President Trump, frustrated in his attempts to repeal and replace Obamacare turned to two measures yesterday to force Obamacare to “implode.” First, using an executive order (something he was critical of President Obama for doing), he ordered the Secretary of Labor to develop regulations for a new Obamacare plan. Small businesses, that could not afford to provide insurance and whose employees were pushed into the Obamacare market can now form national associations and obtain an insurance policy for their employees. As a national association, they will not be restricted by the requirements of any one state as to the policy’s benefits. Fewer benefits will result in lower premiums. The President believes that these barebone policies will be attractive to young healthy individuals in the Obamacare marketplace. Lower premiums come with higher copayments and deductibles, but for the fit young this is a reasonable risk to take.
The President knows that these policies will not be attractive to those with chronic health issues, like hypertension, diabetes, breathing problems and heart disease. They will remain with their Obamacare policies but as the young and healthy flee the insurance companies will have to raise premiums to offset the cost of these chronically ill individuals. In economics, this is called adverse selection – and the President is, with his presidential executive order, creating the scenario for that to take place.
There is no penalty for pre-existing conditions; premiums will not increase for those with pre-existing chronic illness. That is clear from both the executive order itself and has been reiterated by the White House. But, increasing premiums, increasing deductions and coinsurance, all likely results of the flight of the young and healthy to the President’s new health plan, will mean that patients with chronic illness will not be able to afford their care. All the insurance in the world will not be sufficient if you cannot pay your deductibles or coinsurance.
And this brings us to the second action by the President. Obamacare as currently practiced provides payments to the insurance companies to cover the deductibles and coinsurance of citizens getting Obamacare coverage with limited incomes. More income than would allow them to participate in Medicaid but an income where deductibles and coinsurance payments are prohibitive. Congressional Republicans in an earlier attempt to repeal and replace went to court saying the government could not make these payments to the insurance companies because Congress never appropriated funds. The Federal Courts agreed, and President Obama ordered his Department of Justice to appeal that decision. President Trump ordered his Department of Justice to stop the appeal and accept the Court’s decision. Insurance companies will no longer get subsidies for these low-income beneficiaries starting today. Insurers have two options, swallow the losses or require full payment of the deductibles, etc. Which do you think they will choose? I am betting that this is another reason for premiums to rise.
For my conservative brethren, this is a market solution and a reinvention of Obamacare. For my liberal brothers and sisters, this will raise premiums, making insurance unaffordable or making the deductibles and coinsurance payments so significant that one cannot afford to use the insurance they have. I believe the real idea is to accelerate the collapse of Obamacare and force both the Republicans and the Democrats to the table to find an alternative. None of this is about health care; it is all about how to redistribute limited resources. In the words of Margo Channing (Bette Davis in All About Eve) “Fasten your seatbelts, it's going to be a bumpy night.”