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Fast Money & Foreign Objects
Obamacare premiums were stabilizing. Then Trump happened.
The wild card for 2018 rates is the president of the United States.
Updated by Dylan Scott@dylanlscottdylan.scott@vox.com Oct 18, 2017, 8:30am EDTsaid it would need to increase its health insurance premiums on the Affordable Care Act’s marketplace by 8 percent, on average, in 2018.
It was an entirely unremarkable number that would allow the plan to cover the expected increase in health care costs and account for the return of the ACA’s health insurance tax. “For us, our population is starting to stabilize,” Kim Cepullio, president of UPMC commercial products, told me this week.
Then on Monday, UPMC issued a substantial revision. Premiums weren’t going up 8 percent next year after all. Instead, the increase would be 41 percent, on average.
What changed? Obamacare hadn’t been overhauled. The customers were still the same. But President Donald Trump had inherited an individual health insurance market that was starting to stabilize and decided to break it.
After months of threats, Trump announced late last week that he would halt federal payments to health insurers, known as cost-sharing reductions. His administration also slashed budgets for Obamacare outreach and suggested it would not enforce the law’s individual mandate, which requires every American to have insurance or pay a penalty.
Insurers like UPMC have responded by hiking their rates by upward of 40 percent. “The elimination of the CSRs has a big impact on our rates next year,” Cepullio told me.
Trump is not willing to take any blame: “When the premiums go up, that has nothing to do with anything other than the fact that we had poor health care — delivered poorly, written poorly, approved by the Democrats,” the president said on Monday. “It was called Obamacare.”
Over the past two weeks, though, as I spoke with a nearly dozen health insurers, actuaries, and policy experts, there was near-unanimous consensus: Trump was directly responsible for driving premiums higher. If the White House had made a good-faith effort to implement Obamacare, they said, premiums on the marketplaces likely would have increased by single digits on average.
An emerging Senate deal could belatedly try to undo the damage — but 2018 rates have already been set and the plan has no guarantee of passing Congress.
Instead, premium hikes of 40 percent will be commonplace. Some states and health plans are taking steps to mitigate the actual rate hikes customers will feel. Many Americans buying coverage will be protected from these increases, because they receive financial assistance from the federal government. But the US taxpayer will be on the hook to cover those costs.
People who don’t qualify for aid, meanwhile, could bear the full brunt of those hikes — putting a deeper dent in their wallet or making insurance altogether unaffordable.
“The notion that this is a market-driven phenomenon is ridiculous,” said Mario Molina, the former CEO of Molina Healthcare, a big player in the market. “This is Donald Trump monkeying around with health insurance, which is something he doesn’t understand.”
Obamacare was finally starting to stabilize after its first few years
Despite Trump’s frequent insistence that Obamacare is failing, the law’s markets have actually been trending toward some kind of stabilization, insurers and experts said.
Insurance companies had figured out how to price their plans, and their margins were improving. They were making twice as much money on average per customer in 2017 than they were in 2016. The law’s tax subsidies made coverage attractive to the nearly 9 million who qualified for them and used them to buy coverage, capping the monthly premium they would have to pay.
Kaiser Family Foundation
But what the market couldn’t plan for was Donald Trump being elected president.
Over the past year, the Trump White House has sown doubt about whether the law’s individual mandate would be enforced and cut funding for enrollment outreach. Last week, Trump said he would officially end the cost-sharing reduction payments, which compensate insurers for providing discounts to lower-income customers on their out-of-pocket costs. Insurers have long said they would hike premiums to make up for the lost payments if that happened.
The ACA was starting to find its footing. Then Trump knocked it off balance.
“If this was a normal world, where everything was working, you would have single-digit rate increases,” Molina said.
UPMC is a prime example. Its original proposal in May was to raise rates by 8 percent on average — between 3.1 and 13.1 percent, depending on the specific plan.
The carrier had to account for certain variables, like the ongoing increase in health care costs and some uncertainty because other plans had exited the Obamacare markets, which would bring new and unknown customers into its pool. The most notable piece of the initial proposed increase was the return of the ACA’s health insurance tax, which required about a 5 percent bump.
“We’re about able to keep those increases below medical trend,” Adam Pittler, the director of product development at UPMC, told me. “I think carriers have much more experience with this population. The risk pool itself is stabilizing.”
Other insurance experts who systematically analyze the ACA markets shared the same view of what a world without Trump would have looked like.
The story is different in every state and every county — some areas are faring better or worse than others. But the overall picture was one of a stabilizing market.
“We probably would be seeing rate filings for 2018 … between 5 to 10 percent, on average,” David Anderson, a former insurance official who now researches health policy at Duke University, told me.
Dave Dillon, a fellow with the Society of Actuaries, estimated that underlying cost trends would have generally increased premiums by 5 to 10 percent, and the return of the insurance tax would have added another 2 to 4 percent. Oliver-Wyman Health, a consulting firm, estimated a 5 to 8 percent increase based on cost trends and then a 3 percent increase from the insurance tax.
Those factors would have been present no matter what. They’re the fundamentals of the ACA market. But they don’t account for Trump.
“We’ve got this laundry list of things he has done that has clearly made it worse than if Hillary Clinton were president,” said Bob Laszewski, a health care consultant with close ties to the insurance industry.
Why Obamacare premiums were already going up
Why were some increases still expected this year? Health care costs continue to rise, insurers are still adjusting to the market, and outside factors — like the return of the ACA’s health insurance tax after a one-year moratorium — would have driven prices up.
The health care law’s markets for individual health plans certainly had flaws before Trump was elected. The ideal scenario the Affordable Care Act’s architects envisioned — one in which every American who didn’t get insurance through work and Medicaid or Medicare would shop through the law’s exchanges for a plan, creating a robust market of healthy and sick, young and old — didn’t materialize.
The law was very effective in drawing in people with lower incomes, who qualified for generous financial aid that kept their premiums as low as $100 or $200 per month. Of the 10.3 million people who signed up through the Obamacare marketplaces last year, 8.7 million received federal assistance.
And millions of people who were previously excluded from the individual insurance market had a chance to buy health coverage for the first time after the law ended discrimination based on a person’s medical history. That had been an explicit goal for Democrats when they passed the ACA.
Obamacare premiums were stabilizing. Then Trump happened.
Well?
The wild card for 2018 rates is the president of the United States.
Updated by Dylan Scott@dylanlscottdylan.scott@vox.com Oct 18, 2017, 8:30am EDTsaid it would need to increase its health insurance premiums on the Affordable Care Act’s marketplace by 8 percent, on average, in 2018.
It was an entirely unremarkable number that would allow the plan to cover the expected increase in health care costs and account for the return of the ACA’s health insurance tax. “For us, our population is starting to stabilize,” Kim Cepullio, president of UPMC commercial products, told me this week.
Then on Monday, UPMC issued a substantial revision. Premiums weren’t going up 8 percent next year after all. Instead, the increase would be 41 percent, on average.
What changed? Obamacare hadn’t been overhauled. The customers were still the same. But President Donald Trump had inherited an individual health insurance market that was starting to stabilize and decided to break it.
After months of threats, Trump announced late last week that he would halt federal payments to health insurers, known as cost-sharing reductions. His administration also slashed budgets for Obamacare outreach and suggested it would not enforce the law’s individual mandate, which requires every American to have insurance or pay a penalty.
Insurers like UPMC have responded by hiking their rates by upward of 40 percent. “The elimination of the CSRs has a big impact on our rates next year,” Cepullio told me.
Trump is not willing to take any blame: “When the premiums go up, that has nothing to do with anything other than the fact that we had poor health care — delivered poorly, written poorly, approved by the Democrats,” the president said on Monday. “It was called Obamacare.”
Over the past two weeks, though, as I spoke with a nearly dozen health insurers, actuaries, and policy experts, there was near-unanimous consensus: Trump was directly responsible for driving premiums higher. If the White House had made a good-faith effort to implement Obamacare, they said, premiums on the marketplaces likely would have increased by single digits on average.
An emerging Senate deal could belatedly try to undo the damage — but 2018 rates have already been set and the plan has no guarantee of passing Congress.
Instead, premium hikes of 40 percent will be commonplace. Some states and health plans are taking steps to mitigate the actual rate hikes customers will feel. Many Americans buying coverage will be protected from these increases, because they receive financial assistance from the federal government. But the US taxpayer will be on the hook to cover those costs.
People who don’t qualify for aid, meanwhile, could bear the full brunt of those hikes — putting a deeper dent in their wallet or making insurance altogether unaffordable.
“The notion that this is a market-driven phenomenon is ridiculous,” said Mario Molina, the former CEO of Molina Healthcare, a big player in the market. “This is Donald Trump monkeying around with health insurance, which is something he doesn’t understand.”
Obamacare was finally starting to stabilize after its first few years
Despite Trump’s frequent insistence that Obamacare is failing, the law’s markets have actually been trending toward some kind of stabilization, insurers and experts said.
Insurance companies had figured out how to price their plans, and their margins were improving. They were making twice as much money on average per customer in 2017 than they were in 2016. The law’s tax subsidies made coverage attractive to the nearly 9 million who qualified for them and used them to buy coverage, capping the monthly premium they would have to pay.
But what the market couldn’t plan for was Donald Trump being elected president.
Over the past year, the Trump White House has sown doubt about whether the law’s individual mandate would be enforced and cut funding for enrollment outreach. Last week, Trump said he would officially end the cost-sharing reduction payments, which compensate insurers for providing discounts to lower-income customers on their out-of-pocket costs. Insurers have long said they would hike premiums to make up for the lost payments if that happened.
The ACA was starting to find its footing. Then Trump knocked it off balance.
“If this was a normal world, where everything was working, you would have single-digit rate increases,” Molina said.
UPMC is a prime example. Its original proposal in May was to raise rates by 8 percent on average — between 3.1 and 13.1 percent, depending on the specific plan.
The carrier had to account for certain variables, like the ongoing increase in health care costs and some uncertainty because other plans had exited the Obamacare markets, which would bring new and unknown customers into its pool. The most notable piece of the initial proposed increase was the return of the ACA’s health insurance tax, which required about a 5 percent bump.
“We’re about able to keep those increases below medical trend,” Adam Pittler, the director of product development at UPMC, told me. “I think carriers have much more experience with this population. The risk pool itself is stabilizing.”
Other insurance experts who systematically analyze the ACA markets shared the same view of what a world without Trump would have looked like.
The story is different in every state and every county — some areas are faring better or worse than others. But the overall picture was one of a stabilizing market.
“We probably would be seeing rate filings for 2018 … between 5 to 10 percent, on average,” David Anderson, a former insurance official who now researches health policy at Duke University, told me.
Dave Dillon, a fellow with the Society of Actuaries, estimated that underlying cost trends would have generally increased premiums by 5 to 10 percent, and the return of the insurance tax would have added another 2 to 4 percent. Oliver-Wyman Health, a consulting firm, estimated a 5 to 8 percent increase based on cost trends and then a 3 percent increase from the insurance tax.
Those factors would have been present no matter what. They’re the fundamentals of the ACA market. But they don’t account for Trump.
“We’ve got this laundry list of things he has done that has clearly made it worse than if Hillary Clinton were president,” said Bob Laszewski, a health care consultant with close ties to the insurance industry.
Why Obamacare premiums were already going up
Why were some increases still expected this year? Health care costs continue to rise, insurers are still adjusting to the market, and outside factors — like the return of the ACA’s health insurance tax after a one-year moratorium — would have driven prices up.
The health care law’s markets for individual health plans certainly had flaws before Trump was elected. The ideal scenario the Affordable Care Act’s architects envisioned — one in which every American who didn’t get insurance through work and Medicaid or Medicare would shop through the law’s exchanges for a plan, creating a robust market of healthy and sick, young and old — didn’t materialize.
The law was very effective in drawing in people with lower incomes, who qualified for generous financial aid that kept their premiums as low as $100 or $200 per month. Of the 10.3 million people who signed up through the Obamacare marketplaces last year, 8.7 million received federal assistance.
And millions of people who were previously excluded from the individual insurance market had a chance to buy health coverage for the first time after the law ended discrimination based on a person’s medical history. That had been an explicit goal for Democrats when they passed the ACA.
Obamacare premiums were stabilizing. Then Trump happened.
Well?