As the Atlanta Journal Constitution points out today, the Trump administration has until May 22nd to decide whether they will continue to pursue the Obama administration’s appeal to provide subsidies to insurers who participate in the federal exchanges.
Of course, any decision to remove those subsidies would likely result in yet another massive round of premium hikes and further withdrawals from the already crippled exchanges where an astounding number of counties across the country have already been cut to just 1 health insurance provider. And, as we’ve pointed out before, higher rates = lower participation = deterioration of risk pool = higher rates….and the cycle just repeats until it eventually collapses.
As background, in 2014, House Republicans sued the Obama administration over the constitutionality of the cost-sharing reduction payments (a.k.a. “taxpayer funded healthcare subsidies”), which had not been appropriated by Congress. Republicans won the initial lawsuit but the Obama administration subsequently appealed and now Trump’s administration can decide whether to pursue the appeal or not.
One key to insurers selling plans in the marketplace are reimbursements they receive called cost-sharing reductions. These aren’t the same as the tax credits that people receive to help pay their premiums; it is financial assistance to help low-income people pay their out-of-pocket costs, such as deductibles. The Congressional Budget Office projected those payments would add up to $7 billion this year and $10 billion in 2018.
But for insurers, there’s a question over how long that money will be delivered, due to an ongoing political and legal dispute about whether the cost-sharing money should be distributed at all.
In 2014, House Republicans sued the Obama administration over the constitutionality of the cost-sharing reduction payments, which had not been appropriated by Congress. The lawmakers won the lawsuit, and the Obama administration appealed it. Late last year, with a new administration on the other end of the suit, the House sought to pause the proceedings — with a deadline for a status update in late May.
The Trump administration and House lawmakers have to report to the judge this spring. If the Trump administration drops the appeal, it would mean the subsidies would stop being paid — a huge blow to the marketplaces and millions of people. If lawmakers wanted the payments to continue, they would have to find a way to fund them. One opportunity for that is coming up fast, the continuing resolution that must be passed by April 28. If the Trump administration continues the lawsuit, it will be in the odd position of fighting its own party.
The CBO estimates the payments would total roughly $10 billion in 2018.
As we’ve noted before, several large insurers, including UnitedHealth Group and Aetna, have already made the decision to exit Obamacare due to financial losses. Now, Molina Healthcare is also pondering whether it would be able to continue to participate in the absence of federal subsidies.
Big insurers like UnitedHealth Group and Aetna have mostly left the individual market over the years, citing financial reasons. Several counties across the country only have one insurer offering ObamaCare plans.
Now Molina Healthcare is signaling it may downsize its presence in the market, or pull out altogether, if Congress or the administration doesn’t act to stabilize it. Molina has 1 million exchange enrollees in nine states this year.
“We need some clarity on what’s going to happen with cost-sharing reductions and understand how they’re going to apply the mandate,” said Molina CEO Dr. Mario Molina.
Asked if Molina would leave ObamaCare if the payments are stopped, the CEO said: “It would certainly play into our decision. We’ll look at this on a market-by-market basis. We could leave some. We could leave all.”
Mario Molina, chief executive of Molina Healthcare, predicted that if the cost-sharing reductions are not funded, it could result in premium increases on the order of 10 to 12 percent.
While all this uncertainty swirls, health insurers must decide — soon — whether to make rate filings to sell insurance in 2018. The deadline varies by state, but for those that have marketplaces run by the federal government, it is June 21. Filing doesn’t mean that insurers will participate; they’ll have months more to negotiate and could still drop out. But it’s the first step toward offering plans in 2018 and should provide a signal about what the marketplaces are likely to look like.
Meanwhile, it seems pretty likely that Obamacare couldn’t survive another collapse in coverage like we saw in 2017 (charts per the New York Times):
2016 healthcare insurance carriers by county:
2017 healthcare insurance carriers by county:
The first step is admitting you have a problem.