Richard A. Hirth is professor of Health Management and Policy, and Chair of the Department of Health Management and Policy, University of Michigan.
1- Prof. Hirt, before addressing the changes proposed by Trump’s administration, we analyze the two broad points of the Obamacare which are often highlighted as flawed. Costs: to what extent are Republicans right in saying that Obamacare’s costs are not sustainable for the US? Are there some costs that could be limited?
Partly because the penalties for violating the mandate to have insurance are not sufficiently large to ensure that nearly all individuals purchase insurance, enrollment from younger and healthier individuals has fallen short of expectations. This has led many insurers operating in the individual market through the health insurance exchanges to raise premiums or drop out of the market, particularly during the last year. However, two factors limit this from becoming a crisis as bad as what critics are claiming. First, premiums in early years of the exchanges were actually lower than anticipated, and the often large increases in the last year brought premiums in line with (not above) initial expectations. Second, most persons buying coverage on the exchanges receive premium subsidies that shield them from much of the increase, so it was not the case that many of the younger and healthier enrollees dropped coverage this year (as would have been expected if a classical adverse selection death spiral were occurring).
2- Violation of the so called “Keep your plans promise”: why did the Government choose to compel holders of a health insurance to pay more for a new plan which abides by a set of minimum requirements?
The rhetoric of “if you like your plan, you can keep it” was unfortunate and ill-advised. It was in fact true for the vast majority of persons with private coverage. Most plans were already sufficiently generous that the new benefits mandates did not have substantial effects of coverage or costs. However, it was not true for several million persons holding skimpy but cheap coverage. The desire to bring younger and healthier people into the main risk pool led to the effective banning of such skimpy plans. Had they been an allowed route of meeting the coverage mandate, more younger and healthier persons may have opted for such plans to avoid cross-subsidizing premiums of older and sicker persons. In other words, the existence of such plans threatened the policy goal of providing coverage to older individuals and persons with pre-existing conditions at rates comparable to those of younger and healthier persons.
3- Do you think it is possible, and desirable, to include in the law some constraints on employers in order to prevent them from switching employer-based insurances?
When the law was passed, there was concern that many employers would simply drop their coverage and turn their workers over to the individual market. This did not occur, and the penalties in the law for larger employers whose workers collect subsidies on the exchanges seem to have been strong enough to avoid major disruptions of the employer-based model of insurance.
4- For what concerns the changes proposed by Trump’s administration, what do you think about the special enrolment period provision – which requires to submit more documentation proving the need for special enrolment periods – combined with the open enrolment provision – which reduces the enrolment period by 45 days? While the former tries to increase the number of people under coverage by undermining the possibility of enrolling after getting sick, the latter might erode the market of insurance coverage. Do they respond to two different aims?
I believe they are both largely aimed at the same goal, preventing gaming of coverage. The shorter enrollment period also limits the amount of time people have to gain new information about changes in their health status. 45 days is still longer than most employer-based enrollment periods, and the market and exchange websites are now better functioning and better understood than in the early years, so I don’t think the 45 day limit is very significant.
5- Trump’s administration also proposed to decrease the minimum standard of actuarial value for every level of the insurance plans: do you think that this will radically drop subsidies?
Since subsidies are based on a benchmark “silver” plan, they would only drop substantially if the benchmark plan was also at a lower actuarial level (which is certainly possible). The main issue here is that even the current benchmark plan (silver, with 70% actuarial value) requires enrollees to face substantial out-of-pocket costs for care. Overall, if subsidies are set such that they decline if actuarial value declines, already substantial out of pocket burdens (premiums plus cost-sharing for services) would rise further. I expect that many enrollees would not be pleased with higher cost-sharing.
By Leonardo Fiorespino