Despite President Trump having been in office for more than seven months now and Republicans retaining control of both houses of Congress, the Affordable Care Act, which is best known as Obamacare, remains the health law of the land.
The hallmark legislation signed into law by former President Barack Obama in March 2010 has taken care of its primary goal of reducing the uninsured rate. Between late 2013 and mid-2016, we witnessed the aggregate uninsured rate fall from 16% to around 9%, representing an all-time low, according to the Centers for Disease Control and Prevention.
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However, Obamacare has also been a relatively unpopular law since its inception. Until recently, when Republicans tried unsuccessfully on numerous occasions to repeal and replace Obamacare, you could easily count on two hands just how many months over the past six-plus years that Obamacare had more "favorable" views than "unfavorable" when it came to Kaiser Family Foundation's Health Tracking poll. Most Americans never really cared for the individual mandate, which required them to purchase health insurance, and they certainly disliked the Shared Responsibility Payment, which required them to pay a penalty if they didn't purchase health insurance.
Nevertheless, rate requests have been submitted by insurance companies in nearly every state, and we're heading into 2018 with the strong likelihood that Obamacare will remain law.
President Trump threatens to go nuclear on Obamacare
Of course, that doesn't mean President Trump has to like what's transpired.
The Commander in Chief has suggested that if Congress doesn't get its act together and repeal Obamacare, he'd consider going nuclear and withholding cost-sharing reductions in order to topple the program. Cost-sharing reductions, or CSRs, are the subsidies paid to lower-income individuals and families making between 100% and 250% of the federal poverty level, and they help cover the costs of heading to the doctor (e.g., copays, deductibles, and coinsurance). More than 7 million people enrolled via Obamacare's marketplace exchanges qualified for CSRs in 2017. Without CSRs, lower-income folks would have health insurance but would probably be unable to afford the copay and deductible costs of being seen by a doctor.
This all ties back to a 2014 lawsuit filed by the House Republicans against Sylvia Burwell, who at the time was the Secretary of the Department of Health and Human Services (HHS). The GOP argued that only Congress has the right to apportion federal funding, which in this case meant approving funds for CSR payments. Since these subsidies weren't getting the alleged proper approval, Republicans sued. In May 2016, they won; however, Judge Rosemary Collyer stayed her order, given the likelihood of an appeal from the Obama administration, which did come in. That appeal remains in place today, though Trump has appointed Tom Price as the new HHS secretary. All Donald Trump would have to do is drop the appeal of the case, and Collyer's order would halt further CSR payments to insurers and low-income individuals and families.
Insurers, not knowing what will happen, have been requesting significant rate hikes to take into account both adverse selection (i.e., getting more sick enrollees than expected) and the possibility that these CSR subsidies could be taken away, in which case members may not be able to pay their medical bills. According to ACASignUps.net, which has aggregated price request data for nearly every state, the average rate hike request if CSRs remain in place is almost 16% in 2018, while premiums could jump by an average of 30% if CSRs are taken away.
Three states with possibly the highest average rate-hike requests
As in years past, we've seen a wide variance of rate requests. Alaska, which is known for having the highest monthly premiums, could see premiums drop by an average of 30% to 22% next year, simply depending on whether or not CSRs are kept or taken away. The drop is thanks to a new reinsurance program within the state.
Oklahoma could also see premiums fall by 1.9% in 2018 if CSRs are paid, or rise by an average of 8.7% if they aren't. While good news on the surface, it's little consolation considering the 76% that Blue Cross Blue Shield of Oklahoma hiked rates in 2017.
At the other end of the spectrum, three states could be in line to hike premiums by more than 50% if CSRs don't get paid. Please note the emphasis on that "if," because it could mean significantly more money flowing out of the pockets of unsubsidized Americans come 2018 if CSRs get taken away.
These states are:
- New York: According to published rate requests in early June from the Department of Financial Services, insurers in the Empire State are requesting an average hike of 16.6% if the CSRs remain. This comes on top of the average 18% rate hike they requested last year. However, ACASignUps.net has New York pegged for an average weighted rate hike of up to 50.5% should CSRs be taken away. Last year, regulators only managed to lower New York insurers' rate-hike request to 16.6% from 18%, so there's little hope of much solace for New Yorkers on Obamacare in the coming year. Insurers provided little info on what's driving their double-digit rate-hike requests, but it's believed to be uncertainty stemming from future CSR payments.
- Georgia: The Peach State is another that could be facing some very extreme premium increases should CSRs be taken away by President Trump. The weighted average rate hike for Georgia, inclusive of CSRs, is already a whopping 29.2%. However, if those CSRs aren't there, Georgians could see premiums spike higher by a weighted average of 52.2%. Feel free to point the finger at Anthem (NYSE: ANTM), the largest in-state Obamacare insurer, whose Blue Cross Blue Shield of Georgia is requesting a rate hike of 40.6% with CSRs continuing to be paid, or 63.6% without them. Anthem is among the biggest beneficiaries of government-sponsored subsidies under Obamacare, and their removal could possibly hurt it more than any other national insurer.
- Maryland: Taking the cake with the largest possible average weighted premium increase in 2018 looks to be the Old Line State. Even if CSRs are paid, Maryland's insurers have requested an average weighted rate hike of 46.1%. However, if CSRs are taken away, this premium increase jumps to a weighted average of 57.1%. Both CareFirst of Maryland and CareFirst Blue Choice requested average rate increases of 58.8% and 50.4%, respectively, with one Cigna plan within the state requesting up to a (I hope you're sitting down for this) 150.83% increase in 2018 from the previous year. As in numerous states, CSR uncertainty and a need to significantly boost premiums to account for adverse selection are the primary catalysts behind these large rate-hike requests.
For the time being, CSRs will continue to be paid, but there's no telling what the future could hold if the president is unhappy with the progress Congress is making on healthcare reform. There's no doubt in this writer's mind that something needs to be done to encourage more young-adult enrollment. However, sabotaging Obamacare by pulling CSRs seems like a bold but unwise move that would just spike the uninsured rate and premium costs in the near term for unsubsidized Americans. Put plainly, if you're an Obamacare enrollee (which this writer is), be prepared to pay significantly more for similar health coverage come 2018.
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