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The Republican efforts to repeal and replace the Affordable Care Act (ACA) have failed for now, and in response, President Donald Trump tweeted that the Republican-held legislature should let “Obamacare fail,” though he promised to not give up on repeal.
“Obamacare isn’t failing. It’s failed. Done,” said Trump Tuesday afternoon. “We’ll let Obamacare fail. We’re not going to own it. I’m not going to own it.”
But the ACA, known as Obamacare, does not appear to be failing, experts say, and Trump is in control of its fate. Currently, the individual insurance markets have stabilized, according to analysis by the Kaiser Family Foundation and S&P. Insurers’ financial performance has been very solid, showing improved loss-ratios, which is the standard by which health insurance is measured. Gross margin is also up, according to the data.
— Larry Levitt (@larry_levitt) July 18, 2017
The real failure of the ACA currently
The ACA’s biggest problem is the fact that 38 counties across the United States are at risk of having no insurers participating in the exchanges. Most of these are sparsely populated, but having no options for people looking to buy individual plans is a failure.
But since, currently, it’s the only system in place—not the GOP replacement—the Trump administration is in a position to be a part of the solution. Or a part of the problem.
The federal government pays cost-sharing payments to insurers to incentivize them to join the marketplace to sell plans to low-income people. Under the Obama administration, the House challenged these payments, but a judge permitted the payments to continue pending appeal. The payments would stop if the House suit wins, or if the Trump administration decided to drop the appeal. It’s the uncertainty of whether it will drop the appeal that is scaring insurers and resulting in exits.
The payments need to continue
“The most important thing that the president and the Republican senators can do is to ensure the funding for the cost-sharing reductions continues,” Dr. Mario Molina, former CEO of Molina Healthcare, told Yahoo Finance. “[Trump] has funded those on a month-to-month basis with no assurance they will continue. This is causing a lot of destabilization in the marketplace.”
Consistently, insurance executives like Molina have cited uncertainty about the Trump administration keeping payments coming as the reason for withdrawing from the market or hiking premiums significantly. Blue Cross and Blue Shield of North Carolina, for instance, raised premiums an average of 23% for 2018, and noted that they would have only increased 8% if the administration had been decisive about delivering cost-sharing subsidies.
“Insurers have had to raise premiums in anticipation that they will go away,” said Molina. “[Trump] could immediately bring down costs and bring stability if he could get the Republicans together to fund them on a permanent basis.”
According to KFF, stopping payments would actually increase the cost to the federal government by $2.3 billion as premium tax credits would go up with premiums.
This puts the ball firmly in the administration’s court to act, and polling suggests that it would be a politically shrewd move. Twice as many people surveyed by KFF noted that the current administration and Republican-controlled Congress would be responsible for future problems, rather than the previous administration.
“If he withdraws the funding, [Trump] will immediately cause collapse and there will be no one to blame but him,” said Molina. “Many insurers will raise premiums, and many will withdraw.”
The two big things Trump could do to further stabilize the market
In addition to committing to paying insurers, the Trump administration could do them a favor by enforcing the ACA’s mandate for coverage, which results in more healthy people signing up for coverage, which stabilizes the market. Though this hasn’t been an issue of uncertainty—the Trump administration has been certain about not enforcing the mandate—a reversal would incentivize insurers to participate and drive down premiums. According to Molina, many insurers think the ACA penalties for not carrying insurance were too low.
“If he does those two things [committing to cost-sharing payments and enforcing the mandate] the ship will right itself,” said Molina. “If he doesn’t, then the blame falls squarely on his shoulders.”
Lessons from Medicare—which has seen insurer exits before
There are also lessons we can learn from Medicare Advantage’s insurer exits.
In a paper published by Georgetown’s Health Policy Institute with the Robert Wood Johnson Foundation, researchers Sabrina Corlette and Jack Hoadley looked to see how lessons from Medicare could be applied to the ACA.
According to Hoadley, reinstating risk-sharing that existed in the early years of the ACA would help stabilize the market. “That would really help the insurers in some of these states with a limited number of plans to feel less at risk and provide a backbone if things don’t work out so well,” Hoadley told Yahoo Finance. Currently Alaska is experimenting with reinsurance to unburden insurers, a tactic other states could use.
Committing to advertising during open enrollment would be another tactic that would satisfy and help attract insurers, Hoadley said. People who need healthcare will enroll, but healthy people are different. “They’re the ones where outreach and advertising works,” said Hoadley. “That helps make the risk pool healthier.”
Though it would require Congress as well, Hoadley’s research found that increasing the payments—not just committing to them—worked well for Medicare in the past.
Some insurers exited the Medicare Advantage program in the early 2000s, which caused 31% of Advantage participants to not have a plan available. The government increased payments to insurers, and after, everyone had at least one option on the market. These costs would be offset by increased participation and lower premiums, which would mean lower premium tax credits. While these payment increases may not be feasible now, Hoadley told Yahoo Finance that regulatory easing could have a similar effect in getting insurers to participate.
Ways to repair the ACA go beyond learning from Medicare’s exploits, and many of them are not simply up to Trump but would require Congress and reaching across the aisle for support. Seeing as the ACA repeal versions generally kept the same structure as the ACA—which had roots in the conservative movement and was implemented by Mitt Romney—bipartisan fixes are not impossible.
Molina said the Trump administration needs to act quickly if it wants to stabilize markets. “[The GOP] were ready to move heaven and earth [for the repeal bill],” he said. “They have the ability to act quickly—Congress is still in session and will be for weeks. McConnell could introduce legislation and the House would follow.”