The following article by Reed Abelson and Margot Sanger-Katz was posted on the New York Times website March 15, 2017:
If you listen to many Republicans in Washington, the Affordable Care Act’s insurance markets are in a “death spiral,” “imploding,” “collapsing” or “will fall of their own weight.” That’s part of the rationale behind the new House proposal to reshape the health care system.
On Monday night, House Speaker Paul Ryan repeated this line, even in the face of projections that his plan could lead to 24 million fewer Americans with health insurance in 10 years. “Put this against the backdrop that Obamacare is collapsing,” he said in interview with Fox News. “This, compared to the status quo, is far better.”
But the new estimates from the Congressional Budget Office contradict this long-held talking point. According to the budget office, the Obamacare markets will remain stable over the long run, if there are no significant changes. The House plan would cause near-term turmoil, it found, but the markets would eventually become stable. “The nongroup market would probably be stable in most areas under either current law or the legislation,” said the report, using the technical term for the market where people buy their own health insurance.
Mr. Ryan is right that the Obamacare market has endured hardships. It isn’t as competitive as many of its advocates had hoped, and shoppers in many parts of the country have only one insurer to choose from. Prices, which were lower than expected in the first few years of the program, spiked this year by an average of 22 percent across the country. There have also been some high-profile exits from insurers like Aetna, UnitedHealth Group and most recently Humana. Rural counties have been particularly hard hit.
But those recent woes are not the same thing as a death spiral, a technical term used to describe a complete market failure in which premiums spiral upward so only the sickest customers buy coverage.
Growing evidence suggests that the markets, despite their problems, are far from collapse. Because of how the current subsidies work, people were generally shielded from this year’s higher prices, and enrollment has remained steady. Several recent analyses argue that this year’s increase was a market correction, and that a smoother market would follow in the years ahead.
Many insurers had been struggling to make money but now seem closer to breaking even, said Deep Banerjee, an analyst with Standard & Poor’s. This includes Health Care Service Corp., which operates Blue Cross plans in numerous states and recently reported that financial results improved in 2016. The industry should do even better this year because of higher premiums and other changes the insurers have made.
But insurers say lawmakers need to make fixes in order for them to remain in the market and have praised some of the early steps taken by the Trump Administration to stabilize the market.
The C.B.O. concludes that the Republican bill would make the markets far shakier over the next two years. A big reason is that it would do away with Obamacare’s individual mandate, a financial penalty devised to encourage signups among healthy customers and to keep prices down.
Without it, the office predicts that premiums would rise 15 to 20 percent, and that seven million people would leave the market. (In 2020, when a new tax credit system kicks in, prices are expected to start going down, as enrollment keeps falling for several years.) That first year of sharp price increases and substantial coverage losses would play out during the midterm congressional elections.
In addition to creating this turbulence, the C.B.O. report found, the House plan would do little to increase competition or increase choice.
It is hard to see how the bill would entice insurers into the market if they are not already selling coverage. Many companies were initially attracted to the Obamacare markets by the idea of a large and growing pool of people ready to buy their plans. But they have been discouraged by lower-than-expected enrollment and the challenges of making money.
While there may be fewer restraints on the kind of policies the companies could offer under the Republican plan, the budget office estimates the individual market will be much smaller in the next few years. So insurers would have to decide if the effort was worth their while.
“I don’t think there is anything in this bill that makes the market a lot more attractive to insurers,” said Larry Levitt, a policy expert at the Kaiser Family Foundation.
The law would leave in place many of Obamacare’s regulations, which companies say make insurance plans pricey. Rules that insurance companies must charge the same prices to healthy or sick customers will remain, as will the requirement that every plan include basic benefits, including prescription drugs and rehabilitation services. The law would allow plans to charge slightly higher deductibles than allowed under Obamacare, and the C.B.O. expects that some of the more generous plans on the market will be phased out.
Although the budget office says the overall market would be stable under the new plan, rural areas could become even less attractive to insurers. Insurance companies tend to shun these areas because medical care is expensive, leading to high premiums.
Tax credits in the Republican plan don’t adjust for the local cost of insurance, so people with expensive plans in states like Alaska, Arizona and Nebraska could find themselves paying much more, according to a recent analysis from the Kaiser Family Foundation. A result could be that far fewer people sign up for coverage if the gaps between their subsidies and premiums widen.
The Republicans’ plan does take some steps to help stabilize the market by setting up a separate fund for states to help cover people with the most expensive conditions. The C.B.O. thinks the $80 billion allocated to the states will have a significant impact, not only by lowering overall premiums but also by reducing the risk to an insurer from providing coverage. The budget office describes these funds as contributing “substantially” to the stability of the market, though exactly how to use the money would be up to the states.
The White House and congressional leaders have been arguing that any assessment of the current health bill alone is incomplete. The Department of Health and Human Services is working on regulatory changes, and Republicans in Congress may introduce additional bills to reform the health insurance system. But those proposals are yet to be seen, and may be limited in how much they can change. Many of Obamacare’s rules for health insurers are specified in law. And any legislative changes would require the approval of at least eight Senate Democrats to overcome a filibuster.
For now, it looks as if the Republican plan would make the markets less stable in the short term, and possibly make them equally stable, if smaller, 10 years from now. But if the plan never passes, forecasts of a death spiral may be premature.
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