Here & Now

Insurance Expert: GOP Indecision Leaves ACA Market Shaky

Frederica Freyberg:

In our look ahead this week what are the options for Republicans in Congress to repeal and replace the Affordable Care Act? President Trump this week turned up the heat saying Congress should not leave for its August recess until a new health care plan is passed. This week we look at what some of the different scenarios could mean for Wisconsin. Joining us is Justin Sydnor, University of Wisconsin associate professor in risk management and insurance. Thanks for being here.

Justin Sydnor:

Glad to be here.

Frederica Freyberg:

Let’s tick through these. We’ve got the repeal and replace. We’ve got repeal and not replace. We’ve got repeal and replace later. We’ve got nothing happens and the ACA is allowed to quote fail. What does this uncertainty do to insurance markets including those plans operating in Wisconsin?

Justin Sydnor:

I think uncertainty is the right word there. The insurance carriers in Wisconsin and everywhere else have a hard job of trying to establish exactly what their plans are going to look like. And that’s affected by a range of regulations coming out of Washington. And right now they really don’t know what to do. There’s substantial uncertainty.

Frederica Freyberg:

When do they have to kind of have these plans ready for people to choose from?

Justin Sydnor:

Most of the filings with state regulators that lock down the prices, the premiums for these plans have been coming in and going on over the summer. And insurers are struggling to figure out exactly what prices to set because they’re not quite sure what the plan marketplace will look like next year. Ultimately they have to get ready to promote these plans and sell them by October, November, early enrollment periods.

Frederica Freyberg:

There’s always this talk that Obamacare is in a death spiral. President Trump has talked about just letting it fail. Is it in a death spiral as it is right now?

Justin Sydnor:

In fact throughout most of the country and certainly in Wisconsin, it’s very much not in a death spiral. It’s really a situation where it’s not really that you could let it fail. If the ACA just moves on forward as it’s been established, it’s very unlikely to fail, especially in places like Wisconsin. Part of the reason people think it might be in a death spiral, in recent years, there has been some increases in premiums. We’ve seen that in Wisconsin as well. But if you think about Wisconsin we’ve seen smaller premium increases than the country as a whole. And the really big indicator is that we haven’t seen drops in enrollment in the state and actually through most of the country. And that’s what we’d see if these premium increases signaled that the market was collapsing. So instead what we see is people are still enrolling. And most of the early evidence from this year suggests the premium increases were enough to stabilize the markets and make them profitable.

Frederica Freyberg:

Why were there these premium increases though?

Justin Sydnor:

Many insurance companies were losing money on the plans they were selling through the Affordable Care Act exchanges. And that was largely because the mix of people buying plans is a little less healthy than they anticipated when they first established their plans. They also had to do some premium increases to catch up with some rising medical costs that affect everyone, including what we’ve seen for employer-sponsored plans.

Frederica Freyberg:

Yet were these premium increases historic, or were they potentially smaller than they might have been without the ACA?

Justin Sydnor:

Most of the ACA markets saw somewhat larger increases for instance in the past year than what you saw for employer-sponsored plans. But they weren’t wildly different. And over all if you look at the premiums for ACA plans, the individual market plans in Wisconsin, they’re actually very close to the total premiums that get paid in employer-sponsored settings for similar levels of coverage.

Frederica Freyberg:

How could policy makers help it along toward failing though? That is a possibility.

Justin Sydnor:

Yeah, very much. If we conduct the ACA as it was designed, it’s unlikely to fail on its own. But the administration and Congress have a number of things they can do to cause it to fail if that’s what they want to do. Probably the most important of those that’s been in the discussion right now is what happens with the so-called cost sharing reductions. In the Affordable Care Act plans, insurers are required to offer plans for people with very low incomes that give them low deductibles and low levels of co-pays and co-insurance. And the federal government in response helps to pay the additional cost of that extra coverage. And they’ve made promises to pay that. But there’s a debate about exactly how that money has been appropriated and whether or not the government will continue to make those payments. And the administration and Congress have some power to remove those payments and have a lot of power to keep uncertainty as to whether those will go on. That’s a big effect on insurers. Because if those payments aren’t made, the insurers lose substantial amounts of money and would have to either pull out of markets or raise their premiums to make up for that.

Frederica Freyberg:

Is this something being talked about in Washington?

Justin Sydnor:

Quite actively. Every day there’s a debate. And words coming out of Washington, often very conflicting, about whether or not these premium payments will be made to insurers and whether they’ll make any long-term commitment to paying them. So far the administration has refused to make any long-term commitment to making these payments.

Frederica Freyberg:

Unfortunately we need to leave it there. A lot more to talk about. Justin Sydnor, thanks very much.

Justin Sydnor:

Thanks for having me.