Why one state that did everything right is still losing ACA exchange enrollment

By Shelby Livingston  | December 7, 2018

New Jersey ticked off all the right boxes to strengthen its individual market in 2019. It enacted its own state-based individual mandate to replace the zeroed-out federal penalty. It created a reinsurance program to keep premiums lower for its residents next year. Average premiums are falling by more than 9%. And it already prohibits the sale of skimpy, short-term insurance plans that threaten to lure healthy people away from the exchanges across the country.

"New Jersey is like the example of the state that did everything right," said Katherine Hempstead, senior policy adviser at the Robert Wood Johnson Foundation. "They seemed to inoculate themselves from everything going on nationally."

Yet, enrollment in New Jersey's insurance exchange at the end of the fifth week of open enrollment trails behind last year's sign-ups by 14%. Among the HealthCare.gov states, New Jersey isn't experiencing the largest decrease in sign-ups by any stretch, but the drop is surprising given the interventions the state took to counteract Trump administration and congressional actions anticipated to dampen enrollment.

New Jersey's experience illustrates that factors beyond the expansion of short-term and association health plans and the repeal of the penalty for the federal individual mandate for not having insurance are contributing to the drop in enrollment. It brings into question the extent to which states can stop the bleeding. 

Several factors could be contributing to the decline in New Jersey exchange enrollment, which matters because as the pool of people buying coverage shrinks and if the remaining enrollees are sicker than average, premiums could rise even higher. Some experts have questioned whether New Jersey is adequately driving awareness of its new mandate for coverage, effective next year.

Raymond Castro, director of health policy at New Jersey Policy Perspective, said there's more national news coverage about the zeroed-out mandate at the federal level than there is local news about the state mandate, which could be confusing residents. Still, others doubt the individual mandate was ever much of an enrollment driver in the first place, saying the fine for not having insurance is too low.

Castro said the two cheapest silver plans in the state are sold off the exchange this open enrollment, providing an incentive for people who make too much to receive federal premium subsidies to buy coverage off-exchange. About 140,000 New Jerseyans who buy individual coverage do not receive subsidies; 40,000 of those bought it on the exchange in 2018 and could be opting for off-exchange options this year, Castro said.

In the past, health insurers loaded a surcharge onto silver plans both on and off the exchange to make up for the loss of cost-sharing reduction payments, which the Trump administration decided to stop paying last year. But this year, New Jersey insurers found out they could limit the surcharge to only on-exchange silver plans, and that reduced the price of those sold off the exchange, Castro explained. Those off-exchange enrollment numbers are not included in the CMS data on open enrollment sign-ups, so it's unknown for now how many people are buying coverage there.

"It stands to reason that some people are going to be buying that plan off-exchange because it's a better deal for them," Hempstead said, adding that there are many other states in a similar position of having a cheaper off-exchange plan.

Moreover, while premiums have decreased in New Jersey, the difference between the benchmark premium (which is used to calculate subsidies) and cheaper plans has also gotten smaller. That means individuals who are eligible for subsidies are going to pay a bit more, which may deter some from enrolling in coverage, she said.

Hempstead's research shows that's a phenomenon occurring all over the country and is driven in part by the added competition from more insurers joining the exchange in 2019. Oscar Health, for instance, is entering the exchange market in New Jersey next year. According to Hempstead, about two-thirds of subsidized enrollees in U.S. counties with a new carrier will find plans to be less affordable. That said, more than half of unsubsidized enrollees will have lower premiums.

Mark Herschlag, CEO of Cosmo Insurance Agency in Lakewood, N.J., said one reason fewer people are enrolling is health plans have gotten worse. Premiums are lower, but deductibles and copayments are still high and keeping residents away, he said. Moreover, the out-of-pocket maximum that consumers are subject to has grown substantially.

New Jersey deductibles are actually more affordable than the national average. Silver plan deductibles in the state are about $2,500, while bronze deductibles are $3,000. The out-of-pocket maximum is as high as $7,900 for an individual and $15,800, however. The average benchmark premium in New Jersey is $352 before subsidies, down from $413 in 2018, according to the Kaiser Family Foundation.

Nationally, the average deductible for a plan with a combined medical and prescription drug deductible in 2019 is $4,375 for a silver plan and $6,258 for a bronze plan, according to the Kaiser Family Foundation. People who enroll in silver plans and have incomes less than 250% of the poverty level are eligible for subsidies that reduce deductibles and copayments.

Herschlag also suspected that many New Jersey residents are forgoing insurance to join healthcare sharing ministries. Those ministries, in which members make monthly payments to cover the expenses of other members, are growing in popularity in several states. Healthcare sharing ministries satisfy the state's individual mandate. But they pose risks for consumers because they are largely unregulated, and they don't have to comply with ACA consumer protections, such as covering pre-existing conditions.

Enrollment declining across the nation 

Many other states are in a similar position to New Jersey. Enrollment as of Dec. 1 in the 39 states using the federal insurance exchange is behind last year's sign-ups at the same time by about 11.3%. About 3.2 million people have signed up for coverage, down from 3.6 million last year. Open enrollment ends Dec. 15 in most states.

A Modern Healthcare analysis of the CMS weekly enrollment snapshot data shows each of the 39 states has experienced an enrollment decline so far. That's despite average benchmark premiums across the nation decreasing by about 1.5% in 2019. Enrollment is down in Alaska, Maine, New Jersey and Wisconsin even though those states, which use the federal exchange, implemented reinsurance programs and successfully lowered average premiums.

It's hard to know what's contributing most to the lower sign-ups, and that answer could differ by state. Some polls show that awareness of open enrollment in general is low across the nation. A Kaiser Family Foundation poll released Wednesday showed that about 69% of Americans who buy their own insurance did not know that open enrollment ends in most states on Dec. 15. That may be a result of the Trump administration slashing the budget for marketing and advertising for HealthCare.gov open enrollment.

But even in the sixth open enrollment period since the inception of the exchanges, marketing and advertising remain important because the individual market's membership is constantly changing, unlike the more stable employer-sponsored insurance market, said Rosemarie Day, founder and CEO of consultancy Day Health Strategies.

"You're not dealing with the same customer base every year," she said, adding that some states that operate their own exchanges boosted their marketing efforts after the federal pullback and have seen an uptick in 2019 enrollment so far.

Some states that haven't moved to limit them are likely losing enrollment to short-term plans or association health plans. Private health insurance exchange eHealth said more of its customers opted for short-term plans over unsubsidized Affordable Care Act-compliant plans during the first half of the ACA open enrollment period for 2019 coverage than during the previous open enrollment. Among eHealth customers buying short-term plans and ACA plans without subsidies, 7 in 10 enrolled in a short-term insurance plan from Nov. 1 to Nov. 25, while 30% opted to buy an ACA plan at full cost.

In some cases, a drop in total sign-ups isn't necessarily a bad thing. Experts pointed out that the economy is stronger; people who previously enrolled in an exchange plan may now be getting coverage through their jobs. And in Virginia, which is experiencing the most significant drop in exchange enrollment at 36% year over year, customers are likely finding better deals through the newly expanded Medicaid program than they would through the exchanges.

Shelby Livingston is an insurance reporter. Before joining Modern Healthcare in 2016, she covered employee benefits at Business Insurance magazine. She has a master’s degree in journalism from Northwestern University’s Medill School of Journalism and a bachelor’s in English from Clemson University.

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