DC Deciphered

In yesterday’s post I talked about the new “stabilization” rules the Trump administration just announced for the Obamacare exchanges for 2018.  But I questioned whether Trump’s goal is really to stabilize Obamacare, especially considering his recent remarks about letting Obamacare explode.  So I wanted to look at the broader context of Trump & the GOP’s behavior surrounding Obamacare for help answering this question.

Today I’ll look at couple of actions taken in the past by the GOP and/or Trump with respect to Obamacare that were clearly intended to (and did, in fact) weaken Obamacare as it was being implemented during its first few years.*

In the next post I’ll talk about decisions regarding Obamacare implementation that the GOP/Trump still have ahead in the future. Looking at these additional factors will help us figure out what Trump and the GOP’s real goal is with respect to Obamacare, and with these new “stabilization” rules in particular:  is it an attempt at sabotage or is it a genuine attempt to stabilize Obamacare until they have a viable replacement . . .

Why Look Back?

But you might ask, why is Trump/the GOP’s past behavior with respect to Obamacare relevant to the new rules the Trump administration just issued a few days ago?  Well, once you understand what the GOP/Trump have done to damage Obamacare in the past, you’ll realize that taking the word of the Trump administration on the intent behind the new rules (e.g. that they’re meant to stabilize the Obamacare markets) is sort of like believing the guy who set your house on fire when he says, “don’t worry, trust me, I’ve got the fire extinguisher.”

Of course past behavior isn’t dispositive. People can change, especially when they’re put in new circumstances.  And I don’t dismiss the possibility that now that Trump and the GOP have the responsibility of being the party in charge, they may genuinely feel the need to make Obamacare work, knowing any failures will be pinned on them.  That’s why I’m even asking the question I’m asking in this post – I truly don’t know the answer. But in looking for the answer, it would be foolish to ignore their past behavior.  So with that . . .

The GOP Got Rid of Risk Corridors, Pushing Many Insurers Out of the Market

The GOP was able to make one really big dent in Obamacare that didn’t get much notice at the time.  It stemmed from a battle begun long before Trump became President, before any of us ever imagined we’d one day be saying the words “President Trump.”  When Democrats wrote the Affordable Care Act (aka Obamacare), they realized that it would likely take a few years for the new markets to stabilize.   Most of the insurance companies had never before operated in a private market where they were required to offer insurance to anyone who wanted it (regardless of preexisting conditions).

So the authors of the bill knew that it would be difficult for the companies to figure out exactly how to price their insurance plans properly in order to cover their expenses.  Some companies might end up with more sick customers than expected and then lose money on their plans.  Other companies might end up with healthier customers or just might overprice their plans and end up making a large profit.

In order to protect the insurance companies from the risk of huge losses, the law included a provision called “risk corridors” which would operate for the first there years of Obamacare’s operation (2014 – 2016).  Under the risk corridors, the government would share the risk with the insurance companies, covering their losses in those first three years.  If an insurance company made a profit above a certain margin, they would pay that money to the government, and those “fees” would go toward covering the losses of other companies in the market.  This mechanism gave the companies three years to adjust to the new markets without having to worry about excessive losses.

But a problem arose in 2015 when it turned out too many companies set their rates too low in the first year of Obamacare (and ultimately in the next 2 years as well).**  So there were a number of companies that needed to be compensated for their losses, and not enough companies with profit to cover them.  The drafters of the ACA had expected that the losses and the excess profits would balance out and take care of each other, so they failed to provide a fallback plan.  Therefore the law says nothing about where the government should get the money to cover the losses in a situation like this.

Enter Marco Rubio.  Rubio – who had been trying to get the risk corridors repealed since back in 2013 –  saw a great opening for an attack here.  He knew the Obama administration would need to get the money somewhere, so he started making a whole bunch of noise warning the public that a “taxpayer bailout” of insurance companies was coming.  Though Rubio’s legislation to repeal the risk corridors provision – introduced 2 years earlier – had never gone anywhere, his noises about the risk corridors finally started to get attention with the rest of the Party.

Then-Senator Jeff Sessions (now Trump’s Attorney General), along with a couple other Senate colleagues and their staffers came up with the legal language that they were able to insert into that year’s must-pass spending bill in order to block the Obama administration from getting the needed funding.  Sessions & his colleagues realized they didn’t need to repeal the risk corridors, as Rubio had been advocating, they simply needed to go with their oft-used weapon of defunding the program that they wanted to eliminate. The Obama administration had been arguing that it had the authority to move certain already-budgeted money around and use it to fund the risk corridors.  The Sessions language said that no, Obama could only use money if it was specifically appropriated for the purpose of risk corridors, and they weren’t appropriating any money for that.  The GOP has essentially killed the risk corridors.

With this provision in place, the Obama administration was left with a significant shortfall for the program.  Insurance companies who’d been promised compensation ended up being reimbursed at a rate of only 12.5% of their losses for 2014.  The government paid nothing for 2015, and hasn’t made an announcement yet as to its plans for 2016.  With such significant losses going uncovered, many insurance companies – particularly the smaller co-ops, which had provided a significant source of competition in many markets – were forced to exit the exchanges.  Rubio’s years-long quest – with the assistance of Sessions et al – was ultimately extremely successful at damaging Obamacare, taking a very large chunk of competition out of the market and leaving hundreds of thousands of customers scrambling for new plans at new higher prices.

Catching up to where things stand today, many of the companies who were not properly compensated under the risk corridors have brought lawsuits against the government.  One case was dismissed late last year, but just recently, one company, Moda Health Plans was granted summary judgment in its favor.  The judge said Moda relied on the risk corridors program in deciding to enter the insurance market, and the government is obligated under the statute to reimburse the company.  He said that the “rider” added later by Senator Sessions doesn’t relieve the government of its obligation, it simply cuts off one of its funding streams.

The judge also held that the government breached an implied contract with Moda by not paying what it owed under the risk corridors.  This case will likely be appealed and could ultimately end up at the Supreme Court, particularly because there are a number of other cases pending on this question, all of which will be heard by different judges.  However, whether these companies eventually get their compensation or not, the damage to the insurance markets has already been done.

 

Trump Reduced 2017 Enrollment by Halting Consumer Outreach

For the first few years of the Obamacare exchanges, a big part of the Obama administration’s investment in the program was outreach to target communities to inform people about the exchanges and to encourage people to sign up.  The Obamacare exchanges were a wholly new way of getting insurance, and for much of the target audience, just signing up for insurance at all was something they had never done or hadn’t done in a very long time. 

So outreach was a very important part of the deal.   The Obama administration used old-fashioned mail, tv ads, and social media such as Facebook and Instagram to reach out to people and encourage them to sign up.  The first year the Obamacare exchanges were in operation, Obama even made a much-watched appearance on the satirical interview show Between Two Ferns to draw attention to draw people to healthcare.gov to sign up for insurance.

But this time around, the last couple weeks of the open enrollment period for 2017 ran over into the new Trump administration (open enrollment ended on January 31^st this year).  These last couple weeks of the enrollment period typically see a surge of sign-ups as procrastinators realize time is running out. And it’s an especially important time because it’s when young people – the cohort most needed for healthy risk pools – are most likely to sign up.

But this year, when Trump came into office, he decided to cancel the outreach programs that the Obama administration had been running.   Trump canceled television and radio advertising, even ads that had already been placed and paid for (so it wasn’t a money-saving effort).  He also halted all email outreach encouraging people to sign up.  He did all of this while repeatedly criticizing the law and claiming that the exchanges were falling apart.  (After facing major blowback for these actions, the Trump administration did bring back some of its online outreach a couple days later, but did not bring back the canceled tv and radio advertising).

The lack of outreach still had a noticeable effect on enrollment.  In those last two weeks, only about half as many people signed up for a plan on the exchanges as compared to last year (376,000 vs 700,000).   The New York Times Upshot looked at the numbers and said that “snapshots” over the previous months indicated that the exchanges had been on track to enroll higher numbers than last year, until Trump canceled the outreach.  They call this drop off in sign-ups the “Trump effect”:

The falloff suggests that Trump administration actions may have confused consumers, discouraged them from enrolling or simply made it easier to forget about the deadline . . .

[T]he reductions in outreach may have prevented some people who intended to sign up from getting the reminder that they needed. More broadly, promises from Mr. Trump and Republicans in Congress to quickly repeal Obamacare may have caused some people to think the law was no longer in effect at all.

A number of states run their own Obamacare exchanges instead of using the federal website healthcare.gov.  Those states conducted their own outreach and several of them reported strong sign-ups continuing in the final two weeks.   The former CEO of healthcare.gov, Kevin Counihan told CNBC that he felt the Trump administration cut off outreach efforts with the intention of “suppressing” enrollment.

“I find it kind of curious” that the White House has ended the ads, because “the Trump administration has gone out of its way to position itself as an advocate for the common man,” Counihan said.

“This program, the ACA, is completely designed for the common man.” Counihan said, adding that the “majority of individuals” signed up on the exchange earn less than $35,000 annually. “it feels, in some respect, a little ironic.”

A federal inspector general is now looking into the Trump administration’s decision to halt the Obamacare outreach, and will review the effect on enrollment.

And Read Obamacare Wars – Part 1 about the Trump administration’s new “stabilization” rules for Obamacare.  What do you think – are they really intended to promote stability in the insurance markets?

Read Obamacare Wars – Part 3 in which I look at 2 key decisions re Obamacare implementation that Trump & the GOP are in the process of making right now which will determine the fate of Obamacare . . . and help tell us their real goal: stability or sabotage.

*****

Notes:

* This post will only cover actual tangible changes Trump/the GOP have been able to make to the law, not even touching on the ways they’ve been able to damage it rhetorically with multi- millions of dollars in attack ads and years of lies about what’s in the law and how it was passed.

**This, by the way, is part of the reason there were such large premium increases for 2017.  The 2017 rates were, for the most part, exactly where HHS had always predicted they would be for the year.  But many insurance companies started out years ago by setting their rates lower than HHS expected them to be – and lower than where they needed to be to cover expenses.  So larger increases were later needed to get their premiums to the right spot.