What if health insurance were less comprehensive, but also cheaper?
That’s a politically volatile question, and it gained some currency this week as President Trump signed an executive order designed to undercut Obamacare’s premise that affordability shouldn’t come at the price of less-than-full coverage for medical care.
Mr. Trump signed an executive order designed to open the door to health plans that tread more lightly on consumer pocketbooks, but aren’t as generous in coverage. Separately, his administration said it will stop paying out a key subsidy designed to help people insured on Obamacare’s exchanges.
The president can't remake America’s health-care system without Congress’s participation, but his actions Thursday could destabilize the insurance marketplace even as they allow more Americans to buy coverage that’s outside the Affordable Care Act (ACA) rule book. And where conservatives celebrate what they see as a modest step to expand consumer choice, defenders of Obamacare say it’s one more instance of Republicans undermining a law that, while not a fix-all, has been a win for average Americans.
The executive order seeks to lighten regulation in one realm of the insurance market, called association health plans – potentially exempting them both from the ACA’s mandates for “essential benefits” to be covered and from its rate protections for people with preexisting conditions. The order also seeks to expand the use of short-term medical plans, which are currently designed as stopgap coverage for just a few months.
An open question is how many such plans will become available and how many Americans will migrate to them. But, to the degree that Mr. Trump’s new move draws people away from Obamacare’s marketplaces, the result could be to push up premiums within those exchanges, since the bias will be for healthier people to depart and less-healthy people to remain. And it comes as Republicans are already facing criticism for undermining Obamacare even as the American public wants to shore it up.
“These association health plans ... enable healthy groups to band together and get lower premiums, which results in higher premiums for other groups,” says Dan Mendelson, president of Avalere Health, a health-care consulting firm based in Washington.
“It's an invitation to cherry-pick [consumers] in the market,” and that will be destabilizing, he says.
Cuts to subsidies
Separately, late on Thursday the Department of Health and Human Services said it will cease to pay out subsidies known as cost-sharing reduction (CSR) payments, saying Congress has never appropriated the needed funds. The Obama administration was able to continue the subsidies despite a lawsuit seeking to block them.
Those CSR payments amount to some $7 billion a year to insurers, to help moderate-income families with out-of-pocket medical costs (separate from the tax-credit subsidies they can receive to help with premiums).
Combined, the moves appear to signal a pointed strategy of undercutting Obamacare - which has been one of Trump’s key targets since the election campaign. Yet it’s a risky gambit for Republicans and Trump.
It’s conceivable that, to the degree the moves shake up insurance markets, pressure will mount on both parties to consider bipartisan reforms. But in today’s fraught political climate, a likelier scenario may be that Democrats focus on blaming the GOP, passing political ownership of insurance-market challenges to Republicans. Some analysts say attacks on Obamacare could backfire to the point that liberal calls for a single-payer system gain more traction than rival conservative ideas do.
Obamacare already under fire
Trump signed the order in the aftermath of repeated failures of Congress’s Republican majority to coalesce around legislation that would fulfill campaign promises to “repeal and replace” Obamacare.
Although not repealed, the law already faced headwinds, including Republican-led reductions in funding for “navigators” to help consumers shop for insurance on the exchanges.
And even prior to the announcement canceling CSR payments, rumblings from Trump that this might occur were rippling into insurance-plan prices.
Premiums on the exchanges appear set to rise on average by double-digit rates for 2018, affecting some 7 percent of Americans, who are in the individual marketplaces rather than enrolled in employer-based coverage, Medicare, or Medicaid. But an additional 9 percent of Americans are uninsured. Where a liberal solution is to bring more people into comprehensive care, many Republicans say this level of nonparticipation is a sign Obamacare is failing to deliver affordable insurance, and that consumer-driven reforms are the answer.
“Americans face a stark choice on what their health care will look like in the future,” health-policy expert Robert Moffit of the conservative Heritage Foundation wrote in September.
Referring to rising calls by Democrats for a single-payer system, he said, “they can adopt a government-run health-care system, financed by new and heavy federal taxation, with federal officials making all the key decisions about medical benefits and services. Or, they can adopt a system in which individuals control health-care dollars and decisions, including the kinds of health plans, benefits, and treatments that best suit their needs.”
The impact of the new executive order remains to be seen. It directs cabinet secretaries to consider changes that will require a months-long process including public comment and review of legal uncertainties. And then the actual uptake in the marketplace would be uncertain.
“A broader interpretation of the Employee Retirement Income Security Act (ERISA) could potentially allow employers in the same line of business anywhere in the country to join together to offer healthcare coverage to their employees,” the order said.
In remarks at the signing, Trump said the move “would open up additional options for employers to purchase the health plans their workers want.”
Premium subsidies to rise?
Some conservative health-policy experts see the effort as a positive one for the health-care system, even if its scope is far short of a replacement for Obamacare.
Chris Pope of the Manhattan Institute says it may enable more small employers to offer insurance to their workers, as large employers typically do.
But he agrees with other analysts that the result would be to tilt the ACA customer base toward those who most need comprehensive plans. The result would be to push premiums up – and since those premiums are most often subsidized, much of the cost would fall on US taxpayers.
“Subsidies are going to continue to rise,” says Mr. Mendelson of Avalere.
And higher-income purchasers of ACA insurance, who aren’t eligible for subsidies, would see premiums rise faster than otherwise in this scenario.
With or without ripple effects from the executive order, members of Congress in both parties face voter pressure to address concerns about the Obamacare marketplaces. Not only have premiums been rising fast lately, but fewer insurers are offering plans, reducing competition even in many urban markets.
Steps to shore up the exchanges have already been the subject of some discussions across party lines, but broad partisan differences remain a formidable obstacle.
[Editor's note: This article has been updated to reflect subsidy cuts that were announced later on Oct. 12 than the president's executive order.]