Much has been said and written about the Affordable Care Act (ACA) over the last few years, especially as it relates to the international education community. In the early days of the act, there was speculation and some uncertainty as to how this would actually impact the industry, but the IRS provided us all with very clear and concise guidance on how international students are affected by the ACA. In short, they are exempt for the first 5 calendar years!
Although it’s been almost 3 years since we received that direct guidance, there is still a mixture of plans and opinions as to what options are best for students. As part of our annual 2016 predictions, we predicted that the popularity of ACA plans will decline – and that certainly appears to be holding true. In fact, some could argue that the popularity will not just a decline, but they could disappear as options altogether.
What’s Happening in the Industry
Over the course of the last few months, we have seen a string of large insurers in the USA sound out warnings about their ACA plans. In late January, UnitedHealthcare announced that they had lost $475 million dollars in 2015 on their ACA plans that were available through the exchanges, and in 2016 they expect this loss to rise to more than $500 million. Aetna also signaled they had lost “in the mid-single digits” on the exchanges in 2015, but expected the 2016 year to be better.
While these losses are specific to the exchanges, carriers are clearly struggling with this new complex and varied market. It also starts to show some of the weaknesses of the ACA and the mindset of some of the large ACA players – so will this affect ACA plans in the international education market too?
Some of the items we are seeing in the marketplace for ACA plans include:
- Losses – similar to the exchanges, carriers are struggling to handle the losses from ACA plans. With unlimited policy coverage and mandatory inclusion of benefits that were once excluded or heavily capped (due to their high loss nature), these plans are now experiencing much higher losses than in previous years and are proving to be unsustainable.
- Premiums – with the high losses, this invariable leads to higher premiums, and with ACA plans we are already seeing this as rates soar to well over $2,000 per year, and this could continue to rise.
- Plan Style – as carriers struggle to curb losses and understand the nature of ACA plans, this has led to plan changes which are making them less appealing to schools. This has included higher out of pocket expenses, with increasing deductibles and carriers refusing to cover dependents.
These indicators do suggest that ACA plans are struggling to adapt, and when premiums increase and benefits are lost, the market naturally turns to look for other options.
Emergence of Short Term Limited Duration Plans
While there will always be a place for ACA compliant plans, as they offer the highest level of coverage that is available in the market, with the changes that we are seeing, the market is slowly starting to realize and understand that there are other options.
The most common of which are short term limited duration plans. This style of plan is:
- exempt from the ACA
- traditionally offered by offshore/international insurance companies
- provide schools with the ability to customize their coverage
To learn more about these differences and the plan options, please see our best practices guide for more details.
Another interesting key development is the shift that some providers are making to offering non-ACA compliant options, especially from those who traditionally only offered ACA compliant plans. This is yet another sign that the market is steering us away from the ACA, and towards plans that in many cases are more suited to an international student.
Only time will tell where the market falls, but the trends we are seeing show us that schools are starting to understand that ACA-compliant options might not always be the best for their international students and scholars. However, with this being an election year, things could all change again, but we will leave that for another blog post later in the year.