The ObamaCare Cleanup Begins Early executive action can improve short-term insurance markets.
https://www.wsj.com/articles/the-obamacare-cleanup-begins-1486424917
All of a sudden the press is filled with stories about Republicans supposedly retreating from their promise to repeal and replace ObamaCare. Liberals are claiming vindication and conservatives are getting nervous, but the stampede to declare failure is premature. The orderly transition to a more stable and affordable health-care system is merely beginning.
As with much else in the Donald Trump era, people should avoid rushing to conclusions. Too much significance is attributed to Republicans adding the word “repair” to their vocabulary, as if this represents a policy change. The insurance markets really do need repair, and doing nothing isn’t realistic amid ObamaCare’s downward spiral.
Likewise, the GOP retreat in Philadelphia last month was contentious, according to leaked audio, but debating the merits of different ideas is how political parties form a strategy. Republicans now recognize that they can’t blame President Obama for insurance disruptions, even if his Administration caused them. They also increasingly understand that they’ve been handed an armed bomb and need to be careful and serious when defusing it.
The exchanges are ailing and fragile—beset by high and rising premiums and a wave of insurer exits. The Health and Human Services Department announced Friday that final enrollment on the federal exchanges for 2017 dropped by about 400,000 from last year. “In spite of the best intentions of Washington and the industry, the intended goals of the ACA have not been achieved. Millions of Americans remain uninsured, and still lack access to affordable health care,” Aetna CEO Mark Bertolini said on an investor call, expressing the business consensus.
Uncertainty is inevitably priced into premiums, and benefits and rates for 2018 started to be designed and set months ago. They’ll be approved by regulators in the spring, so Mr. Trump’s HHS nominees, Tom Price and Seema Verma, need to move fast to bring more predictability to the markets.
One of the President’s first acts was to sign an executive order to “waive, defer, grant exemptions from, or delay” rules that burden individuals, states and business in order to “create a more free and open health-care market.” The specifics are waiting in an HHS proposed rule about “market stabilization” now under review by the White House budget office.
This rule likely includes short-term measures to deregulate ObamaCare’s most onerous provisions. Technical reforms could be immediately reflected in lower premiums. These include relaxing the essential benefits mandate or the price controls that limit how much rates can vary from person to person. The Obama HHS turned the individual mandate into swiss cheese, creating “special enrollment periods” that allow people to dip in and out of insurance at will. Ensuring continuous coverage may be a priority.
Another useful interim change to reduce gaming would be to shorten the ObamaCare “grace period,” a 90-day window that requires insurers to cover consumers who aren’t paying their premiums. A McKinsey study found one of five exchange enrollees stop paying at some point during the year, and half of them re-enrolled in the same plan the next year, availing themselves of three months of “free” coverage.
Congress could also help stabilize the exchanges by suspending the 10-year $145 billion tax on the insurance industry. The costs will be passed on to consumers in higher rates, which is why Congress and the Obama White House agreed to a one-year suspension for 2017. Oliver Wyman estimates that another delay would offer immediate premium relief of 3% for 2018. This would buy some goodwill amid debates about who owes who what in various ObamaCare reimbursement programs.
Meanwhile, the work to replace the law in the longer term is well underway. The House Energy and Commerce Committee had a legislative hearing on four bills last week, and other power centers are making progress. House Speaker Paul Ryan said he hopes the repeal and replace proceedings will conclude by the second quarter.
The defining failure of ObamaCare is that too few people find its centrally planned insurance either affordable or valuable, despite the subsidies. The Republican-Trump bet is that more competitive markets will do a better job delivering coverage that people want and need.
Mr. Ryan’s scheduling goal may be too ambitious, and maybe health-care reform round II will break down in intra-GOP disarray about ideological purity and implacable Democratic opposition. But the panic is excessive based on the evidence so far.
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