The Continuing Collapse of ACA’s Exchanges Highlights the Need for Reform ... and Better Estimates

Under CBO’s original estimates, the exchanges should have been thriving by now. More accountability is needed.
Demian Brady
June 23, 2017

The Senate unveiled its draft bill to repeal and replace the Affordable Care Act (ACA) the week of June 19th. The legislative language arrived on the heels of news that yet more insurance companies will drop out of the ACA’s state exchanges. Anthem had announced in early June that it would leave Ohio’s exchange next year. They are now also withdrawing from Wisconsin and Indiana, while Cigna is dropping out of Maryland starting next year.

In June, 2009 Obama described the exchanges as “a market where Americans can one-stop shop for a health care plan, compare benefits and prices, and choose the plan that’s best for them ... . ... This will give them a better range of choices, make the health care market more competitive ... .” This is not how things turned out. The exchanges became operational in 2014; as soon as September of that year, the first announcement came that a provider was dropping out of a state exchange.

Despite the federal subsidies offered, the ACA's coverage regulations make it difficult for providers to offer plans through the exchanges that would be financially viable. In 2016, 85 percent of exchange enrollees had a choice of at least three insurance options. That figure sank to 57 percent in 2017, while a third of counties have only one option offered through the exchanges.  

The Congressional Budget Office (CBO), Congress’s official scoring agency, originally projected that the exchanges would be stable with more than twice as many enrollees than actually signed up. CBO overestimated the impact that the individual mandate would have on driving middle class households into the exchanges. Similarly, CBO underestimated the costs of the ACA’s Medicaid expansion. CBO has a long track record of estimating health care proposals using faulty methodology.

Similar concerns have been raised by NTUF and many others about CBO’s estimates for the House's American Health Care Act (AHCA) to repeal and replace the ACA. Developing estimates of major legislative packages like the ACA or the AHCA is no easy task. There are several moving parts whose interactions are complicated. But given its track record, CBO should make an effort to re-assess the assumptions built into its health care models, and those people trumpeting CBO’s figures should be sure to make note of the uncertainty inherent in such cost estimates (and which CBO also clearly acknowledges in its reports).

Small changes in assumptions built into models can lead to much different results. For example, CBO determined that under the AHCA, 23 million Americans would lose or forego health insurance coverage over the next ten years. This figure was widely reported and often quoted by opponents in the media as a reason to oppose the bill. An alternative estimate from the independent chief actuary of the Centers for Medicare & Medicaid Services agreed that there would be more individuals uninsured, but counted much fewer: 13 million by 2026. Quite a big discrepancy from the CBO prediction. The primary difference was in their respective assumptions about the impacts of the Medicaid reforms in the AHCA, with the Actuary seeing a smaller drop off in net Medicaid enrollment, and much less in budgetary savings.

It is also very important to consider that, neither the Actuary nor the CBO incorporated macro-economic feedback from the repeal of the ACA’s trillion in taxes. This — coupled with efforts to enact comprehensive tax reform and the ongoing work to peel back onerous regulations — would stimulate job creation which in turn would decrease the ranks of the uninsured.

As NTUF has proposed through a Taxpayers’ Budget Office, outside accountability would be useful to make sure that lawmakers and taxpayers are getting accurate information about the budgetary impact of proposals.

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