[EDITOR’S NOTE: This article – originally titled “10 ways the GOP sabotaged Obamacare” – was updated on February 3, 2020.]
The Trump administration and Republicans in Congress have long said that the ACA is collapsing under its own weight. But the individual insurance markets in most states had begun to stabilize by 2017, and began to show profits by 2018.
After steep rate increases in 2017 and 2018 (the latter driven largely by the Trump administration’s decision to stop funding cost-sharing reductions), rate increases for 2019 averaged less than 3 percent nationwide, and average rates for 2020 were essentially unchanged from 2019. And while there were numerous insurer exits from the exchanges at the end of 2016 and at the end of 2017, that was not the case at the end of 2018; there was an overall trend towards insurers joining the exchanges for 2019, and that happened in many states for 2020 as well.
While the individual market might have stabilized to some degree, Republican talking points about the problems in the individual market are not entirely without merit. The markets are note out of the woods —insurers still have some concerns about the ACA-compliant market, and premiums can be entirely unaffordable for people who don’t receive premium subsidies.
The unaffordability of premiums for people who aren’t subsidy-eligible can be partly blamed on the fact that the ACA incorporated a hard cutoff (household income of 400+ percent of the poverty level) for subsidy eligibility. But the story of the high premiums themselves is not complete unless we take a look back over the last several years and look at all the ways Republican lawmakers, governors, and pundits – and now the Trump administration — took steps to deliberately weaken the Affordable Care Act.
Once the premium increases of 2017 and 2018 gave way to much smaller increases — and even decreases — in 2019 and 2020, it was no surprise that the Trump administration took credit, attributing the lower rates and smaller rate increases to their own administrative prowess. But the recent premium stabilizations have come about despite the GOP’s efforts to drag down the ACA.
1. CO-OPs short-changed from the start
Let’s start by considering the ACA’s Consumer Operated and Oriented Plans, or CO-OPs. Early drafts of the ACA called for $10 billion in federal grants for the CO-OP program. But insurance lobbyists and conservative lawmakers insisted on $6 billion in loans instead of $10 billion in grants, restrictions limiting CO-OPs to the individual and small-group market (and not the more stable and profitable large-group market), and limitations stating that the federal loan money could not be used for marketing.
The ACA passed in 2010 and the CO-OPs were to be up and running in the fall of 2013, in time for the first open enrollment period. But during 2011 budget negotiations, $2.2 billion was cut from the CO-OP funding. And then during the “fiscal cliff” negotiations at the end of 2012, another $1.4 billion in CO-OP loan funding was eliminated.
So instead of $10 billion in grants, the CO-OPs got $2.4 billion in short-term loans, and a slew of restrictions on their business practices. Some of those restrictions were relaxed in 2016 under new HHS regulations, but it was too little, too late for most CO-OPs.
As of 2020, only four of the original 23 CO-OPs are still operational.
2. Day One legal challenges
On March 23, 2010, the same day the ACA was signed into law, attorneys general from 14 states began the process of challenging the ACA’s individual mandate via the court system. A total of 26 states eventually joined in the lawsuit, which went all the way to the Supreme Court.
In June 2012, the Supreme Court upheld the legality of the individual mandate, but ruled that the federal government could not withhold Medicaid funding from states that didn’t expand Medicaid. This had the effect of making the ACA’s Medicaid expansion optional, which has, in turn, hobbled the ACA’s progress in many states.
3. Refusal to take the ACA’s Medicaid expansion funding
The ACA scheduled Medicaid expansion to take effect at the beginning of 2014. But at that point, half the states had opted against expansion, despite the fact that the federal government paid the full cost of expansion for the first three years (and nearly all of it after that). Even now, as of early 2020, there are still 15 states that have not expanded Medicaid, although Nebraska will expand Medicaid eligibility as of October 2020, with enrollment starting in August.
The fact that a third of the states continue to refuse federal funding to expand Medicaid obviously has a negative impact on people living in poverty, but it’s also deleterious to the individual insurance markets in those states. Medicaid expansion allows adults with income up to 138 percent of the poverty level to enroll in Medicaid. In states that have not expanded Medicaid, however, the state’s regular eligibility guidelines apply, and generally prevent able-bodied childless adults from enrolling, regardless of how low their income is.
And ACA premium subsidies in the exchanges don’t apply to people with income below the poverty level, as those applicants were supposed to be eligible for Medicaid instead. So in 14 of the 15 states that have not expanded Medicaid (all but Wisconsin), there is no financial assistance available for people with income below the poverty level who don’t qualify for Medicaid based on each state’s strict eligibility guidelines. That creates a coverage gap, into which 2.3 million people currently fall.
Those 2.3 million people should have coverage, according to the ACA. But they don’t, because GOP-led states sued the Obama Administration to block the ACA, and the result was that Medicaid expansion became optional. Fifteen states still haven’t expanded Medicaid, despite the fact that their decisions leave 2.3 million people with no realistic access to health insurance coverage.
But what about the people with income between 100 percent and 138 percent of the poverty level? In states that expanded Medicaid, those individuals are eligible for Medicaid. In states that have not expanded Medicaid, people in that income bracket are eligible for substantial premium subsidies in the exchange, but not Medicaid.
An August 2016 HHS Research Brief indicated that in states that had not expanded Medicaid, people with income between 100 percent and 138 percent of the poverty level account for nearly 40 percent of total exchange enrollment – the highest percentage of any income category in those states. In contrast, people at that income level make up just 6 percent of the exchange enrollment in states that had expanded Medicaid.
Lower incomes are correlated with poorer health. And in states that haven’t expanded Medicaid, a substantial percentage of the population enrolled in exchange plans have incomes below 138 percent of the poverty level. The result is an individual market risk pool that has overall worse health than it would have if Medicaid had been expanded. Refusal to expand Medicaid is one of the factors that drives premiums up in the individual market.
4. Obstruction of enrollment efforts
Most states have opted to let HHS do the heavy lifting on exchange creation. Although there has been some shifting over the years, there are currently just 13 fully state-run exchanges (12 states and DC). The rest of the states use HealthCare.gov, either as part of the federally run exchange, or as an enrollment platform for a federally supported state-based exchange (several states that currently using HealthCare.gov are working towards having their own state-run exchanges by 2021 or a future year).
In states that use the federally run exchange, HHS provides funding for navigators to assist with the outreach and enrollment process. This is local, community-based help that particularly benefits lower-income people, and it’s funded by the federal government. Sounds like a win for the states, right?
But by January 2014, laws had been passed in 17 states that restricted navigators’ ability to help residents understand and enroll in the new plans. Some of those laws have since been blocked by the judicial system – Missouri’s, for example – but quite a few red states took it upon themselves to hamper their residents’ access to people and organizations who could help them make sense of the new insurance rules and plans.
Fast forward to January 2017. Trump was inaugurated 11 days before the end of the open enrollment period for 2017 coverage. And in the final week of open enrollment, the federal government scaled back advertising and outreach for HealthCare.gov, including pulling some ads for which payment had already been made. The result? Enrollment declined year-over-year in HealthCare.gov states, but grew in states that run their own enrollment platforms. This is particularly troubling for the stability of the insurance pools, because the last-minute stragglers who sign up at the end of open enrollment tend to be young, healthy people – exactly the people who are needed in the risk pool to keep it stable.
Later that year, just before the start of open enrollment for 2018 coverage, the Trump administration announced that funding for HealthCare.gov marketing and enrollment assistance would be sharply reduced, with a 43 percent reduction in navigator funding. The administration made another sharp reduction in funding in 2018, with total navigator funding dropping to just $10 million. That was down from $63 million in 2016, for a total reduction of 84 percent. That $10 million is spread across all of the states that use HealthCare.gov; for perspective, California’s state-run exchange allocated $6.3 million in navigator funding in 2019.
5. Efforts to invalidate premium subsidies
In King v. Burwell (formerly King v. Sebelius), plaintiffs argued that premium subsidies could not legally be distributed in states that didn’t establish their own health insurance exchanges. The Supreme Court ruled in the government’s favor in 2015, upholding the legality of premium subsidies in every state.
It’s notable, however, that Indiana, Oklahoma, Alabama, Georgia, Nebraska, South Carolina, and West Virginia all joined amicus briefs in support of the plaintiffs in King v. Burwell. Those states – all of which use the federally run exchange – supported the idea that premium subsidies should not be available in states that use the federally run exchange.
If the challengers had won, the individual mandate penalty would no longer have applied to most exchange enrollees in states that use the federally facilitated exchange, as coverage would not be considered affordable without the premium subsidies (note that the mandate penalty no longer applies as of 2019, except in states that have implemented their own individual mandates). And the employer mandate penalty would also not have applied, since it’s triggered when employees receive subsidies in the exchange.
But there are 1.09 million people in those seven states who were receiving premium subsidies as of 2019. Not only would their subsidies no longer have been available had the King v. Burwell plaintiffs prevailed, but without premium subsidies, the individual market would likely have collapsed altogether in states that didn’t run their own exchanges. That concern did not, however, stop those states from siding with the plaintiffs.
6. A legal challenge to cost-sharing reductions (which ironically ended up benefitting many enrollees)
The ACA’s cost-sharing subsidies are an essential part of making health care accessible for lower-income Americans. For people with incomes up to 250 percent of the poverty level, cost-sharing reductions (CSRs) are automatically added to silver plans, making the coverage much more robust than it would otherwise be.
From 2014 until October 2017, the federal government reimbursed health insurers for the additional coverage provided by CSR; those reimbursements totaled $7 billion in 2016. But in 2014, House Republicans, led by then-Speaker John Boehner, filed a lawsuit against the Trump administration, challenging the executive branch’s authority to reimburse insurers for CSRs, as they had not specifically been appropriated by Congress.
In 2016, a district court sided with House Republicans. But the ruling was stayed to allow the Obama Administration to appeal, and CSR reimbursements continued to flow to insurers. The Trump administration initially offered mixed messages in terms of whether CSRs would continue to be paid. In April, Trump even indicated that he would consider holding CSRs hostage in order to get Democrats to negotiate on health care reform.
The uncertainty surrounding CSRs in 2017 was repeatedly cited by insurers in their concerns about the stability of the individual markets. Instead of working to stabilize the individual market by resolving the issue (ie, passing a bill to allocate CSR funding), the Trump administration and Congressional Republicans let the uncertainty drag on until October 2017. At that point, just two weeks before the start of open enrollment for 2018 coverage, the Trump administration announced that CSR funding would end.
There is no doubt that this was intended to be a blow to the ACA-compliant markets, but somewhat ironically, it ended up being a boon. Insurers in most states added the cost of CSR to the premiums for silver plans (some had already done this prior to the official termination of CSR funding — correctly assuming that the federal funding would be eliminated — while others scrambled to add it before the start of open enrollment). This resulted in larger premium subsidies for 2018, since subsidies are based on the cost of benchmark silver plans. Premium subsidies remain disproportionately high in 2020, as insurers in nearly every state are now adding the cost of CSR to their silver plan rates. The larger subsidies have resulted in free bronze plans being available (depending on the applicant’s income) in many areas, and even some free gold plans.
7. Undermining of ACA’s risk corridors
Risk corridors were a three-year program designed to keep the individual markets stable during the early years of ACA compliance. The idea was to take money from insurers that ended up with lower-than-expected claims, and send it to insurers that ended up with higher-than-expected claims.
And if insurers with higher-than-expected claims needed to be reimbursed more than the amount contributed by insurers with lower-than-expected claims, HHS was going to make up the difference. This was clarified in the 2014 Benefit and Payment Parameters, finalized in 2013. On the flip side, if insurers had done exceedingly well, HHS would have been able to keep the excess funding. Obviously that didn’t happen.
Then in late 2014, Republican lawmakers, led by Senator Marco Rubio, added language to a must-pass budget bill (Cromnibus) that retroactively made the risk corridors program budget neutral. This was after 2014 coverage had been provided for nearly the full year, and after 2015 open enrollment was already underway, with rates long-since locked-in.
Claims were indeed higher than expected in 2014. When the dust settled, carriers with higher-than-expected claims were owed a total of $2.87 billion, while carriers with lower-than-expected claims only contributed $362 million to the program. HHS took that money – which they could no longer supplement with federal funding due to the December 2014 Comnibus Bill – and spread it around to all the insurers that were owed money, but they were only able to pay them 12.6 percent of what was owed.
The 2015 risk corridor results were similarly bleak. Large insurers were mostly able to weather this setback. But smaller insurers, and particularly the start-up CO-OPs, were not. Lawsuits over the unpaid risk corridor funds made it all the way to the Supreme Court — oral arguments were heard by the Court in late 2019. But regardless of how the Supreme Court rules, it’s too late for the insurers (mostly CO-OPs) that were driven out of the market once the risk corridor shortfalls were announced in 2015.
8. Efforts to repeal the ACA in 2017 (with a successful repeal of the individual mandate penalty)
On January 20, within hours of his inauguration, Trump signed his first executive order. The order directed federal agencies to
“exercise all authority and discretion available to them to waive, defer, grant exemptions from, or delay the implementation of any provision or requirement of the Act that would impose a fiscal burden on any State or a cost, fee, tax, penalty, or regulatory burden on individuals, families, healthcare providers, health insurers, patients, recipients of healthcare services, purchasers of health insurance, or makers of medical devices, products, or medications.”
In April 2017, HHS finalized a market stabilization rule aimed at propping up the individual insurance market via new regulations. But at that point, insurers were repeatedly stating that two of their biggest concerns were certainty with regards to ongoing funding for CSRs, and enforcement of the individual mandate. Neither of these was addressed by the market stabilization rule, and indeed, the Trump Administration and GOP lawmakers methodically did exactly the opposite of what insurers said they needed with regards to those two issues.
In May 2017, the House of Representatives passed the American Health Care Act (AHCA), which would have repealed several aspects of the ACA. As passed by the House, the AHCA would have undermined insurers’ efforts to keep healthy people in the risk pool. Unsurprisingly, the Congressional Budget Office estimated that 4 million people would have dropped coverage in 2017 if the AHCA had been enacted. Half of them would have been in the individual market, despite the fact that less than 6 percent of the U.S. population has coverage in the individual market.
Fewer healthy people in the risk pool results in further market destabilization. And there is no doubt that it would have been healthy people opting to drop coverage in 2017 if the AHCA had been enacted; sick people don’t voluntarily drop their health insurance.
But the AHCA did not pass in the Senate. Despite the majority of the GOP Senate delegation supporting ACA repeal, they could not get the votes to pass any of the measures that were introduced (Senators John McCain, Susan Collins, and Lisa Murkowski famously rejected the “skinny” repeal bill in July 2017).
In December 2017, after abandoning the idea of repealing most of the ACA due to lack of votes, Congressional Republicans passed the Tax Cuts and Jobs Act. This was a far-reaching tax bill, but it included a provision to eliminate the ACA’s individual mandate penalty after the end of 2018. Unsurprisingly, when insurers filed their 2019 rates in the spring and early summer of 2018, nearly all of them increased their premiums more than they would have if the individual mandate penalty hadn’t been going away.
There is no doubt — insurers clearly spelled it out in their rate filings — that premiums rose much more in 2017 and 2018 than they would have if GOP lawmakers and the Trump administration hadn’t introduced so much uncertainty regarding the ACA. Although rates have since stabilized and even decreased a bit in some areas, the decisions that were made in 2017 (including the elimination of the individual mandate penalty) continue to result in premiums that are higher than they would otherwise have been.
10. Texas v. Azar: Another legal challenge with tenuous logic and significant potential ramifications
When GOP lawmakers passed the Tax Cuts and Jobs Act that prospectively repealed the individual mandate penalty, it triggered a new lawsuit filed by 20 Republican-led states (Wisconsin and Maine subsequently withdrew from the state after Democratic governors were elected; there are 18 plaintiff states in the case as of 2020).
The plaintiff states’ argument is essentially this: The Supreme Court ruled in 2012 (see #2, above) that the individual mandate was constitutional because the fine for non-compliance was deemed a tax rather than a penalty. Now that the “tax” for non-compliance with the individual mandate has been set at $0, plaintiffs in Texas v. Azar are arguing that the entire ACA is unconstitutional and should be struck down.
Legal scholars on both sides of the issue believe that this is an absurd argument, but Judge Reed O’Conner sided with the plaintiffs in December 2018, ruling that the ACA should be invalidated. And a few months later, the Trump administration (Department of Justice) agreed that the ACA should be overturned.
Oral arguments were held in the Fifth Circuit Court of Appeals in July 2019, with Democratic-led states stepping in to defend the ACA since the Department of Justice has agreed with the plaintiffs in the case.
A three-judge panel from the Fifth Circuit Court of Appeals issued their ruling in December 2019, just after open enrollment for 2020 health coverage had ended in most states. Although their ruling had been anxiously awaited, it essentially just kicked the can down the road: The panel agreed with the lower court in ruling that the individual mandate is unconstitutional without an associated tax. But they opted to send the case back to the lower court for a determination of which specific provisions of the ACA should be overturned as a result (despite the fact that the lower court had already ruled, a year earlier, that the entire ACA should be overturned). That has the effect of delaying the case out past the 2020 elections.
A group of Democratic-led states subsequently asked the Supreme Court to step in and hear the case during the 2020 term, instead of waiting for it to make its way back through the lower court. But the Supreme Court declined to do so. So for the time being, the Appeals Court is awaiting a decision from the lower court in terms of which provisions of the ACA should be overturned.
The case is likely to eventually end up before the Supreme Court, which would once again be tasked with determining the constitutionality of the ACA — but this time with two Trump-appointed justices on the bench.
If the ACA is overturned, insurers in the individual market would no longer be required to offer coverage to people with pre-existing conditions, premium subsidies and cost-sharing reductions would no longer be available, Medicaid expansion would end… In short, things would return to the way they were prior to 2014, with self-purchased coverage available only to those who are healthy enough to qualify and well-heeled enough to pay for the coverage themselves.
Somewhat ironically, several of the plaintiff states — which are working to overturn the ACA via this court case — have been scrambling to implement laws and regulations to protect their citizens from the fallout of the ACA being overturned. But without the federal funding that currently pays for premium subsidies and Medicaid expansion, it’s doubtful that many states would be able to replicate the current level of coverage and affordability for their citizens.
11. Regulatory action to destabilize the ACA
When GOP lawmakers failed to repeal the ACA in 2017 (with the exception of the individual mandate penalty), the Trump administration started looking for ways to chip away at the law via regulations instead. As mentioned above, the administration has opted to significantly reduce the federal funding that was being used to help people enroll in plans offered through the exchanges. But there have also been some regulations that have further undermined the ACA-compliant markets, mainly by making it easier for people to enroll in plans that don’t meet the ACA’s requirements for individual and small group coverage.
In June 2018, the Trump Administration finalized regulations that allowed self-employed people and small businesses to join association health plans without having a commonality of interest or a purpose for the association other than obtaining health insurance. This regulation has been struck down by a federal judge and although the case is being appealed, the Department of Labor has confirmed that association health plans based on the 2018 regulations cannot currently be marketed to sole proprietors and small businesses.
But perhaps more significantly, the Trump administration has also relaxed the rules that apply to short-term health plans, making them a somewhat viable alternative for healthy people who don’t want to pay for ACA-compliant coverage. About two-thirds of the states have stricter rules for short-term plans (some are long-standing, and some were implemented after the new federal rules were put in place), so the federal rules don’t fully apply in most states. But in areas where longer short-term plans became available under the new federal rules, insurers generally noted that as a factor driving premiums higher for ACA-compliant health plans in 2019 and 2020. This makes sense, as the people likely to purchase short-term plans tend to be healthy (short-term plans don’t cover pre-existing conditions, and they’re medically underwritten), leaving a less healthy pool of people in the ACA-compliant market.
The Trump administration has issued regulations that allow employers (starting in 2020) to reimburse employees for the cost of individual market coverage. In addition, employers have the option of reimbursing employees for excepted benefits (including short-term health insurance) via an excepted benefits health reimbursement arrangement.
That provision is intended to make short-term health plans a more attractive option, which, in turn, makes the ACA-compliant markets less stable. Depending on what employers opt to do with the new health reimbursement arrangement (HRA) options, the individual market could become more or less stable; it would depend on how many people end up switching to ACA-compliant coverage via individual coverage HRAs, how healthy that population is, and how many people end up enrolling in short-term plans via the excepted benefits HRAs.
12. GOP refusal to work on bipartisan fixes
The ACA has been in effect for nearly a decade, and Republican lawmakers have been trying to repeal, defund, or undermine is for nearly a decade. (You can see some of their efforts here.) But they have been mostly unwilling to work together with Democrats to make any significant changes to the ACA to make it work better.
It’s true that the 21st Century Cures Act – which passed in late 2015 – had bipartisan support and allows small businesses to reimburse employees for the cost of individual market health insurance. This had previously been prohibited under guidance that HHS and the DOL had finalized in 2013, as part of their work to implement the ACA.
But other fixes that could have been made to the ACA never got off the ground. The family glitch has persisted, as has the subsidy cliff and the Medicaid coverage gap (granted, fixing any of them at the federal level would be expensive, and states with a Medicaid coverage gap could choose at any time to expand Medicaid and eliminate the coverage gap).
Republican lawmakers could have worked with Democrats to appropriate funding for cost-sharing reductions in 2014 – or anytime since then – rather than suing the Obama Administration. And Republican-led states could have taken advantage of the benefits of the ACA, including Medicaid expansion funding, instead of trying to topple the law in court (Texas v. Azar) and leave their residents — especially those with low incomes and/or pre-existing conditions — without viable coverage options in the individual market.
Louise Norris is an individual health insurance broker who has been writing about health insurance and health reform since 2006. She has written dozens of opinions and educational pieces about the Affordable Care Act for healthinsurance.org. Her state health exchange updates are regularly cited by media who cover health reform and by other health insurance experts.