Buzz
After countless failed attempts to dismantle the Affordable Care Act (though the exact count might be a bit off, it’s been quite a year), President Trump took two significant steps yesterday that could devastate insurance markets. Don’t panic just yet. Your existing insurance remains in effect, and you'll still be able to purchase an 'Obamacare' plan next year. However, this signals some ominous developments.
Here’s a breakdown of the two actions that took place:
The President issued an executive order directing agencies to permit 'association health plans' in the marketplace. These are bare-bones insurance plans that offer minimal coverage.
The White House declared it will cease funding the subsidies that help keep deductibles affordable for low and middle-income individuals on specific plans.
These measures, combined with earlier actions taken by the White House, are weakening the ACA to such an extent that some health policy analysts are referring to the situation as 'synthetic repeal.' Here’s a summary of some of the changes so far, as reported by analyst Topher Spiro:
In January, an executive order was issued directing agencies to loosen the mandate that everyone must purchase health insurance. (The widespread participation in insurance keeps premiums affordable.)
The IRS halted enforcement of the tax penalty for not purchasing insurance.
Government websites removed much of the guidance about health insurance and how to obtain it.
In January (yes, this is still January), Trump ended much of the advertising aimed at encouraging people to sign up during the final days of open enrollment. According to some reports, half a million fewer people enrolled than anticipated.
Trump began hinting at withholding cost-sharing reduction payments, and some insurers have already decided to raise premiums for 2018 due to the uncertainty (yes, by more than they would have otherwise).
The House passed a version of the bill intended to repeal the ACA, confusing people about whether the ACA is still in place. (It is.)
Insurers are no longer obligated to cover birth control in employer-sponsored plans for organizations that have religious or moral objections to birth control.
This year’s open enrollment period is half as long as in previous years, with breaks every Sunday morning. Additionally, its advertising budget was slashed by 90 percent.
And now, this.
Why CSR Payments Matter
By halting CSR payments, the government is essentially sabotaging itself—this will cost them more in the long run—and could turn the previously mythic insurance market 'death spiral' into a reality.
Here’s the situation: As part of the ACA, insurers are required to provide plans with lower deductibles and copays for low and middle-income people who buy a silver plan through the marketplace. A family of four can qualify for this if their income is between $24,600 and $61,500.
These are referred to as “cost sharing reduction” payments because deductibles and copays represent the costs you share with your insurance company. Under the ACA, the government covers a portion of your expenses by paying directly to the insurance company, allowing them to offer these plans without hiking premiums.
(This is distinct from the premium tax credit, which is given to you directly to reduce your premiums.)
If the government halts CSR payments, insurers will be forced to raise their premiums. According to the Kaiser Family Foundation, silver plan premiums would need to increase by 19 percent to make up for the loss. If you're eligible for premium tax credits, your premium payments won’t change; the other subsidy, the premium tax credit, will cover the difference.
And yes, this will cost the government money. They will save $7 billion this year, but if the elimination of CSRs persists for a decade, the government’s cost (in premium subsidies) will reach $194 billion. The Congressional Budget Office also projected that one million people would lose coverage in 2018 if CSRs end in 2017.
This Was the Worst Possible Time to Halt CSR Payments
Here’s an interesting twist on the timing: the decision was made before open enrollment kicked off on November 1, yet after insurance companies had already finalized their rates for 2018. Both insurance companies and states had to gamble on whether the CSRs would continue. Some got it right, and others didn’t.
This means insurers might not be able to hike premiums to cover their costs; instead, they could decide they can't offer insurance at the promised rates and pull out of the market. That plan you were about to sign up for? Gone.
There's a strange legal conundrum here: the law mandates that the government “shall” pay the CSRs, but Congress never actually allocated the funds to do so. Currently, there's a court battle at a standstill, allowing CSR payments to continue. The White House referenced this in their decision, arguing that the payments weren’t lawful. However, the agreement between the government and insurance companies was that they would be paid the CSRs, and now the insurers are left hanging. This could lead to lawsuits.
So, what happens to the insurance plan you were about to buy? It’s unclear! Perhaps insurers can secure approval for an emergency price hike, or they may decide to exit the market entirely before you can enroll. If they leave the government-run exchanges after you've signed up, you'll lose the premium subsidy, which could make your premiums soar. We’ll just have to wait and see.
Sarah Kliff provides a summary of the damage if everything proceeds as planned:
To summarize: Trump is implementing a policy where the government ends up spending billions more to insure fewer people.
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Eliminating these payments would increase premiums for everyone using Obamacare, whether they are older, younger, healthier, or dealing with illness. Moreover, it risks destabilizing the already vulnerable Obamacare marketplace, potentially leading to a last-minute withdrawal of health plans that relied on government support for these subsidies and don’t believe they can absorb the financial strain.
One potential solution could be for Congress to allocate funds for CSRs, enabling their continuation. This might be an ideal moment to reach out to your senators and representatives!
Association Health Plans Could Also Be Harmful
Earlier, before the CSR setback, President Trump issued an executive order that seeks to legalize “association health plans”, which would not adhere to the ACA’s essential benefit standards (such as maternity care) or regulations for keeping premiums affordable for individuals with pre-existing conditions.
These plans target young, healthy, and often uninformed individuals. (Let's be honest, most of us don’t always make the wisest decisions.) They come at a low cost but provide limited coverage. If you suffer an injury or pregnancy, you could end up with overwhelming medical bills.
Another significant issue is that only healthy, shortsighted individuals will opt for these plans. This creates an imbalance, meaning comprehensive insurance plans—the kind most of us currently rely on—will no longer have a mix of sick and healthy participants. If your plan is filled with people who are unwell, your premiums will rise. This might prompt you to reconsider, possibly opting for the cheaper plan—or even choosing no insurance at all.
Ultimately, this leads to higher premiums for genuine health insurance and negatively impacts those who select association plans. This is not just speculation; these plans have been operating legally in Tennessee due to a peculiar loophole. Tennessee boasts some of the highest premiums in the nation, and struggles to maintain insurers in the market.
The executive order also aims to make the dream of “buying insurance across state lines” a reality. The catch is that if you're in Pennsylvania and purchase a plan from Montana, it won’t include any Pennsylvania doctors or hospitals in its network. Insurers have already had the option to sell plans across state lines, but they simply aren’t interested.
The newly permitted plans don’t yet exist; the executive order merely instructs agencies to determine what kind of regulations would be necessary to bring these plans into existence.
So... We're still good for next year, right?
The good news is that open enrollment kicks off on November 1! You can still sign up for insurance. Prices are, in theory, fixed. Probably your insurer won’t go under and pull out of the market. Best of luck?
