Back With A Vengeance: President Trump Debilitates Affordable Care Act (ACA) Markets

Photo courtesy of the LA Times.

Written by Aldo Aragon

It is a shame to see the president of our nation threaten the core of health care and the health security of millions of Americans with the sole purpose of fallaciously telling reporters, “See, I told you Obamacare was going to implode.”

President Trump took two critical actions this week to weaken the Affordable Care Act (ACA). The first came by an executive order that allowed small businesses and professional associations to organize in smaller risk-pools to purchase health insurance. The second action ended the ACA’s cost-sharing reduction program (CSR), which subsidized payments to health insurers to maintain coverage for low-income individuals. Such a move was quite unexpected as many analysts anticipated both Congressional Republicans and the White House to place health care on the back burner with an essential tax reform debate on the horizon. Nevertheless, President Trump’s decisions will create massive ripples across Congress and health insurance markets. First, let’s examine the actions in greater depth.

It seems as if allowing small pools of professionals and businesses to obtain cheaper health insurance would be a great thing. In the long-run, this mechanism could lead to wider coverage with minimal financial stress to employers. However, this action takes a sledgehammer to the cornerstones of the ACA. The ACA aimed to provide affordable and comprehensive coverage to people previously excluded from health insurance due to the high premiums. Such an aim was addressed through the ‘essential health benefits’ provision, requiring  insurance plans to cover a list of ten benefits including ambulatory services and mental health services. Of course, these vary by state, but not too drastically.

The concern with mandated coverage for ‘essential health benefits’ relates to the high costs insurers and consumers would incur. To hedge against this, the ACA operated with the highly-controversial individual and employer mandate which required virtually everyone to enroll in  ACA-approved health care plan. In doing so, the ACA effectively created a larger risk-pool, a population of both younger and older consumers to quell any uncertainty for insurance providers.

President Trump’s action threatens the core of these two bedrock provisions of our current health care framework. By allowing for groups of people to opt for cheaper plans that do not abide by the ACA guidelines, President Trump entices younger consumers to choose skimpier plans. After all, younger consumers do not feel as if they need such comprehensive plans in the short-run. In turn, the ACA-established risk-pools will shrink, consisting mostly of those who truly need comprehensive plans. Health insurers will react to this dynamic by raising premiums, thereby prompting more consumers who do not necessarily need insurance to drop out. At this point emerges what one might call a “health insurance death spiral”, where people with pre-existing conditions see their protection continually threatened. By disintegrating the ACA’s core market structure, new plans can redefine what essential health benefits entail. An unfortunate byproduct could be greater insurer discretion regarding which conditions are covered under each plan.

Now let’s explore the CSR repeal. As mentioned, the ACA aimed to help low-income families gain health insurance, believing that health security proved a key catalyst for social mobility. To translate this philosophy into policy, CSRs minimized the risk for insurers providing for low-income people by providing a steady stream of subsidies with which to bolster  their balance sheets. With this program gone, insurers will respond with massive hikes to premium rates. In short, this presidential action ensures that thousands of low-income people will face unaffordable premiums and loss of coverage.

What kind of result do the two actions produce together? For one, the elimination of CSRs exacerbates the death spiral begun by the former action. It is a shame to see the president of our nation threaten the core of health care and the health security of millions of Americans with the sole purpose of telling reporters, “See, I told you Obamacare was going to implode.” Undoubtedly, you will hear that line in the coming months.

From a political strategy standpoint, Congressional Republicans should be outraged. Let’s take a trip back to the summer. Many congressional Republicans expended large amounts of political capital trying to “repeal-and-replace” the ACA, yet to no avail. Meanwhile, party leaders received unfounded pressure from President Trump, a figure in the process who did not seem interested in accomplishing one of the critical promises of his campaign. Fast forward a few months and two of the main provisions in all renditions of the Republican health care plans have now been passed via White House initiatives.

Congressional Republicans must now answer for the implosion of health insurance markets while preparing for paramount political battles in tax reform and immigration reform. Surely, Republican party leaders will be eager in their search for a challenger for the 2020 primaries. In the meantime, millions of Americans will be searching for new health care.

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