In his speech after withdrawing the Republican health care bill from consideration on Friday, Speaker of the House Paul Ryan said that “Obamacare is the law of the land” and will remain so “for the foreseeable future.” But law professors who have followed the Affordable Care Act (ACA) for the past seven years ago know that its future is not yet secure. President Trump has said that “the best thing we can do politically speaking is let Obamacare explode,” and there’s a lot he can do to make that explosion a reality.
It doesn’t have to come to that. Contrary to GOP reports, the ACA is not collapsing. The Medicaid expansion will continue chugging along and we’re even seeing other states—Kansas and North Carolina most recently—move toward their own expansions. The individual markets in some states are fragile, but they are not in a death spiral. As the Congressional Budget Office noted in its first score of the GOP bill just two weeks ago, the marketplaces would “probably be stable in most areas” under current law.
Without question, however, President Trump and HHS Secretary Price have the ability to radically destabilize the individual marketplace. The only question is whether they attempt to do so through active sabotage, incompetence, or purposeful ambivalence.
One of us (Nick Bagley), along with Harvard PhD student Adrianna McIntyre, has already compiled a preliminary list of executive actions President Trump could take that would reshape the ACA. Many of these will not be news, but we write here to focus on two actions with the greatest potential to disrupt the market: ending cost-sharing payments to insurers and declining to enforce the individual mandate.
The largest concern facing the individual markets is the fate of House v. Price, a lawsuit brought by the House of Representatives against President Obama’s HHS Secretary (Sylvia Burwell) in 2014. The House argued that the administration was acting illegally in making cost-sharing payments to insurers because Congress had not specifically appropriated those funds. A judge on the District Court for the District of Columbia ruled both that the House had standing to sue (wrong) and that the administration’s spending violated the Appropriations Clause (right).
The Obama administration appealed the case to the DC Circuit, but, of course, on November 7, 2016, there was an intervening event: the election of President Trump. The GOP-led House then asked the court to stay the litigation to see what the future might hold for health reform. The case is being held in abeyance, with the next status report due at the end of May, just days before insurers must file their insurance plans for 2018.
Here’s why the case is such a big deal for the individual markets: The ACA instructs insurers to limit the out-of-pocket expenses for enrollees who make less than 250% of the federal poverty level. This cost-sharing cap thus plays a key role in keeping insurance affordable for the low-income population. The federal government is then supposed to reimburse insurers for cutting those low-income customers a break.
Without an appropriation, however, the federal government can’t keep making those payments. Insurers would remain bound by the statutory requirement that they reduce cost-sharing for their customers, but they wouldn’t get reimbursed. Without those funds, most insurers will not only refuse to enter the market next year, but may exit the market immediately—cancelling plans and leaving patients uncovered.
What happens next with the lawsuit is anyone’s guess. President Trump could simply drop the appeal, leaving the district court’s ruling in place and crashing the markets. Alternatively, the Republican-controlled Congress could appropriate the money for the cost-sharing payments, which would make House v. Price moot.
Neither of these outcomes seems especially likely, however. It’s more probable, in our view, that the president and the House will mutually agree to put the litigation on life support—holding it in abeyance indefinitely while the cost-sharing payments keep flowing. That’s not an ideal outcome for insurers: House v. Price will hang over their heads like the sword of Damocles, and they’ll be rightly skittish that the Trump administration might eventually dismiss its appeal and cut off their cost-sharing payments. But with the right assurances, insurers could probably be persuaded to stay in the market.
Setting aside House v. Price, the administration will also have to decide how it prioritizes enforcement of the individual mandate. Within days of taking office, not only did President Trump sign an executive order designed to “Minimiz[e] the Economic Burden” of the ACA, but Kellyanne Conway went on television and suggested that the president “may stop enforcing the individual mandate.”
That hasn’t happened—yet. But the IRS, in response to Trump’s executive order, has agreed to process tax returns that refuse to answer whether the taxpayer has complied with the individual mandate. Formally and informally, the administration could take other steps to reduce the efficacy of the individual mandate.
And it’s the individual mandate that makes the exchanges possible. Many of the law’s most popular provisions—preventing insurers from denying coverage or charging more on the basis of pre-existing conditions, chiefly—enable sicker people to enter the individual market. To keep premiums stable, however, healthy people have to buy insurance too. Hence the individual mandate. If the administration lets it be known publicly that it’s weakening the mandate, as it has already begun to do, healthier people may flee the market, leading to increased premiums and potential instability.
But House v. Price and the individual mandate are just the beginning. If it chooses, the administration could use dozens of other tools to destabilize the individual insurance markets and undermine the ACA. Even the uncertainty over what the administration might do will inflict damage.
The administration may come to believe that it’s in its political interests to make the exchanges work. But if it doesn’t, it has the power to inflict a lot of damage.