President Trump and congressional Republicans finally goaded the health insurance industry into defending the Affordable Care Act this week — sort of. But these companies’ pusillanimous response to the GOP’s direct threat to Obamacare’s survival is a reminder that the industry, which collectively has made hundreds of millions of dollars from the law, has in many ways been its worst enemy.
The health insurers’ rare outspoken defense of the law came via separate letters from the industry’s lobbying arms, America’s Health Insurance Plans and the BlueCross BlueShield Assn., to Trump and to congressional leaders. The letters warn that the Republican determination to undermine the ACA threatens to drive more insurers out of the individual market, push up premiums and other costs, and burden hospitals with more unpaid bills.
But the letters amounted to a less than full-throated defense. For one thing, AHIP and the association sought cover by issuing the warning jointly with six other stakeholders’ groups, including the American Medical Assn. and the American Hospital Assn.
For another, the letters’ focus wasn’t on the ACA generally but on one provision, the law’s so-called cost sharing reductions. These are subsidies offered to households in the individual insurance market with incomes below 250% of the federal poverty level. (This year, that threshold is $61,500 for a family of four.) The subsidies help pay for out-of-pocket expenses such as copays and deductibles, and are paid directly to the insurance carriers.
These subsidies are the provision of Obamacare dearest to the insurance companies, but also one most vulnerable to Republican sabotage. They’re the target of a federal lawsuit brought by House Republicans, who maintain that because the money for the subsidies wasn’t specifically appropriated by the ACA, paying them out is illegal. A federal judge agreed last year, but stayed her ruling pending further appeals. The Obama administration defended the subsidies in court, but the Trump administration hasn’t been clear about whether it would continue the appeal or drop it.
Shutting down the subsidies, which are estimated at about $7 billion this year, would destroy the individual health insurance market almost instantaneously. Nearly 60% of buyers of health plans on the ACA exchanges are covered by the reductions. In many states, insurance companies participating in the exchanges have the right to pull out immediately — not even waiting for the end of the year — if the cost sharing reductions end.
On Wednesday, Trump said in an interview with the Wall Street Journal that he was considering using the CSR provision as a cudgel to force Democrats to negotiate over repealing the law. “Obamacare is dead next month if it doesn’t get that money,” he said. “I haven’t made my viewpoint clear yet. … What I think should happen and will happen is the Democrats will start calling me and negotiating.”
This wasn’t the first time Trump threatened to blow up the Affordable Care Act, nor the first time he alluded to the CSRs as the instrument of execution, nor his first assertion that Democrats would take the heat for the ensuing collapse.
It was this longer history, rather than Tuesday’s interview, that undoubtedly prompted the industry letters. They warn that “a critical priority is to stabilize the individual health insurance market” and that the matter is becoming urgent, as “the window is quickly closing to properly price individual insurance products for 2018.” The letters state that “the most critical action to help stabilize the individual market for 2017 and 2018 is to remove uncertainty about continued funding for cost sharing reductions.”
This only underscores how little the insurance industry has done to protect a law that cemented its position at the absolute center of healthcare delivery in the United States. Most coverage of the consequences has focused on the financial losses that several big insurers have sustained in the individual market as it has struggled to stabilize during the last three years. Much less has been written about the bigger picture, which is that most of the big insurers have been making a mint from Obamacare, chiefly through their participation in Medicaid expansion.
As we reported last year, that side of the ACA business has been so lucrative that the big insurers have hungered for more. Anthem, which has been grousing about elusive profits in the exchange market, bought Medicaid insurer Amerigroup, which operates Medicaid plans in 13 states, for nearly $4.5 billion in 2012, and acquired Simply Healthcare, with nearly 200,000 Medicaid and Medicare members in Florida, for $1 billion in 2015. Medicaid managed-care enrollment at St. Louis-based Centene grew last year by more than 20%, to 5.1 million members in 24 states. “Clearly, 2015 was a banner year,” crowed its chief executive, Michael Neidorff, in a conference call last year.