Republicans in Washington are taking a massive risk when it comes to health insurance policy, and it’s separate and apart from passing a bill through the House of Representatives that restructures the US healthcare system without a score from the Congressional Budget Office.
From President Trump on down, Republicans are pointing to the fact that as insurance companies are abandoning the health insurance exchanges created by the Affordable Care Act, they're slowly creating a situation in which some Americans will have no exchange-based options at all in 2018.
“Why is it that the Fake News rarely reports Ocare is on its last legs and that insurance companies are fleeing for their lives? It's dead!” Trump tweeted over the weekend.
By publicly acknowledging the problems with the ACA -- even trumpeting them at every opportunity -- Republicans are also admitting that there is a real crisis brewing and that they are basically rolling the dice when it comes to making an effort to avoid it.
That’s because the GOP is currently banking on the idea that the Senate will somehow hit a bullseye that completely eluded the House as it passed the American Health Care Act: Crafting a new law to replace the ACA that not only satisfies both moderate members of the party and conservative hardliners, but also avoids throwing millions of Americans off of their existing health insurance.
Imagine for a moment that they can’t get the job done.
Say negotiations in the Senate break down and no bill ever gets out of committee and comes to the floor. Or imagine that the Senate does manage to produce a bill that replaces the ACA, but in order to get the 51 votes it needs, the bill contains provisions necessary to bring along the most moderate members of the Senate GOP caucus. In that case, the repeal and replace effort would run into a brick wall in the form of a conference committee where representatives from the House and Senate try to hammer out a compromise. It’s plausible -- even likely -- that there would be no bill acceptable to Senate moderates that would also be palatable to House hardliners.
The point here is that there is an excellent chance that a few months from now, there will be no new healthcare legislation ready to go to President Trump’s desk. And if that happens, America could face a tremendous crisis in the health care market, because while lawmakers have been trying to hammer out a new structure for the insurance market, they have been largely ignoring the collapse of the one that we already have.
On Monday, health insurers in Connecticut announced that they would seek major premium increases for 2018. On average, individual plans sold through the ACA’s health insurance exchanges would see premiums rise by between 15.2 percent and 33.8 percent, while top level plans would leap from 19 percent to 52 percent.
Insurance companies said that the rate hikes were necessary to compensate for risk and uncertainty in the marketplace. It’s a common theme heard across the country as insurers either demand more money to continue offering coverage through the health care exchanges, or exit markets altogether.
Insurance giant Aetna recently announced that it would be pulling out of exchange markets in Iowa and Virginia. Medica, a smaller firm, said that it was also considering abandoning Iowa, which would leave many areas of the state with no insurers offering policies through the exchanges.
The reasons for the slow-motion collapse of the ACA’s exchanges are varied. The law, passed more than seven years ago, has many flaws that need to be addressed, and it has also been the victim of outright sabotage by Republican members of Congress invested in seeing it fail.
“What we need to do is admit that it needs to be fixed,” Aetna CEO Mark Bertolini said in an appearance at a health care conference last week. “Eight years without touching it? No piece of major social legislation has ever had that happen.”
But he said that the biggest problem with the ACA is its funding structure.
When the bill was passed, lawmakers created a sort of three-legged stool of support for insurers, meant to both compensate them for offering cheaper premiums to low-income consumers and to protect them from increased financial risk associated with accepting all applicants, regardless of their health status. The three elements were: Reinsurance, Risk Corridors, and Risk Adjustment.
Reinsurance was designed to compensate insurers who enrolled more high-cost customers than other plans. Risk corridors were meant to stabilize the market in its early years by offering protections to insurers that underestimated their costs. Risk adjustment was meant to redistribute funds between insurers operating in exchange markets when some took on more high-risk consumers than the others did.
Taken as a group, the three protections were meant to create a stable base for the markets to begin building on.
But Congress sawed off one of those legs in 2015, blocking the Obama administration from making risk corridor payments, depriving insurers of billions of dollars in promised payments, and helping to drive healthcare cooperatives that sprung up across the country into bankruptcy.
Now, the Trump administration is threatening to withhold cost-sharing reduction payments, meant to compensate insurers for offering below-market-rate premiums to low-income consumers.
The combination of lost government contributions has left insurers trying to serve an expanded risk pool without promised financial support, driving up premiums or driving insurers out of the market altogether.
“If it's just funded on the premium basis without reinsurance, if cost-sharing reductions don't show up after September, none of it works," Bertolini said in an appearance on CNBC, in which he hinted that Aetna might have to look at pulling out of the two remaining states where it offers coverage on ACA exchanges.
It’s not hard to see where this ends if Congress fails to create a replacement health care system while simultaneously ignoring the problems with the existing one. It’s the worst of all possible worlds: a truly broken system with no viable replacement ready to go.
And from Trump to the most junior member of the House Freedom Caucus, practically every Republican in Washington will be on the record as having seen the collapse coming and nevertheless failing to prevent it.