I Worry for the Common Man

The strange thing about the President’s new executive action on health care is the identity of those who will suffer the consequences. This past week, Mr. Trump kicked off a deregulatory process to permit widespread formation of Association Health Plans (AHPs), insurance policies run by groups of small firms. Then his administration announced that it would stop paying cost-sharing subsidies, payments to insurers to compensate them for lowering deductibles and other out-of-pocket costs for the poorest buyers. Both moves are likely to end up inflicting the most pain on self-employed, middle-income folk—in other words, on a Republican constituency.

This is not “letting” Obamacare fail. Most nonpartisan experts believe that these active measures are likely to undermine the pillars of the 2010 law and hasten the collapse of the healthcare marketplace.  While I have no doubt he will blame the previous administration when things go very wrong, it’s hard to blame your predecessor for problems two years after you take office. Especially when your party has unified control of the federal government. 

The uncertainty about what Trump would do has already driven premium prices higher for 2018. Now it’s going to get worse.  President Trump had threatened for months to stop subsidy payments, which go to insurers that are required by the laws to help eligible consumers afford their deductibles and other out-of-pocket expenses. The fifth year’s open-enrollment season for consumers to buy coverage through Affordable Care Act (ACA) exchanges will start in less than three weeks, and the president ending the payments is grounds for any insurer to back out of its federal contract to sell health plans for 2018.

Like employer-sponsored insurance, these Association Health Plans would not be subject to many of the ACA’s regulations. They could therefore entice young and healthy people away from thehealthcare marketplaces. Depending on how easy it becomes to join an AHP, the effect would be more or less dramatic. In an extreme case, most healthy people could leave the ACA’s exchanges. If any insurers stuck around—not a sure thing—the exchanges would look like high-risk pools, where the ill go to buy subsidized coverage. 

However, they would only function as such for those earning less than 400% of the poverty line (that is, less than $48,240 for an individual in 2017). The ACA offers no subsidies for buyers at higher incomes, and premiums would rise too high to be affordable. In this world, you would not want to be middle-class, self-employed person with a chronic health condition.

These “Association Health Plans” will not pop up any time soon. The deregulatory process takes time, and could be delayed by legal challenges. By contrast, the exchange subsidy payments will likely stop immediately. 

Yet the requirement that insurers offer discounts on out-of-pocket costs for the poor is written into law. They must continue to do so, but without recompense. (This is why Mr Trump’s argument that the funds are an “insurer bailout” is bunk; that the cash goes to insurers, rather than directly to poor buyers, is just an artefact of the law’s design.)  Firms must still recoup their costs, so the result is higher premiums for everyone else - 20% higher, if the Congressional Budget Office is to be believed. Many insurers anticipated the end of the payments and so have already raised their prices for next year.

Poorer buyers are protected, because the tax credits they receive rise in tandem with premiums. The people who will suffer are, again, those who earn more than 400% of the poverty line¬—in other words, the middle-class, usually self-employed Americans whom Republicans have always said they are trying to help by scrapping the Affordable Care Act (ACA). Many, particularly in states with fragile markets, are likely to forego health insurance in 2018. But that is not an option for those who have chronic medical conditions.

The White House says the executive order will give people more choice - butcritics, who include state insurance commissioners, most of the health-insurance industry and mainstream policy specialists, predict that a proliferation of these other kinds of coverage will have damaging ripple effects, driving up costs for consumers with serious medical conditions and prompting more insurers to flee the law’s marketplaces.

I worry for the common man with a chronic disease.