Wednesday, January 11, 2017

Partial repeal of the ACA will lead to the nongroup system’s collapse

Modified transcript:

Partial repeal. What does that mean?  How would it be done? It would be done through the budget reconciliation process.

Congressional GOPers cannot outright repeal the Affordable Care Act because they do not have a filibuster-proof majority. However, they can defund and repeal parts of the law that impact the federal budget. Those components include: the individual and business mandates, Medicaid expansion financing, cost-sharing reductions, and premium tax credits. 

The problem is that repeal, even partial, without a replacement or even delayed replacement, will be destructive and negatively impact insureds, providers, and insurance companies. My greatest concern is the human cost. Republicans are aware that taking away 20+million people’s healthcare coverage could be a public relations nightmare. 

In my last video, I outlined some of the benefits of the law that people across the political spectrum like. GOPers and Donald Trump talk about keeping those elements people like such as allowing kids to stay on their parents’ plan until age 26 and not excluding people who have pre-existing conditions.

Sadly, you cannot retain those things without keeping some of the elements people don’t like, such as the individual mandate—the requirement to purchase health insurance or pay a tax penalty. It is because of the mandate and subsidies that premiums are supposed to be affordable. That hasn’t happened evenly, in fact in some areas of the country, premiums have sky-rocketed.

The mandate requires everyone to buy into the healthcare system. This creates a marketplace of risk pools that are composed of the young and the old as well as the healthy and the sick. This is what is supposed to keep costs reined in, but since the mandate is not sizable, many people who should purchase coverage (mainly, the healthy and the young) have opted instead to take the tax penalty. In my opinion, the mandate should have been made much more coercive, meaning a larger tax penalty.

For tax year 2016, the penalty rose to 2.5% of total household adjusted gross income, or $695 per adult and $347.50 per child, to a maximum of $2,085. For tax year 2017 and beyond, the percentage option will remain at 2.5%, but the flat fee will be adjusted for inflation. (I omitted to state the flat fee would be adjusted for inflation in the video.)

Congressional Republicans could also take away federal funding for Medicaid expansion. The goal of expansion was to fill the gap between those who qualified for Medicaid and those who met the minimum income to receive subsidies through the healthcare exchanges. Basically, the gap is where people make too much income for Medicaid but not enough to meet the eligibility for healthcare exchange subsidies—they are in the so-called Medicaid dead zone.

Medicaid expansion was supposed to be required of all states, but in 2012, the Supreme Court decided that it was to be optional. 19 states have refused to expand Medicaid to their citizens for ideological reasons, even though the federal government is estimated by the CBO to cover 93% of states’ costs during the first 9 years of Medicaid expansion. Costs were 100% covered when it initially rolled out. 

The GOP can also pull the plug on cost-sharing reductions or CSRs. Under the ACA, insurers are required to reduce cost-sharing obligations, such as deductibles and co-pays, of low-income enrollees. People with income between 100% and 250% of the federal poverty level ($11,800 to $29,700 for individuals, for example) are eligible to enroll in plans with CSRs for lower deductibles, premiums, and coinsurance, reducing their out-of-pocket costs.

The federal government reimburses insurers for these costs. Should payments cease mid-year—which could be the case if this element of the law is defunded—insurers will face billions of dollars of unexpected liability and could drop out of the marketplace altogether. Consumers would then be left to look for new coverage, which they may or may not be able to find and if they do, it most likely would be unaffordable.

Healthy people may choose to also drop out of the exchanges completely, thus leaving a risk pool of older, sicker individuals. Increased claims and less premiums collected would result in yet higher premiums for insureds still in the marketplace. Those who cannot afford the increases, could drop out and then we would see a vicious death-spiral of the individual insurance market. And no, despite some insurance companies exiting the marketplace for 2017, a death spiral is not currently happening. In fact... 

Watch the entire segment: