How Obamacare’s saboteurs are raising your health care cost

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President Donald Trump is threatening to cut the health-care subsidy payments that make Affordable Care Act plans affordable.
Wochit

Donald Trump has been predicting Obamacare’s collapse since he began his presidential campaign more than two years ago — and certainly, no one has done more than he has to make that prophecy come true.

But Michigan’s biggest health care providers and insurers still believe the health care framework the state put in place to comply with the stringent requirements established by the Affordable Care Act can be made to work for their patients and policyholders — if Congress takes steps to shore up the support beams President Trump seems determined to sabotage.

At least 900,000 more Michiganders have health coverage today than before the ACA kicked into high gear three years ago. Most joined the ranks of the insured when Michigan, in league with other states, extended Medicaid benefits to working families whose modest incomes had previously left them stranded between Medicaid eligibility and affordable health coverage.

The collapse of the Republican campaign to dial back federal funding for Medicaid means that Michigan residents who obtained coverage when the state made it easier to qualify for Medicaid benefits are safe, for now. So are the majority of workers who continue to get coverage through their employers — including small businesses that have been legally required to provide such benefits since passage of the ACA.

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Who’s at risk now?

When Trump and other critics talk about the imminent implosion of Obamacare, they’re really talking about the fragility of the state exchanges where small businesses and individuals who enjoy neither Medicaid eligibility nor employer-provided health insurance must go to purchase coverage that meets the requirements established by the ACA. 

Michigan’s Health Insurance Marketplace and similar exchanges established by other states were supposed to make health care more affordable by throwing hundreds of thousands of young, relatively healthy people into the same insurance pool as their older, sicker neighbors. But even Obamacare’s most enthusiastic champions concede that three years of real-world experience has revealed weaknesses in that theory.

Part of the problem is that the so-called individual mandate doesn’t really require young people (or anyone else) to buy health insurance; it simply threatens to exact a tax penalty every April 15 if they fail to do so. The more people who elect to take the tax penalty rather than purchase health insurance policies, the smaller and riskier the pool of policyholders insurance companies have to provide for becomes. 

Under current federal rules, moreover, even those who decide to buy policies can drop coverage — or simply stop paying their insurance premiums — with the confidence that they’ll be able to renew coverage with no penalty if they need medical services down the road. The more expensive it is to buy insurance on the state exchange, the greater the incentive to forgo coverage until an injury or serious illness arises.

If federal policymakers were determined to making the state insurance exchanges work the way they were designed to, they would 1) encourage healthy people to purchase coverage, and 2) vigorously enforce tax penalties against those who declined.

(Congress might also amend the ACA to make policyholders who let their coverage lapse wait six months before they could renew, thus strengthening everyone’s incentive to maintain continuous coverage — but that would require lawmakers to take constructive action.) 

Since President Trump took office, the government has done exactly the opposite. Enforcement of the individual mandate is negligible. And when was the last time you saw a television spot or billboard directing viewers to the coverage options available on Michigan’s health care exchange?

It would be an overstatement to suggest that the Trump administration is exclusively responsible for declining enrollments, or for the decision some insurance companies have made to get out of  state insurance exchanges that have ended up serving a pool of policyholders that has turned out to be smaller, older and more expensive than they hoped.

But the administration’s malign neglect has certainly discouraged some healthy adults who might otherwise have signed up for coverage from doing so.

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Terrorizing insurers

The most imminent threat to the health of the individual insurance market, of course, is Trump’s threat to stop reimbursing insurers for the discounted co-pays they give to lower-income policyholders. The president’s cynical premise is obvious: If Republican lawmakers can’t figure out how to repeal Obamacare, maybe his administration can starve it to death.

More than four-fifths of Michiganders who purchase health insurance on the state exchange reap a tax credit for doing so. The cost-sharing reduction payments Trump keeps threatening to withhold, known in the insurance industry as CSRs, are designed to reduce the cost of coverage for lower-income policyholders further by subsidizing the deductibles they have to pay for prescriptions and medical services.

Policyholders who qualify for such discounts will continue to enjoy them through the end of 2017, no matter what the Trump administration does, because the discounts are baked into the coverage plans they signed up for.

What’s at risk is the checks the federal government sends insurers each month to reimburse them for the discounted co-pays some policyholders pay.

The CSRs were part of the ACA’s grand design, and the Obama administration continued to make them even after Republican legislators declined to fund them. But a lawsuit has raised doubts about the legality of that work-around, and the new administration has repeatedly threatened to withhold the payments, although it has continued to make them.

Last year, the nine companies that offer individual coverage on Michigan’s insurance exchange collected $166 million in CSR reimbursements. Blue Cross Blue Shield of Michigan, which covers more than two-thirds of the policyholders who have purchased individual coverage on the exchange, says it will lose “tens of millions” in revenue between now and Dec. 31 if Trump makes good on his threats to suspend the payments.

A plan for all seasons

Under deadlines established by the state and federal governments, insurers were required to submit the insurance plans they propose to offer on Michigan’s exchange in June. In many states, uncertainty about Obamacare’s future has prompted most insurance companies to bail out of the individual market altogether, but regulators in Michigan and seven other states tried to allay underwriters’ anxiety by allowing them to propose insurance offerings with two price lists — one assuming that the government continues to make the CSR payments, and a second that reflects the steeper premium hikes policyholders will face if the payments stop.

Last week, the state Department of Insurance and Financial Services extended until Sept. 1 its deadline for telling insurers which set of rates they’ll be allowed to offer customers during the open-enrollment period that runs from Nov. 15 to Dec. 3. Meanwhile, bipartisan groups of lawmakers in the U.S. House and Senate are working on a stopgap bill to defuse the White House’s threats and guarantee the CSRs at least through the end of next year.

Still, Congress isn’t scheduled to reconvene until after Labor Day, suggesting that insurers may have to lock into a list of products and prices before the CSR issue is resolved.

“It is absolutely absurd that three months before open enrollment, we don’t know what our plan designs are and how they’re going to be paid for,” complains HAP CEO Terri Kline, who worries that her company and its competitors “are either going to end up charging our policyholders too much or too little.”

Quiet before the storm

So far, Michigan’s individual insurance marketplace has remained relatively robust. As of June 1, nine companies were planning to sell policies next year in the 16 regional markets recognized by the federal government.

But that stability could vanish quickly. BCBS is the only company that offers individual coverage in all of Michigan’s 83 counties; some counties far from the state’s populous southeast region have as few as two providers to choose from.

Even if the CSRs are assured, BCBS policyholders renewing coverage for 2018 face average premium increases of 14%-26%. HAP’s individual policyholders can anticipate an average hike of 16% (although Kline says the increase would have been smaller if her company had been able to factor in improvements in the overall health of its insurance pool before premium schedules were due June 1).

Finally, although insurers can no longer adjust the rates or coverage plans they’ve proposed for 2018, they have until late August to pull any of those plans from the market. BCBS says it expects to stick with what it’s proposed, but HAP will likely withdraw some of its offerings depending on how the CSR issue is resolved.

Ray of sunshine

The good news is that Michigan’s small group market, where about 360,000 Michigan residents obtain coverage through their small-business employers, is more stable and less likely to be roiled by big premium increases in 2018. 

And because declining unemployment is making the competition for workers more keen, few insurers expect small-group enrollment to decline — even if congressional reformers succeed in relaxing the insurance mandate for small businesses, an idea that enjoys support in both parties.

Whether individuals in Michigan have access to affordable health care coverage will depend largely on whether lawmakers in both parties defuse the president’s destructive posturing and take constructive action to stabilize the markets.

Right now, the most concrete plan to do that is the one being offered by a bipartisan group I wrote about last week. Divided equally between House Republicans (most of whom backed the House bill to repeal Obamacare) and House Democrats, the Problem Solvers caucus hopes to introduce legislation next month that will guarantee the CSRs and make some other practical fixes to shore up the individual market.

If your representatives in Congress hasn’t signed on, ask why. If  they tell you they have a better plan that can get 218 votes in the House and 51 in the Senate, they’re probably lying.

Contact Brian Dickerson: bdickerson@freepress.com

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How Obamacare’s saboteurs are raising your health care cost

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