If The Individual Insurance Market Crashes, Can People Still Get Coverage?

In his high-stakes strategy to overhaul the federal health law, President Donald Trump is threatening to upend the individual health insurance market. But if the market actually breaks, could anyone put it back together again?

The question is more than theoretical. Since Jan. 20, the Trump administration has already acted to depress enrollment in Affordable Care Act plans, has instructed the IRS to back off enforcement of the requirement that most people have health insurance or pay a penalty and threatened to withhold billions of dollars owed to insurance companies. All of those actions make it more difficult for insurers to enroll the healthy people needed to offset the costs of the sick, who make it a priority to have coverage.

The president himself has made his strategy clear in interviews and tweets. "The Democrats will make a deal with me on healthcare as soon as ObamaCare folds — not long," Trump tweeted March 28. "Do not worry, we are in very good shape!"

But the individual insurance market is not in such good shape.

A growing number of insurers are asking for double-digit premium increases or deciding to leave the market altogether. In the latest announcement, Anthem said Tuesday that it was pulling out of the Ohio marketplace, where it serves more than 10,000 customers, next year. And while most analysts say the market probably would eventually rebound, in the short term things could get messy.

"Is the administration doing what it needs to do to stabilize the market? No, they're doing the opposite," says Kevin Counihan, CEO of the insurance exchange program during the Obama administration.

Trump's biggest weapon by far is refusing to reimburse insurance companies for billions of dollars in payments the law requires them to make to help policyholders with incomes up to 250 percent of the federal poverty level, about $30,015 for an individual and $61,500 for a family of four, afford their deductibles and other out-of-pocket payments. These "cost-sharing subsidies" are being challenged in an ongoing lawsuit filed by Republican House members against Health and Human Services in 2014, and Trump can effectively end them at any time by dropping the suit.

Meanwhile, major insurance companies like Aetna and Humana have already announced that they won't participate in the health exchange market for 2018.

Other insurance companies have said they would like to stay in, but only if they are granted huge rate hikes, citing the uncertainty of whether the Trump administration will repay them for the cost-sharing discounts and whether it will enforce the health law's "individual mandate" that requires most people to have coverage or pay a fine.

In Pennsylvania, for example, insurers are seeking premium increases of less than 10 percent for 2018 – but warn that if the mandate to have insurance is not enforced or cost-sharing reductions are not paid, those increases could balloon to 36 percent or more.

Those who follow the market closely say the exits and requests for large premium increases are no surprise. "It's just been one thing after another in this market," says Kurt Giesa, an actuarial expert at the consulting firm Oliver Wyman. He said if the administration follows through on its threat not to fund the cost-sharing subsidies for the rest of the year, "that could be the straw that breaks the camel's back."

Giesa pointed out that it's not just insurance companies that would suffer if the individual insurance market is crippled. "That strategy of crashing the market has real human consequences," he says. "There are 15 million-plus people relying on that."

That group includes not only people who purchase insurance through the "health exchange" state marketplaces, but also those who purchase insurance on their own, usually because they earn too much to get federal assistance paying their premiums. Premium subsidies are available to those who earn less than 400 percent of the poverty level, about $48,240 for an individual and $98,400 for a family of four.

People who pay their own way are the ones getting hit hardest, says insurance industry consultant Robert Laszewski. "There is a horrific death spiral going on with the [non-subsidized] part of the market right now," he says, because rate hikes are limited for those getting help from the government, but not for those paying the full premiums.

A major question is how hard would it be for the government to regain the trust of insurers as a reliable business partner, regardless of what changes are eventually made.

Counihan acknowledges that insurers felt they were treated unfairly even before the Trump administration took office, when Republicans in Congress prevented full payment of "risk corridor" funds that the law promised to insurers who enrolled more than their expected share of sick people. Insurers are still owed millions of those dollars, and many have sued the federal government to try to get the money.

Counihan said the first words out of the mouths of most insurance CEOs he met with were "we don't trust you guys."

Giesa says the government's misbehavior goes back even further – to the fall of 2013, when the Obama administration allowed some consumers to keep their old plans. That effectively kept healthy people out of the new markets, "after companies had set their prices," Giesa says, resulting in some big losses for insurance companies.

Despite the woes, insurance analysts say they doubt the individual market would stay down for long.

One reason, says Laszewski, is that for many nonprofit insurers serving the individual market as the insurer of last resort is part of their mission, unlike with big commercial insurers. Boards of Blue Cross Blue Shield plans and other nonprofits, he says, tend to be made up of representatives of "labor, the local hospitals, big employers. ... They have community connections. So it's going to take a lot to drive them off."

Another reason insurers will likely return or work to remain in the individual market is that it's part of the future of health care, says Counihan. With so many people now working for themselves in the "gig economy," he says, selling insurance "is going to be more business-to-consumer than business-to-business."

"This market could grow," agrees Giesa. "And I don't think [insurance companies] want to be left out completely from this market if there's an opportunity to break even, or make a little money."

In the end, says Counihan, regardless of what he considers the Trump administration's "disorganized neglect, I think this market is here to stay."

Kaiser Health News, a nonprofit health newsroom whose stories appear in news outlets nationwide, is an editorially independent part of the Kaiser Family Foundation.

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