The Takeaway: With Friends Like These…
Congressional Republicans and President Trump seem to delight in spinning colorful metaphors to describe the Affordable Care Act (ACA), from a collapsing bridge to a traffic accident. They portray themselves as on a rescue mission… for example.
However, they don’t talk much about what they would actually do to make things better, and for good reason. Based on their actions rather than their words, they seem much more like assassins trying to kill the ACA while escaping the blame by calling themselves the rescuers.
The Trump administration has jumped to the front of the ACA hit squad by taking actions to undermine the stability of the individual insurance market. First, they issued an executive order that raises questions about whether they will enforce the individual mandate. Second, they tried to sabotage open enrollment by pulling back ads, which the government already paid for, and other forms of enrollment support such as email reminders. Attacked on all sides, they reversed course. Nevertheless, their intention to undermine is clear: sow confusion among insurers, get fewer people to sign up and cause rates to spike.
Congress’ plan to repeal critical provisions of the ACA without a replacement will have a similar effect. Moreover, obviously, their plans to take away tax credits and Medicaid benefits from millions of people will clearly undermine, not save, health care.
It’s important to remember that prior to the ACA, the insurance market for people who did not have employee-sponsored insurance was dysfunctional. Insurers could deny people coverage based on even minor health conditions or slap them with a pre-existing condition exclusion. In some states, carriers could increase rates if an insured person got sick. And carriers repeatedly used health screens to try to skim off the healthiest people and leave the sick behind.
The ACA reform of this dysfunctional market rests on three pillars:1) changing the insurance “rules of the road” to make decent coverage available to all; 2) tax credits to make coverage affordable; and, 3) an individual responsibility requirement (aka “individual mandate”) to prevent people from waiting until they get sick to seek coverage. These three types of reforms have greatly improved the functioning of the non-group market.
All three of these pillars could use some shoring up. In some states and especially in rural counties, there are too few insurers. For many people premiums, and especially cost sharing, remain too high. And insurers have argued that the current financial penalties for not having coverage are too weak to get some healthy people to enroll. However, many of the so-called rescue plans on the table do not solve these problems but rather do the opposite. They would substantially weaken rather than strengthen the ability of people to obtain affordable coverage that actually provides financial protection against the cost of medical care. Let’s look at each area in turn.
Rules of the Road
The fixes Republicans propose, to varying degrees, weaken the ACA’s market reforms by permitting such now-banned practices as gender rating and discriminatory benefit design. These changes would essentially force insurers to discriminate. Why “force” and not merely “allow”? Because once discrimination becomes legal, any insurer who doesn’t practice it will attract a disproportionate share of sick people and their rates will spike, driving them out of business. A market that allows discrimination becomes a race to the bottom.
Also, one of the biggest complaints about health insurance today is that cost sharing is too high. So how do Republicans propose to fix this problem? By making cost sharing even higher with reduced benefits and higher deductibles.
Let’s set aside for the moment the question of how tax credits to pay for coverage would be paid for in the federal budget if Republicans carry out their plan to use benefit cuts as a budget offset to pay for big tax cuts to the wealthy. Proposals emerging from congressional Republicans generally give people less financial assistance and tilt that assistance away from low- and moderate-income households while providing more help for the affluent. This would make coverage unaffordable for many who have it now.
Individual Responsibility Requirement (IRR)
This is certainly the most unpopular part of the ACA, but some provision must be in place to prevent people from waiting until they need care to obtain coverage. Republicans have proposed alternatives such as late enrollment penalties and/or auto enrollment. While giving states some flexibility to experiment with these options makes sense, they are not likely to work as well as the current provisions in the ACA. It is also worth noting that the IRR works well in Massachusetts and in some other countries, such as Switzerland, where the IRR is similar to ACA in design. However, importantly, Massachusetts and these other countries rely on both bigger carrots (better benefits and bigger subsidies) and bigger sticks (higher penalties for non-enrollment).
What can we conclude from the actions of the Trump administration to date and congressional Republican proposals to undermine systematically the provisions of the ACA that make coverage accessible and affordable? The inescapable conclusion is that in 1984, er, 2017, “save” means “destroy” when it comes to health care coverage.