The cloud over the future of the Affordable Care Act (ACA) is proving to be a major threat to the stability of the health insurance exchanges that are the backbone of the law, says UMass Medical School’s Robert W. Seifert, MPA.
Not sure what the future holds for a key element of Obamacare, a number of major insurers have pulled out of the state-level exchanges through which millions now buy health care policies. And a May 23 budget from President Donald Trump that massively cuts Medicaid has further shaken the markets.
Aetna recently announced plans to pull out of ACA exchanges in Nebraska and Delaware, and previously said it would no longer be selling individual plans in Virginia and Iowa.
Aetna and other insurers have been shaken by the uncertainty over whether the Trump administration, under the American Health Care Act (AHCA), will continue to pay billions to help subsidize premiums for those who buy insurance through the exchanges.
“Insurers don’t like uncertainty,” notes Seifert, principal of the Center for Health Law and Economics at UMass Medical School. “They insure against risk — that is what insurers do — but they need to be able to predict what their risks are going to be.”
A major concern for insurers is their inability to accurately forecast their costs without knowing what the future holds for the estimated $8 billion a year in premium subsidies the federal government now spends, according to Seifert.
“If there is a lot of uncertainty, as there is now, the threat for insurers to leave the market is very real,” he said.
The Trump administration, which wants to repeal Obamacare, recently announced it would push off for another three months a decision on whether to continue the subsidies.
Republicans in the House of Representatives have made it clear they want to end the subsidies and have challenged in court the federal government’s right to make those payments.
With the future of the subsidies up in the air, insurers have been forced to raise their premiums on the assumption that the federal dollars may go away at some point, Seifert says.
Higher premiums, in turn, have forced some people to drop insurance policies bought through the ACA exchanges, with the turmoil, in turn, also prompting insurers to pull out.
“That uncertainty in itself drives premiums up and drives people away from that market,” Seifert said. “A lot of insurers have simply just walked away from the market because they really can’t tolerate the uncertainty.”
On top of the issue of subsidies, the new budget proposes massive changes to Medicaid that would cut $610 billion in spending over a decade. The budget assumes the AHCA will be passed into law, thereby eliminating Medicaid expansion.
While some critics have argued the local ACA health insurance markets are in a “death spiral,” the exchanges could be shored up with the help of a couple key policy initiatives, Seifert says.
Simply removing the ambiguity around the future of the insurance subsidies would help stabilize the exchanges, Seifert said.
A reinsurance pool under which the federal government would help provide additional payments to insurers which, by chance, are left with a sicker pool of customers, would also help strengthen the exchanges, Seifert said.
The ACA originally had such a provision. While it has since expired, there has been talk of bringing it back or creating something similar, he says.
“If the uncertainty were cleared up, that would do a lot to stabilize the insurance exchanges,” Seifert says.
