June 11, 2017


How Obamacare may morph into Medicaid (JB Silvers, 6/11/17, The Conversation)

[I]f their numbers indicate they cannot make a profit, health insurance providers can leave. This is important, since insurers are making broad guesses regarding projected costs and premiums for consumers when they file so early, with little experience to back their decisions.

This year, they have much less certainty regarding the ground rules and subsidies on the exchanges. If they make the reasonable assumption that the government will cut back on their subsidies, as Republicans have indicated they will, the premiums they set now must reflect this additional risk in the future, since insurers will still be legally committed to their filings. Judging from early indications, this additional uncertainty will drive up premiums over 20 percent, although the underlying general increases in health care costs are less than 5 percent.

On top of this, the additional cost sharing reduction (CSR) subsidies under the silver plans are literally being held hostage by the president. A pending court case and President Trump's statements give credibility to the threat of withholding these payments.

The loss of these would require additional premium increases of 19 percent to offset the reduced government support.

These subsidies are critical to the many people buying silver plans since they reduce the average out-of-pocket cost of copays and deductibles radically from the standard 30 percent (i.e., the part not covered by the silver plans) to only 6 percent for the lowest-income people and somewhat higher for those with greater income.

The insurers' dilemma

As a former CEO of an insurance company, I can say that this would create a huge dilemma for me. Premiums must be sufficient to cover likely costs, or I will lose my job!

But I don't know what costs will be, and now I can only guess at what subsidies will be available. So, I must file rates that cover the most extreme possibilities.

The resulting high premiums will be excessive for those not receiving subsidies. These folks most likely will just revert to their former uninsured status.

This will leave only those low-income purchasers whose subsidies under the ACA will automatically rise to offset the higher premiums, leaving the net cost to the working poor the same based on the percentage of their income that is deemed "affordable.". [...]

In any event, the delay and uncertainty, along with predicted reactions of insurers, will guarantee that only low-income working people who are eligible for subsidies will be covered by exchange plans.

Ironically, these are akin to the folks that Medicaid covers now but at a higher level of income than what would qualify for coverage normally. Thus, the result of the impending meltdown of the exchanges may be effectively an extension of Medicaid-type coverage to a greater number of working poor than we have now.

By destroying the initial thrust of the ACA exchanges to give affordable options to everyone regardless of income or health status, we may effectively wind up just extending our current and revamped Medicaid programs for the poor to those with somewhat higher incomes - an ironic result for those bent on reducing Medicaid. 

Posted by at June 11, 2017 5:39 PM