Even before Donald Trump's election, the health-insurance market was in trouble for people who were not on Medicare or Medicaid and who did not obtain insurance through their employers. Health-insurance plans were dropping out of this "individual" coverage market and premiums and deductibles both were rising rapidly.
Haste in jettisoning Obamacare will invite chaos
The Affordable Care Act is anything but; however, it can be fixed with some patient — the key word — planning.
By Bryan Dowd, Roger Feldman and Pinar Karaca-Mandic
The Affordable Care Act — the "ACA" or "Obamacare" — took much of the blame for the poor performance of the individual insurance market and almost certainly accounted for some of Trump's support. Trump promised his supporters that repealing and replacing the ACA would be one of his top priorities for early action.
Within the last few days, Trump apparently has begun reconsidering his position on full repeal of ACA. That wavering immediately was denounced by some of his supporters. In fact, Trump supporters demanding immediate action on Obamacare now may be the most powerful constituency in the country when it comes to health-insurance market reform. So it is important for them to understand what changes to Obamacare imply.
Political aspirations and policy proposals are important. But eventually they bump up against reality, which we refer to as The Way the World Truly Works (TWTWTW). The designers of Obamacare did not understand TWTWTW, nor do most congressional Republicans and Democrats. We fear that Trump's supporters, demanding immediate action on Obamacare, may not, either.
Full repeal of Obamacare probably is not possible, because 60 Senate votes would be required to override the inevitable filibuster. However, the Republicans can use the budget reconciliation process to rescind those parts of Obamacare that affect revenue and expenditures. These include money for Medicaid expansions, subsidies for low-income people in the health-insurance exchanges, the tax penalty for not purchasing insurance (the "mandate") and special payments to health plans with higher-than-expected costs. However, the health-insurance market regulations that require health plans to accept anyone who applies for coverage and limit the range of premiums that can be charged (community rating), would remain in place.
Here is what will happen if the tax penalty and premium subsidies are withdrawn while the regulations requring guaranteed coverage and community rating remain in place: The individual coverage health-insurance market will collapse.
No one will be able to buy coverage. Why? Because there will be no reason for anyone to purchase insurance when they are healthy. They can wait until they have a medical problem, then enroll in a health plan until the medical episode is over. In addition, low-income people, many of whom are young and healthy, can't afford to subsidize older, sicker, wealthier people, and they would receive no federal assistance to offset those subsidies.
There will be a short period of chaos followed by complete collapse of the market. Neither consumers nor health plans are the villains in this story. They're just people acting rationally, given the constraints placed upon them. It's TWTWTW.
This problem could be addressed, at least in part, by limiting plan enrollment to the annual open-enrollment period. But it is not clear that such a non-budgetary change could be made through the budget reconciliation process.
Many exchanges were failing anyway. And indeed, Obamacare largely was to blame. The levels of coverage dictated by the federal government were not what people wanted to buy, and the penalties for going without insurance were not strong enough. Expanding Medicaid and allowing young adults to remain on their parents' employer-based health-insurance policies probably siphoned off some younger, healthier people who otherwise might have purchased insurance through the exchanges.
But demanding the sort of immediate changes to Obamacare that are technically possible but fall short of full repeal, could make matters much, much worse.
If you are a young, healthy, relatively well-to-do person in the individual-insurance market and the Republicans act quickly through the budget reconciliation process, you will not be able to return to the pre-Obamacare "good old days" of low premiums and decent coverage that reflect your current good health. You won't be able to buy health insurance at all.
So our advice to Trump supporters is to play it smart and exercise a bit of patience. Obamacare can be replaced with a much better system — probably one administered largely at the state rather than the federal level. But it will take some time to work out the details. Don't repeat the Democrats' mistakes made in haste and end up crashing on the rocks of TWTWTW. If the individual-insurance market collapses, it will be Trump and his supporters, not the Democrats, who get the blame.
The authors are faculty members in the Division of Health Policy and Management in the University of Minnesota's School of Public Health.
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Bryan Dowd, Roger Feldman and Pinar Karaca-Mandic
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