Friday, October 13, 2017

Premiums in Obamacare Exchanges Now Up 10% to 20% More After Administration Ends Unlawful Insurance Bailouts/Subsidies

PPACA creates two different primary mechanisms to redistribute taxpayer dollars to insurers and enrollees to reduce the cost of insurance for Exchange enrollees.  As Josh Blackman describes over at Cato:
[W]hile the ACA funds the subsidies under Section 1401 with a permanent appropriation, to date, Congress has not provided an annual appropriation for the cost-sharing subsidies under Section 1402. Once again, where Congress would not act, President Obama did so unilaterally. The executive branch pretended that the ACA had actually funded Section 1402 all along, and it paid billions of dollars to insurers. Once again, Mr. Trump is exactly right that this is a “BAILOUT.” And, once again, the payments are a violation of the separation of powers. 
Last year, a federal court ruled that Congress did not “squeeze the elephant of Section 1402 reimbursements into the mousehole of Section 1401.” Mr. Obama’s policy “violates the Constitution,” the court concluded. “Congress is the only source for such an appropriation, and no public money can be spent without one.” 
This case, brought by the House of Representatives, now hovers in a state of limbo. The Trump Justice Department has not yet signaled whether it would continue the appeal begun by its predecessor. If the government is serious about repudiating pen-and-phone governance, it should announce that the payments are illegal and drop the appeal. This decision will no doubt trigger litigation by ACA supporters, but the far more obvious choice rests with the elected branch.
Yesterday, President Trump announced that he was stopping those cost-sharing subsidy payments.  This hastens the demise of the ACA Exchanges by further elevating premiums for those enrollees selecting Silver plans in the Exchanges by 10% to 20% more  (above and beyond the 12% to 60% premium increases already slated) in 2018.

In California, for example, Exchange plans were to increase by 12.5% in 2018, without these additional payments to reduce the cost of Silver plans (the most common Exchange plan, where about 60% of enrollees end up) will go up 25% instead.

In Idaho, Silver plans were to increase by 20%.  This change will elevate those plans now by 40%.

Other states are much worse off.  Georgia, with rates that are 57% higher than last year, tops the list.  While many of Florida's premiums will be 45% higher in 2018.  And these increases are before yesterday's announcement that the cost-sharing subsidies will be eliminated meaning Florida and George enrollees can safely tack another 10% to 20% onto the cost of their Silver Plans in 2018.

This impacts families making between 135% (or 100% in states that didn't expand Medicaid) and 250% of the federal poverty level (FPL) as only those families making 250% or less of FPL were eligible for these subsidies.  Some estimates peg that as high as half or more all Exchange enrollees even though this only impacts Silver Plans. Only Silver Plans qualify for these extra cost sharing reduction subsidies under Section 1402.

This means that in the Exchanges, families of four making approximately $33,000 to $61,000 and couples making $22,000 to $40,000 will be impacted negatively.

Constitutionalists and fiscal hawks will undoubtedly applaud this decision as it eliminates one more form of redistribution under the ACA while adhering back to the separation of powers and ending an unlawful, unilateral, executive action made by the last administration.

However, proponents of the ACA and popular media have and will pan the move as being cold-hearted, mean-spirited and outside of the intent of PPACA by increasing the costs to the very Americans who can afford it least: those at the lower end of the pay scale; but just outside of the reach of Medicaid eligibility.

This is the equivalent of tossing one more grenade into the already beleaguered foxhole of Obamacare.  To the extent that this hastens real, practical, meaningful reforms to our health insurance markets, it will ultimately lead to insurance premium relief.  But doing this days before open enrollment and knowing it will likely mean that about $2 million fewer people will be able to afford healthcare is going to make this a public relations and political nightmare if our politicians can't come together to start to put real fixes in place in the next few months.

I was on the Armstrong and Getty Radio Program this morning discussing this topic. 


For more on that comment by Senator Ted Cruz regarding the doubling of insurer profit under Obamacare, see, "Insurers' Profits Have Nearly Doubled Since Obama Was Elected."