President Trump recently declared “Obamacare dead,” yet despite numerous attacks from his administration and opponents in Congress, the Affordable Care Act keeps on ticking. It seems Trump can’t kill the ACA, but he is making it more and more expensive.
The acts of sabotage cause insurance companies to raise premiums, which hurts high-income earners the most because they make too much to qualify for the tax credits that help make insurance more affordable. For the 88% of marketplace participants in Wisconsin who are currently getting those subsidies, the tax credits absorb the cost of rising premiums. As a result, the attacks on the ACA that increase premiums are also significantly increasing federal spending for the credits.
Last October, President Trump announced he would no longer pay for the cost-sharing reductions that insurance companies are required to offer lower-income people to help pay their deductibles and other out-of-pocket costs. Insurance companies responded by raising their premiums to make up the difference. In Wisconsin, Trump’s decision resulted in an average 36 percent increase in premiums.
Right now, insurance companies are working to account for the costs of Congress’s decision to zero out the tax penalty that the IRS charged for not having health insurance. They are also grappling with the administration’s decision to allow insurance companies to sell skimpier health plans that aren’t required to comply with many of the ACA’s consumer protections, such as not basing rates on gender, occupation, or health status, providing essential health benefits, and not discriminating against people with pre-existing conditions.
All of these actions make it more risky and expensive for insurance companies to insure people through the Marketplace, but because nearly 90 percent of Wisconsinites with ACA plans received tax credits, the rate they paid remained largely unchanged, or in some cases decreased. The premium tax credits are tied to the cost of Marketplace plans in someone’s region. Each person’s expected contributions is capped as a percentage of their income, so when the premiums go up their tax credits go up as well. The higher costs associated with sabotage lead to higher premium tax credits. But what about people who make too much to qualify for tax credits? They and the federal government are left paying the price of sabotage.
After recent coverage appearing to highlight the resiliency and successes of the ACA, President Trump unveiled his latest acts of sabotage. The administration announced that it would no longer make risk adjustment payments to insurance companies. These payments help to even out the cost of providing health care to people who are sicker and therefore more costly. Insurance companies with healthier people paid into the fund and then insurance companies serving sicker people were paid out of the fund. Not only did this help to stabilize the market, it also discouraged insurance companies from cherry-picking younger, healthier customers. The decision to stop these payments forces more uncertainty into the insurance market, and many insurers, which are in the midst of determining their 2019 rates, have been very critical of this change.
Last year, the Trump administration cut ACA Navigator funding by 40 percent. This week, Trump announced that he was cutting an additional $25 million from the program. ACA Navigators provide free in-person help to enroll in health insurance and education on how to best use your health insurance. Many people, especially those with fluctuating income or difficulty using computers, need the help of Navigators to get the best coverage options for themselves and their families. This is the most recent attack in a seemingly unending war the Trump administration is waging on health care.
Expect these acts of sabotage to do what all the others have done: raise rates, which then lead to higher tax credits for those who receive them.
This sabotage hits the people who don’t qualify for tax credits the hardest because they have to pay the higher premiums if they want coverage. They’re also the ones being priced out of the Marketplace. According to a report from the Centers for Medicaid and Medicare Services the percentage of people who receive premium tax credits is increasing. In 2017, 82 percent of people with insurance through the ACA received tax credits. For 2018, that number had jumped to 88 percent. About 12,000 Wisconsinites who do not qualify for premium tax credits dropped out of the marketplace between 2017 and 2018, which largely accounts for the higher percentage of people receiving tax credits. There are still about 24,000 people participating in the ACA Marketplace who don’t receive tax credits, and the Trump administration’s sabotage efforts will hurt them the most.
In the wake of a never ending barrage of sabotage, the Affordable Care Act seems more stable and resilient then most would have thought. But there is a clear price to pay for these acts of sabotage, and the federal government and people making too much to qualify for tax credits are the ones who have to pay it.
