On Capitol Hill, the prospects for transforming the health-care system don’t look good. Hard-line conservatives want to go back to the initial plan of repeal first, replace later (or never). The Freedom Caucus wants to eliminate the Medicaid expansion, while congressional leaders want to increase the funding to compensate mostly red states that never expanded, ensuring parity nationwide. Republicans are essentially caught between their promise that nobody will lose coverage after Obamacare and the vow of their right flank to reduce federal health-care dollars. And without the president coming in to dictate the way forward, lawmakers will likely remain at one another’s throats and searching for a resolution.
But get outside the Capitol rotunda and you’ll find that Obamacare is changing rapidly. The law is either stabilizing or careening toward disaster, depending on your perspective, thanks to numerous private-sector developments, enforcement priorities, and proposed rulemaking.
First off, insurance giant Humana announced it would pull out of individual market exchanges in 2018. Humana offers exchange coverage in only 11 states and to only 150,000 customers, a fraction of the 12 million who have exchange policies.
This would have been a far worse outcome if Humana successfully merged with Aetna, which a judge blocked, sinking the deal. Another major insurance merger between Cigna and Anthem is all but shattered, with Cigna suing to get out of it. In theory, more participants bring more competition to the marketplace, but if insurers continue to drop out of the exchanges and focus on other business lines, then the part of the industry most transformed by the ACA could find a lack of willing issuers.
What’s interesting is how this has been framed as a problem for Republicans, who have always blamed any setbacks in insurance on Obama. With great power comes great responsibility, a comic book once said, and with total control of the government, the GOP feels the need to save the exchanges or face the consequences.
To that end, newly minted Health and Human Services Secretary Tom Price issued proposed rules for “market stabilization” on Wednesday, which look more like rules to increase the hassle of obtaining coverage.
The proposed rule (which I don’t see accompanied with the identification of two other rules that could be repealed, as per a Trump executive order) would cut in half the annual open enrollment period for exchanges, moving the deadline from January 31 to December 15. It would force higher verification standards on anyone who tries to elect coverage outside the open-enrollment period because of a significant life event (like unemployment, for example, or a marriage or the birth of a child). Insurance companies would be able to apply premium payments to a prior debt incurred by the same individual, allegedly to prevent gaming from customers who only pay sporadically but take advantage of guaranteed issue to get coverage when they need it.
This is the equivalent of putting an insurance-company storefront on the eighth floor with no elevator, so people too infirm to make it up the stairs cannot apply. Shrinking the time to get coverage and building in hurdles to get coverage outside the enrollment period has the effect of making it harder to get insurance. You can call that “stabilization” if you want, but it’s a pretty transparent effort to design regulations favorable to the industry. Furthermore, we really lack the data to say that individuals are gaming the system by only paying for coverage when necessary. Yet all these regulations are written with that fear in mind. HHS is also seeking comment on whether rules that require continuous coverage year-round would be preferable to a mandate to obtain coverage. This is part of Price’s proposal for an Obamacare replacement, and you can expect HHS rule making to trend in this direction.
The other big regulatory change in this proposed rule concerns the actuarial value of coverage. One big change to Obamacare is that coverage had to have some sort of minimum value, so you would actually get coverage you could use. HHS is proposing to give insurers more flexibility in setting those actuarial values. Before, the “de minimis” variation could be within only two percentage points of the actuarial value target that is written into the law. Now an insurer can issue policies that are up to four percentage points less, though they still cannot go over two points on the upside.
This isn’t a huge difference, but it chips away at the value of allowable exchange coverage. The professed goal is to stabilize premium prices and “cost sharing” by consumers. But you will get what you pay for. And having “coverage” instead of real coverage doesn’t do much good when someone gets sick.
Price has many more options to alter the system, but so do other agencies. According to a much-discussed report in Reason, the IRS decided against changing its policy to reject all forms that don’t answer the question of whether or not a taxpayer maintained health-insurance coverage. This only means that things stay the same as in previous years. However, as tax collection is the main enforcement mechanism for the individual mandate, it signals that the IRS won’t see the mandate as much of a priority. Whether that results in fewer people paying the penalty remains to be seen. But, if nothing else, it’s a subtle weakening of the mandate.
If de-emphasizing the mandate leads to fewer healthy people in the risk pool, it would have the opposite effect of stabilizing the individual market. But so many of these executive actions appear designed to shrink that marketplace so it can be drowned in the bathtub. Not only does this build a narrative of Obamacare failure; it also reduces the stakeholders in the exchanges. It could make repeal easier down the road, which is why Republicans are encouraging Price to do his worst.
So while legislative action is stalled, the themes for executive action are deregulation for insurers and flimsier, harder-to-obtain coverage for consumers. That’s what “fixing” the Affordable Care Act looks like in practice under Republicans.