“Obamacare is dead,” President Donald Trump frequently declares.
But reports of its demise appear to be premature. For the first time ever this year, insurers selling plans in Obamacare’s markets appear to be on a path toward profitability. And despite the drumbeat of headlines about fleeing insurers, only about 25,000 Obamacare customers live in communities facing the prospect of having no insurer next year.
Insurers in the Obamacare marketplaces spent 75 percent of premiums on medical claims in this year’s first quarter, an indication the market is stabilizing and insurers are regaining profitability, according to a Kaiser Family Foundation study released this week. By comparison, in the prior two years, insurers spent more than 85 percent of premiums on medical costs during the same period, which translated into huge losses.
“We’re not seeing any evidence of a death spiral or a market collapse,” said Cynthia Cox, Kaiser’s associate director of health reform and private insurance. “Rather, what it looks like is insurers are on track to have their best year since the [Affordable Care Act] began.”
The financial results are only for the first quarter, and there are still plenty of problems with the markets: Just 141 insurers submitted plans to sell on the exchange market for next year — a nearly 40 percent decrease from this year, HHS said this week. And there are 38 counties nationwide where no insurer has filed any plans to sell for 2018, potentially leaving 25,000 individuals with no coverage options. In addition, insurers in many states are once again seeking eye-popping premium increases, often exceeding 20 percent.
Another sign of trouble: The uninsured rate nationwide ticked up to 11.7 percent, according to a Gallup survey this week, up from a historic low of 10.9 percent.
But those woes don’t mean the Obamacare markets are on the verge of collapse. One big reason for their resilience: the overwhelming majority of Obamacare customers are eligible for subsidies that shield them from big price spikes.
“You have about 10 million people, mostly low-income, who are relying on this program for their sole source of health care coverage,” said Dan Mendelson, president of the health care consultancy Avalere Health. “That gives the program some level of stability and implies that it is unlikely that there will be a complete implosion of this benefit program.”
Much of the current turmoil can be attributed at least in part to questions about the future. The ongoing slog to pass an Obamacare repeal package means insurers have no clear understanding of the long-term makeup of the individual market.
In addition, mixed signals from the Trump administration about whether it will continue making crucial subsidy payments or keep enforcing the individual mandate are further unsettling insurers.
“The Trump administration has poured gasoline on the fires of uncertainty in the private insurance market,” said Sen. Ron Wyden of Oregon, the top Democrat on the Senate Finance Committee. “What plans need more than anything else is some predictability and some certainty.”
“It’s been six and a half months so far and they still haven’t gotten to any clear policy or even a clear signal,” added Joe Antos, a health care finance expert at the conservative American Enterprise Institute.
Insurers’ filings for 2018 highlight how that uncertainty is contributing to struggles in the markets. In Tennessee, for example, the state’s dominant Blue Cross Blue Shield plan wants to raise rates by an average of 21 percent for next year. But the insurer attributed that increase entirely to uncertainty about federal subsidy payments and enforcement of the individual mandate.
The Kaiser data tracks projections by industry analysts that the Obamacare markets are on a path toward viability, despite the financial bloodletting of the law’s early years that saw billions of dollars in losses. An April report by analysts at Standard and Poor’s found that Blue Cross Blue Shield plans, which dominate many Obamacare markets, saw big improvements in their bottom line last year and that many would approach break-even margins this year.
“It’s an improving market, but still fragile, and uncertainty doesn’t help,” said Deep Banerjee, one of the authors of the S&P report.
Any blanket statements about the viability of the Obamacare markets are bound to be misleading. That’s because there are really 51 different state markets, including D.C. with unique characteristics.
California has experienced vigorous competition, relatively stable pricing and healthy enrollment from the outset. A recent report from the Trump administration showed that the average enrollee in the state’s marketplace, Covered California, last year was 20 percent less expensive than Obamacare customers nationwide.
“I sort of feel like we’re in an alternate universe to some of the national rhetoric,” said Peter Lee, Covered California’s executive director. “We continue to have a very stable and well-functioning market in California, as is the case in much of the nation.”
California hasn’t announced rates for 2018, but Lee stressed that uncertainty around the cost-sharing subsidies, the individual mandate and GOP repeal efforts will drive prices much higher than otherwise would be necessary.
“The business of health insurance is not like rolling the dice or playing blackjack,” Lee said. “It is actuaries that bet on certainty.”
Maryland’s marketplace looks very different. The state’s largest insurer, CareFirst BlueCross BlueShield, wants to raise rates by more than 50 percent for 2018. The other three competing insurers are seeking increases of at least 23 percent. It’s the second straight year that Maryland’s individual market insurers are seeking huge increases.
“You’ve heard the term death spiral? I think unfortunately that’s where we are,” said Maryland Insurance Commissioner Al Redmer, Jr., a Republican.
Redmer is dismissive of suggestions that the market’s struggles are the result of uncertainty caused by the actions of congressional Republicans and the Trump administration.
“To say we’re seeing a 50 percent rate increase because of uncertainty is ludicrous,” Redmer said. “That ignores history. Uncertainty did not create half a billion dollars in losses over the last four years.”
The biggest blow to the Obamacare markets in recent months has been Anthem’s decision to pull back from the marketplaces. The Blue Cross Blue Shield plan, which this year sold coverage in 14 states, is exiting or scaling back its footprint significantly in Ohio, Wisconsin, Indiana and Nevada, leaving potentially bare counties in three of those states.
But those exits have been at least partially offset by Centene’s decision to significantly expand its Obamacare footprint. The insurer is entering three new states and expanding its presence in six others. In Missouri, for example, 25 counties were at risk of having no insurer before Centene announced it would sell plans in those markets.
The problem of counties without insurers could still blow up in the coming weeks. That’s because insurers typically have until late September to make final decisions about market participation.
If they see more signs of market mayhem — in particular, if the Trump administration follows through on threats to cut off cost-sharing subsidies — there could still be a mass exodus.
“I would have expected more insurance companies to be exiting,” said Kaiser’s Cox. “It has been remarkable how resilient this market has been.”
Adam Cancryn contributed to this report.