This report describes a comparative analysis of three proposals to allow Americans to keep their existing health plans under the Affordable Care Act (ACA). The proposals are evaluated based on their potential impact on the ACA-compliant market and the cost and coverage of health insurance. The possibility of each proposal causing a "death spiral" in the ACA-compliant market is also addressed.

Cover: Evaluating the "Keep Your Health Plan Fix"
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Evaluating the "Keep Your Health Plan Fix"

Implications for the Affordable Care Act Compared to Legislative Alternatives

by Evan Saltzman, Christine Eibner

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Research Questions

  1. How much will ACA-compliant market premiums be affected?
  2. How many individuals will opt out of the ACA-compliant market?
  3. What effect will there be on the total number of uninsured?
  4. How do the risk profiles of the ACA-compliant market and the non–ACA-compliant market compare?
  5. What will be the impact on the federal budget?
  6. Will the ACA-compliant market be viable?

President Obama's promise that Americans could keep their existing health care plans under the Affordable Care Act (ACA) has received increased scrutiny in the wake of millions of Americans having their plans cancelled. These cancellations primarily occurred in the individual or nongroup market, where individuals purchase health care plans directly from an insurer instead of through an employer. Many such plans do not meet the minimum coverage requirements of the ACA, leading insurers to send plan-cancellation notices to their enrollees.

This report describes a comparative analysis of three proposals to remedy the situation: one by the White House, another by Senator Mary Landrieu (D-LA), and a third by Representative Fred Upton (R-MI). The proposals are evaluated based on their potential impact on the ACA-compliant market and the cost and coverage of health insurance. The possibility of each proposal causing a "death spiral," in which rising premiums and decreasing enrollment undermine the viability of the ACA-compliant market, is also addressed.

The authors find that the three proposals vary from slight to moderate impact on ACA premiums, enrollment, and federal spending, but none of them would result in the unraveling of the ACA-compliant market.

Key Findings

Premium increases are small to moderate

  • ACA-compliant market premiums in 2015 would rise from a low of 1 percent under the optional extension proposal to a high of 10 percent under the optional extension plus buy-in proposal.

ACA-compliant market enrollment declines are modest to substantial

  • Under the optional extension proposal, enrollment in the ACA-compliant market would decline by 500,000 (4 percent). The optional extension plus buy-in proposal would lead to a decrease of 3.2 million enrollees (26 percent), the largest of the three proposals.

The number of uninsured decreases

  • The optional extension and mandatory extension proposals lead to small decreases in the number of uninsured of 260,000 and 450,000, respectively. Under the optional extension plus buy-in proposal, the number of uninsured would drop by 2.5 million. One important caveat to this seemingly positive outcome is that the non–ACA-compliant plans may have a significantly lower actuarial value than plans offered in the ACA-compliant market and provide more limited coverage.

ACA-compliant market enrollees are older and less healthy, while non–ACA-compliant nongroup plans retain and/or attract young and healthy individuals

  • ACA-compliant market enrollees are at least eight years older, on average, than participants in the nongroup market and spend twice as much on medical care.

The net cost of the ACA's coverage provisions will increase, particularly under the optional extension plus buy-in proposal

  • Despite declining enrollment in the ACA-compliant market, we find that the amount spent by the federal government on premium tax credits and cost-sharing subsidies actually increases, while revenue from the individual mandate penalty decreases. The optional extension proposal would add $0.6 billion in net cost in 2015, while the optional extension plus buy-in proposal would increase federal spending by $5.2 billion.

None of the proposals will lead to a death spiral or the implosion of the ACA-compliant market.

  • Key reasons for the sustainability of the ACA-compliant market include subsidies restricted only to the ACA-compliant market, the Marketplace's subsidy structure, reinsurance, and the composition of the buy-in population.

Support for this report and for RAND Health's Comprehensive Assessment of Reform Efforts (COMPARE) initiative is provided by RAND's corporate endowment and through contributions from individual donors, corporations, foundations, and other organizations. This work was also supported in part by an internal investment from RAND Health, a division of the RAND Corporation.

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