Republican lawmakers consistently claim that the Obamacare marketplaces are collapsing, so they need to pass a bill to repeal and replace the health law.
“The marketplace is collapsing, and countless more Americans will get hurt if we don’t act,” Senate Majority Leader Mitch McConnell said on the Senate floor last month.
“We'll move ahead with deliberate speed,” Sen. Lamar Alexander (R-TN) said in a recent speech. “We’re doing that because exchanges are collapsing.”
The marketplaces, though, have refused to cooperate. They are not working perfectly — but they are far from ruinous demise, experts say. But the Republican replacement plan, introduced Thursday, could change that. It contains several provisions that could accelerate the crumbling of the marketplaces and leave millions of Americans with no health care options.
“Honestly, the marketplaces are in okay shape,” says David Anderson, a research associate at Duke University who studies the individual market. “The amount of competition isn’t where some people would like it to be, but this isn’t collapse.”
We know what Obamacare collapse would look like. Insurance plans would be fleeing the marketplaces en masse, refusing to sell coverage in the individual market. People who buy their own plans would be left with few to no options.
This is not the scenario we’re in in almost all of the country. It is true there are 46 counties that lack Obamacare plans signed up to sell 2018 coverage. It is also true there are 967 counties that have three or more competitors in the marketplace.
“I don’t view this as a crisis,” says Caroline Pearson, a senior vice president with the health research firm Avalere. “For most enrollees, the marketplaces are still functional and still provide coverage options.”
So far, we’ve seen some health insurance companies exiting the Affordable Care Act marketplaces — but we’ve also seen some health plans expanding their footprint. There are a handful of trouble spots where no health plans want to sell coverage, but we also have a number of instances this year where insurers have identified those gaps and decided to fill them in.
“There is a small minority of rural markets — we think it’s about 1 percent of counties — that have no 2018 plans signed up,” Pearson says. “But most markets have insurers. Most markets have multiple insurers.”
Obamacare’s marketplaces aren’t doing great, but they aren’t collapsing
The Affordable Care Act marketplaces have struggled since their launch to attract the robust competition the law’s architects desired. Where the drafters envisioned vibrant insurance markets, we’ve instead seen many monopolies and duopolies.
The marketplaces aren’t what the ACA’s boosters hoped for, but they’re mostly functioning. The health law’s subsidies coupled with the mandate to purchase insurance have meant that the marketplaces did expand coverage to about 10 million individuals. The subsidies in particular have held down the prices that marketplace enrollees pay out of pocket, meaning that this group is largely insulated from significant rate hikes.
Over the past few months, we’ve seen health insurers announcing their 2018 plans for Obamacare, where they’ll sell coverage, and what places they’ll leave.
Some insurers have quit the marketplace, often citing the financial losses they’ve experienced in the past three years and the uncertainty of the current moment in health care.
Most recently, Anthem announced it would leave the Indiana and Wisconsin marketplaces due to “a shrinking and deteriorating individual market, as well as continual changes and uncertainty in federal operations.”
Iowa saw a major health plan, Wellmark, quit its marketplace earlier this year. And the national health plan Humana largely pulled out of Obamacare in January, leaving 18 counties around Knoxville, Tennessee, with no options at all.
The most concerning areas of the marketplace are the counties where no insurance plans want to sell coverage. Right now, these are mostly rural counties concentrated in Ohio and Missouri.
But the market is still fluid, Pearson says, and she expects some of those counties to get filled as insurers see a business opportunity in being the only plan in the market.
“The announcements will continue to trickle out until open enrollment,” she says. “The worst-case scenario seems to be some number of counties being uncovered, but we also don’t know which insurers might jump in.”
Case in point: When Cigna’s exit left those counties around Knoxville without any plans, Blue Cross Blue Shield of Tennessee swooped in and said it would sell coverage in the area.
On the other side of the country in Washington state, a local health plan did the same thing: Premera announced it would cover a small county on the Pacific Coast that had been left with no options after another insurer pulled out.
Insurance exits that Republicans predicted would decimate the Obamacare marketplace never happened. For example: When the House passed its health repeal bill last month, top legislators kept talking about the dire situation in Iowa — how the state would have 94 of its 99 counties with no Obamacare options if an insurance plan called Medica decided to quit.
“Now 94 of the 99 counties will have no insurer in Iowa — 94 of the 99 counties in Iowa will have no insurer,” House Majority Leader Kevin McCarthy said at the time.
What McCarthy didn’t mention: That health insurance plan has decided to stay in Iowa. It didn’t quit, and every Iowa county has at least one option.
“We’ve filed with the intent to provide access to insurance for all Iowans, whether they are farmers, small business owners or other individuals who need coverage,” Medica said in a statement this week announcing its decision.
A handful of insurance plans are even expanding their presence on the marketplace.
The health plan Centene announced in mid-June that it would start selling Obamacare coverage in three additional states beyond those where it already participated in 2017. That expansion may cover some of the counties in Ohio and Missouri that lack insurers, although the company has not released a map of its coverage area yet.
And the health startup Oscar announced Wednesday it would continue selling coverage in the New York marketplace while expanding into five additional states.
“We see an opportunity in these places,” Oscar chief executive Mario Schlosser said in an interview.
The Senate bill could create a death spiral by killing the individual mandate
Observers worry that the Senate bill could damage the individual market badly, pushing it toward collapse by weakening the incentives healthy people have to purchase coverage.
The Senate bill would keep the Affordable Care Act’s requirement that insurers have to cover everyone, including people with expensive preexisting conditions. It mandates that insurers offer sick and people and healthy people the same premiums too.
But the Senate bill doesn’t require all Americans to purchase health coverage, as the Affordable Care Act does. The requirement to buy insurance or pay a fine was one of Obamacare’s least popular provisions, but it was necessary. If the law was going to keep premiums affordable and allow sick people with expensive medical conditions to buy coverage, it would need to get healthy people to buy plans too. The healthy people in any insurance market subsidize the higher spenders.
An insurance market where insurers have to cover everyone but people don’t have to sign up is a recipe for a death spiral. Premiums would likely rise as only the people who actually need health insurance coverage purchase plans and healthy people decide to take the risk of remaining uninsured.
One element of the bill that would protect against a death spiral would be the tax credits offered to low-income Americans, which limit how much they have to spend on a health insurance plan.
At the same time, the type of plans the Senate bill subsidizes are unlikely to be very attractive to healthy consumers. They would cover, on average, 58 percent of a consumer’s costs. This is a relatively ungenerous plan; it means that on average, the individual ends up paying 42 percent of her health care bill through some combination of deductibles and co-payments.
“Why would you pay to enroll in that kind of plan if there was no penalty?” former Republican Senate health aide Rodney Whitlock says. “If you’re paying so much of your own money upfront just to get through the deductible, there isn’t much to the plan.”
Republicans have long predicted an Obamacare death spiral. So far, it hasn’t happened. But their plan would near certainly move the individual market much more in that direction.