The Post-Republican Obamacare Market Will Be Stable And Very Profitable For Health Insurers

Predictions that the individual health insurance market will now implode are misplaced.

First, in the wake of the Republican collapse of efforts to replace Obamacare, Medicaid will continue on unaffected. The Obama Medicaid expansion is fully funded for years to come. The nineteen states that did not take the expansion will continue to be on the outside looking in as their taxpayers continue to fund the expansion in the 31 states that did expand. And, health insurers will continue to enjoy that growth in their business as states continue to benefit from the open-ended federal funding.

The individual health insurance market will not collapse.

With about 3,000 counties in the U.S., I can't give you an absolute guarantee that there won't be a few that will not have an insurance carrier serving the Obamacare market in 2018. But generally, the vast majority of people eligible for subsidies will have at least one carrier to buy from.

The Kaiser Family Foundation is out with a recent study looking at medical loss ratios in the first quarter of 2017. They concluded that "individual market insurers on average are on a path toward regaining profitability in 2017."

I wouldn't go so far as to say that participating health plans will generally make money in 2017––the first quarter medical loss ratio is always better early on as consumers satisfy their ever-growing Obamacare deductibles.

But I do think 2018 could be a decent bottom line year for most Obamacare exchange insurers. And, 2019 should be just fine.

Does this mean the Obamacare insurance exchanges are working well?

No.

If the stability and success of Obamacare is measured by insurance company profitability things are improving.

But if stability and success is measured by how the Obamacare insurance exchanges are impacting the people who have no other place to go for their health insurance, this aktivitas remains a disaster for at least the 40% of the market that are not eligible for subsidies.

First, Obamacare is a tale of two cities.

1. The lower-income people who are eligible for Medicaid as well as the people who make less than 400% of the federal poverty level and are therefore capped in how much they will pay for health insurance––these people are doing fine. 
2. The 40% of the U.S. population that live in households that make more than 400% of the federal poverty level and get no premiums subsidies and pay the full cost of premiums, out-of-pocket costs and any big rate increases––these people are getting clobbered.

This is why in a bizarre way we can have stability in the Obamacare insurance exchanges: If health plans increase their rates by 50% or charge premiums into the thousands of dollars a month, there is virtually no impact on those who get a subsidy. True, those making over 250% of the federal poverty level will bear the impact of the ever-larger deductibles, but none of the premium increase.

Health plans have all but given up on getting a healthy risk pool under Obamacare. After four successive open enrollments run by the Obama administration, the aktivitas never got close to the percentage of the eligible pool needed to be successful.

The carriers looked at this landscape and concluded the only viable strategy was to just keep boosting the rates until they reach profitability. And, that is what they have been doing and that is why their medical loss ratios are starting to improve.

But that has meant huge premiums and deductibles. It is now not uncommon to see the lowest cost unsubsidized plan in a market for a family cost at least $1,000 a month, $12,000 a year, with an individual deductible in the $6,000 to $7,000 range. I have seen many areas where the lowest premium is already at $1,500 a month, $18,000 a year. Even for upper income families this is intolerable with premiums well over 10% of their gross income and deductibles making the plans useless to all but the sickest.

This is what the Kaiser Family Foundation would call stable: "The individual insurance market has been stabilizing in most of the country and could continue just fine."

The big political irony is that it is not the traditional Democratic constituency––lower income people in Medicaid or eligible for exchange subsidies––that are getting hurt. It is the upper income people not eligible for any benefits that more often voted for Trump and this Republican Congress that are getting left out as the health plans raise their rates toward profitability.

Even if Trump kills the $7 billion in annual payments to the health plans for the lower-income cost sharing subsidies it will not alter this trajectory. The carriers will simply respond by increasing their rates as of January 2018 to be able to fund the low-income cost sharing subsidies they are required to give people under the Obamacare law.

Obamacare is not healthy. Premiums and deductibles will continue to rise because the pool is out of balance with too many sick people for the number of healthy that have signed up. That will only get worse as the unsubsidized get priced out of the market.

But health insurers will focus their business on what will be for them the ideal market––people immune to what they, or the taxpayer, have to pay for the product.

The people who are and will be getting hurt badly will be the higher income ones who more often vote Republican.

But, Obamacare is well on its way to "stability."

But it is a bizarre form of stability.

And, this will not change until this or another Congress and President change it.

Strike Two––The Republican Obamacare Repeal And Replace Fiasco

Three strikes and you're out.

On Monday, Senate Republicans approved proceeding to debate on "repealing and replacing" Obamacare by a vote of 50-50-1, with Vice President Mike Pence casting the deciding vote.

Strike One
Yesterday, Senate Republicans failed to approve the bill they had been working on for over a month, which included the Cruz amendment that would have bifurcated the individual health market into separate healthy and sick pools. The vote was 43-57. Of course, all Democrats voted no. The nine Republicans voting against the leadership bill included Collins (ME), Corker (TN), Cotton (AR), Graham (SC), Heller (NV), Lee (UT), Moran (KS), Murkowski (AK), and Paul (KY).

Interestingly, West Virginia’s Capito, who had expressed lots of reservations about the Senate bill, did not vote against it.

The list of those voting no included both the most conservative and the most moderate. Both Maine and Kansas have not expanded Medicaid. Yet, Collins and Moran both voted no, at least in part, because of the impact the long-range caps on Medicaid would have on the large senior populations (nursing home payments) benefiting from the baseline Medicaid kegiatan in their states.

Lee and Paul voted no because the Senate bill didn’t go far enough to reduce the cost of insurance. Paul’s objective is complete repeal generally wanting to go back to 2013. Lee also wants a wide-open market.

The rest, in one way or another, just saw the Senate bill as leaving too much stress berat in its wake, with the CBO estimating that 22 million fewer would ultimately be covered, and are generally are calling for a return to the "regular order" committee process and bipartisan negotiations with Democrats. The persoalan with that approach is that most of the 43 Republican Senators that voted for the bill want nothing to do with an agreement that makes Senate Democratic Leader Chuck Schumer happy.

All of this was made more complicated this week when the Senate parliamentarian ruled key provisions in the Senate bill out of order under budget reconciliation rules. These included the six-month lockout substitute for the individual mandate, association health plans, and going from 3:1 age rating to 5:1 age rating.

Strike Two
Repeal, with a two-year period within which to create a replacement, also failed, on a 45 to 55 vote. This time the Republican no votes included Alexander (TN), Capito (WV), Collins (ME), Heller (NV), McCain (AZ), Murkowski (AK), and Portman (OH).

The Last Attempt:
Now, McConnell will likely proceed to pass a “skinny” bill that only repeals provisions that arguably have unanimous support among Republicans: Repealing the medical device tax, the employer mandate, and the individual mandate.

His purpose is to just pass something that would keep this alive by having a bill to take back to the House for a conference. His hope is that he can ultimately hash out an agreement with the House. But that is nuts. The House bill is arguably even more conservative than the Senate bill. What makes McConnell think by bringing the Freedom Caucus back into these discussions that he can find a way to keep his moderate Republicans onside?

No one knows if this “skinny” strategy has 50 votes and won’t until the vote is taken.

Even if McConnell can pass the "skinny" option, I just can’t see a viable end game here for Republicans on their own.

There is also a zero chance of any kind of bipartisan agreement so long as a substantial majority of Republicans––as well as the Twitter in Chief––find a “bailout” of Obamacare unacceptable.

Let me also suggest that the Jeff Sessions fiasco has relevance here.

President Trump has said repeatedly that Obamacare is imploding. Any attempts now by the Secretary of HHS to administratively shore it up would likely put Secretary Price in the same boat that Attorney General Sessions is sitting in right now.

And, if we needed any more complications, the Anthem CEO’s comments this morning won’t help. He said, “We don’t believe we have been heard,” when referring to the largest Blue Cross carrier’s warnings to Congress and the administration about the precarious state of the individual health insurance market. He also said uncertainty over whether the $7 billion in low-income cost sharing subsidies would be paid by the Trump administration would lead to 20 points more in rate increases on top of the average 20% rate increases Anthem has already applied for. He also said that Anthem would consider getting out of more states if the Obamacare insurance exchanges aren't quickly stabilized.

The Anthem comments just underscore that the only thing a successful "skinny" strategy on the part of Republicans could lead to is a 2018 individual market fiasco, particularly for the individual market participants who don't get a subsidy.

If you had set out to design the perfect nightmare you couldn’t do it this well.