After weathering volatility, Common Ground sees signs of ACA market stabilization

Common Ground Healthcare Cooperative could receive $56.8 million in unpaid subsidies after a federal judge recently ruled in favor of 100 health insurance companies in a class action lawsuit brought by the Brookfield-based insurer.

The lawsuit stemmed from the federal government’s decision to end cost-sharing reduction subsidies that were intended to offset insurers’ costs of offering plans to low-income individuals under the Affordable Care Act. President Donald Trump’s administration announced the decision to end the subsidies in October 2017.

Despite the end in payments, insurers are still required to offer the plans, which caused them to lose millions of dollars in 2017 after they had set their prices for the plan year months earlier, according to Common Ground. Some insurers exited the market in 2018 as a result.

For Common Ground – a nonprofit, member-governed health insurance co-op – the drop-off in federal subsidies forced the insurer to bump up its premiums. Those increases particularly affected higher-income health insurance consumers, such as the self-employed, CPAs and independent consultants who buy insurance through the individual marketplace, said Cathy Mahaffey, chief executive officer of Common Ground.

Cathy Mahaffey
Cathy Mahaffey

“We had to increase our premiums to consumers to make up for the lack of those payments,” Mahaffey said. “So we’re pleased, obviously, with the judge’s ruling … but from our perspective this is money that’s due back to our members because we had to increase premiums to account for it.”

Under the decision by the United States Court of Federal Claims, the U.S. Department of Health and Human Services would be required to pay a total of $1.6 billion in unpaid subsidies from 2017 and 2018 to the roughly 100 insurers that are part of the class action. In addition to Common Ground, that group includes several other Wisconsin-based companies, including Children’s Wisconsin’s Children’s Community Health Plan, which would receive $20.5 million under the ruling; Marshfield-based Security Health Plan of Wisconsin, which is due $20.2 million; and Wausau-based Aspirus Arise Health Plan of Wisconsin, Inc., which is due $7.7 million.

It is expected that the federal government will appeal the case.

Common Ground, the lead plaintiff in the suit, has navigated uncertainty in the health insurance industry since launching in 2014 under a provision of the Affordable Care Act.

However, after several years of weathering market volatility, there are indications the market could be stabilizing.

After posting losses in its first three years of operation, Common Ground reported its first profitable year in 2018.

It recently announced it will pay out $18.5 million in premium rates to its individual members who paid premiums for insurance coverage in 2018 because medical expenses were less than the co-op planned for. The ACA requires insurers to rebate individual premiums when medical claims costs over a three-year period average below 80% of premiums received.

The average rebate amount from Common Ground is about $370. Common Ground said it’s the only Wisconsin health plan in the individual marketplace paying rebates to its members this year. It sells insurance in 20 counties throughout eastern Wisconsin.

“This is our members’ money,” Chris Martin, Common Ground board chairman, said in a news release. “As a nonprofit, member cooperative, we are devoted to serving our members and being honest stewards of their financial resources.”

A stabilizing market

During this open enrollment period – which runs from Nov. 1 to Dec. 15 – customers will have more options for health insurance on the individual market in 2020 than in previous years, when several insurers dropped coverage due to unpredictability in the market and federal government.

In response to rising premiums in the individual market, then Gov. Scott Walker in 2018 enacted a state-based reinsurance plan aimed at holding down premiums and drawing more insurers to the marketplace. Gov. Tony Evers has continued that program.

“A strong, competitive insurance market helps ensure consumers have more options when it comes to finding the right insurance plan for them and their families,” said Mark Afable, state insurance commissioner. “The Wisconsin Healthcare Stability Plan is helping insurers keep insurance rates low for Wisconsinites while promoting a stable marketplace. We want to see more options for every Wisconsinite.”

In 2018, Common Ground was the sole ACA individual insurance carrier in seven counties. In 2020, that won’t be the case in any counties, Mahaffey said.

This open enrollment season, 61 counties have three or more insurance carrier options on the individual market, compared to 46 counties with that many options in 2018.

Consumers in Door, Oconto, Manitowoc and Sheboygan counties only had one option for an insurer in 2019. In 2020, there are four options in those counties.

“What we’re seeing for 2020 is there aren’t any brand-new insurance carriers coming into Wisconsin but there are existing insurance carriers that made the decision to expand their service area or are offering insurance now on the exchange,” Mahaffey said. “I attribute that to the fact that insurance carriers are getting more comfortable with the ACA, they are knowing now how to set premiums for the population that we’re serving. That was one of the biggest challenges from the onset.”

Rates on the individual market will be 3.2% lower in 2020 on a weighted average than rates in 2019, according to the OCI.

Common Ground has lowered its premiums for the second year in a row, which Mahaffey attributes in part to the state reinsurance program and the co-op being able to set premiums more appropriately as it learns more about its patient population.

That doesn’t necessarily correlate to members paying lower premiums, however, as many Common Ground members receive a tax credit to help pay their premium. Those making below 400% of the federal poverty level are eligible for premium subsidies. For a single person, that threshold is $49,960. For a family of four, it’s $103,000.

“In 2020, what we’ll be watching is, with more carriers coming into the marketplace, what will be the impact to consumers and their costs, the net cost of their premium,” Mahaffey said. “There may be some consumers that, even though insurance carriers are lowering their premiums, ultimately some consumers may be paying more because of the way that the tax credit is calculated.”

Despite winning the class action lawsuit, there remains uncertainty whether insurers will receive cost-sharing reduction subsidies moving forward. That makes Mahaffey concerned about the long-term impact on individuals who purchase insurance in the individual market.

“When premiums go up, people drop coverage or turn to bare-bones coverage that does not include numerous consumer protections that are now part of the law such as pre-existing condition coverage and prescription drug coverage,” she said. “People who enroll in these plans will find themselves underinsured when something goes wrong with their health.”

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Lauren Anderson
Lauren Anderson covers health care, nonprofits, education and insurance for BizTimes. Lauren previously reported on education for the Waukesha Freeman. She graduated from the University of Wisconsin-Madison, where she studied journalism, history and African studies. In her free time, Lauren enjoys spending time with family and friends and seeing live music wherever she can.