Even if he fails to repeal Obamacare, it looks like Donald Trump will be responsible for ratcheting up insurance premiums for millions of Americans in 2018.
That much is becoming clear now that insurers have started requesting their annual rate increases. The numbers so far are staggering. With filings submitted in 18 states, carriers have asked regulators to let them hike premiums by an average of 34 percent next year, according data compiled by Charles Gaba of ACAsignups.net. By comparison, premiums jumped just 22 percent this year as insurers attempted to finally fix their unprofitable exchange businesses, which had lost money covering an older, sicker, more costly pool of customers than companies had anticipated. (That was just slightly below their average requested hike of about 25 percent.)
Why are carriers asking for such dramatic rate increases? To borrow Gaba's phrase, Americans are paying a “Trump tax.”
For months now, the president has threatened to throw the individual insurance market into chaos by cutting off key subsidies—known as cost-sharing reduction, or CSR, payments—that the government is supposed to pay to insurers under the Affordable Care Act. Those funds are worth billions to the industry, and while the White House has continued dolling them out while deciding whether to keep defending a lawsuit over their legality, it hasn't committed to doing so in the long term. So insurers seem to have started pricing in the possibility that the subsidies will in fact disappear, along with other looming uncertainties, such as whether the government will keep enforcing the individual mandate.
Some insurers have tiptoed around this issue in public. But others have been explicit about it. In May, after Blue Cross Blue Shield of North Carolina submitted a 22.9 percent rate increase to its state regulators, executives said the hike would have been a mere 8.8 percent if the subsidy payments weren't in question. “2017 is so far, so good,” CEO Brad Wilson told Vox. “It’s still early and our numbers for the year run about 30 to 45 days behind. But the analysis underway so far in 2017 appears to show stability in the market in terms of price, utilization, and the customer base.” But unfortunately, Blue Cross Blue Shield needed to tack on the Trump tax.
That seems to be what's happening across much of the insurance industry. Accoring to a report released this week by the Kaiser Family Foundation, by almost all measures carriers have been faring far better on the Affordable Care Act's exchanges this year than in the past. Medical loss ratios—the percentage of premiums carriers spend covering insurance claims—plummeted in the first quarter, and are now even lower than they were before the Affordable Care Act was in place. Gross margins—the average amount by which premiums top claims—more than doubled. “Early results from 2017 suggest the individual market is stabilizing and insurers in this market are regaining profitability,” the authors concluded.
To be clear, even with higher prices, insurers seem to have been unable to make money selling Obamacare coverage in certain areas of the country—particularly rural regions with thinner customer bases. That, combined with political uncertainty over health care, has led many carriers to pull out of these markets, and a handful of counties are at risk of being left without an insurer on their exchanges next year. But given the broad national trends, there is no way Americans should be facing anything close to an average 34 percent premium hike next year. They might be, thanks to the Trump tax.
Exactly how much more are Americans paying because of the president's saber-rattling? A Kaiser analysis previously found that killing the CSRs would push up the cost of a benchmark silver plan by 19 percent—almost as much as last year's total hikes. Blue Cross Blue Shield's announcement suggests insurers are building in a buffer roughly around that figure.
Thankfully, low- and middle-income Americans who receive tax credits to pay for coverage on Obamacare's exchanges won't be affected by the hikes, since those subsidies cap their premiums as a percentage of their income. But there are millions of Americans who purchase Obamacare-compliant plans either on or off the exchanges who don't receive any subsidies, and who will bear the full brunt of any price increase.
And for what? Initially, Trump appeared to be threatening the CSRs as part of a half-baked strategy aimed at making Democrats negotiate on an Obamacare replacement. That flopped when Nancy Pelosi and Chuck Schumer refused to come to the table. Now, from all appearances, Trump seems to want to sow enough havoc in the insurance markets to create the impression that Obamacare is collapsing on its own and needs to be replaced. After all, if he’s going to keep nattering on about Obamacare being “dead,” it helps if something’s killed it.
So far, that tactic doesn't seem to have moved many of the senators withholding their support of the Better Care Reconciliation Act, or made the Republicans’ various proposals any more popular with public. As of now, it’s just families who will pay, quite literally, for Trump's pointless and cruel political gambit.