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Insurance regulators are panicked about Obamacare’s future

Anti-Trump Activists March To Trump Tower In New York Photo by Kevin Hagen/Getty Images

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The White House's decision to stay mum on certain health policy issues — particularly whether it will fund key Obamacare payments for low-income enrollees — has left insurers skittish about selling marketplace coverage in 2018.

Health insurers say they can't make decisions about participating in the health law marketplaces until the Trump administration makes its policies clearer. Does the White House really expect the marketplaces to explode, as President Trump has said previously, or are they planning to take action to make them work?

Regulators, meanwhile, worry that some areas in the country will end up with big rate hikes or no plans willing to sell Obamacare coverage at all.

"It's been hard to know what is going to happen because the federal government doesn't know what they're going to do," says Doug Ommen, Iowa's insurance commissioner.

Half of Iowa's Obamacare insurers announced they would leave the market last week. They cited the uncertainty around the future of Obamacare as a factor.

Ommen is frustrated with his shrinking marketplace but, in a way, he sympathizes with the situation. "It has been difficult to know what to expect," he says. "It's a very unstable circumstance."

Pennsylvania insurance commissioner Teresa Miller says that for about a month, it really felt like the Trump administration wanted Obamacare to stabilize.

"I was really encouraged," she says. "We had folks [from the Trump administration] reaching out to us saying, 'We want to work with you and your insurers.'"

But ever since the GOP health care bill failed — and the president predicted the marketplace's failure — things have felt different.

"You had a couple of members of Congress talking about how they'll wait for the marketplaces to collapse," she says. "All of a sudden our insurers are like, "Oh, no. If you all want to make it fail, that can happen."

The big question: will the Trump administration continue to defend Obamacare's multibillion-dollar fund for low-income enrollees?

There is an acronym you should get ready to hear a lot in coming weeks and months: CSR. It stands for cost-sharing reductions, which the federal government pays to health insurers to lower cost sharing (things like deductibles and copays, for example) for the poorest Obamacare enrollees. Last year, the federal government paid out $7 billion through this program.

The House filed a lawsuit in July 2014 arguing that Congress didn't actually appropriate the money for those funds, and therefore the administration should not continue to make these payments. Nick Bagley wrote an excellent in-depth explainer on the lawsuit if you want to learn more.

Long story short: The Trump administration has to decide whether it will continue to defend these CSRs — or if it will concede to the House's case (that the administration doesn't have authority to make these payments) and end a multibillion-dollar Obamacare funding source.

Advisers are reportedly split on what to do. An administration official tells me that they will continue paying the CSRs so long as the litigation continues. That person did not, however, answer questions about whether the Trump administration would continue to defend the payments in court.

"Our biggest concern is the cost-sharing reductions," says Lori Wing-Heier, who oversees Alaska's insurance markets. "We need to get some stability there. It's such an unknown."

Insurers are desperate to know what happens to these Obamacare payments. Before deciding to enter markets or what premiums to charge they want to know if this $7 billion fund will stick around.

"The uncertainty that has been fostered with the concerns about ... the continued and uninterrupted payment of cost-sharing reductions could do grievous harm to the individual market," Candy Gallagher, senior vice president of state policy at America's Health Insurance Plans, told regulators in a presentation.

The Obamacare marketplaces have certainly had their struggles. Many saw big rate increases and insurers quitting in 2016. The regulators I spoke with felt like the first few years were hard — but that insurers seemed on track to finally find their footing next year.

A report released Friday by the ratings firm Standard & Poor's bolsters that view. It found that 2016 was the first year the Blue Cross Blue Shield plans (which are dominant on the Obamacare marketplaces) turned a profit.

"2016 results and the market enrollment so far in 2017 show that the ACA individual market is not in a 'death spiral,'" that report concluded. "However, every time something new (and potentially disruptive) is thrown into the works, it impedes the individual market's path to stability."

The Trump administration has the ability to clarify its stance on this issue. But it hasn't. Health insurers and regulators say that hurts the ACA marketplaces.

The White House could issue an announcement any time about whether it plans to continue paying these subsidies — and whether it will enforce the individual mandate, another area of uncertainty.

But so far that hasn't happened, and regulators say it's negatively affecting their Obamacare marketplaces.

"We should have a pretty decent market," Miller from Pennsylvania says. "I feel cautiously optimistic, but the uncertainty is driving everybody crazy."

Chart of the day

Standard & Poor’s

Last year, the individual market was profitable for the first time under Obamacare. A new Standard & Poor's report says the marketplaces still need a few more years to stabilize but showed promising signs in 2016. "The U.S. ACA individual market shows signs of improvement, as most insurers' 2016 results were better than 2015 results," the rating agency concludes, noting that the "market is still developing and will need a couple more years to reach target profitability."

Kliff’s Notes

With research help from Caitlin Davis

  • "Uncertain future of Obamacare leaves Michigan hospitals unsteady": “Unsteady times have been forcing some hospitals around the country to report delaying expansion plans, cutting costs or taking on added risk to borrow money for capital investment projects. But those kind of hedges against changes to the Affordable Care Act are not widespread in Michigan, hospital officials say. Instead, the state's hospitals are seeking to solidify gains that have boosted the numbers of patients treated, raised profit margins and lowered costs since the Affordable Care Act's biggest provisions took effect four years ago.” —Matthew Dolan, Detroit Free Press
  • "The collateral damage of Obamacare repeal": “Conservatives want to wipe out Obamacare's insurance regulations to make health coverage cheaper — but if they do, it could affect far more than the people who buy health insurance on their own. In a new analysis provided to Axios, the Century Foundation finds that if Republicans turn those regulations over to the states, 91 million Americans in ‘self-insured’ employer plans would be hit too — and they'd probably have no way to get them restored.” —David Nather, Axios

"Seven House Republicans face TV ad attacks over health care": “The seven Republicans targeted — Reps. Mike Coffman (Colo.), Carlos Curbelo (Fla.), Darrell Issa (Calif.), Tom MacArthur (N.J.), Brian Mast (Fla.), Martha McSally (Ariz.) and David Valadao (Calif.) — appear on lists of key districts targeted by Democrats in 2018. Coffman, Issa, MacArthur, Mast and McSally said they planned to support the American Health Care Act before it was pulled from the House floor last month; Curbelo and Valadao took no firm position.” —Mike DeBonis, Washington Post