Republicans in Congress have run into serious trouble with their efforts to overhaul the Affordable Care Act. Congressional leaders are still talking about the possibility of repealing the whole act, or coming up with a way to change or replace it. President Donald Trump is also talking about using executive branch actions to block the health law.
Up till now, the Trump administration has been doing what it can to maintain continuity at the Affordable Care Act public exchange system and the Affordable Care Act subsidy programs. That could change. The administration could, for example, start withholding payments to health insurers through the Affordable Care Act cost-sharing reduction subsidy program. That program helps lower-income users of public exchange coverage pay their deductibles and coinsurance amounts.
The idea that the Trump administration could, in effect, go on strike against the Affordable Care Act raises questions about what an aggressively, intentionally crippled Affordable Care Act system might be like.
Some agents and brokers may hate the idea. Other insurance professionals may see an Affordable Care Act showdown as the only option the administration has to break through paralyzing Washington health policy gridlock. Either way, “Trump showdown care” is as much of a near-future scenario that insurance professionals have to consider as the idea that the country could simply repeal the Affordable Care Act, keep the current system pretty much as is, adopt a system based on the Senate’s stalled Better Care Reconciliation Act bill, or even startle everyone by shifting to a true single-payer health care system.
Here are some thoughts about how “Trump Showdown Care” world could work.
1. Much will depend on what steps Congress, the courts, federal employees and federal law enforcement agencies are able and willing to take to limit the administration’s actions.
The courts could rule, for example, that the Trump administration has a legal obligation to run Affordable Care Act programs, such as the act’s health insurance premium tax credit subsidy program, as well as it can while the act is still in effect. Or, Congress could pass an ordinary bill, with a veto-proof majority, requiring Trump to continue to keep the Affordable Care Act system intact, at least temporarily.
If, however, Trump’s Centers for Medicare and Medicaid Services refuses to make Affordable Care Act subsidy program payments, or it turns off the computers that run HealthCare.gov, and federal law enforcement agencies and Congress decline to step in, it’s not necessarily clear what force could compel the administration to keep the Affordable Care Act system intact.
If law enforcement agencies sit on the sidelines, the Trump administration might simply be able to return the laws and regulations back to where they were in 2009 by declaring that this should happen, even if a majority of lawmakers in both the House and the Senate oppose that.
For insurance professionals, the key point is that this is a good time to pay close attention to agent groups’ legislative affairs people.
2. Issuers might pull individual major medical coverage off the shelves in many markets.
Health insurers typically have project margins on major medical coverage of 10% or less, even in good years. Insurers can’t afford the kinds of big losses that could result from inaccurate assumptions.
Republicans, meanwhile, have proposed Affordable Care Act changes that could skew enrollee health risk in hard-to-predict ways. If Trump Showdown Care makes the disruption even worse, insurers may have no choice but to cancel plans to offer individual coverage for 2018, because they would have no way to design and price 2018 products in a prudent fashion.
Federal efforts to withhold subsidy payments could force some insurers to get permission from state regulators to cancel policies that are already in force, or, if state regulators refuse to give such permission, to enter state-supervised receivership, rehabilitation or liquidation proceedings. The hot new insurers in 2018 could be the state guaranty funds that back insolvent insurers.
For insurance professionals, the best way to cope with this possibility is to make sure clients have major medical coverage in place, in the hope that they will be able to keep their coverage through any period of disruption, or at least be first in line for guaranty fund assistance or emergency health coverage programs.
3. Issuers of products that compete with individual major medical coverage, such as short-term health insurance, might rejoice at first, thanks to a decline in competition from individual major medical coverage, but explosive growth might eventually force them to cap sales.
In theory, gap-filler products could fill much of the void left by the shrinkage of the big medical plan providers.
In the real world, issuers might start out excited about the chance to sell policies as quickly as their computers can process the applications. For insurers, however, rapid growth can be a serious financial risk. Gap-filler product sellers might eventually have to limit sales, especially if a prolonged individual major medical shutdown leads to antiselection pressure.
Issuers of gap-filler products can use medical underwriting, but, traditionally, they’ve often used simplified underwriting arrangements. If severe individual market disruption occurs, many healthy people might go bare. People with health problems might be the people with the biggest incentive to seek out gap-filler product alternatives. They might join together through social media to come up with creative new strategies for getting around the insurers’ pesky underwriting systems. The more creative people with health problems get at evading screening efforts, the more pressure the issuers of gap-filler products will face to tighten underwriting programs and limit sales.
The individual major medical market is also much bigger than the gap-filler market. Even if the issuers of gap-filler products find effective, affordable ways to control health risk, a sudden enrollment surge could increase the issuers’ need for capital to support the new business. Getting the new capital could take time and lead to temporary sales freezes.
For insurance professionals, the best strategy for coping with this possibility may be to get clients’ applications in for the gap-filler products as early as possible, before most other people stranded by the Affordable Care Act showdown get their applications in.
4. Assumptions that a showdown will be brief could interfere with any efforts to develop the kinds of alternatives to individual major medical coverage that could get the market through a prolonged showdown.
Experienced, dynamic benefits consultants could probably help their communities set up simple, self-funded health plans that could at least help patients pay for preventive care and routine sick care while battles rage in Washington.
Eventually, issuers of gap-filler coverage, and managers of other types of major medical coverage alternatives, such as health care cost-sharing ministries and travel medicine programs, could get the capital and personnel they need to expand access to their programs.
If, however, most players assume that the showdown will end quickly, they may not be willing to invest much time or money in developing alternative arrangements.
For any insurance professionals that want to help provide temporary fill-in plans, the best strategy might be to have a very simple, complete proposal ready to whip out at a moment’s notice, to offer a solution that can get communities through a showdown that may last just a few days, or may drag on for months.
5. The showdown could increase health plan claim costs even after everything goes back to normal.
If the showdown does last months, and, especially, if it disrupts coverage that’s already in force, it could discourage some people from getting preventive care.
A coverage gap could also reduce some people’s access to care for illnesses and injuries.
If, for example, a prolonged showdown blocked patients’ access to diabetes management care, that could lead to some people with diabetes having feet amputated, suffering from strokes or becoming legally blind. The complications could lead to ongoing medical care costs, loss of the ability to work, and, in extreme cases, long-term care needs.
The result may be that, even when the federal government stabilizes its health insurance policy, insurers may have to increase premiums to reflect higher morbidity levels, or find ways to get the government to compensate them for showdown-related morbidity.
For insurance professionals, one response to this possibility could be to do everything within their power to remind clients that health is wealth. Clients should be encouraged to do whatever they can to maintain their own health and get necessary, high-value preventive care and sick care, even if showdown-related disruption makes getting that care expensive and inconvenient. Missing work to wait all day to see an overwhelmed endocrinologist who provides charity care may be annoying, but it’s better than losing a foot.
— Read Tavenner Asks Congress to Save 2018 Individual Health Market on ThinkAdvisor.