concentrating more costly patients in the ACA-compliant plans - was a consequence of the design selected for expanding health care coverage in the United States.

Although required benefits were increased by ACA, to keep premiums affordable patients were leveraged into lower actuarial value plans, especially plans like the silver plans that pay 70 percent of allowable charges. Outside of the exchanges, the other 30 percent is paid by patients, especially through much higher deductibles. Also some income is forgone by providers who contract for lower fees to serve in narrow networks that take away patients’ choices in health care.

It was obvious that many people with modest incomes would not be able to afford their share of the costs of these plans so the politicians included income-based federal subsidies for both the premiums and the cost sharing of the silver plans purchased through the ACA insurance exchanges (marketplaces).

Fine, but what about the hard working middle-income individuals and families who have just enough income that they are disqualified from receiving the subsidies? They are hurting. The higher premiums, the higher deductibles, and the decrease in choices through narrower networks are a greater burden that has been placed on these individuals and families.

This new BCBS report is further bad news for middle-income Americans. It shows that the ACA-compliant plans, both within and outside of the exchanges, have been subjected to adverse selection - the individuals pooled in these plans have greater medical needs and thus are more expensive - driving up premiums and increasing deductibles, with the full brunt borne by middle-income families that do not qualify for subsidies.

It does not have to be this way. We could improve Medicare, expand it to include everyone, and pay for it with equitable taxes based on ability to pay, wherein nobody suffers a financial hardship because of health care. Adverse selection would no longer exist because everyone would be included in the same universal risk pool.