While the Supreme Court’s 6-3 decision Thursday in King v. Burwell to keep insurance subsidies in place on federal exchange plan, the ruling also offers a path forward for the individual private insurance market.
The uncertainty over Healthcare.gov only added to the chaos for health plans over the last few years. Now, after learning exchange models and forecasting the initial utilization needs of new members, they can focus on optimizing individual plans with cost-comparison and provider-choice tools and value-based benefit designs, said Ashraf Shehata, a partner in KPMG’s healthcare center of excellence.
Considering their poor performance and high costs, some state exchanges are probably going to wind down and default to the federal marketplace, which was the original idea in the House versions of the ACA. That may actually work well for insurers, regulators and consumers.
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“The law of large numbers make sense,” Shehata said. “Rather than 50 exchanges, the idea of a larger exchange can leverage and synthesize the economies of scale.” Instead of dozens of plan-exchange interfaces and related administration, selling exchange plans can be simpler for insurers and possibly less expensive, reducing the need for premium surcharges that the state exchanges as well as Healthcare.gov have had to rely on. Insurers, Shehata said, can “offer more functionality for members if they have a predictable model,” so they can finally tackle issues in retail health insurance like cost-comparison of common treatments and medicines.
At the same time, some states, like California, will try to pioneer their own work and pursue a more aggressive consumer-advocacy agenda. Covered California is negotiating on behalf of consumers to lower premiums, capping co-pays for medicines and using data analytics to help insurers more accurately price risk and follow through on quality commitments. And state-specific regulation of individual and small business health plans will also continue.
One big problem still lingers in the quest for universal coverage, though. An estimated four million Americans in Texas, Florida and elsewhere remain uninsured because their state has not expanded Medicaid eligibility.
The outcomes in those states will partly depend on politics and conservative state leaders, but there are signs that even Republican Governors can meet the federal government half-way and craft market-based programs through waivers, said Shehata.
“Many states are willing to look at waivers for Medicaid expansion,” for risk-based programs with community and behavioral health features that transcend hospital coverage and could help save money. “The collaboration between these states and the private insurance market is starting to take off,” he said, noting programs starting in Indiana and Michigan.