Getty Enhanced Interrogation Will Obamacare Really Explode? Health-care expert Larry Levitt says it’s the Republicans who own Obamacare now—and here’s what they can do with it.

Katelyn Fossett is a web producer for POLITICO Magazine.

“Obamacare, unfortunately, will explode,” President Donald Trump said on Friday afternoon after House Republicans pulled their bill to repeal and replace the Affordable Care Act, a stunning defeat seven long years—and 18 sudden days—in the making. A glum House Speaker Paul Ryan, the architect of the doomed bill, was forced to acknowledge “Obamacare is the law of the land,” but likewise warned that the current system is unsustainable.

But is it? It’s true that the big problems of skyrocketing premiums in certain states and insurance companies backing out of the exchanges set up under the 2010 law have yet to be solved. Even Democrats admit that. But will Obamacare really explode in one big death spiral? Trump has repeatedly said Republicans would be better off letting it fail in the hopes that votes will blame Democrats when they next go to the polls in 2018.


We tried to pare back some of the spin and grandstanding in the wake of Friday’s no-vote and talk to someone who knows health care inside and out: Larry Levitt, senior adviser at the Kaiser Family Foundation and former senior health policy adviser to the White House. He told us what might really become of Obama’s signature health law in the months and years to come.

Politico Magazine: What do you think is next? Do you think they will just let Obamacare go, and what will that look like?

Larry Levitt: The Trump administration faces some tough decisions over what to do with the Affordable Care Act. The president has talked in the past about how the law is collapsing, and he has said maybe he’ll just let it collapse. The general consensus is that the law is actually not collapsing, and the Congressional Budget Office recently said that regionally, the insurance market would be stable under the ACA or the alternative the House GOP was considering. But the Trump administration could actively undermine the Affordable Care Act marketplaces or own them and work to improve them, from their perspective, and work to reshape it in a more conservative mold. I think the insurers are going to be watching very closely how the Trump administration approaches this in the next weeks and months.

Politico: You said they could reshape it. What would that look like?

Levitt: The administration has a lot of authority to reshape the law, both on the Medicaid side and the insurance marketplaces. There’s been this big fight over the essential benefits that insurers are required to provide, and the administration has some flexibility in altering those benefits administratively. There’s a lot the administration could do with state waivers, both to Medicaid and under the ACA.

Politico: So with the essential benefits, for instance, they could exempt some things from those?

Levitt: Well, so the statute lays out the 10 benefits that insurers have to provide, but within those broad categories, it’s up to the secretary of HHS to define the details. So HHS could allow insurers to set more limits on those benefits, could give states more leeway in defining them. There’s some limits to the authority: The benefits have to be comparable to a typical employer insurance policy, but you know, there’s still a lot they could do to alter the benefits. So the Pottery Barn rule does apply here: If they break it, they own it. From this point forward, anything that happens to the ACA belongs to the Trump administration.

Politico: So you’re saying, for instance, that they can’t take maternity care out of the essential benefits, but they can say what falls under that umbrella?

Levitt: Well, maternity care is a tough one. Prescription drugs, there’s probably a little bit more flexibility—allowing insurers more leeway in defining which drugs they cover. Or in some benefits being able to set limits on the number of physical therapy limits an insurer has to cover.

Politico: The case that Obamacare is collapsing is driven by this uncertainty, which is making insurers pull out. What does this fight do that uncertainty?

Levitt: The uncertainty insurers had been facing was what would come next after the Affordable Care Act, after this repeal-and-replace debate. It now looks like, for the foreseeable future, the Affordable Care Act is what’s coming next. So in some sense, there is greater certainty for insurers now in knowing that the ACA is here to stay. The big uncertainty has come in what the Trump administration may do administratively.

The most immediate risk is what happens with cost-sharing subsidy payments to insurers. These are the payments that are at issue in the lawsuit that the House filed against the HHS, challenging their authority to make these payments. If the administration decides to stop those cost-sharing subsidy payments, you could see insurers running for the exits.

Politico: So there is a case that in some ways this uncertainty is at a new low after this. So that’s a case the marketplaces might do better, right?

Levitt: Right, so those insurers know that the ACA is here to stay. But what they don’t know is what the administration might do to undermine the law or allow it to collapse. This is a program that has to be operated for it to succeed. So, for example, for insurers to be profitable in this market, there has to be active outreach to bring in new customers. The Obama administration was active in doing that outreach, including the president himself. It’s hard to imagine President Trump going on “Between Two Ferns” to encourage young people to sign up for health insurance through the ACA.

Politico: So you mentioned the cost-sharing subsidies to undermine Obamacare. What other tools can the Trump administration use to undermine it?

Levitt: The individual mandate, as we heard recently from the Congressional Budget Office, is key to keeping insurance markets stable. And the Trump administration has a lot of administrative authority to undermine the individual mandate. They could grant waivers to large groups of people because they could lead to hardship under the individual mandate. They could announce they’re not going to enforce the penalties under the individual mandate, so there could be an open invitation for people to flaunt it. You know, it is the individual mandate that is the stick to try to get young, healthy people to sign up to balance out the sick people who know they need insurance.

Politico: So when you were looking at the disagreements that sank the bill, did you think there were any kind of creative workarounds or middle-ground options that you thought people had left unturned?

Levitt: There was this idea of a stability pool—the hundred million dollars in grants to states that would go a long way toward keeping some markets that are now fragile. That hundred-million-dollar pool could go a long way toward stabilizing fragile markets around the country. This was the kind of thing that Republicans in the past called a bailout to insurers, but was a part of their own bills. It’s hard to imagine any congressional action at this point to shore up the ACA, but a grant pool like that could shore things up.

Politico: So what problem would that get around?

Levitt: So, by and large, insurance markets are stable under the ACA, but insurance risk is pooled at the state level, and there are some states where the markets are fragile, where premiums have increased substantially and in some cases, enrollment has started to drop. These markets are still well short of a death spiral, but there could be bigger premium increases to come in these places. And a pool of money that states could use to help cover the cost of a very expensive and sick people could help stabilize those markets. This is what I think people will be watching for in how the Trump administration responds. For example, in Tennessee, which is one of those markets that’s fragile, [the insurance company] Humana recently announced it is pulling out, and it will leave a number of counties in the state with literally no insurers participating. Now, under the Obama administration, there would be a lot of jawboning going on to try to get an insurer to offer coverage there—it’s not clear that will happen under this administration. That happened in Arizona this past year when there was a risk there might be no insurers participating.

Politico: So let’s say the Trump administration pulls out all of its tricks and goes after Obamacare. Do you think it could collapse?

Levitt: The worst case is there are parts of the country where there are no insurers offering coverage, and that could certainly happen, but it’s not going to be the case in the vast majority of the country. I don’t think that in the vast majority of states there’s a risk of collapse. But things could absolutely get worse, with fewer people enrolled and premiums rising fasters.

That’s insurance markets, but with Medicaid—the Medicaid expansion continues as long as states continue to get federal money.

Politico: Would there be a Trump way of undermining the Medicaid expansion?

Levitt: Not so much undermine, but the Trump administration has already signaled it would grant waivers to states that want to experiment more broadly with how they run the Medicaid programs. So things like work requirements, things like requiring more low-income people to pay premiums to enroll in Medicaid. I think those are likely to change.

