Even Talking About Weakening Obamacare Provisions Weakens The Exchanges

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The Affordable Care Act is not "exploding" or "imploding," as President Trump likes to claim. But Trump does hold several keys to sabotaging the insurance marketplaces, should he so choose — one of which his administration is reportedly weighing using.

Every month, the Trump administration faces a deadline to pay what are called "cost-sharing reduction" (or CSR) subsidies to insurers. Those are subsidies that reimburse insurers to help low-income marketplace customers afford health care, on top of the tax credits that help those people pay their premiums. A lawsuit filed by House Republicans during the Obama era has left the fate of those payments uncertain.

Trump reportedly wants to end the payments, as Politico reported, but the White House chose this week to continue the payments once again. Still, the ongoing ambiguity about the future of the payments is apparently causing premiums to rise and insurers to pull out of markets.

Obamacare isn't "imploding," but insurers are shaken

Recent analyses from multiple organizations (including the Department of Health and Human Services itself) show that the exchanges aren't imploding; in fact, they're relatively stable.

But the Affordable Care Act, also known as Obamacare, does have its problems: Premiums continue to increase, as they did throughout Obama's presidency (though subsidies have shielded a majority of people on the exchanges from those increases), and insurers have backed out of exchanges.

Ending the CSR payments could be catastrophic for the exchanges. It could cause premiums to rise by 19 percent or even more, as the Kaiser Family Foundation found in a recent analysis — and that assumes that insurers even stay in the exchanges, Kaiser added.

Likewise, weakening the individual mandate would drive up premiums, which could drive more people out of the marketplace, and on and on — a phenomenon known as a death spiral. The Trump administration has continued enforcing the mandate, but it has also indicated it may not be committed to continuing to do so.

All of that could be bad for Obamacare. But even without those actions, simply talking about weakening the provisions is having a detrimental effect on markets, experts say.

The Kaiser Family Foundation has written that "mixed signals" about cost sharing subsidy payments and enforcement of the individual mandate "have led to some insurers to leave the market or request larger premium increases than they would otherwise."

The Congressional Budget Office has concurred. Analyzing the Senate's first attempt at a health care overhaul, the nonpartisan agency predicted that "uncertainty" could create problems in the exchanges:

"Several factors may lead insurers to withdraw from the market—including lack of profitability and substantial uncertainty about enforcement of the individual mandate and about future payments of the cost-sharing subsidies to reduce out-of-pocket payments for people who enroll in nongroup coverage through the marketplaces established by the [Affordable Care Act]."

The CBO's analysis of the House's bill, the American Health Care Act, contained a virtually identical passage.

How the uncertainty affects insurers' decision-making

From an insurer's standpoint, all of this makes it easy to raise prices or want to pull out of the markets altogether, explained J. Mario Molina, former CEO of Molina Healthcare, who has previously criticized Republican overhaul plans on NPR. He said that some insurance companies consider all of the policy uncertainty, consider the relatively small share of their business in the marketplaces, and then throw up their hands.

"You're entering into a market and you don't really know what to expect, so that increases your risk," he said. "If you offer an insurance product, are the only people who are going to buy it sick people?"

That makes some companies quit the marketplaces altogether.

"Why should they take on this risk for what is probably for many of them a relatively small piece of their business if they don't think they're going to make any money doing it?" he said.

Uncertainty surrounding the cost-sharing subsidies gives insurers a tough choice, he added: Insurers can continue business as usual, hoping they will continue receiving the reimbursements from cost-sharing. Or they can change course.

"The other thing you can do, and this is what many health plans are going to do right now, is you assume the CSR is not going to be funded, and you raise your premium rates," Molina predicted.

How the uncertainty could end

This all gives the Trump administration its own tough choice. On the one hand, by continuing to pay the subsidies, they are keeping the exchanges going, meaning millions can continue to get that access to insurance. But on the other hand, it means opting to continue a system that the president has railed against for years.

There is yet another option, says the Kaiser Family Foundation's Cynthia Cox, who specializes in private insurance: The administration could end the uncertainty altogether.

"I think the statement would need to be very firm. This can't be something that's said in a tweet," Cox said. "It has to be an official government statement that the individual mandate will be enforced and that the CSR payments will continue to be made as long as the lawsuit stays in the current state."

Similarly, she said, Congress could decide to appropriate the funds for the CSR payments.

All of which might sound far-fetched to anyone following the news these days. Republicans are still scrambling to pass a so-called "repeal and replace" proposal for Obamacare. The president, likewise, has said he now wants to "let Obamacare fail." Not only that, but the Trump administration has used federal funds to run messaging against Obamacare on social media, the Daily Beast's Sam Stein reported on Thursday.

So for now, the uncertainty is weighing on insurers as they try to set their rates for 2018, as Kaiser Health News reported this week. But if insurers did get concrete reassurance about the subsidies and the individual mandate before setting those rates, Molina said, they might just lower them.