June 05, 2015

After King v. Burwell, Viable Exchanges are ACA's Next Challenge

The U.S. Supreme Court will soon rule on King v. Burwell, deciding whether federally run health insurance exchanges can legally offer subsidies and tax credits to limited-income enrollees. If the Court ends this financial assistance, healthy people are likely to opt out of the exchanges, leaving insurers with a more expensive and less healthy population, driving rates and further driving enrollees out.

In a commentary article published in Modern Healthcare on June 5, Mike Adelberg, senior director at Faegre Baker Daniels Consulting, explained another challenge faced by the Affordable Care Act (ACA).

"Running a health insurance exchange, it turns out, is harder than anyone expected," Adelberg said. He explained that the long-term problem state-run exchanges face is lack of scale. "There are high costs associated with running an exchange," he said. "Rapidly rising assessments could lead to big rate hikes and chase away healthy purchasers, thus starting the death spiral. Even the most successful small-state exchanges...might not be insulated from this problem." 

What can states do to avoid a "death spiral" for their exchanges? Adelberg suggested pooling resources among states or leasing working systems from one another. Adelberg said the best long-term solution, though, may be "creating a flexible national platform that provides some customization for states, and allows the feds to collect a fee from states using the national platform."

Following this article's publication, Adelberg was quoted in Politico and The Hill

The Modern Healthcare article is available to subscribers.

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