President-elect Donald Trump has a lot on his plate based on the 100-day action plan he presented shortly after winning the presidency. While it's tough to narrow down what could be at the top of the list, Trump has made it crystal clear during his campaign that the Affordable Care Act's days are numbered.
Obamacare delivers mixed results
In many respects, Obamacare, which is the more common name of the Affordable Care Act, has delivered a mixed bag for America.
On one hand, Obamacare has decisively pushed the uninsured rate in the U.S. considerably lower since the fourth quarter of 2013. The Centers for Disease Control and Prevention pegged the uninsured rate at 8.9% during the first half of 2016, which compares to an uninsured rate of 16% immediately preceding the implementation of Obamacare. Additionally, the expansion of Medicaid in 31 states has allowed lower-income individuals and families who may never have previously had access to medical care the opportunity to receive care.
But Obamacare has had shortcomings too. Most recently, the affordability of the program has come into question. Unsustainable losses have pushed three of the five national insurers to dramatically reduce their coverage in 2017, resulting in fewer choices for consumers and presumably better pricing power for those insurers that stuck around.
The risk corridor program has also generally been a bust. The risk corridor was to be funded by overly profitable ACA insurers; it would disburse these funds to money-losing insurers that had priced their premiums too low. The issue is that there just weren't enough profitable insurers to meet the demands of those losing money. Of the $2.87 billion in funds requested by unprofitable ACA insurers, only $362 million wound up being disbursed. The result was that three quarters of the ACA's approved healthcare cooperatives went out of business, thus denying consumers low-cost health insurance options. The lack of adequate financial protection also likely discouraged new insurers from entering the fray.
With Obamacare's open enrollment season well under way, consumers are set to face a national average increase in the benchmark silver plan (the second-lowest cost silver plan) of roughly 25%!
Trump's health plan takes a detour
During his campaign, Donald Trump didn't mince words about Obamacare's failures and vowed to repeal and replace it once in office. However, following President-elect Trump's initial meeting with President Obama, Trump's plan to completely repeal Obamacare may no longer be on the table.
Trump specifically noted two aspects of Obamacare that he would strongly consider keeping in place. First, as with Obamacare, he'd allow children under the age of 26 to stay on their parents' healthcare plans. Second, he'd keep in place the mandate requiring that insurers accept all applicants, regardless of whether they have preexisting medical conditions or not.
Why is Trump suddenly changing his tune about these two specific Obamacare provisions? Chances are that it would assuage some of the criticism surrounding Trump's seven-point healthcare plan, commonly known as Trumpcare. Trump's plan, which has previously been covered in greater detail, revolves around these seven components:
- Repeal Obamacare
- Allow consumers to purchase health insurance across state lines
- Give consumers full premium tax deductions
- Encourage the use of Health Savings Accounts
- Require price transparency from health insurers
- Block grant Medicaid to the state
- Remove barriers to entry for overseas drug providers
The biggest argument against Trumpcare is that it would effectively leave 21 million people that are currently insured on the outside looking in. Rolling back Obamacare means ending the Advanced Premium Tax Credit and cost-sharing subsidies, as well as the Medicaid expansion. At last check, 84% of enrollees in a marketplace exchange were receiving the Advanced Premium Tax Credit to help lower their premiums, while more than half received cost-sharing reductions to make copays, coinsurance, and deductibles more affordable.
Further, ending Obamacare would, in theory, mean health insurers could once again pick and choose who they want to insure. People with potentially costly medical conditions could struggle to gain insurance coverage in such a scenario.
Disallowing insurers the right to pick and choose who they insure, and keeping college-age and recent graduate-age young adults on their parents' health plans, could be a good start to preventing the loss of health insurance for millions of people.
Trumpcare could still fall short, even with those two Obamacare provisions
Yet even with a small handful of Obamacare provisions left in place, Trumpcare could still have some large holes to fill.
One of the biggest issues is that it could leave insurers in the same bad spot they're in now. If Trump were to leave the mandate in place that health insurers must accept all applicants, it would likely mean insurers would still be hamstrung by the adverse selection process (i.e., dealing with sicker enrollees). Remember, prior to Obamacare, health insurers could turn away costlier customers -- they can no longer do so. Assuming Trump does compromise on this point and keeps the mandate in place, premiums aren't likely to fall much, if at all.
Adding fuel to the fire, there would also be minimal incentive for younger, healthier adults to enroll. Young adults under the age of 26 being able to stay on their parents' plans will help somewhat, but the incentives to enroll simply won't be there. Removing the individual mandate, and its attached Shared Responsibility Payment (the penalty associated with not having insurance), takes away what coerced some people to enroll. With no penalty for not purchasing insurance, more people, including highly sought after healthier young adults, could remain uninsured.
To add to that, Trump's proposal to allow consumers to fully deduct their premiums could hit a snag. Younger adults and lower-income individuals and families would only receive a small amount of tax help because they could presumably only afford lower-priced coverage. Conversely, well-to-do folks could probably afford more all-encompassing coverage, and would grant larger tax benefits. In other words, it appears to provide benefits in an upside-down manner. Lower-income individuals and families are who need the assistance to enroll, but they would be the least likely to benefit based on the current proposal.
Long story short, there appears to be plenty of work left to be done with Trumpcare.
Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.
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