Consumers Mutual CO-OP closing
Consumers Mutual Insurance of Michigan is an ACA-created CO-OP that currently insures 28,000 members. They announced on November 2 – the day after the start of open enrollment for 2016 plans – that they would not sell policies on Michigan’s exchange (Healthcare.gov) in 2016, and that their current on-exchange members would need to switch to a different carrier for 2016.
According to Crain’s Detroit Business, only a little more than a fifth of Consumers Mutual’s members purchased their plans in the exchange in 2015, and at that point, there was a possibility that the remaining 80 percent of the current enrollees might be able to keep their plans, with the CO-OP continuing to offer plans outside the exchange.
But that hope was short-lived. By November 4, the announcement on Consumers Mutual’s website indicated that all enrollees – including those who had purchased their plans outside the exchange – would need to seek new coverage for 2016, and that the CO-OP would wind down its operations by the end of 2015.
Early in the day on November 4, I talked with Michigan’s Department of Insurance and Financial Services (DIFS) about Consumers Mutual, and they confirmed that the initial decision to exit the exchange came from the CO-OP, not from state regulators. For most of the CO-OPs that have folded completely over the past year (the majority in just the last two months), state Insurance Commissioners have essentially ordered them to wind down operations amid dwindling reserves and potential insolvency.
But CEO Dennis Litos had confirmed that the CO-OP was reviewing its financial situation in conjunction with DIFS, and that one of the possibilities that was being considered was fully closing the CO-OP. Ultimately, that’s what DIFS and Consumers Mutual determined would be the most prudent course of action.
Consumers Mutual enrolled just 29 percent of their projected membership in 2014, and had net losses of $16 million during the first year of operations. They are the 12th CO-OP (out of 23) to fail, and are among the majority whose closing is attributed to the fact that the federal government is only paying out 12.6 percent of the risk corridor payments that are owed to carriers based on losses in 2014.
6.5% premium increase for 2016
On August 18, the Michigan Department of Insurance and Financial Services (DIFS) announced that the weighted average rate increase in the individual market for 2016 would be 6.5 percent, although that’s lower now that Consumers Mutual is exiting the market. The CO-OP had by far the highest average rate increase of any of the exchange carriers in Michigan, at 20.5 percent (the next highest is UnitedHealthcare, at 14.7 percent), but it no longer applies, since members will have to switch to a different carrier for 2016.
When we consider only the benchmark (second-lowest-cost Silver) plans across the state, the average increase in premiums in Michigan will be 1.2 percent. That’s far lower than the 7.5 percent national average increase in benchmark plan premiums, although the change in benchmark premiums is not a particularly useful number for consumers, since the benchmark plan isn’t necessarily the same plan from one year to the next.
In 2015, average premiums in Michigan’s exchange decreased by 1 percent. Relative to that, the 2016 rate changes are much higher, but it’s important to keep in mind that they’re still about half as much as the average rate increases nationwide for 2016. For comparison’s sake, you can see 2015 exchange premiums by insurance carrier, metal level, age, and smoking status in a document prepared by DIFS.
In Michigan’s small group market, average premiums will increase by just one percent.
In August, DIFS released a user-friendly chart showing each carrier’s proposed and approved rate change, along with whether or not the carrier sells plans in the exchange, and how many enrollees each carrier has. In every case, the rates were approved as-proposed, although HealthPlus Insurance Company (off-exchange) had proposed a 38 percent rate increase and later withdrew their request, and Time Insurance Company also withdrew their proposed 37 percent rate increase, after their parent company announced that they would be exiting the individual market. But no rate adjustments were made by DIFS during the review process.
Blue Care Network of Michigan and Blue Cross Blue Shield of Michigan have the majority of the individual market enrollees in Michigan (65 percent combined, including on and off-exchange). Blue Care Network’s average rate is increasing by 9.7 percent, while BCBS of Michigan will have an average rate increase of 11.4 percent.
Michigan’s individual health insurance market is one of the most robust in the country. There are 14 individual carriers that are offering roughly 200 plans for sale in the Michigan health insurance exchange during the 2016 open enrollment period that continues until January 31 (two carriers – Time and Consumers Mutual – that offered exchange plans in 2015 are exiting the market and will not offer plans for 2016). An additional six carriers are only offering plans outside the exchange. The same open enrollment period applies both on and off the exchange. The carriers participating in the exchange are:
- Alliance Health and Life Insurance Company
- Blue Care Network
- Blue Cross Blue Shield of Michigan
- Harbor Health Plan
- Health Alliance Plan
- McLaren Health Plan Community
- Physicians Health Plan
- Priority Health
- Priority Health Insurance Company
- Total Health Care USA
- UnitedHealthcare Community Plan
In the small group market, the majority of the carriers are only offering plans outside the exchange, but six carriers will be participating in the Michigan SHOP exchange for 2016.
King v. Burwell – subsidies are safe
On June 25, the Supreme Court ruled that subsidies are legal in every state, regardless of whether the exchange is run by the state or the federal government. That means subsidies for 224,354 people in Michigan are safe, and subsidies will continue to be available for future enrollees.
The Kaiser Family Foundation estimated that if the King plaintiffs had won, premiums would have increased by an average of 294 percent for people who had been receiving subsidies. And individual market enrollees who weren’t receiving premium subsidies would have seen rate increases of 60 – 90 percent next year due to market destabilization that would have occurred had the subsidies been eliminated.
Following the Court’s ruling, Michigan Governor Rick Snyder said “We appreciate that the deep uncertainty of this issue has been resolved. The health and wellbeing of the people of Michigan is always a top priority. Our focus can now center on securing the second waiver for our Healthy Michigan Plan, which has been an outstanding success.”
Healthy Michigan Plan waiver
Snyder referenced the Healthy Michigan Plan waiver in his address after the King v. Burwell opinion because a ruling for the King plaintiffs would have been very detrimental for the state’s efforts to secure the waiver, and for the future of Michigan’s Medicaid expansion program.
Michigan’s Medicaid expansion program has enrolled 600,000 people in coverage so far. The state expanded Medicaid under the ACA, but it did so with a waiver, rather than straight expansion, because the state requires enrollees with incomes between 100 percent and 133 percent of the poverty level to contribute 2 percent of their income to health savings accounts. And under a state law enacted in 2013, Medicaid expansion for able-bodied adults is limited to 48 months for people with incomes between 100 percent and 133 percent of the poverty level. After that, they have the option of switching to subsidized private coverage in the exchange, OR staying in the Medicaid program but paying higher cost-sharing.
The waiver for Medicaid expansion was initially approved, but by the end of 2015 the state must gain approval from the federal government to implement the program that calls for higher cost-sharing or a transition to subsidized coverage in the exchange after 48 months. Because subsidies were in limbo pending the outcome of the King case, the re-approval of the Medicaid waiver in Michigan was also in jeopardy – but that obstacle no longer exists.
On September 1, Michigan submitted their waiver to CMS, and the agency will respond by December. Officials in Michigan are optimistic that the waiver will be approved, but if it’s not, the Healthy Michigan program will end next spring, by April 30.
Michigan residents had pent-up demand for health insurance. Enrollment in both marketplace plans and Healthy Michigan, the state’s revamped Medicaid program, “blew through” projections for 2014 and beyond.
And, 2015 marketplace enrollment is even higher than last year’s. More than 341,000 Michigan residents selected a health plan on HealthCare.gov between Nov. 15, 2014, and Feb. 22, 2015.
Forty-two percent of those signing up were new to the marketplace for 2015. Eighty-eight percent of Michigan residents who selected a health plan qualified for financial assistance, which is just one point higher than the average for all states that use HealthCare.gov.
As expected, some enrollees didn’t pay their initial premiums, and others opted to cancel their coverage early in the year. HHS also stepped up enforcement of documentation requirements for immigration status and premium subsidies. By the end of June, 288,751 people had effectuated coverage in private plans through the Michigan exchange. Nearly 78 percent were receiving premium subsidies, and 54 percent were receiving cost-sharing subsidies.
Despite the robust enrollment, a University of Michigan study found that insureds – both those with Medicaid and those with private insurance – experienced no significant decrease in availability of primary care appointments following implementation of the ACA. In fact, for those with Medicaid, appointment availability actually increased from 2013 to 2014.
Open enrollment to buy health insurance for 2016 began on November 1, 2015 and continues until January 31, 2016. After that, you’ll only be able to purchase 2016 coverage (including outside the exchange) if you experience a qualifying event. Examples of qualifying events include getting married or divorced, having a baby, or adopting a child. However, Native Americans can enroll year-round, as can anyone eligible for Medicaid or CHIP.
Although Michigan allowed insurers to extend transitional, or “grandmothered,” health plans until as late as September 2017 (renewal possible until October 2016), some insurers opted to discontinue their offerings in 2015. Grandmothered plans are not fully compliant with the ACA.
If you receive a notice that your plan is being cancelled, you have several options. You can shop for new coverage directly through your current carrier, through an agent or broker, or through the marketplace at HealthCare.gov. You can also see if you qualify for a hardship exemption, or skip coverage and run the risk of owing a penalty..
Penalties increasing again for 2016
The ACA’s individual mandate requires most people to have health insurance or pay a penalty; however, there are quite a few exemptions.
Those who don’t qualify for an exemption and remaind uninsured in 2015 will have to pay the greater of:
- 2% of annual household income above the tax filing threshold. The maximum penalty is the national average cost for a bronze plan, which in 2015, is $207 per month for an individual ($2,484 for the year), or $1,035 per month ($12,420 for the year) for a family with five or more uninsured members.
- $325 per adult and $162.50 per child under 18. Using this method, the maximum amount a family will pay is $975.
For 2016, the penalty is increasing to the greater of:
- 2.5% of annual household income above the tax filing threshold (the national average cost for a bronze plan in 2016 will be determined by the IRS once rates are finalized),
- $695 per adult and $347.50 per child under 18. Using this method, the maximum amount a family will pay is $2,085
Use the healthinsurance.org calculator to see if you may have to pay a penalty.
2014 enrollment recap
More than 272,500 Michigan residents signed up for qualified health plans during the first open enrollment period. Eighty-seven percent qualified for financial assistance, compared to 85 percent nationally. An HHS report shows the average monthly premium, after tax credits, for Michigan consumers as $97. Thirty-nine percent of enrollees pay $50 or less per month after subsidies.
Thirteen percent of Michigan residents selected a bronze plan (20 percent nationally), 75 percent selected a silver plan (65 percent nationally), 9 percent selected a gold plan (9 percent nationally), 2 percent selected a platinum plan (5 percent nationally) and 2 percent selected a catastrophic plan (2 percent nationally). Twenty-eight percent of Michigan enrollees were between the ages of 18 and 34.
Background on Michigan’s exchange efforts
Gov. Rick Snyder, a Republican, supported a state-run exchange for Michigan. However, he did not have the support of enough fellow Republicans to move ahead.
The Michigan attorney general joined 25 other states in challenging the Affordable Care Act. The Senate passed a bill to authorize a state-run exchange, but bill was voted down by the House’s Health Policy committee and didn’t get a floor vote.
Eventually, the state moved ahead with a state-federal partnership. Michigan is responsible for plan management, but left all other functions to the federal government.
When the King v. Burwell case was pending before the U.S. Supreme Court, Snyder again broached the topic of a state-run exchange to ensure Michigan residents have continued access to subsidies to pay for health insurance. Ultimately, the Court ruled that subsidies would continue to be available in every state, and Michigan did not have to consider a back-up plan to create a state-run exchange.
Michigan did accept federal funding to expand Medicaid under the ACA. Governor Snyder campaigned in 2014 on the success of the expansion program in the state, noting that Michigan had enrolled 63,000 more people than projected in 2014, just in the first eight and a half months of the year. From late 2013 until August 2015, total enrollment in Medicaid and CHIP in Michigan grew by 21 percent.
Michigan health insurance exchange links
Statewide network of non-profit agencies providing free enrollment support services to health insurance consumers