Obamacare’s health insurance markets are flirting with financial disaster — and that’s before Republicans have had a chance to lay their hands on the law they’ve vowed for seven years to repeal.
The insurance markets, which have been bleeding money, have taken one hit after another this week, beginning with news that Humana would become the first major insurer to pull out of the market completely next year. Molina — which had expected a $60 million profit on the exchanges for 2016 — reported a $110 million loss on Wednesday, and will assess ongoing participation at a later date. “There are simply too many unknowns with the marketplace program to commit to our participation beyond 2017,” said CEO Mario Molina.
Other insurers are sounding alarms about the imperiled market.
“Death spiral” is how influential Aetna CEO Mark Bertolini summed it up Wednesday morning, predicting that plans will flee, creating insurance deserts in swathes of the country. President Donald Trump blasted out Bertolini’s remark in a tweet.
The Trump administration, which hasn’t yet delivered its promised repeal and replace plan to Congress, is sending mixed signals. One minute it’s weakening Obamacare by taking steps that dampened enrollment. Another minute it’s trying to entice insurers to stick around long enough to transition to an eventual GOP replacement — but with steps that industry analysts say may fall short.
“I don’t know that it’s going to keep insurers in if they were otherwise inclined to exit,” said Caroline Pearson, an expert on the Obamacare marketplaces at consulting firm Avalere Health.
The administration’s zigzags haven’t placated worried insurers, who see another year of red ink from enrollees that are older and sicker than they had expected. Congress’ paralysis on repeal and replacement translates into precisely the kind of uncertainly that makes risk-averse insurers want to run for cover. And Trump’s executive order, signed just hours after his inauguration, unnerved the health plans with its call for government agencies to abolish as much of the law as possible through administrative action. That fueled fears that his administration won’t enforce the individual mandate requiring most Americans to get coverage.
“There’s no way of knowing from outside if the left hand doesn’t know what the right hand is doing or if the Trump administration is somewhat conflicted,” said Larry Levitt, senior vice president at the Kaiser Family Foundation.
Trump has said he’d send a repeal plan to Congress soon. But his new HHS Secretary Tom Price offered no specifics in his first meeting with Republican senators since his confirmation last week, according to several lawmakers who attended Wednesday.
“It was a good meeting but I don’t know that too much new was revealed,” said Cory Gardner (R-Colo.).
"For each of my questions he came up with the same answer,” said Bill Cassidy (R-La.). “We have the House, the Senate and the administration negotiating on this.”
HHS on Wednesday proposed a set of new rules to stabilize the market, partly by cracking down on loose enrollment rules that insurers have complained allowed some Obamacare customers to wait until they get sick to seek coverage. They would also shorten the enrollment period to six weeks for 2018, and set out other fixes that insurers see as a down payment — but consumer groups say will raise costs even more, further discouraging younger and healthier people from signing up.
And the new rules don’t come with new cash. Insurers’ No. 1 concern is the fate of the subsidies that help low-income Americans to afford medical care. House Republicans went to court to stop the Obama administration from making those payments but now have second thoughts. Cutting off the payments completely would shift the costs to the insurers, and guarantee a mass exodus.
And neither the White House nor Congress have addressed the billions of risk corridor payments the insurers were supposed to get under the health law, which the GOP Congress blocked as a “bailout” during the Obama presidency.
“If all of the carrots and sticks disappear it’s impossible to make the markets work,” said Ceci Connolly, CEO of the Alliance of Community Health Plans. “We have plans that are hungry for some clarity in very short order.”
The prospect of market collapse has everyone on Capitol Hill spooked, setting off another partisan blame game.
“This is all the Democrats’ problem.” said Sen. John Barrasso (R-Wyo.), explaining that Republicans are trying to clean up the Democratic mess. “We’re trying to repair the damage and to provide relief for some of the people who have been hurting.”
Democrats counter that the markets were on a rocky but steady path toward stability until Republican threw them into turmoil.
Rep. Elijah Cummings (D-Md.) argued that the insurers are retrenching because the Republicans have created so much uncertainty about the future of a law covering 20 million people. “It seems like it would be very, very difficult to figure out your rates when you don’t know what’s going to happen,” Cummings said. “So therefore what do you do? You err on the side of safety. And for them safety is not getting involved, wait and see, and then maybe jump back in later on.”
Despite the headlines generated by Humana — which had already exited much of the market before this year — most health care experts don’t see a death spiral. Blue Cross Blue Shield plans dominate the markets in many states, and so far those plans aren’t pulling out.
But Anthem, which sells Blue-branded plans in 14 states, has warned that it may reconsider participation if steps aren’t taken to improve the market’s financial viability..
“We still need certainty about short-term fixes in order to determine the extent of our participation in the individual market in 2018,” said Anthem CEO Joseph Swedish, on a call with investors earlier this month.
Jeff Goldsmith, a veteran health care consultant, said Bertolini’s apocalyptic rhetoric is a bargaining tool to impel Congress and the Trump administration to make insurer-friendly changes to the markets.
”They don’t have a choice,” Goldsmith said, of the Trump administration’s efforts to prop up the markets. “They’ve got kind of a dead patient there.”
Indeed, there are some states that already look fraught for 2018. In Tennessee, Humana is currently the only carrier in 16 counties. If no insurer fills the void, that would leave roughly 50,000 Obamacare customers with no place to turn for coverage.
“In most of the country the marketplaces have been stabilizing,” said Levitt. “This program was always going to take some care and feeding to work going into the future. … If you’re losing money right now, and you don’t think the law is going to be around in a couple of years, why stick around?”
Adam Cancryn, Jennifer Haberkorn and Rachana Pradhan contributed to this report.