From the time the ACA became law in 2010 through the 2016 election, Republicans have made their protests against Obama’s signature legislation their rallying cry—Repeal and Replace! They have made every effort to disparage it and pin every Democratic politician to it. However, one thing they won’t say on one of their stump speeches or brag about on Twitter: they are largely responsible for significant reasons the ACA has not been more successful.
First, there’s the issue of Medicaid expansion. I will absolutely grant that the way Democrats went about structuring Medicaid expansion was unconstitutional. As NFIB v Sebelius decided, compelling the states to expand Medicaid with the threat of withdrawing all Medicaid funding if they declined to expand was a violation of the 10th amendment. This threat of withdrawing funds was unconstitutionally coercive as it amounted to “a gun to [the States] heads.” As Chief Justice Roberts concludes in his opinion:
Congress has no authority to order the States to regulate according to its instructions. Congress may offer the States grants and require the States to comply with accompanying conditions, but the States must have a genuine choice whether to accept the offer. The States are given no such choice in this case: They must either accept a basic change in the nature of Medicaid, or risk losing all Medicaid funding.
So, while no longer being at risk of losing existing Medicaid funding, states could still choose to accept the expansion and funding that goes along with it. The ones that chose not to are overwhelmingly Republican: Alabama, Florida, Georgia, Kansas, Mississippi, Missouri, Nebraska, North Carolina, Oklahoma, South Carolina, South Dakota, Tennessee, Texas, Wisconsin and Wyoming. That means that individuals and families that are working and middle class that would otherwise be covered under Medicaid are not given that option in those states. It’s estimated that 3.1 million adults are in this “coverage gap” where they don’t qualify for Medicaid as well as not qualifying for subsidies on the individual market. This has also resulted in an increase of hospital closures in states that have not expanded. While these states have refused expansion due to not wanting to accept additional funding of which they’ll partially be responsible for, they will have to deal with the consequences that come with fewer people receiving proper medical care.
Another area where Republicans have successfully undermined the ACA is risk corridors. What are risk corridors? First, a tiny primer on how insurance companies make money. When there’s a financial risk, like in the case of expenses related to health care needs, an insurance company will assess the aggregate cost of those risks among a group of people and then decide how much to charge that pool of participants in the form of premiums. This spreads the cost of those risks out across the pool so that no individual is overburdened by disproportionate expenses.
Private health insurance companies want to make a profit and this is accomplished when the amount of money they pay out in claims is less than the amount of money they receive in premiums. So, they want to either pay as few claims as they can or they up the premiums (again, this is super simplified). The ACA has provisions that a standard set of benefits must be covered in all plans and that people with pre-existing conditions cannot be denied coverage. With these new provisions, the insurance companies didn’t yet have the actuarial data to properly price these plans.
In order to assuage insurer’s apprehension to offer individual market plans and stabilize premiums, the ACA created risk corridors which offered to reimburse insurance companies in the case that their actuarial calculations were wildly off and it resulted in excessive losses. This was one of the cornerstones to prevent a death spiral in the individual market due to significant increases in premiums. This sudden jump in prices would lead to healthy people who didn’t feel like they “needed” insurance to drop their plans, causing premiums to skyrocket on the remaining sick people who desperately needed coverage. Rinse and repeat until everyone would be priced out of the market.
However, senators like Marco Rubio—capitalizing on negative memories related to the financial and auto bailouts—trivialized this key component as an “Obamacare bailout”. He was able to insert provisions in the 2014 funding bill that prevented public funding from being allocated to these risk corridors. The American Academy of Actuaries estimated that risk corridors lowered premiums in 2014 and 2015 by up to 14% and 11% respectively. However, once Rubio’s legislation went into effect, the amount of payments to insurance companies dropped dramatically. By 2016, insurance companies had to eat about $12 billion that would have otherwise been paid out to insurance companies through risk corridors. It was a direct factor in many co-ops and insurance providers leaving the individual market altogether and a spike in premiums due to less competition and more uncertainty.
Another avenue of uncertainty was the threat to end cost-sharing subsidies by previously suing and then Trump threatening to end them. Cost-sharing subsidies are federally funded reimbursements to insurance companies that offer reduced cost-sharing (i.e. deductibles and co-payments) to marketplace enrollees with incomes 100-250% of the poverty level. Trump finally followed through in October of 2017. Prior to actually ending these subsidies, several insurance companies warned that they would significantly increase premiums to offset the risk they could possibly assume by no longer receiving those payments, and we are now seeing that play out. The CBO estimates that premiums on silver plans on the marketplace increased by about 10% in 2018 and will increase to about 20% by 2021.
The last successful effort to undercut the ACA came from the Tax Cuts and Jobs Act of 2017 (i.e. Trump Tax Cuts). The TCJA effectively eliminated the individual mandate by designating the penalty at $0. This was actually a double whammy for the Republicans. Besides being able to say they undercut one of the violations of freedom introduced by the ACA, they could also say they cut taxes while also reducing government spending. But wait, how does eliminating the individual mandate penalty reduce spending? Well, as one would naturally think, by taking away the immediate penalty for the decision to not carry insurance, health people decided to not carry insurance.
I suspect many conservative and libertarian-minded people will think this is a good thing. After all, people should have the freedom to purchase what they choose, right? However, as I'll go in to more detail in later posts, individuals in the health care market aren't islands and bad things happen when healthy people leave the insurance pool. Prior to passing the tax cuts, the Congressional Budget Office projected that eliminating the individual mandate would increase premiums by 10% in most years of the decade relative to the baseline projections. This was because as healthy people leave the insurance pool, that leaves a larger portion of the insured being comprised of the ill. Ill people cost more to cover and premiums go up.
It’s undeniable that through these actions, fewer people have had access to affordable health insurance and the costs for insurance have risen significantly higher than they otherwise would have under the law. With all this time the GOP has been working to sabotage the ACA and calling for Repeal and Replace, you would think that they would have been working on an alternative that would cover more people and cost less. I'm curious, for those who have supported the general GOP opposition to Obamacare, do you approve of these specific actions that have directly led to fewer people being insured and premiums skyrocketing? Is that generally the direction we want to be moving as a country? Expanding on that question, in the fourth post of this series, I’ll cover the Republican repeal and replace efforts after assuming control of the White House and both chambers of Congress in 2017.