Insurers Exit Obamacare Amid Political Uncertainty and Market Instability

Since entering the presidential race, U.S. President-elect Donald Trump has consistently made repealing the Affordable Care Act (Obamacare) one of his key objectives. After his election victory, he persistently advanced practical efforts to implement new healthcare reform policies; however, two successive votes on the proposed reforms ultimately failed in the House of Representatives.

The turning point came in the early hours of May 5, 2017 (Beijing time), when the healthcare reform bill that President Trump had staunchly advocated was narrowly passed by the U.S. House of Representatives with a vote of 217 in favor and 213 against. American public opinion widely regarded this as a hard-fought legislative victory for the Trump administration since taking office.

Recently, a columnist for The Atlantic wrote an article analyzing why insurance companies cannot sustain themselves in the long run under the Affordable Care Act, from the perspective of each state’s acceptance of the reform.

As a legacy print media outlet that has long sought to maintain a nonpartisan, neutral stance, The Atlantic rarely endorsed the Democratic Party during the 2016 presidential election. How does this publication interpret the political legacy of the Obama era and the policies currently being vigorously promoted by the Republican Party? VCBeat (WeChat ID: vcbeat) has compiled the core viewpoints to provide insights into the reasons behind the failure of Obamacare.

“Obamacare” is the common name for the Patient Protection and Affordable Care Act (abbreviated as the “Affordable Care Act,” or ACA), which was signed into law by former President Obama in March 2010. The legislation aims to help the United States achieve universal health coverage, improve the quality of healthcare services, and reduce healthcare costs.

Under the Affordable Care Act, health insurance coverage is mandatory. The law provides subsidies to millions of individuals to purchase insurance and prohibits insurers from charging risk-based premiums based on pre-existing conditions.The alternative bill, the American Health Care Act (AHCA), which the Republican Party is actively seeking to pass, would allow states to no longer mandate that insurers charge individuals with pre-existing conditions the same premiums as healthy individuals.

In fact, although it has been implemented for seven years, the concept of “universal health coverage” advocated by the Affordable Care Act is not understood by all Americans. Especially against the backdrop of the 2008 global financial crisis, which severely battered the U.S. economy, many American citizens,In particular, the broad middle class does not accept the ideal of taxpayer-funded coverage for so-called “universal welfare,” which has consistently hindered the implementation of the ACA.。

For critics of the Affordable Care Act, one of the reasons to argue that the law is “collapsing” isMany insurers appear to be withdrawing from the ACA health insurance exchanges, or state-based online individual health insurance markets.. In fact, one of the most frequently cited data points by Republicans, including President Trump, isBy this year, it is projected that one-third of all counties across the United States will have only a single insurer participating in the Affordable Care Act exchanges.。

U.S. Secretary of Health and Human Services Tom Price expressed similar views in a recent editorial. He likened the Affordable Care Act to a house on fire, stating that “many of our fellow Americans are trapped inside.”Although some insurers are still weighing whether to participate in the Affordable Care Act exchanges, the reality is clear: insurer participation in the ACA is steadily declining.

In just the past few weeks, Aetna withdrew from Virginia’s Affordable Care Act (ACA) marketplace, meaning the company will participate in Obamacare exchanges in only four states this year. In most parts of Iowa, Medica, a Minnesota-based insurer, is now the sole remaining provider, and it has also announced plans to stop selling individual health insurance plans. After Humana exited the Tennessee market in February, leaving approximately 40,000 residents without any health coverage, Blue Cross Blue Shield (BCBS) reluctantly entered the Tennessee market on May 9, stipulating that insurance could only be purchased under certain conditions.

According to an analysis by the Kaiser Family Foundation (KFF), 31% of counties across the United States will have only one insurance company this year, compared with just 7% last year—a striking increase.

However, Republicans’ criticisms of the Affordable Care Act often overlook a key fact: had more states expanded the Medicaid program under the ACA, insurers would likely have been less inclined to withdraw from the market.

Under the Affordable Care Act (ACA), states were required to expand Medicaid coverage to include individuals with incomes below 138% of the federal poverty level, equivalent to an annual income of less than $16,400 for single adults. However, a 2012 Supreme Court ruling made this expansion optional; to date, 19 states across the nation have refused to broaden their program coverage.

In these states, individuals with incomes below 100% of the federal poverty level (approximately $12,000 per year) are ineligible to purchase private insurance through the Affordable Care Act exchanges, and in most cases, they are also unable to qualify for Medicaid.

These low-income individuals have become a population abandoned by insurance companies. However, in those 19 states, people with incomes between 100% and 138% of the federal poverty level remain eligible for subsidies to purchase insurance through the Affordable Care Act (ACA) exchanges. Many of them enrolled in ACA plans; in states that did not expand Medicaid coverage, this group accounted for 40% of enrollees, whereas in states that implemented the expansion, the figure was only 6%.

It is worth noting that low-income individuals are often more susceptible to severe illnesses than their wealthier counterparts. Consequently, insurance companies frequently incur higher costs in states that have refused to expand coverage.. For example, insurance provider and analyst Louise Norris points out that Blue Cross/Blue Shield, as the sole insurer participating in Alabama’s 2017 exchange, incurred approximately $1.20 in claims for every $1.00 collected in premiums—a loss ratio at which sustainable operations are entirely impossible.

So, why do insurance markets remain highly fragile in states that have expanded Medicaid coverage? For example, as mentioned earlier, Iowa expanded its Medicaid program, yet a majority of insurers withdrew from the health insurance exchanges, potentially leaving the state without any Affordable Care Act plans this year.In Iowa and several other states with similar circumstances, this phenomenon may be attributed to the fact that health insurance plans outside the Affordable Care Act have forced insurers to incur high costs for enrollees.

Before the Affordable Care Act (ACA), insurers could deny coverage to applicants deemed too costly or high-risk. After its passage, approximately 35 states continued to allow the sale of “grandmothered” health plans—those sold between the enactment of the ACA on March 23, 2010, and the implementation of its market reforms. In contrast, “grandfathered” plans refer to those that were already in existence prior to the ACA’s enactment.

Only states that are traditionally considered more “liberal,” such as New York and Vermont, prohibit this practice. Enrollees in these so-called “grandmothered” health plans tend to be healthier than other insured individuals, as they are permitted to purchase coverage only after passing the health assessments that insurers previously used for customer selection.

The Affordable Care Act prohibits insurers from raising premiums when enrollees fall ill, but these health plans do.Therefore, in states that permit the continued implementation of “Grandmothered” health insurance plans, many healthy individuals only enroll in Obamacare when they fall ill, forcing insurers participating in the Affordable Care Act to bear greater risk.

According to the KFF’s 2015 State Risk Score Analysis from 2016, states that expanded Medicaid coverage and prohibited the continued sale of “grandmothered” health plans had the lowest risk scores. In contrast, states that did not expand coverage and still allowed the sale of such plans had risk scores significantly higher than the national average, with a gap of 8 percentage points compared to the former group.

Of course, Kaiser researchers also acknowledge that other hidden population factors may have contributed to these results, but they believe the study “does show that state policy decisions can have a clear impact on risk pools.”

Karen Pollitz, a senior fellow at KFF, continues to use Iowa as an example. In that state, Wellmark (BCBS) has been able to maintain its large market share by continuing to offer “grandmothered” and “grandfathered” plans, thereby allowing it to make choices that best serve its own interests.

Reports indicate that over the past three years, Wellmark has incurred $90 million in losses from its ACA plans, including a single $18 million claim payment to one enrollee within a single year. This is why Wellmark will not only exit the ACA marketplace in 2018 but also discontinue all ACA-compliant health insurance plans.

Today, many insurers are more concerned about whether the Trump administration will continue to implement Cost-Sharing Reductions (CSR) to cover medical expenses for low-income individuals under the Affordable Care Act. Republican members of the House of Representatives successfully sued the Obama administration in 2014 to block these payments, and the newly passed healthcare bill in the House also seeks to eliminate this funding.

As a result, insurers participating in the Affordable Care Act will face billions of dollars in medical cost burdens. As Cori Uccello, Senior Health Researcher at the American Academy of Actuaries, stated, “Insurers are most concerned about whether they will be reimbursed.”Meanwhile, other insurers remain skeptical, believing that the Trump administration may still enforce the individual mandate under the Affordable Care Act; consequently, they have generally adopted precautionary measures by raising premium rates.

Of course, since it remains uncertain whether Trump’s healthcare reform will pass the Senate, it is still too early to make definitive statements about the future of Obamacare. However, data clearly show that insurers’ widespread exit from the ACA has become an indisputable fact.

Republicans have long criticized President Obama’s Affordable Care Act as a system in which “the healthy pay for the sick” and “the rich pay for the poor,” and they once confidently predicted that Obamacare would inevitably enter a “death spiral.” However, the collapse of insurance markets is often not entirely due to their own inherent flaws; decisions made by state governments, Congress, and the Trump administration have also been driving forces behind this trend.

[References]

https://www.theatlantic.com/health/archive/2017/05/why-so-many-insurers-are-leaving-obamacare/526137/