With Obamacare repeal dead in Congress for the time being, the White House is signaling that it may step up efforts to sabotage the law this week—and possibly throw insurance markets into chaos in the process.
The rumblings began with a Saturday afternoon tweet from President Trump, in which he suggested that, after months of toying with the idea, he might finally follow through on a threat to end crucial subsidies to insurers, known as cost-sharing reduction payments. Of course, he didn't use that exact language.
If a new HealthCare Bill is not approved quickly, BAILOUTS for Insurance Companies and BAILOUTS for Members of Congress will end very soon!— Donald J. Trump (@realDonaldTrump) July 29, 2017
While wildly misleading—the cost-sharing subsidies are in no way an insurer “bailout”—the tweet left little doubt about what Trump was thinking. Then on Sunday, adviser Kellyanne Conway told Fox News that the president would make a final call on the issue this week. “That's a decision that only he can make,” she said, somewhat tautologically.
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The subsidies don't appear to be the only part of Obamacare in danger. Asked by ABC's Martha Raddatz on Sunday whether the administration might stop enforcing the law's individual mandate requiring Americans to buy insurance coverage, Health and Human Services Secretary Tom Price suggested it was an option.
“The individual mandate is one of those things that actually is driving up the cost for the American people in terms of coverage,” he said, inaccurately. “So what we’re trying to do is make sure that Obamacare is no longer harming the patients of this land. No longer driving up costs. No longer making it so that they’ve got coverage and no care. And the individual mandate is one of those things.
“All things are on the table to try and help patients,” Price added.
Neither of these announcements comes as much of a surprise—insurers across the country have requested large rate hikes for 2018 to protect themselves in case Trump cuts off the cost-sharing subsidies or relaxes enforcement of the mandate. But even if the president won't catch the industry off guard, he can still do immense damage to the insurance markets.
Turning off the cost-sharing subsidies has often been referred to as Trump's nuclear option on Obamacare. Under the law, insurers are required to reduce out-of-pocket expenses like co-pays and deductibles for poorer customers. In return, Washington is supposed to pay the carriers directly in order to cover the expense. But several years ago, the House of Representatives sued to halt the payments, arguing they'd never been appropriated correctly. A federal trial court agreed, and Trump needs to decide whether to keep appealing the case.
If Trump hits the kill button, insurers will lose billions. Seven million Americans, or 58 percent of all marketplace enrollees, qualified for the cost-sharing reductions in 2017, and carriers will legally have to continue offering the reduced-cost plans whether or not the subsidy money keeps flowing from Washington. To make up for it, health plans would have to raise their premiums by 19 percent, according to the Kaiser Family Foundation. If that's the extent of the damage, then the nuclear option will have turned out to be a bit less than atomic. However, there's also a worst-case scenario in which many insurers would simply choose to leave the exchanges rather than stick with a line of business the White House would clearly be trying to napalm.
Scaling back the individual mandate would also roil the market, though how much would depend on precisely what Secretary Price chose to do and how insurers coped. The Congressional Budget Office believes that killing off the tax penalty for those who don't buy insurance outright would drive premiums up 20 percent as younger, healthier individuals dropped their coverage, leaving behind a sicker customer base with higher medical expenses. But marginally widening the mandate's exemptions might not have the same dramatic impact on costs. The big question, again, is whether insurers would simply get sick of the campaign to undermine the exchanges and drop out.
It is unclear exactly what Trump and his team thinks they will achieve by waging an all-out war against Obamacare using executive authority. Trump has at times suggested that the best thing Republicans can do would be to let Obamacare “implode” on its own, then clean up the damage with an all-the-more-urgent repeal bill. Perhaps he still thinks the party would more readily pass a replacement if the market is in ruins. But that's a dicey political calculation. First, Obamacare is not collapsing due to its own structural flaws; Trump is trying to tip it over, and much of the media will cover that. Moreover, voters get angry when their insurance premiums rise. Even if they don't realize that the president has taken the unprecedented step of trying to undercut the country's health coverage system for political gain, there's a strong chance they'll blame the party in power, which they've just watched spend six months bumbling in its attempt to pass health care legislation. What seems less likely is that they’ll blame the Democrats who passed the law, as Trump has suggested voters would do.
It's also worth keeping in mind that, if Trump kills the cost-sharing subsidies and the insurance markets don't crumble outright, the Americans poised to experience the brunt of the pain are basically middle-class voters. Insurers will still be required to keep a lid on out-of-pocket costs for low-income customers, and Americans who make less than 400 percent of the poverty line would still get tax credits that cap their health premiums as a percentage of their income, meaning they won't feel any pinch from rising prices. It's households that earn too much to receive subsides that'd end up paying more for their coverage. That group is incredibly vocal, and—being higher income—they tend to vote.
One sign that the administration knows it’s on shaky political ground is its obviously misleading rhetoric on both the cost-sharing subsidies and mandate. Calling the former a bailout makes absolutely no sense—it's not as if insurers accidentally underpriced their health plans in this case and now need financial help. Rather, they were required to offer low-income Americans discounted coverage, which the government promised—by statute—to subsidize.
The idea that the individual mandate drives up costs is even more absurd. Yes, people who have to buy insurance who otherwise wouldn't end up spending money they'd prefer not to. But by drawing healthy people into the market, the rule brings down the average cost of coverage. Floating these ridiculous rhetorical trial balloons suggests the administration lacks a stronger argument and knows it.
Or maybe not. Maybe this whole thing is just irrational. Maybe like Samson chained to the pillars, Trump just wants to bring Obamacare's whole structure tumbling down, even if it might kill his presidency, too. With this White House, you never know.