The Affordable Care Act is “blowing up,” Donald Trump claimed at a rally, jumping on the government’s announcement that premiums for a popular group of ACA plans will increase by 25 percent next year. “All of my employees are having a tremendous problem with Obamacare,” he claimed.
Well, no. ACA rates are going up by double digits, but that does not mean that most people’s premiums are. Most people — including, we presume, quite a few Trump employees — get their health insurance through their employers, not the ACA marketplaces for individual insurance-buyers. For that matter, most of those individual buyers also will not face a huge premium spike. The 25 percent is an average, masking regional variation, and most people buying on the ACA marketplaces get significant government help that softens any top-line premium increase.
So — surprise! — Mr. Trump is wrong.
But that doesn’t mean the rate-hike news is insignificant. Rate increases of this magnitude are unsustainable. The law is facing a big test.
After the rate hike, premiums will be about where the Congressional Budget Office initially projected they would be at this point. It may be that many insurers initially priced their plans too low and have been playing catch-up ever since. In addition, the increases may reflect insurers’ anticipation of the end, in 2017, of programs meant to stabilize costs in the first few years of the law’s rollout. If so, market volatility may abate in coming years.
But the increases also may reflect more fundamental problems. Enrollment still lags CBO projections. Will more people come into the system? Another big question is whether the law will unleash competitive forces, as planned. Insurers are feeling their way toward offering coverage that appeals to marketplace customers; it turns out insurers that keep costs down by offering relatively narrow networks of doctors and hospitals, a model that some big-name insurers are not accustomed to, have been doing relatively well. If that continues, more insurance companies may tweak their plans and enter or re-enter markets that have relatively little competition now, providing options to consumers and helping keep costs down.
On the other hand, parts of the system may decline: Next year’s premium spikes may drive away people who make too much to qualify for government subsidies, which would worsen conditions for insurers, which might accelerate their withdrawal from more markets, leading premiums to rise even more. This is possible — but a couple of factors should be considered before embracing this most pessimistic view. One is that many sizable ACA markets continue to work pretty well. Another is that the penalty for people who don’t buy insurance is only just fully phasing in, which may encourage more relatively healthy people to buy in, which would help insurers’ bottom lines.
Either way, if our politicians are interested in solutions rather than point-scoring, there are fixes they can consider. One would stiffen the penalty even more, to drive up enrollment. Another would enhance the subsidies people got to buy marketplace insurance. A third would create some form of “public option” insurance plan — perhaps triggered when insurers pulled out of a region — to fill gaps in places where markets may never work well.
The ACA has reduced the rate of uninsured people in the United States. But it remains, not surprisingly, a work in progress.
— The Washington Post,
Oct. 25