In the three years that the Health Insurance Marketplace (also called the Exchange) has been in existence, health insurance companies have been leaving counties across the United States. Republicans want us to believe that the fault lies on the Democrats and the law that brought us the Exchanges. Laws are not static documents that succeed or fail based on their original wording and all laws are tweaked and improved over time. This situation was (and still is) exacerbated by the uncompromising Republican political opposition to Obamacare (PPACA) both in Congress and in many state governments where Republicans were (and are) in control. The exit of insurance companies from the Exchange is a direct consequence of several Republican actions (and inactions) since Obmacare (PPACA) became law.
At the end of June, health insurance companies were required to reveal their proposed 2018 rates for any Health Insurance Marketplace plans they proposed to sell . As of 7/5/17, the map (given below) provided by the Centers for Medicare and Medicaid (CMS) shows that many counties across the United States currently have only one insurance carrier and some even have zero carriers for 2018.
While the exit of insurance companies from the Exchange has been a problem in some parts of the country from 2014-2016, this trend is accelerating under the new political climate in Washington. What, if anything, is the present administration doing to stabilize this situation? Our elected officials seem more intent on spreading political propaganda and placing blame on the Democrats and Obamacare (PPACA) for these departures than on offering remedies to make sure all Americans who want to buy individual health insurance can.
Let’s look at three ways that the Republicans contributed to the exit of insurance companies from the Exchange so that they can justify saying that “Obamacare is a failure.”
1. Congress withholds Obamacare (PPACA) funding.
a. Premium-stabilizing payments (for high-cost enrollees) to health insurance companies. One of the surest ways to speed up the exit of Insurance companies from the Exchange is to stop paying them money promised. To encourage insurers to sell on the brand new Exchange, Obamacare (PPACA) provided for three special programs that were intended to help offset insurers’ losses on high-cost enrollees in the first three years of operation. It should be noted that these risk and market stabilization programs are not new to Obamacare (PPACA)–the Medicare Part D program also has permanent versions of the same programs in place. In 2015 and 2016, the Republican- controlled Congress refused to fund these insurance-stabilizing programs and many insurers found themselves not getting the money they expected to receive. As a result, some insurers have sued the government in order to recover the funds they were promised, some have gone bankrupt, and others simply exited the market altogether. Reneging on this promise does not fill insurers with a strong desire to enter the Exchange any time soon.
b. Refusing to guarantee billions of dollars in cost sharing subsidy reimbursements expected by health plans. First the Republicans in Congress sued the Obama administration to stop funding these subsidies (in 2014) and then won in court (2016). The payment of the subsidies to the insurance companies have continued because the Obama administration appealed the court decision. Since President Trump took office, insurers have been left in the dark over whether President Trump will withdraw the appeal or whether Congress will appropriate the money. Because of the payment uncertainty, the exit of insurance companies from the Exchange continues.
2. The Republicans in Congress and President Trump have eroded confidence insurers have in the Health Insurance Marketplace (Exchange). This erosion in confidence health insurers have in the Exchange is being accomplished in many ways. The Republicans in Congress continue to push severely flawed Obamacare repeal and replace bills drafted under cloaks of secrecy. President Trump refuses to enforce the Obamacare (PPACA) law to the best of his ability and openly works within the executive branch agencies to sabotage it. For example, through executive orders, President Trump has given permission to the IRS to stop enforcing the Obamacare (PPACA) Individual Mandate penalty. In addition, recent statements (like CMS administrator Seema Verma’s “This is yet another failing report card for the Exchanges”) and actions by Tom Price, the Secretary of HHS, send the clear message that support for the proper execution of Obamacare (PPACA) provisions will cease altogether under the Trump administration (repeal or no repeal). The exit of Insurance companies from the Exchange is accelerated under this uncompromising political atmosphere.
3. Republican governors “sabotage” Obamacare in many states. State governments controlled by Republican governors (and legislatures) were instrumental in taking actions that hurt the successful implementation of the Exchanges. These actions include the following:
a. States that did not expand Medicaid have sicker risk pools in the Health Insurance Marketplace. Obamacare was written with the idea that states would expand Medicaid, the insurance program for the poor, to cover people earning up to 138 percent of the federal poverty level. But a 2012 lawsuit (that made it to the Supreme Court) made that expansion optional, and so far 19 states have rejected the expansion. In these non-expansion states, people earning between 100 and 138 percent of the poverty level qualify for subsidies to buy insurance on their state’s Exchanges. According to HHS, these low income Americans make up about 40 percent of their state Exchanges in the non-expansion states, compared to only 6 percent in the expansion states. Given that poor people, especially those who have not had proper health care prior to joining the Exchange tend to be sicker (and in need of more health care) than richer people who have been continuously insured. The sicker the plan’s risk pool composition, the more insurance companies have to spend on care and the less they have for themselves. The exit of Insurance companies from the Exchange is more pronounced in states that did not expand Medicaid (compare the figure below with the one above).
b. Some states allow “grandmothered” plans. These non-Obamacare compliant plans written after Obamacare became a law in 2010 but before the Exchange opened in 2014 continue to be sold in all but 15 states (and the District of Columbia) where they were outlawed. The “grandmothered” plans did not have to take all applicants and beneficiaries had to pass a healthiness test to buy them. People with pre-existing conditions were either not welcome or paid extra to get insured. When healthy beneficiaries in these skimpier “grandmothered” plans got sick and the insurers raised their rates (something that’s not allowed under Obamacare), the beneficiaries simply dropped their “grandmothered” plans and signed up for Exchange plans. Thus, the existence of ”grandmothered” plans siphoned off healthy people and made the Exchange risk pools sicker in those states. You can see from the map below that the exit of insurance companies from the Exchange was more pronounced in states that allowed “grandmothered” plans to exist while the other states have more stable marketplaces (compare the map below with the first map above).
Actions and inactions by elected Republican state and federal government officials over the past three years are largely responsible for the instability in the Exchange (Health Insurance Marketplace) created by Obamacare (PPACA). The exit of insurance companies from the Exchange is most pronounced in states where Medicaid was not expanded and where “grandmothered” plans were allowed to siphon healthy potential enrollees from the Exchange.
While Republican efforts in the Senate to repeal Obamacare(PPACA) have recently stalled, the Trump administration continues to sabotage Obamacare’s success. The Republicans in power are sending the clear message to the insurance companies that the Trump administration has no intention of doing what is necessary to stabilize the Exchange in counties where insurance losses are not limited. In this corrosive and uncertain political climate, health insurers, like rats on a sinking ship, are abandoning ship.