After nearly a decade since the Affordable Care Act was signed into law, the U.S. is poised to find out what Obamacare will look like without its linchpin requirement for people to buy health insurance.
The sweeping tax reform bill that passed late last year included a repeal of the requirements that everyone has health insurance, starting in 2019. Obamacare allies, independent estimates, and Democrats say the move by President Trump and congressional Republicans will raise premiums and cause the program's insurance exchanges to crumble.
Meanwhile, new regulations from the Trump administration to expand access to cheaper, low-quality plans could have just as much of an effect on the exchanges, experts say.
Insurers are debating whether to renew participation in Obamacare’s exchanges in 2019 that offer coverage on the individual market, which is used by people who do not get insurance through a job or the government. Insurers face a deadline as early as this spring to decide whether to participate in Obamacare's insurance exchanges for 2019.
Price increases caused by the mandate’s repeal could be revealed by Obamacare insurers right before voters head to the polls in November for the 2018 midterm elections, providing a possible boost for Democrats already favored in the elections.
Outside groups are ready to seize on any premium hikes or insurer losses linked to the loss of the mandate.
“Voters are already furious at the GOP's historically unpopular agenda, and they are rightfully blaming Republicans for their increased healthcare costs resulting from the sabotage of the [Affordable Care Act],” said Joshua Karp, spokesman for the liberal super PAC American Bridge. “What's more, any renewed repeal push risks turning November's blue wave into a tsunami.”
It's not clear how much Republicans will push to repeal Obamacare this year. While some lawmakers want to take another stab at it after failing last year, Senate Majority Leader Mitch McConnell has said the Senate isn't likely to try again.
American Bridge plans to intensify its voter communication and digital efforts on healthcare this year, beginning in Nevada, Ohio, Virginia, and Florida, a source told the Washington Examiner. Sen. Bill Nelson, D-Fla., is expected to be in a hotly contested re-election race, and Sen. Dean Heller, R-Nev., is seen as vulnerable heading into the midterms. More states will likely be added to the list in the coming months.
Divining the impact of repeal
The nonpartisan Congressional Budget Office has predicted that the loss of the mandate will lead to 4 million people deciding to forgo insurance in 2019 and 13 million people dropping coverage by 2027. That would cause premiums on Obamacare’s exchanges to increase by 10 percent every year, starting in 2019.
CBO reasons that younger and healthier people, who would have faced penalties if they don't sign up, will have less incentive to buy health insurance without the penalties. The loss of healthier people on the exchanges will deteriorate risk pools as only sick people will sign up for Obamacare. The penalty is $625 for a single adult, or 2.5 percent of income, whichever is greater.
However, the impact of repealing the mandate on insurance coverage has been hotly debated.
Republicans have long charged that the CBO overestimates the number of people who would go without coverage if the mandate disappears. Some Republicans have said that the mandate has never been a key driver of enrollment, pointing to the poor financial performance of Obamacare insurers and rising prices over the past few years.
Sen. Bill Cassidy, R-La., said this month he believes the CBO “lost any credibility” over insurance coverage numbers because the coverage estimates due to the mandate repeal were far off.
Cassidy has pushed his own Obamacare repeal bill, which fell short in September.
At least 8.8 million people signed up for Obamacare in the 2018 open enrollment period on healthcare.gov, which residents in 39 states use to buy Obamacare plans. That is slightly below the 9.2 million who signed up last year.
The 2017 open enrollment period lasted until Jan. 31, while the shorter 2018 period under President Trump ended Dec. 15.
The figure does not include the 11 state-run exchanges, as some exchanges continue to sign up people during longer open enrollments.
Republicans charge that the mandate is also unfair to lower and middle-class earners.
Sen. Susan Collins, R-Maine, has pointed out that 80 percent of the mandate's fines are paid by people who make less than $50,000 a year.
“So, those fines are falling disproportionately on middle and low-income Americans," she said in late November before the tax bill was passed.
The CBO has taken the objections to heart. The agency is taking another look at its baseline for determining insurance coverage losses due to the mandate repeal and expects to release new numbers this year.
Another estimate from Standard & Poor’s found 3 to 5 million people would not get health insurance over the next decade due to mandate repeal.
Obamacare’s exchanges have been struggling in recent years as insurers have fled due to a sicker-than-expected enrollee population.
This year, 48 percent of Obamacare enrollees have a choice of three or more insurers. That figure is down by 10 percentage points from 58 percent in 2017, according to data from the Kaiser Family Foundation.
Subsidies will help Obamacare 'limp along'
Either way, experts think that the exchanges will survive in 2019. The reason is federal subsidies designed to lower premiums for customers.
“The [Affordable Care Act] in 2019 limps along. It is not good; it is not bad; it is just there,” said David Anderson, research associate for Duke University’s Margolis Center for Health Policy.
This year, 84 percent of people who buy an Obamacare plan will receive a subsidy to help pay for some or most of their insurance premium. Those people are likely to still sign up for Obamacare coverage even if the premiums spike.
However, those increases would hit the unsubsidized population hard.
“People who make more than 400 percent of [federal poverty level] have to deal with the entire cost of the sick risk pool,” Anderson said, referring to the cutoff to qualify for income-based subsidies. “It will be almost impossible for them to find an affordable policy.”
Other experts note that 2019 will be “more of the same: Premium increases in this market and fewer insurers participating,” said Chris Sloan, senior manager for the research firm Avalere Health. “As we get fewer and fewer insurers each year, the risk of having bare counties [with no insurers] starts to increase.”
Several states were at risk this year of having counties with no Obamacare insurer.
For instance, in Virginia, the Obamacare insurer Optima Health decided to pull out of selling Obamacare plans for 2018 in most of the state. The decision meant that in August, 48 counties in Virginia were facing the prospect of having no Obamacare insurers this year.
However, state regulators worked with insurers to get coverage for those bare counties before the start of the 2018 open enrollment on Nov. 1.
Other factors could imperil insurer participation and raise premiums going into 2019. One major concern is whether Congress will fund cost-sharing reduction payments to insurers for next year. The payments reimburse Obamacare insurers for a requirement to reduce out-of-pocket costs for low-income exchange customers.
Trump cut off the payments in October, and insurers raised Obamacare prices by an average of 20 percent, according to the CBO.
Congress is now working on a bipartisan deal to fund the payments for 2018 and 2019, but so far, it has gone nowhere. The deal would include a bill to give states $10 billion for two years to set up a reinsurance program, which gives Obamacare insurers funding to cover their sickest claims and thereby lower premiums overall.
Some new wrinkles
Insurers not only have to figure out how to handle the loss of the individual mandate, but also new regulations aimed at expanding cheaper plans sold off the individual market, which includes Obamacare's exchanges and is used by people who don't have insurance through a job or the government.
Obamacare requires plans sold on the individual market to cover 10 essential health benefits, including maternity care and hospitalization. Insurers cannot charge people based on their health history, a method called underwriting, which results in unaffordable plans for sick people.
Those requirements result in pricier plans on the exchanges. The individual mandate, coupled with the insurer subsidies, was supposed to offset the costly requirements by driving younger and healthier — and less expensive — people to sign up.
But the Trump administration is making several regulatory moves to expand access to plans that do not have to abide by Obamacare’s requirements.
The administration proposed a rule this month that loosens the definition of who can band together to purchase healthcare. The rule would change the definition of “employer,” allowing individual workers or people in small groups to form an association and offer health plans.
The goal is to give people an opportunity to buy cheaper plans that circumvent certain Obamacare regulations.
For example, a group of small restaurants would be able to form an association and offer health plans, even if they aren’t in the same area.
The move is also meant to expand access to association health plans for people who are self-employed, a key constituency on Obamacare's exchanges.
Experts say that move could have a major impact on the law’s exchanges.
“We could see more of those people moving into the association health plans and out of the individual market,” said Avalere Health's Sloan.
The exodus to association health plans would “significantly worsen” the risk pool for plans sold on the exchanges, said Matthew Fiedler, a fellow with the Brookings Institution, a left-leaning think tank.
The proposed rule requires that an association plan keep protections for people with pre-existing conditions, a key driver of costs on the exchanges because insurers can’t charge sicker people more money. However, association plans do not have to cover all 10 essential health benefits, which could lead to cheaper plans.
They also can charge elderly people higher premiums. Under Obamacare, a plan can charge an senior who doesn’t get Medicare three times the premium they charge a younger person. Now an association plan can charge a senior five times the amount, leading to lower premiums for younger people but higher premiums for seniors below the 65-year-old eligibility for Medicare.
It is hard to predict how great of an impact the association rule will have on the 2019 market.
Sloan says the full effects won’t be felt until 2020 or later. That is because it is “going to take a little while for association health plans to get up and running.”
The administration is seeking 60 days of public comment on the proposed rule, expected to conclude in March, and then the administration will have to finalize it. After that, groups have to look at the regulation and get people to join, Sloan added.
But another regulation expected this year could be implemented much faster.
Trump signed an executive order last year to require his administration to create regulations for the expansion of association health plans and extend the duration of short-term plans from 90 to 364 days.
Under a short-term plan, an insurer can ask you about your health history and deny coverage or charge higher premiums based on your health status.
The administration has not released any regulation for short-term plans, but the administration could release a final rule to be implemented immediately.
Insurers already sell short-term plans, making a turnaround much faster than for association health plans, said Karen Pollitz, senior fellow at the Kaiser Family Foundation.
“The short-term rule — depending on what it says and how it is crafted — could have more immediate and dramatic destabilizing effects,” she said, referring to the exchanges.
Pollitz speculated that people won't have to wait long to determine the health of the marketplace in 2019. She pointed to the spring, when insurers will have to file their bids to participate in the marketplaces in 2019, a deadline that usually ends in May or June.
These are considered initial bids, and insurers can still enter later in the year, but Pollitz said the spring deadline could be the “canary in the coal mine.”
“If insurers say 'I don’t want to play in 2019,' then that will be a bigger impact than insurers who say they want to hike their premiums,” she said.
Pollitz isn’t sure which direction they will go. Kaiser recently reported that the 2017 Obamacare exchange markets were stabilizing after their poor financial performance in 2014 and 2015 and a rebound in 2016.
However, more uncertainty surrounding the impact of the new insurance regulations could be the last straw for insurers that already dealt with uncertainty over the future of Obamacare and the loss of the cost-sharing reduction payments.
“One big question will be whether insurers put up with this,” Pollitz said. “Will they decide whether it is too crazy and can’t keep up with a game where the rules change in the middle of a hand?”