Soaring insurance prices for the coming year under the Affordable Care Act place intense pressure on the next president to follow through with campaign promises for a new round of changes to the nation’s health-care system after years of bitter stalemate.
The revelation this week by the Obama administration that premiums will increase by 25 percent, on average, for a popular group of plans sold through HealthCare.gov immediately became tinder for GOP presidential candidate Donald Trump and congressional Republicans. The lashing was nothing new; during the six years since the law was passed, partisan hostility repeatedly has hobbled the daunting task of creating federal rules and ways for millions of Americans to buy coverage.
Yet the timing only magnified the news of the spiking prices, as well as a dwindling number of insurers selling ACA plans in many states. Three years after crippling computer defects marred the launch of HealthCare.gov, the marketplaces face a host of new challenges that epitomize the difficulty of trying to broaden coverage in a politically fraught climate:
Will enough healthy people sign up for ACA health plans when the marketplaces open Tuesday for their fourth enrollment season and help to stabilize the program? And will the pre-election focus on rising premiums further erode public support for the biggest and most contentious expansion of health coverage in decades?
The first clue to both — the number of people who pick ACA plans in time to be covered by Jan. 1 — “may be one of the first things awaiting a new administration,” said Larry Levitt, senior vice president of the Kaiser Family Foundation. That early enrollment data usually arrives in mid-January, “just before the inauguration,” Levitt said.
If the election is won by front-runner Hillary Clinton, the Democratic nominee who champions the law but wants to change it, “how well open enrollment goes will be pivotal in how high the ACA ends up in the agenda,” Levitt said.
Asked about the price hikes in an interview with a Florida radio station, Clinton said, “Well, we’re going to make changes to fix problems like that.” She said that “costs have gone up too much,” but added that “we can do that without ripping away the insurance that people now have.”
Trump is vowing to swiftly repeal the law. He characterized the rate increases as a sign that the Affordable Care Act is “blowing up.”
No matter who wins, the price jump “definitely increases the urgency for dealing with the problems for an incoming administration,” said Dan Mendelson, chief executive of Avalere Health, a health-care consulting firm.
Though the political repercussions are national, the 2017 prices announced on Monday affect only people who buy insurance through the marketplaces, designed for consumers who cannot get affordable health benefits through a job. Roughly 10 million Americans have such coverage now, and more than 80 percent qualify for subsidies under the law. The greatest burden of the rate increases will fall on marketplace customers with incomes too high for the tax credits.
The big jump in rates is the result of a confluence of factors that have built up over several years. They involve policy, politics, finances and the courts.
For starters, any insurer entering the new ACA marketplaces three years ago had to set its prices without knowing who would sign up and how much medical care they would use. This calculation was complicated by the fact that, under the law, insurers could no longer refuse to cover people with preexisting conditions such as cancer or asthma — and could not charge them more.
Some health policy experts think that some insurers, pressed by the Obama administration to help make the law succeed, charged artificially low prices to attract new customers. Other experts say insurers simply made bad guesses.
“This was a market where the insurers clearly had very little idea who the customers were going to be,” said Joseph Antos, a health policy expert at the American Enterprise Institute. The rates that insurers proposed this spring for 2017 are the first based on enough data for many companies to understand that they are losing money because their ACA customers tend to be sicker than most Americans with private insurance.
Antos predicts that after 2017 and perhaps 2018, the prices are likely to stabilize. Not all health policy experts agree, and the law’s GOP critics say that the marketplaces are entering a “death spiral.”
Obama administration officials are portraying this year as a “transition” time for the marketplaces, pointing out that some of the largest rate increases for 2017 are in states where ACA marketplace prices have been relatively low.
Mendelson, however, contends that “this premium increase was largely avoidable” if political Washington had managed to “iron out small details.” Instead, “the only thing you see is spin coming out of the White House and blame coming out of the Republican Congress.”
Fixes that could have helped include giving insurers flexibility to sell less-expensive policies with fewer benefits and imposing significant penalties on people who “game the system,” by buying insurance just before they need costly medical treatment or prescription drugs and then dropping it soon afterward.
“If there had been some positive back and forth, we’d have 20 million people, no problem,” Mendelson said, referring to the number of ACA customers that congressional budget analysts had forecast for this year — twice the actual enrollment.
Instead, the House has taken more than 60 votes to repeal the law, and foes have repeatedly taken the law to court.
Their legal results have been mixed. A 2012 Supreme Court ruling affirmed the ACA’s constitutionality but allowed each state to decide whether to carry out the expansion of Medicaid the law envisioned. As a result, in the 19 GOP-led states that refused to expand the program, marketplace insurers have drawn more low-income people than they would have otherwise, some with expensive, pent-up medical needs.
In addition, Congress has blocked federal health officials from spending money that the law intended to help ACA insurers if their expenses proved unexpectedly high during the first three years. Because of that, the Health and Human Services Department announced last fall that it had enough money to pay only about 13 percent of the $2.9 billion it owed insurers for the first year of this “risk corridor” program. HHS has since said it also will not have any money to pay for the second year.
During his final months in office, President Obama is talking about fixes the law needs. In a speech in Florida last week, he mused that Congress might become more cooperative once he is out of office. He said the government should expand the premium subsidies — to help more middle-income individuals and families afford an ACA health plan and to give more money to young adults as an inducement for them to enroll and thus balance out insurers’ costs.
If Clinton succeeds Obama, she will arrive at the White House with a substantial agenda for altering the ACA. One of her main ideas, which Obama has embraced recently, is to allow a government-run insurance alternative in parts of the country in which marketplaces have too few choices. She wants to expand tax credits and give the federal government power to block excessive rate increases in states that do not have that authority.
Meanwhile, leaders of the insurance industry have been talking with administration officials on steps they say would stabilize ACA marketplaces, such as cracking down on people who improperly buy policies outside the regular enrollment periods. But one industry official, speaking on the condition of anonymity because of the discussions’ sensitivity, acknowledged that “recognizing the political calendar and current makeup on Capitol Hill, it’s likely that these discussion and potential fixes will be pushed to next year.”