Data in a new report issued Monday confirms that the Affordable Care Act market stabilized in the first quarter of this year, becoming more profitable for insurers offering individual policies.
That’s good news for the millions of Americans who depend on Obamacare for their health coverage. But it may be bad news for congressional Republicans whose insistence that the ACA marketplace is collapsing in a “death spiral” undergirds their efforts to repeal the law.
The Republicans returned to Washington on Monday from their Independence Day holiday, determined to find a way to pass a repeal measure that is among the most widely detested bills ever placed before Congress.
The individual market has been stabilizing and insurers are regaining profitability. ... Insurer financial results show no sign of a market collapse.
The latest report is published by the Kaiser Family Foundation and based on insurance company reports of average premiums, claims, medical loss ratios, gross margins and other data. It confirms conclusions reached by the Department of Health and Human Services just last week, in a report stating that key elements of the Affordable Care Act have been “working as intended” to moderate premiums for consumers.
The figures, the foundation reported, suggest that premium increases for 2017 were “necessary as a one-time market correction to adjust for a sicker-than-expected risk pool.” Premiums rose by 19.6% in the first quarter compared with a year earlier, but claims rose by only 5.2%. As a result, monthly gross margins per enrollee more than doubled, to $99.43 from $48.13. That’s the headroom with which insurers cover administrative costs and book profits.
The figures also imply that big insurers that left the individual markets may have pulled the trigger too soon or botched their initial pricing beyond repair. Those insurers include UnitedHealth, which had little experience in individual coverage and exited, whining about losses, in 2016; and Aetna, which complained about losses from the ACA but — as a federal judge observed — may have had an ulterior motive for abandoning the marketplace.
The Kaiser data have some limitations, as insurance expert David Anderson of Duke cautions. The first quarter is traditionally the best for health insurers, for two main reasons.
Few enrollees will have burned through their deductibles unless they have massive bills for chronic conditions or a major medical crisis. That means that individual enrollees are still paying for most of their bills out-of-pocket. Moreover, the enrollee pool is likely to be as healthy as it will be all year — as the months pass, some healthier customers who don’t expect to incur big bills will drop out.
Still, the comparison with previous years is compelling: Insurers did much better this year than in any first quarter dating back to 2011.
That brings us back to the Republican wrecking crew. The latest nostrum under Senate consideration is an idea from Sen. Ted Cruz (R-Texas), backed by Sen. Mike Lee (R-Utah), that reportedly has already been sent to the Congressional Budget Office for analysis even though no legislative language has been released.
From what’s known about it, however, it may be the worst idea yet.
Cruz’s proposal would give states the authority to allow insurers to offer non-ACA compliant health plans, as long as they offer customers at least one compliant plan. They could make the non-compliant plans as skimpy as they wished, and charge any premium they wished. The almost certain result would be the “death spiral” in the individual market that Republicans say they’re trying to avoid.
The Cruz amendment would split the market in two. Younger and healthier customers would flock to cheap stripped-down plans, which would probably lack coverage for such costly conditions as maternity, mental health, substance abuse and diabetes, while carrying extremely high deductibles.
Everyone else would have to buy the comprehensive, compliant plans, which would become progressively more expensive as they accumulated high-cost enrollees — women of child-bearing age, people with preexisting conditions and those older than, say, 55 or even 45. Premiums and deductibles would soar, making these plans unaffordable even for customers receiving government subsidies.
Cruz touted his proposal last week at a town hall sponsored by a Koch-connected group in Austin. He said “it adds additional choices so that people who can’t afford insurance now will be able to purchase some form of insurance that they want, that they desire, that helps meet their needs.”
No one who knows anything about health insurance is fooled by this. At the National Review, conservative economist James Capretta observed that “the main effect of the Cruz-Lee amendment would be to shift costs from healthy consumers to less-healthy consumers and households with lower incomes.”
Cruz advertises his plan as restoring “freedom” to the healthcare market by giving consumers more choice, but it’s “freedom” as a label, not reality. The GOP leadership in the Senate may see the plan as a device to lure holdouts among their members by giving them a way to claim they’ve saved the individual market, but they’d be destroying it instead. Given the data showing that the individual market is working better, they have no excuse for this.
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