Wondering what the country’s health-care system would look like under Trumpcare?
Take a gander at Iowa, where the individual market is on the verge of collapse.
Just one insurer remains in most of the state, and that insurer, Medica, is threatening to exit. Republicans love to point to Iowa’s struggles as evidence of Obamacare’s failures. But in reality, the Hawkeye State has functioned as a petri dish for the GOP’s health plan. The state’s problems provide useful lessons for what could go wrong if Trumpcare becomes law nationwide.
So what, exactly, is the matter with Iowa?
The state’s individual market faces several major problems. The first is that, to a large extent, it did not actually implement Obamacare.
Nationwide, nearly all people who bought their insurance on the individual market are enrolled in plans that meet certain Obamacare requirements. For example, these govern what health benefits must be covered, how much patients can be forced to spend out of pocket, and whether or how much insurers can charge based on age and preexisting conditions.
These non-Obamacare-compliant plans are allowed to stick around because they were created before the Affordable Care Act exchanges launched, and Iowa’s state regulators have been more than willing to let them linger.
Because these noncompliant plans offer relatively skimpy coverage and, back in the day, were allowed to effectively screen out older and sicker patients, they’re cheap. As a result, they have siphoned off many of the healthier, younger people in the state.
That means the pool of people left buying more generous Obamacare-compliant plans has been sicker, older and more expensive — a problem known as “adverse selection.” This drives up premiums and causes even the relatively healthy people on the ACA exchanges to drop coverage.
Trumpcare, in the name of promoting “choice,” would basically replicate Iowa’s adverse-selection problem on a much larger scale.
As passed in the House, the American Health Care Act would let states get waivers allowing insurers to offer new plans that don’t meet Obamacare’s coverage or cost requirements. In other words, as in Iowa, Trumpcare would permit healthier and younger people to sort themselves into cheaper plans that cover little, and leave sicker and older people in more expensive plans. Which, as in Iowa, would probably cause markets to unravel.
This isn’t the only thing throwing Iowa’s individual markets out of whack. The state also has one very sick, very expensive enrollee on its Obamacare exchange — and the predicament this presents offers a further lesson for what we should expect from Trumpcare.
According to Wellmark, an insurer that recently announced plans to leave the Iowa exchange next year, a single unnamed patient there racks up more than $1 million in health bills per month. In a sparsely populated state, with an already relatively sick and small insurance pool, no insurer wants to catch this falling knife, as Duke University health researcher David Anderson put it.
From the start, Obamacare had several provisions designed to reduce such expensive risks for insurers, such as reinsurance. Those provisions have either expired, been kneecapped by Republicans or otherwise proved insufficient. Last fall, the Obama administration issued a regulation designed to spread these costly risks over larger pools of people, precisely so that a small regional insurer wouldn’t have to fear getting stuck with the tab for a $12 million patient. That new regulation won’t kick in until 2018, however.
Meanwhile, Trumpcare takes the opposite approach: Rather than making the risk pool bigger, it encourages states to segregate their most expensive patients into smaller “high-risk pools.” There’s no indication that Republicans are willing to come anywhere close to adequately funding these pools. Consequently, insurers will run away (as in Iowa), states will ration care (as in lots of states pre-Obamacare), or both.
Finally, insurance companies in the state have publicly said they’re struggling with the uncertainty over the rules of the road. Will there still be an individual mandate? Will the Trump administration continue reimbursing insurers for the discounts they are legally required to give to poor people? Will there be huge cuts to Medicaid, dumping more low-income and disproportionately sick people onto the exchanges?
Republicans have unified control of government, but they still can’t answer these questions. Even if some version of the Trumpcare bill passes, uncertainty and instability will linger while new regulations are written and states decide what to do with waivers, risk pools and reduced Medicaid funding.
Iowa’s market, already fragile and regulated by state officials who don’t seem terribly committed to making the ACA-compliant market work, is especially sensitive to mounting uncertainty. But it’s merely the canary in the coal mine.