Soon after the Republican bill to reform the US healthcare system was pulled from the House floor due to insufficient support from the GOP, President Donald Trump told reporters that the old law is “exploding.” He has also said Obamacare’s insurance exchanges are “collapsing” and “dead.”
Despite the dire predictions, most analysts — from S&P to the Brookings Institution — say the individual marketplace as it currently operates is not going to collapse on its own.
But, Trump could quicken its demise through a range of options, from standing pat on key issues or deciding to use regulatory power to weakening some of the central tenants of Obamacare.
As he Trump said, “The best thing we can do is let Obamacare explode.”
Perhaps the most significant way Trump could help aid the Obamacare market’s explosion would be to halt the payment of the crucial cost-sharing subsidies.
Such payments go to insurers to offset the costs they incur for offering lower deductible and out-of-pocket cost plans to people in the exchanges with income of up to 200% of the federal poverty line. Roughly 58% of the 12.2 million people signed up through the ACA exchanges benefit from these subsidies.
However, the House has argued that since this money was not assigned in an appropriations bill, it constitutes an illegal use of funds. It sued the executive branch under the Obama administration in a case now named House v. Price (referring to current Health and Human Services Secretary Tom Price). A court ruled in favour of the House in May 2016, but the Obama administration appealed the ruling and a judge ordered the payments to continue until the appeal was heard.
The New York Times reported Monday that the Trump administration still has plans to continue the cost-sharing subsidies. The Department of Health and Human Services pushed back on the report on Tuesday, calling it “inaccurate.” HHS spokesperson Alleigh Marré said regarding the decision to prosecute the case (emphasis ours):
“The administration is current deciding its position on the matter. We have not been contacted by Democrats to save Obamacare, because they consider Obamacare to be a losing cause. Democrats need to help to solve this failed Obamacare plan. The report was in reference to the current status of the lawsuit and is not an indication of what will happen in the future. No decision has been made about how the administration will proceed.”
If Trump and Attorney General Jeff Sessions decide to drop the appeal, the subsidies would cease and cause costs to soar, said Cynthia Cox, associate director at the Kaiser Family Foundation, a nonpartisan health organisation.
“If the administration were to drop the case, the fear for insurers is that costs to cover those lowest-income people would soar,” Cox said. “These subsidies help insurers provide that coverage and without it, fewer of them would be willing to be in the exchanges.”
Even if the companies stayed in the market, insurers would have to increase their premiums substantially in order to make up for the lost payments. Kaiser estimates that average premiums would have to increase 19% on top of current estimates in order to make up for the lost payments.
Additionally, states would see a wide range of premium increases, varying between an extra 9% in North Dakota to an additional 27% in Mississippi.
Laid-back mandate enforcement
Another major option the Trump administration has at its disposal would be taking a step back on the tax penalty for people who don’t obtain insurance.
The Internal Revenue Service already confirmed in February that if a person did not fill out their tax form indicating they had insurance, called a “silent” return, the agency would still accept it. While the mandate could still come up in an audit, it is a big change from the outright rejection of forms the IRS had outlined, making it easier to avoid the individual mandate.
Cox said the Trump administration could also instruct the IRS not to investigate any instances of a “silent” return for then individual mandate, or easily grant waivers for the mandate penalty, allowing people to get out of paying.
“If the Trump administration were to do either of those things, it would have the same effect as repealing the individual mandate,” Cox said.
While the individual mandate is an incredibly unpopular provision of Obamacare, it is designed to get healthier people into the marketplace to bring down costs for those that are older and sicker. It has also proved to help improve insurers’ financial performance in the markets.
Time is running out
There are also other, smaller ways Trump and his administration could undermine the law, like pulling outreach and advertising for exchange enrollment. The most under the radar move for Trump, however, would be to stay incredibly silent.
During the Obama administration, the department of Health and Human Services attempted to provide as much clarity as possible to insurers in order to get them to participate in the insurance market. Changes to the exchanges were announced early, and there was active engagement from HHS.
If Trump and Price decide to stay mum on any future plans for the ACA, the silence alone could deter insurers from continuing to offer plans.
For instance, on April 4, insurer Wellmark said it was pulling out of Iowa’s individual health insurance marketplace. Two days later, Aetna announced it was exiting Iowa. The moves leave 99 counties in the state with only one insurer — and five counties with two. A large portion of this is due to the uncertainty surrounding 2018, Cox said.
“Insurers don’t know what the rules are going to be next year, so that is making them uncertain about sticking around in a lot of these markets,” she said. “If there isn’t more clarity from the Trump administration it’s likely that these exits will continue and possibly accelerate.”
Cox said Iowa was a relatively stable marketplace before the exits. There were multiple providers in every county, and premiums went up less than the national average for 2017. Despite these positive factors, insurers were worried about sticking around too long.
“Aetna didn’t want to be the last one in these markets,” Cox said. “A lot of insurers are evaluating there plans for 2018 and don’t want to get stuck in a situation where they are the only insurer. This means there are more of these exits to come.
Insurers could be pressured into sticking in markets where there is only one insurer to avoid a gap in coverage, so by leaving early, Aetna made sure it wouldn’t get stuck with the bag.
By June 21, insurers have to submit their plans for the 2018 coverage year to be approved in whichever states they wish to participate. If the Trump administration sows the uncertainty until that point, with silence and a lack of clarity, then the explosion he predicted may come to pass.