The upcoming strange politics of the ACA

ACA politics, assuming the Texas v. Azar lawsuit eventually gets bounced, is about to get strange in a new direction as premiums look to be about flat and Medical Loss Ratio (MLR) rebate checks are about to get big.

Charles Gaba has been tracking rate increases across the nation:


There will be variation, but the general story is that unsubsidized premiums are generically flat. I had expected national rate increases to be around 7% between medical trend and premium taxes.  That is not the case.  There are several causes of rates, on average, being flat:

  • More states filing and receiving approval for 1332 reinsurance waivers
  • More insurers entering monopoly markets and increasing competition
  • Medicaid expansion in more states removes the most expensive portion of the risk pool from the ACA individual market.
  • Insurers significantly overpriced 2018 and modestly overpriced 2019.

The first three reasons are good reasons.  These are reasons of pro-active government intervention to correct market failures, competition bringing down prices and expanding a cost effective program to provide direct and indirect benefits to a large population.  The last reason was the result of the policy and messaging shock of the inauguration of the Trump administration and the decision to not pay Cost Sharing Reduction subsidies.  Insurers were operating under incomplete and uncertain information in the spring and summer of 2017.  Insurers had two fundamental choices: run like hell or raise premiums a lot. Some insurers ran like hell, others turtled up to core counties and almost everyone raised premiums by some method of Silver Loading.  This produced dramatically cheaper net of subsidy premiums for most of the country and it has been a major enrollment booster even as the ongoing anti-messaging and operational outs that are administration policy has driven down new enrollment.

Pricing 2018 too high out of policy fear interacting with monopoly status allowed for spread games to proliferate and insurers to roll in the dough.  2019 premiums were based on mostly 2016 and 2017 claims experience, some 2018 retention and claims but the rates were submitted with only thirty to forty percent of the year actually hitting the claims system.  2019 rates were also being set in a policy environment where insurers were uncertain how important the individual mandate and the proliferation of new underwritten plans could be. Pricing actuaries had strong incentives to price high in 2019.

This will lead to significant MLR rebates in Fall 2019 for the 2016-2018 period and much larger and more widespread rebates in the Fall of 2020 for the 2017-2019 period.  I was cynical in the fall of 2017 as I thought about CSR and I may not have been cynical enough:

in the fall of 2019, rebate checks start showing up just as final rates are to be approved…. rate regulators will have strong incentives of getting great press on being tough on the insurance companies by forcing them to hand out very large checks to tens of thousands of residents.

And then in the fall of 2020, ambitious state insurance commissioners will be handing out rebate checks in late September as they are running for Governor or the Senate. Or if they are a bit less ambitious, they are supporting the incumbent party by handing out checks and injecting new federal money into the state and making the fundamental background economic picture a bit better than it otherwise would have been.

We’re about to enter a period of multiple years of effectively flat rates combined with large checks being handed out to tens of thousands of individual policy buyers just as early voting is starting in 2020.  Most of the flat rates will be from 2018 and 2019 being overpriced due to policy shocks and uncertainty.  Some of the flat rates will be the ACA operating as designed and intended.  The big Trump innovation which has contributed to flat rates has been the proliferation of reinsurance waivers.  But most of the action has either been a correction for policy shocks or business as usual.

Yet we should expect to see at least some bragging about the ACA rates are fundamentally flat next fall from people who voted to repeal it repeatedly.  The politics are going to get weird.

 

 

 






29 replies
  1. 1
    Brachiator says:

    Could someone let both the GOP and the Democrats know that the ACA seems to be doing pretty good.

  2. 2
    Baud says:

    It’s painful to contemplate how good our health care system would be right now if Democrats had stayed in control of Congress throughout Obama’s two terms.

  3. 3
    low-tech cyclist says:

    The Democrats need to take credit for this – early, often, and LOUDLY.

    They need to make the point repeatedly that if Trump and the GOP had had their way, not only would they not be getting these checks, but a lot of the people getting these checks (and a lot more besides) wouldn’t even be insured. And those that had insurance would still find themselves suddenly uncovered for pre-existing conditions.

    They must not let Trump or the GOP take credit for these checks. No way, no how.

    They should tell everybody, “if you got a rebate check, thank Barack Obama. And thank the Dems who risked the wrath of the Tea Party (remember them?) by passing the ACA, and the Dems who stood up to Trump and Moscow Mitch and wouldn’t let them kill the ACA two years ago.”

  4. 4
    Baud says:

    Can we stop pretending that being proud of the ACA isn’t anathema to a large minority of voters who we need to win in 2020?

  5. 5
    Sab says:

    @Baud: That has so many double negatives that I can’t tell what you mean.

  6. 6
    Baud says:

    @Sab:

    Being proud of the ACA is anathema to a large minority of voters who we need to win in 2020

    Denegativified

  7. 7
    Chyron HR says:

    @Sab:

    Don’t do what Bernie don’t does.

  8. 8
    Brachiator says:

    @Baud:

    Can we stop pretending that being proud of the ACA isn’t anathema to a large minority of voters who we need to win in 2020?

    Huh? Which fools are you talking about?

  9. 9
    Baud says:

    @Brachiator:

    Every one who kept the ACA in the red during the Obama years by disapproving it “from the left”, especially those who changed their minds when the GOP threatened to take it away.

  10. 10
    Sab says:

    @Baud: OK. Thanks.

  11. 11
    Sab says:

    @Baud: So all those folks with employer insurance who had no idea and didn’t care what a disaster the individual market was because not their problem.

  12. 12
    Baud says:

    @Sab:

    I don’t know their makeup specifically. Possibly.

  13. 13
    Brachiator says:

    @Baud:

    Every one who kept the ACA in the red during the Obama years by disapproving it “from the left”, especially those who changed their minds when the GOP threatened to take it away

    Ah, okay. I’m not sure that this is a significant minority or that anyone should care about them. I’m not sure how they kept the ACA in the red by their… disapproval.

  14. 14
    Ken says:

    @low-tech cyclist: Unfortunately “you’re getting a check this year because your insurer overcharged you two years ago because of Trump’s refusal to pay the cost-sharing reductions” takes more than ten seconds to explain. People’s eyes will glaze over, especially those of the newsreaders.

  15. 15
    Baud says:

    @Brachiator:

    The ACA was underwater because of disapproval from the right and the left. If you add the approval and the disapproval from the left, the ACA would have been in positive territory. It was a constant talking point throughout Obama’s term. You don’t remember?

  16. 16
    Sab says:

    @Ken: How about “you are getting a large check this year because your insurer overcharged you two years ago, so now the ACA is making them pay you back.”

  17. 17
    Central Planning says:

    @Sab: minor tweak – “…Obamacare is making them pay you back.”

  18. 18
    Chyron HR says:

    @Ken:

    “That’s your Obamacare bonus. You’re welcome.”

  19. 19
  20. 20
    Brachiator says:

    @Baud:

    The ACA was underwater because of disapproval from the right and the left.

    The ACA has largely been successful, despite attempts by the right to kill it. If I recall a couple of Anderson points correctly, one of Trump’s moves ended up helping the ACA.

    The Democrats should take credit even if they want to move on to something new. Lefty disapproval can be dealt with. To pretend that the ACA is a failure or should be shunned is nuts.

  21. 21
    Hoodie says:

    I assume this does not include employer-provided insurance premiums. Any data on effects there?

  22. 22
    SRW1 says:

    @Brachiator:

    Could someone let both the GOP and the Democrats know that the ACA seems to be doing pretty good.

    For the GOP, that rather is the problem !!!

  23. 23
    Yutsano says:

    @Hoodie: The way I understood it (but I could be way wrong) is that employer insurance also was subject to MLR rebate, but it goes to the employer rather than the employee. Or that could just be me because I am a fed. Pretty sure DA will correct me if I’m way off base here.

  24. 24

    @Hoodie: MLR rebates for large employer fully insured groups applies at 85% adjusted MLR. However, there have been way fewer policy shocks that has bounced rates around in that market segment so there should be no surge in rebates due to overpricing and running for the hills monopoly creation that we saw in 2018 and 2019 plan years.

    There will be a few, small MLR checks cut for this group as it happens every year but those are fundamentally baseline and incidental accidents.

  25. 25
    Brachiator says:

    @SRW1:

    Could someone let both the GOP and the Democrats know that the ACA seems to be doing pretty good.

    For the GOP, that rather is the problem !!!

    That’s just it. Instead of just bleating about Medicare for all, the Democrats should beat the shit out of the Republcans by shouting about the success of ACA and the failure of the GOP to do anything bold about health care.

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