Rachel Sachs // 3/22/17 //
Right now, there is an enormous amount of uncertainty across the federal government, including in the Presidency and executive branch. Sometimes uncertainty means that agencies will operate in a holding pattern while they wait for essential questions to be settled: Who will the President name to head our agency or department? What policy priorities will they want the career staff to advance? Much of this is normal in the early days of a new administration.
Sometimes, however, the uncertainty created by presidential inaction can be actively destructive, in ways that are harder to pinpoint. After all, the new administration hasn’t done anything yet—how could it be at fault for a particular event? But it is precisely President Trump’s failure to act which can have devastating consequences for a wide range of policies.
I’m hopeful that other Take Care contributors will choose to consider this theme as it applies to their areas of focus, but for now I want to consider its impact on the Affordable Care Act (ACA) and ongoing fights over the ACA’s existence. I suspect this will be the first of many posts on the subject, so I will provide extra backstory.
I should start by saying that the current legislative fight over the American Health Care Act, the purported “repeal and replace” bill for the ACA which the CBO estimates would result in 24 million Americans losing their health insurance, isn’t helping the situation. Right now, nobody has any idea what the rules in the individual marketplace will be next year. I will surely focus on that bill in a future post, and likely in several future posts about different aspects of the situation. Here, though, I focus only on Trump’s own conduct to demonstrate the destruction one person’s inaction can wreak.
One of the two primary ways in which the ACA expanded healthcare coverage to tens of millions of Americans who previously lacked it was to regulate and subsidize an individual healthcare market. Previously, insurers were able to deny coverage to patients with preexisting conditions, or charge them actuarially fair premiums which were still many times more than what most Americans can afford.
Specifically, the ACA created what is often called a “three-legged stool” of insurance. Insurance companies can no longer deny coverage to people with pre-existing conditions, or charge older people many times more as much as young people, or deny coverage for maternity services, etc. People who can’t afford this insurance receive government subsidies. And finally, to avoid the economic concern that only sick people will choose to purchase insurance under these two conditions, the individual mandate requires that everyone buy into the system or pay a tax. Here’s an explainer, for those who’d like more on this metaphor.
If you take away any of the legs of the stool, the system breaks down. Allow insurers to discriminate against the sick? The sickest people can’t afford those premiums anymore and they drop out. Remove or limit premium subsidies? Healthier enrollees will drop out (sicker people value the care more), and a death spiral ensues. Stop enforcing the individual mandate? Same effect.
As such, uncertainty about what the government will do about the law is dangerous. On Inauguration Day, President Trump signed an executive order designed to “Minimiz[e] the Economic Burden” of the ACA. It spoke in vague language and directed agencies to do what they could to reduce the law’s impact. Kellyanne Conway went on television two days later and suggested that the president “may stop enforcing the individual mandate.” On the same day, she said that “For the 20 million who rely upon the Affordable Care Act in some form, they will not be without coverage during this transition time.”
But here’s the thing: Conway’s two statements don’t go together. Companies can’t plan for the 2018 marketplace without answers to these basic questions. Companies can’t figure out who’s likely to enroll in their plans—and therefore can’t price them accordingly—until they know who’s required to buy in and how much support they’ll get from the government. If the administration not only won’t enforce the individual mandate, but goes on television telling everyone that, insurers are likely to lose some of their healthiest enrollees—the ones who keep costs for everyone else down. (If the individual mandate is outright repealed, as the new GOP bill would do, the situation will be far worse.)
And there’s no time to spare. It may only be March, but insurers were originally scheduled to file their applications for 2018 plans and rates by May 3, 2017. Those plans and rates need to be approved and negotiated by the relevant governmental entities to be ready for open enrollment in the fall. The administration has quietly pushed back that May 3 deadline to June 21, but even the extra six weeks may not be enough time. Insurers are already citing the uncertainty in the market as a reason to avoid offering coverage next year entirely. Humana plans to pull out in 2018, potentially leaving a number of Tennessee counties without an insurance option, and other major insurers cite the uncertainty around the administration’s implementation efforts as a reason to stay out of the market.
So here’s the bottom line: assuming that the ACA remains in place (a big “if” for the next few weeks), if insurers drop out of the market, if there are counties without health insurance plans next year, or if rates go up by a large amount, it’s not clearly because of choices that President Obama made (or was forced to make by legislative intransigence and judicial hostility). President Trump’s choice to speak in vague platitudes here (as elsewhere), and to fail to provide certainty in the market, has real consequences for the decisions made by companies and for the people they insure. Those consequences will be Trump’s to own.