The most important day for the Affordable Care Act is not whichever day Republicans schedule their next vote to repeal and replace it (if they do).
The most important day for Obamacare is June 21, 2017. About three months from now — on, coincidentally, the very first day of summer — health insurers have to decide whether they will sell coverage on the Obamacare marketplaces.
“It will give us the first indication of what the ballpark rate increases are, what counties have insurers and which ones don’t,” says Robert Laszewski, an industry consultant who works with insurers that sell on the marketplace. “Insurers will have to make a statement.”
The Obamacare marketplaces are, at the moment, one of the most at-risk parts of the Affordable Care Act. About 12 million Americans who buy insurance on their own — through either a state marketplace or Healthcare.gov — currently rely on these online insurance portals for coverage. Eighty-five percent receive a tax credit to lower their monthly premiums.
The marketplaces only work if private health insurance plans show up and sell coverage. Last year, well before Trump’s election, some insurers dropped out of the marketplaces because they saw them as too small or unstable. June 21 is when we’ll get the first look at whether the marketplaces are in okay shape and have enough competition to survive 2018 — or whether they are, as President Donald Trump predicted, “exploding.”
One major insurer has already pulled out for 2018 — and another might follow
The number of insurers selling on the marketplace fell significantly this year. As Sarah Frostenson and I reported last fall, there are 960 counties on Healthcare.gov that had just one health insurer selling coverage in 2017. That was a big increase from the 180 counties in the same situation in 2016.
There are some marketplaces, like those in California and New York, for example, that are quite stable and have robust competition. These tend to be areas that have larger populations, which make them more attractive for insurers. Simply put, they can earn more money when there are more people to buy coverage.
But rural, sparsely populated areas of the country have struggled to attract many insurers to their marketplaces. This isn’t unique to Obamacare; these places have long had uncompetitive, individual insurance markets. They just don’t have enough people to be an attractive business opportunity for a health plan.
The Kaiser Family Foundation mapped insurer participation last year. You can see that big rural states — Alaska, Alabama, and Wyoming, for example — tend to be those with just one health plan selling coverage.
Big insurance plans like Aetna and UnitedHealth significantly scaled back participation in the marketplaces last year, pulling out of some states entirely. Humana followed in 2017, announcing that it would withdraw from the 11 state marketplaces where the insurer currently sells coverage.
Humana said it quit Obamacare because it was getting too many sick enrollees and not enough healthy people buying coverage.
“Based on its initial analysis of data associated with the company’s healthcare exchange membership following the 2017 open enrollment period, Humana is seeing further signs of an unbalanced risk pool,” the insurer said in a statement. “Therefore, the company has decided that it cannot continue to offer this coverage for 2018.”
Humana’s move will leave more counties with just one health insurer selling coverage — and some counties with no options at all. There are 16 counties in eastern Tennessee where Humana was the only plan on the marketplace, and at the moment, no other insurer has volunteered to sell there.
Analysts now worry that another large insurer, Anthem, may also quit the marketplaces. A report from the investment banking firm Jeffries says the large nonprofit insurer is “leaning toward exiting a high percentage” of Obamacare marketplaces, based on recent conversations with Anthem officials.
Anthem hasn’t yet commented on this report. Its exit would be really significant: One analysis from Axios and the Robert Wood Johnson Foundation estimates it would leave 250,000 people living in places with no Obamacare insurers in 2018.
Most insurers have been quiet on their 2018 plans. There is little advantage to announcing a decision on the marketplaces before insurers see how the Trump administration plans to run them. But come June, insurers will need to make a decision: Either they are in or they are out.
“None of them are good scenarios. They are mostly working out how bad this is going to be.”
Laszewski is a consultant who works with many community-based and nonprofit health insurers that currently sell on the marketplaces. He says most of his clients want to stay on the marketplaces, but the Trump administration is making it difficult.
He has advised his clients to feel comfortable submitting big rate increases this year due to all the uncertainty about who will sign up. “The health plans I work with want to stay in. But the Trump administration is not making that easy.”
Part of the challenge, Laszewski says, stems from Trump’s rhetoric — like his statement last week claiming the law is falling apart.
“I’ve been saying for the last year and a half that the best thing we can do, politically speaking, is let Obamacare explode,” Trump argued in a statement last Friday, shortly after the GOP health bill failed. “It is exploding now.”
Compounding that is a lack of clarity on the policies that will govern the marketplaces next year. The Obama administration last November had initially proposed a May 3 deadline for insurers to submit their bids. Last month, the Trump administration pushed that deadline back to June 21, presumably to give insurers more time to work through the expected policy changes.
There are two key policy issues on which Laszewski says his clients are still waiting for more clarity from the Trump administration:
- Will they continue to defend Obamacare subsidies in a pending lawsuit? House Republicans sued the Obama administration in 2014, arguing that certain Obamacare subsidies for low-income Americans were illegal. The Trump administration has not said whether it plans to continue defending those subsidies, as Obama did, or drop the lawsuit. The latter option, as Nick Bagley explains, would wreak havoc on the Obamacare marketplaces and make them a much less desirable place to sell.
- Will the Trump administration continue to enforce the individual mandate? We know the current administration certainly doesn’t like the individual mandate, but so far it has been mum on what it will do to enforce the $695 penalty for those who do not buy coverage. Insurers want the individual mandate to be strong so more healthy people sign up for insurance.
Laszewski says the insurers he works with can’t really set rates or decide on participation until they have answers to those two key questions. Right now they have actuaries gaming out different scenarios.
“None of them are good scenarios,” he said. “They are mostly working out how bad this is going to be.”