Lately, we’ve heard a lot about Obamacare “exploding” from members of the GOP, including President Donald Trump.
But Obamacare, with its thousands of provisions, isn't going anywhere short of a full repeal.
Most at risk for now, however, are the Obamacare exchanges created to help some 13 million Americans buy quality and affordable insurance outside of the employer-based market. And the overwhelming majority of these people happen to live in rural parts of the country — the very same places that voted for Donald Trump.
To understand what the exchanges did for health care in America, we have to step back a bit. Most Americans (about 50 percent) get their health coverage through their work, and another 34 percent rely on Medicare or Medicaid. About 9 percent are uninsured. The rest — those who are too young to qualify for Medicare and too rich to qualify for Medicaid but want to buy insurance — deal with insurers that sell plans to individuals.
Before the ACA, the individual market often included very skimpy policies that didn’t cover the basics, like hospital stays or maternity care, so they looked nothing like the polices offered through employers. If they did, they were often prohibitively expensive.
The ACA tried to even out this variation by creating marketplaces in each state for these folks. The insurers selling plans on Healthcare.gov had to meet basic requirements (offering “essential health benefits,” for example) that ensured individuals were getting coverage that was closer in line with employer-based schemes and Medicare and Medicaid.
These more comprehensive (and often pricier) plans have been supported through subsidies that help poorer people pay for the extra expense. The marketplaces were also made viable (i.e., not just filled with very sick people) because of the ACA’s “individual mandate,” which required that everybody buy health insurance or face a penalty.
Now the Trump administration faces a choice of whether to undermine these marketplaces or try to make them work by messing with or weakening provisions like the individual mandate or the subsidies. Many of these marketplaces were already struggling. (A third of US counties on Healthcare.gov have only one insurer, and there are 16 counties in Tennessee with no insurer at all after Humana pulled out of the marketplace.) And many of the counties with struggling marketplaces happen to be populated by Trump supporters.
For insights on what might come next for these markets, and the Americans who bought insurance on them, I reached out to Craig Garthwaite, a health economist at Northwestern University’s Kellogg School of Management who has been studying the Obamacare exchanges. Our conversation, lightly edited for length and clarity, follows.
So the 13 million who bought their insurance through the Obamacare marketplaces are the most urgently at risk of losing their insurance?
Yes. If you want to make the case Obamacare is not working well, they are who you would want to focus on.
When the president has said the bill is failing, it’s going to implode on itself or explode, in general it’s predicated on the idea that these markets are in a death spiral, when you raise premiums causing people to exit.
There is no evidence that’s true. We haven’t seen premium increases that chased people out of the marketplace yet. Yes, premiums have gone up, but we haven’t seen marked declines in enrollment in places where the premiums are going up — which is what we would expect in a death spiral. This could be because the individual mandate is doing its job and keeping people in the market, or it could be because the policies were actually quite underpriced to start with.
But we have seen problems with these marketplaces, as you noted in your recent New England Journal of Medicine article. We’ve seen more insurers exiting than entering, and many Americans left with only one insurance option in their county.
It’s more fair to describe this as a nascent marketplace [instead of a failing marketplace]. Creating a new marketplace for health insurance is a messy process. When we looked at the characteristics of firms that are entering and leaving exchanges, we found the firms that are leaving are firms like UnitedHealth and Aetna, and they are not firms that are well-positioned to compete in marketplace.
To compete, you need experience creating, marketing, and providing a low-cost insurance plan for low-income people. [For] roughly 70 percent of the commercial plans UnitedHealth sells, they are the third-party administrator — which means they don’t bear the actuarial risk on people.
Compare that to an insurer like Centene: They make most of their money through Medicaid managed care. Companies like that are good at providing insurance for a low-income population. So the companies that have done well on the exchanges are the ones that have a lot of Medicaid managed care experience.
Is there any way to characterize the people on the exchanges at particular risk of losing their insurance?
A third of all counties have only one insurer left. At a broad level, we’d prefer that each county was served by a large number of insurers providing innovative products. To date, that isn’t the world that we are facing.
What we should be worried [even more about are places] where there are no firms, which is a frightening reality in some areas. Those areas are generally places where we haven’t had a lot of people show up for the marketplaces or where there are dominant providers who demand high rates. For example, rural areas are tough markets here.
Obamacare is having trouble in rural areas. But that’s been a story of health care for the past 15 years. Providing rural health care is really tough. There’s not enough patients to have multiple providers. So providers tend to be mini monopolies — it’s difficult to get low-price care for individuals. For some reason, Republicans have fooled themselves into thinking the expense of Obamacare is based on the insurance market. It’s actually based on the health care market — health care is expensive.
There’s already good evidence the Trump administration is undermining the exchanges in subtle ways, as my colleague Sarah Kliff and others have pointed out. What moves would the administration need to make that would be the death knell?
The fear is that they will soften enforcement of the individual mandate. For example, they could signal that they will be more receptive to hardship waivers or simply not have the IRS really go after people who fail to report whether they have insurance.
If more people leave the marketplaces because of the mandate, those should be the healthy people. [If too many healthy people leave, there’s a problem with the viability of the risk pool.]
The other thing everyone is looking out for is what might happen with the cost-sharing subsidies under the law. If you’re a low-income individual in the marketplaces right now, you get cost-sharing subsidies that decrease the high deductibles you face. They are funded by presidential action, not funded by Congress. The president could reverse those. And that would make insurance unaffordable for those individuals. They would leave the marketplace, and the whole thing would unravel.
Knowing whether that’s going to happen is about predicting the actions of Trump. If anything, we need to have the market size increasing, not contracting. We should be looking at how to get people from the employer market into the ACA marketplace.
But that would depend on an administration buying into keeping this part of the law alive. And we haven’t seen any indication that they will want to do that. Is there any risk that this instability, even without loosening the individual mandate or sabotaging the subsidies, causes enough disruption that we see more insurers exiting the marketplaces?
Yes, this is a real fear. Right now insurers are considering what their premiums should be for 2018. That is a really hard process — essentially trying to guess what the health profile of your risk pool will be based on the premium that you charge. Now consider that you also have to price in the political risk of an administration that may sabotage the marketplaces. That is almost impossibly hard, and I worry that some insurers will say the proverbial juice is no longer worth the squeeze — we aren’t making enough money in this market to make it worthwhile to make the risk tolerable.
Certainly, they are looking at the pulling down of the ACA marketplace commercials at the end of the most recent open enrollment period. This small move appears to have dampened enrollment, and likely enrollment of relatively healthy people. That episode provides clear evidence of what can happen when the administration is not invested in the success of marketplaces and might actually be hoping for failure.
At the same time, those rural counties are the places with zero or only one insurer left — and many of them happen to be places that voted for Trump. Do you think avoiding the political fallout in these areas could prevent the explosion he keeps promising?
It really depends on how blame gets allocated here. The president is clearly trying to shift blame for the implosion onto Democrats, but I just don’t know how successful that will be. In the end, the ACA requires the help of government to run — and that is similar to all other health care in the United States.
The employer market depends on the tax breaks it gets from government, hospitals depend on being tax-free nonprofits, and obviously Medicare and Medicaid depend on government funding.
If the government punts on its responsibilities, or, even worse, it works against the market succeeding, it’s hard to believe that the GOP will be held harmless — particularly after their dumpster fire of a replacement effort ended last week. That being said, the path from where we are today until that point is complicated, and the American people haven’t recently shown an ability to follow complex processes and appropriately assign blame.
If you were a patient right now on the Obamacare exchanges, what would you do?
At this moment, there is nothing really to do. However, at the margin, I would start thinking about what options you have for insurance other than the marketplaces.
This is particularly true if you have some chronic conditions that require medical care. For example, could you change your employment arrangement to have access to the employer insurance marketplace (or your spouse could).