Friday, December 16, 2016

Repeal of ObamaCare mandate could be tipping point

Immediate repeal of ObamaCare's individual mandate next year could cause chaos in the market and threaten coverage for some of the healthcare law’s enrollees, experts warn.
Congressional Republicans have not yet said whether they intend to scrap the mandate right away, but the bill they unsuccessfully pushed last year — and are now using as a blueprint for 2017 — abolished the mandate immediately.
The mandate is one of the most unpopular parts of the law, and Republicans have long decried it as an infringement on freedom, with people forced to buy a product they might not want.
But immediate repeal of the mandate could have severe repercussions, should Republicans seek to leave the rest of the law in place while they draft a healthcare replacement.
Without a mandate, more healthy people are likely to go without health coverage, leaving mostly sick people enrolled in ObamaCare. If that happened, premiums could rise substantially.
Facing heavy financial losses, some insurers could decide to simply drop out of the ObamaCare marketplaces in 2018, potentially leaving people with fewer options for coverage, or, in some places, no coverage options at all.
“This could lead to severe market disruption and loss of coverage among individual market enrollees,” wrote the American Academy of Actuaries.
Before ObamaCare, some states, like New York, tried banning insurers from rejecting people with preexisting conditions without imposing a mandate for coverage. The results were disappointing.
“We have experience with systems that work that way and they didn’t work out well,” said Larry Levitt, a healthcare expert at the Kaiser Family Foundation. “This is a recipe for a death spiral.”  
The American Academy of Actuaries wrote to congressional leaders last week, warning, among other things, about the dangers of repealing the mandate.
As healthy people drop coverage, the actuaries warned, “a premium spiral could result, with fewer and fewer insureds and higher and higher premiums.”
The nonpartisan Congressional Budget Office (CBO) estimated last week that repealing the mandate would increase premiums in ObamaCare by 20 percent.
There is still uncertainty about how severe the effects of repealing the mandate would be.
Some experts say the mandate isn’t working very well because the penalty is too low; as a result, ObamaCare faces a shortage of young and healthy enrollees. But repealing the mandate could make the problem even worse.
“From a practical standpoint, it's a really bad idea,” Joe Antos, a healthcare expert at the conservative American Enterprise Institute, said of repealing the mandate while temporarily leaving the rest of the law. “If they're going to repeal the mandate, they should repeal it when they do a full replace.”
The chaos that could result from immediate repeal of the mandate could cause political problems for Republicans in 2018, should it cause premiums to spike and insurers to drop out, Antos said.
He said those trends were already happening under ObamaCare, but repeal of the mandate would make them worse.
There will be “probably a pretty big increase in premiums for the 2018 plan year, that will be owned by the Republicans” if the mandate is repealed, Antos said.
Insurers have already locked in their participation and premium rates for 2017, so most of the effects would be felt in 2018, though it is possible that some insurers could try to raise premiums or drop out in the middle of 2017.
Even without repeal of the mandate, it is possible that many insurers will choose to drop out in 2018. They could decide that since the law is going away soon, there is no reason to stick it out in the ObamaCare markets for another year.
Insurers have to make their decisions on participating in 2018 by May of 2017.
To stick around, insurers are going to need a sense of what the Republican replacement plan will look like, Antos said.
“For that degree of confidence, there has to be fairly detailed language, legislative language, written and discussed with insurers and everybody else probably by March, maybe April,” he said.
That could be a tall task for Republicans, who have so far not come together around detailed replacement language.
“What Republicans can't afford is to have a massive exodus for 2018,” Antos said, speaking of insurers leaving the market.
Republicans are in discussions with insurers about ways to help them following passage of a repeal bill. It is unclear what, if anything, will come from those talks.
One option is to spend federal money to shield insurers from heavy losses. Insurers are calling for an extension of ObamaCare’s “reinsurance” program, which redirects money to insurers with high-cost enrollees.
The problem, though, is that Republicans have long decried these programs as “bailouts” of insurers.
It’s not just the repeal of the mandate that could upend the system. Insurers are perhaps even more worried that the Trump administration could cancel ObamaCare payments known as cost-sharing reductions, which reimburse insurers for giving discounted deductibles to low-income enrollees.
House Republicans sued the Obama administration, arguing the payments were illegal. The Trump administration could drop the defense of the lawsuit and cancel the payments, but then insurers could bail in the middle of the year, causing chaos.
The Trump administration has not yet said what it will do on the lawsuit.
Though their repeal bill is still being drafted, Republicans are giving every indication that the measure will include a repeal of the mandate.
Rep. Phil Roe (R-Tenn.), asked if he is worried about healthy people dropping coverage without a mandate, countered that healthy people are already not signing up under ObamaCare.
“They're not now because they can't afford it,” he said. He said repeal of the mandate and loosening ObamaCare’s “essential health benefits” governing what insurance plans must cover, could open the door for cheaper plans that are less comprehensive.  
“So let's develop something they can buy,” Roe, the co-chairman of the GOP Doctors Caucus, said of healthy people.
Anxious insurers are waiting to see what happens next.
“This is a time of a great deal of uncertainty,” said Dr. J. Mario Molina, CEO of Molina Healthcare, which provides ObamaCare coverage in nine states. “And I think people are very stressed because people don't do well with uncertainty.”
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