What’s Next for Health Care?

What’s Next for Health Care?

By David Bottoms, REBC, RHU, CLU, CHFC
Senior Vice President, Benefits

The American Health Care Act (AHCA), which had been initially touted as the Republican framework to effectuate the repeal and replacement of the Affordable Care Act (ACA), unceremoniously died with a whimper on Friday, March 24th leaving a cloud of uncertainty hovering over the health care industry which comprises roughly one-fifth of the national economy.

To state the obvious, the failure of the AHCA means that the ACA remains the law of the land; however, given that President Trump now holds the keys to many of the administrative levers regarding ACA enforcement and subsidy funding, in many ways the future of the ACA is almost as uncertain in light of the failure of the AHCA as it would have been with AHCA’s passage.

That said, and in the interest of hopefully providing some helpful comments regarding what likely lies ahead, I will focus here on three key health insurance market segments impacted to differing degrees by the failure of the Republican efforts to recalibrate health care: the employer market, the individual market, and Medicaid.

For starters, the employer market will likely be the least impacted as most employers have already adapted to the compliance related mandates of ACA.  Should President Trump administratively move to relax the enforcement of the employer mandate, some employers who have been offering coverage under duress in the past few years may find relief; however, these employers represent a small segment of the employer-provided healthcare market, so I do not expect major changes for the millions of individuals who obtain health insurance through an employer-provided plan.

For individuals without access to an employer funded plan, but with incomes in excess of Medicaid eligibility limits, the individual health care market is entering a period of unprecedented uncertainty.  Unless President Trump moves quickly to clarify his intentions with regard to the individual market (individual mandate penalty enforcement, subsidy funding, etc.), the turmoil in this market will likely be swift and substantial.

To elaborate, without clarity regarding the Administration’s intentions, it is highly likely that insurance carriers will make the determination that they should either sit out the 2018 plan year or pad their pricing to account for market uncertainty.  Should less carriers remain in the market and/or pricing increase, the descent of the individual market into a death spiral would accelerate.

Some pundits attest that such a decline would serve the interest of the Trump administration as it would make legislative intervention unavoidable and bring more votes to the table to enable passage of a repeal bill.  However, if the individual market “implodes” as President Trump has himself suggested and effective intervention does not occur prior to the 2018 midterm elections, expect to see a heavy price paid by Republicans who will be viewed as having squandered their chance to fix the market before implosion.  Hopefully, an awareness of impending disaster will result in preemptive intervention of some sort, lest millions of Americans be caught in the gap.

The Medicaid market is also entering a period of significant uncertainty.  The ACA sought to expand Medicaid eligibility and funding substantially; however, it did so in such a way that the states that elected to expand Medicaid initially received significant Federal funding for the expansion with the understanding that the Federal funding would be reduced in the years to come.  Partisan philosophical issues aside, many states expressed concern that their portion of the Medicaid costs could hobble their budgets in the years to come and, as such, declined the expansion offer.

The AHCA would have reduced Medicaid funding over time by virtue of a per capita based block grant funding formula, but given that the AHCA’s allocation formula would have been to the benefit of states that had previously expanded Medicaid, it stands to reason that, with AHCA’s failure, more states will consider expanding Medicaid given the lack of a suitable fallback position for lower income residents and as a means for potentially avoiding the risk of being left out in the cold should a future repeal and replace effort have a funding formula similar to AHCA’s.  Increased expansion by states that have not yet done so would be heavily supported by the hospital lobby who stands to be left holding the bag for even higher uncompensated care costs in the absence of a strong individual health insurance market.

There is no question that, given the significance and time-sensitive nature of health care, much could change (and likely will).  Nonetheless, Americans ought to buckle up because we could be in for a bumpy ride.

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