Republicans repeatedly claim that Obamacare is in a “death spiral,” collapsing of its own weight. This is wishful thinking on their part, with little evidence to support it.
Examples of the GOP line:
- “[T]he law is collapsing,” House Speaker Paul Ryan said over the weekend on “Fox News Sunday.” He cited limited choices in some states and insurance companies pulling out of some markets, and he predicted “massive” premium increases in the future.
- President Donald Trump said the law is “just about ready to implode,” during a March 17 photo-op with the Republican Study Committee members who support the GOP plan. “Obamacare is dead; it’s a dead health care plan.”
In reality the law — specifically the ACA marketplaces for those buying their own coverage — is ailing, but still very much alive.
Federal officials announced a few days ago that 12.2 million people were signed up to be covered by Obamacare health insurance policies sold through the federal and state ACA marketplaces, or exchanges, this year — down less than 4 percent from the 12.7 million who signed up during the same period a year earlier. That’s a pretty lively corpse.
Furthermore, this year’s sign-up figure is expected to rise; it doesn’t include “waiting in line” sign-ups that California and three other states allowed for people who had started the enrollment process before the Jan. 31 cut-off. Also, part of the difference is due to Louisiana’s recent expansion of Medicaid, which now covers some who had obtained coverage in 2016 through the Obamacare exchanges.
Indeed, independent experts predict that the Obamacare exchanges — should the GOP Congress fail to repeal the law as promised — likely will remain stable for many years.
“If nothing else changed they would probably stabilize at a lower level of enrollment,” says Mark V. Pauly, a professor of health care management at the University of Pennsylvania’s Wharton School.
That’s also the judgment of the nonpartisan Congressional Budget Office, which said in its analysis of the House bill to replace Obamacare that the market for individuals to purchase policies “would probably be stable in most areas under either current law or the [GOP replacement] legislation.”
Problems, But No ‘Implosion’
It’s true that Obamacare — more formally known as the Affordable Care Act — has serious problems. These were summed up by the health insurance lobby itself in a Jan. 24 statement to the House Ways and Means Committee. America’s Health Insurance Plans said, “The challenges facing the individual exchange marketplace – which have been well-documented – include significant increases in average premiums in 2017, fewer health plan choices, and lower-than-expected exchange enrollment and risk pool stability challenges in some states.”
On average those signing up for ACA policies have been older, sicker and more expensive to care for than many insurance companies had expected. That has forced companies to raise premiums, and caused some to stop writing ACA marketplace policies altogether.
Problems have been particularly acute in Tennessee, for example, where the state’s insurance commissioner, Julie Mix McPeak, said last August that the state’s ACA market was “very near collapse.” Matters have grown worse since, when Humana announced it would cease offering ACA policies in 2018. That would leave people in 16 of the state’s 95 counties without any ACA option next year, unless some other insurer steps in.
But Tennessee is not typical. In a letter to Congress, the National Association of Insurance Commissioners said in January that markets are near collapse in “a few” states, but “in some other states the individual market is robust with increased enrollment and premiums have stabilized.”
That letter was signed by Commissioner McPeak — who is the national association’s president-elect — and by three other NAIC officers, the top insurance regulators for Texas, Maine and Wisconsin.
An example of a healthy market is New York, which has what’s been called one of the most robust ACA marketplaces in the country, with 17 insurance carriers offering plans. The state just announced a 28 percent increase in total enrollments for 2017, with 1.2 million covered by private and other non-Medicaid policies and 2.4 million signing up for Medicaid.
Besides Tennessee, other states with problems include Arizona, where virtually all enrollees have only one carrier option, according to Louise Norris, who tracks insurance markets for healthinsurance.org, an independent health insurance guide for consumers founded in 1994. Oklahoma is one of five states with only one insurance company participating, according to the Kaiser Family Foundation’s report on insurer participation, and where the average premium for a benchmark plan increased 69 percent this year. And in North Carolina, most of the state is served only by Blue Cross Blue Shield, which says it has lost $405 million on ACA plans over a two-year period.
But there are several states besides New York where ACA markets are flourishing. In Wisconsin, Idaho, Massachusetts, New Mexico, Arkansas and California, there is still vigorous participation by insurance companies. Wisconsin alone had 14 insurance companies offering ACA policies.
Industry Opinion
Opinion is divided within the insurance industry itself. Aetna chief executive Mark Bertolini said last month that the ACA exchanges are in a “death spiral.”
“My anticipation would be that in ’18, we’ll see a lot of markets without any coverage at all,” he said. Aetna says it racked up $450 million in losses on ACA policies last year, and it has pulled out of writing ACA policies in 11 states.
But where Aetna has struggled, other companies have profited. “The marketplaces are generally performing well,” Mario Molina, CEO of insurer Molina Healthcare, said on his company’s last conference call following release of earnings, according to USA Today. “They only require modification and adjustment, not wholesale change.”
And while Aetna, Humana and others have pulled out, some new companies have gotten in for 2017. For example, Bright Health in Colorado, Cigna in North Carolina and Virginia, and Wellmark in Iowa.
USA Today reported that even Aetna managed to make nearly $12 million on individual ACA plans in Texas and more than $8 million in Pennsylvania before it pulled out of those states, according to financial filings with state regulators.
And in North Carolina, after raising rates, Blue Cross Blue Shield narrowed its losses on ACA policies to $38 million last year, down from a loss of more than $400 million in the previous two years.
Premium Subsidies
What’s often lost in the GOP’s recitations of Obamacare’s problems is that the large majority of those covered by private ACA policies don’t feel the effect of the rising premiums that are supposedly threatening the stability of the system. Most of them get subsidies, and what they pay for the premiums is capped at a percentage of their income.
For 2017, federal officials say 83 percent of those signing up qualify for subsidies — a total of 10.1 million people. That’s still a very large number of potential customers for insurance companies.
(A note of caution: Not everyone who enrolls for coverage ends up paying premiums and getting coverage. For 2016, when 12.7 million signed up, an average of 10.4 million ended up making their coverage effective during the first half of the year. The “effectuated” figure for 2017 isn’t yet known, so we can only compare initial sign-ups to get an apples-to-apples comparison.)
In theory, a health insurance market goes into a “death spiral” when too many sick people take out insurance, driving up premiums that in turn cause healthier people to drop out. But under Obamacare, CBO said, the subsidies, coupled with the law’s tax penalties for those who don’t obtain coverage, “are anticipated to cause sufficient demand for insurance by people with low health care expenditures for the market to be stable.”
Wharton’s Pauly says rising premiums could drive out everyone who isn’t heavily subsidized, but that wouldn’t cause a spiral. “The taxpayers will have to pay more so they could object but that is not what we usually mean by instability,” he says.
A still-living Mark Twain wrote in 1897 that “the report of my death was an exaggeration.” The same can be said of GOP claims that Obamacare is fatally ill. If they want it dead, they’ll probably have to kill it themselves.
Correction, March 27: We originally reported that Blue Cross Blue Shield of North Carolina was taking in hundreds of millions more than it was paying beneficiaries in 2016, based on a report of its results for the first nine months of the year. The story has been corrected to reflect that for the full year, BCBSNC reported a loss of $38 million on ACA policies.