President Trump says that Obamacare is going to explode.
But if that happens, it is likely because his administration supplies the spark that detonates the marketplaces.
The White House could decide at any time to eliminate subsidies relied upon by insurers to lower costs for Obamacare’s poorest customers, as a result of a court win by House Republicans last spring.
“It’s one thing to say we’re going to watch Obamacare collapse,” said Kathy Hempstead, who oversees coverage programs for the Robert Wood Johnson Foundation. “It’s another to shoot it in the head.”
Eliminating the subsidy program would be the most dramatic maneuver but also the highest-risk. House Republicans had sued the Obama administration to block funding for the subsidies that cover out-of-pocket costs for poorer Americans, arguing that administration had paid for it without congressional authority. That argument prevailed in a lower court last year, but was appealed by the Obama administration. The lawsuit has essentially been put on hold while the House and the Trump administration decide how to proceed.
If the White House drops the appeal, that $7 billion a year would likely disappear almost immediately. Insurers would still be required to pay the bills of poorer participants, but with no way to get reimbursed. That could trigger a mass exodus of insurers and lead to the collapse of the marketplaces that Trump and many other Republicans have long predicted.
But the GOP might not escape blame for the resulting chaos.
“They now own these markets because they control the government,” said Dan Mendelson, CEO of consulting firm Avalere Health, who served in the Clinton administration. “That’s very plain to see.”
But Sen. Bill Cassidy (R-La.) disagrees with that assessment. “We just attempted to change the law and were not successful in doing so,” he said Tuesday. “So it’s going to be current law which causes these markets to explode,” he argues.
The Trump administration hasn’t said whether it will continue the cost-sharing subsidies. HHS said it does not comment on pending litigation, in response to questions from POLITICO.
Greater clarity may come Wednesday when Health and Human Services Secretary Tom Price testifies before a House appropriations subcommittee. Lawmakers are likely to ask about his department’s plans on the health law.
Price has sent mixed signals about his approach to the Obamacare marketplaces. On the one hand, HHS canceled up to $5 million in outreach advertising during the crucial final days of the open-enrollment season, which Obamacare’s allies have blamed for a drop-off in signups. It could also stop enforcing the law’s unpopular individual mandate, which would inject additional turmoil into already fragile insurance markets.
But Price has also proposed new regulations designed to stabilize the markets. The proposal, which is expected to be finalized soon, would crack down on special enrollment periods, requiring Obamacare customers prove their eligibility before they can get coverage outside of the standard enrollment window.
That may not be enough to reassure anxious insurance executives, though.
Insurance consultant Robert Laszewski uses an analogy from the construction business to illuminate the dilemma insurers face with a late June deadline to decide whether they will participate in 2018. He argues that it’s like Trump asking investors to put money into a building that he predicts is going to collapse at any moment.
“If you’ve got hundreds of millions of exposure to it, you have to take his words seriously,” Laszewski said. “What other alternative do you have?”
Laszewski sees a potential bigger problem in the near term if the Trump administration fails to enforce the unpopular individual mandate. Many interpreted the executive order signed by Trump on Day One of his presidency as a signal the administration doesn’t intend to enforce Obamacare’s tax penalty for failing to obtain insurance.
“That’s probably the bigger deal,” Laszewski said. “The individual mandate wasn’t terribly effective, but it was somewhat effective.”
Republican legislators appear split about whether to continue the cost-sharing subsidies.
“I can imagine that the House and the Senate will agree to do this on a short term basis,” Cassidy said of funding the program. “But the idea that we’re going to continue to appropriate billions to bail out a plan which is inherently unstable I don’t think is practical.”
But Rep. Buddy Carter (R-Ga.), who sits on the Energy and Commerce Committee, thinks Congress is under no obligation to bankroll the program.
“Obviously we have to do something to not let it fail,” Carter said of the Obamacare markets. “But at the same time, we also have to do the right thing and the legal thing. How hypocritical would it be for us to sue, to win — and then to say we’re going to do it anyway?”
Sen. Ron Johnson (R-Wis.) wants to see how HHS’ steps to stabilize the markets play out before deciding on the cost-sharing subsidies. “You can do a lot of things through Secretary’s Price’s authority,” Johnson said.
There is bipartisan agreement that many of the marketplaces are in vulnerable shape. The average premium hike for 2017 exceeded 20 percent and roughly a third of all counties had just a single insurer selling plans for this year.
But most health care finance experts don’t buy into the apocalyptic Republican rhetoric about imploding marketplaces. Instead they believe it’s likely the markets will continue to muddle along on an eventual path toward stability. A December report by Standard & Poor’s predicted that insurers’ bottom lines will show steady improvement from 2015 to 2017, and that many more will break even or make money in the individual market this year.
“We expect this to be kind of the bottom,” said Deep Banerjee, an author of the Standard & Poor’s report. “We don’t expect sharp growth in the future, but there should be a slow, gradually growing market from here.”