Malfunctioning insurance exchanges are undermining president’s signature reforms
(FT) – At the heart of Barack Obama’s vision for US healthcare reform were online marketplaces in which Americans would buy low-cost health coverage from thriving insurers. In Pinal County, Arizona, a semi-rural district outside Phoenix, it has not gone according to plan.
After three big insurers including Aetna said they would abandon so-called Obamacare exchanges next year, Pinal County faces the prospect of becoming the first place where not a single company wants to sell insurance on its exchange.
Jackie Shore, a nurse who helps people navigate the system, says she is already receiving calls from worried patients in the county, home to 400,000 people. “They’re in bad shape financially as it is and now they might have even more limited options,” she says. “It’s really going to become a crisis.”
Pinal County is an extreme case, but it reflects deep-seated problems dogging Mr Obama’s reforms, known as the Affordable Care Act. They are threatening to undo a signature achievement of his presidency as the clock ticks down on his final five months.
America’s Health Insurance Plans, a trade group for the many unhappy US insurers, complains that the marketplaces are “unstable”.
Julie Mix McPeak, Tennessee’s insurance regulator, said last week that her state’sObamacare exchange was “very near collapse”.
Echoing the enmity of most Republicans, Donald Trump says he wants to repeal and replace the healthcare law. With the exchange system now teetering, one Republican aide on Capitol Hill says “the law’s opponents sense there is blood in the water”.
At issue is the balance on the marketplaces between healthy and unhealthy people. The insurers UnitedHealth and Humana, which had already decided to quit some exchanges before Aetna joined them this month, found they contain too many sick customers who make claims, and not enough younger, healthy ones. That has winnowed profits and in some cases pushed the insurers into losses.
Initially most exchange customers had two or three insurers competing for their business. But as the number of insurers dwindles, consumers are left with fewer choices and their premiums are more likely to rise. That jeopardises Obamacare’s overarching goal of encouraging more Americans to buy affordable health insurance — and keep it.
Since the law was passed, it has reduced the number of people without health insurance from 48.6m in 2010 to 28.6m in 2015, the lowest proportion of the population on record, according to the National Center for Health Statistics. But the uninsured includes a disproportionate number of healthy 18-34-year-olds, the “young invincibles” needed on the exchanges to make them attractive to insurers.
Henry Aaron, a senior fellow at the Brookings Institution, a think-tank, says that in the near term there are still enough companies to provide adequate coverage. “Nonetheless, supporters of the Affordable Care Act do need to be concerned, because there are structural characteristics of the current situation that insurers are finding it difficult to cope with,” he says. “If the trend were to continue there would be serious consequences.”
According to Avalere Health, a consulting group, 36 per cent of regional marketplaces will have only one insurer offering plans in 2017 if no new options emerge.
Insurance premiums, meanwhile, are set to rise in 2017 by more than they have in previous years, increasing by an average of 9 per cent, according to requests filed by insurers with regulators, says the Kaiser Family Foundation.
The US Department of Health and Human Services says, however, that even if premium rates rose by a quarter, 73 per cent of consumers would still be able to buy insurance for under $75 a month thanks to subsidies (in the form of tax credits) introduced to make coverage affordable.
Tevi Troy, deputy secretary of health under George W Bush and now head of the American Health Policy Institute, says he does not believe that Obamacare is imploding.
But he says: “What the ACA has turned out to be is a fairly costly subsidy programme that covers a lot of low-income people, as opposed to the transformation of American healthcare that was talked about.”
Public opinion is divided, with 46 per cent of adults viewing Obamacare unfavourably versus 40 per cent who view it favourably, according to a Kaiser foundation survey in July.
The Obama administration insists the exchanges are working and “will continue to bring quality coverage to millions of Americans next year”.
It exhibits little sympathy for the departing insurers. “Four years ago, insurers relied on a business model of denying coverage to people with pre-existing conditions,” says an administration official. “The ACA flipped that on its head by saying you have to provide coverage to everyone. It is undeniably taking time for insurers to adjust to that new world.”
However, Mr Obama and Democratic presidential candidate Hillary Clinton have said the law could be improved. Both support creating a public insurance plan that would compete with private plans on exchanges and help lower prices for consumers.
Mr Aaron at Brookings says the solution is to replace multiple regional exchanges with a single national marketplace, which would be more stable.
Robert Blendon, a healthcare policy expert at Harvard University, says the system will probably be fixed through providing more federal subsidies to insurers to compensate for risky customers.
In the meanwhile, time is running out for Pinal County. The US health department says it remains “confident” that all Arizonans will have access to insurance next year.
The US has faced the prospect of “bare” regions with empty exchanges before, but disaster has generally been averted. This time Mr Obama’s legacy is on the line.
https://www.ft.com/content/a23dc4b6-6b9c-11e6-ae5b-a7cc5dd5a28c
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