GOP Lawsuit Would Take Out Vital Leg of ACA
Much of the reaction to the Republican Congressional contingent’s lawsuit against the Obama administration over the Affordable Care Act’s rollout of the program has focused on the delay in imposing requirements on employers.
Many of the opinions question whether the administration overstepped its bounds in the delays or the irony of Republicans suing over the late implementation of a law they detest. But not much attention has been paid to what might be a more significant part of the lawsuit. That targets the reinsurance aspect, payments made to insurance companies to offset losses.
Risk adjustment restricts insurers’ ability to exclude or raise premiums on certain risks. It does this by moving money from plans with lower-risk enrollees to plans with higher-risk enrollees. This is meant to help stabilize premiums.
Risk corridors are also meant to stabilize premiums to encourage insurers not to raise rates because of uncertainty of who will enroll.
Reinsurance makes all this work by subsidizing losses. Without this, insurers would be exposed to significant risk in the first few years as the ACA is implemented. The subsidy was pegged to be $10 billion in 2014, $6 million in 2015 and $4 billion in 2016.
Risk adjustments are meant to be permanent. Risk corridors and reinsurance are temporary to help the transition to the ACA marketplace.
Reinsurance has been criticized as an insurance company bailout. And, in essence, it is. Insurance companies often rely on some kind of reinsurance, mostly on the property and casualty side of things and usually it is a private enterprise. But sometimes that risk is too great for the business sector and government steps in, as in the Terrorism Risk Insurance Act (TRIA).
In the case of the ACA, it was a backstop for insurance companies promising universal coverage and throwing the usual risk calculations out the window. Carriers needed some reassurance that they could sustain a complete reversal of how they do business.
The lawsuit is another Republican effort to chip away at the foundation of the ACA. As I have asked before, what will come next? Many people have differences with the ACA, but it did preserve the insurance company role in the market. Reformers, such as Rep. Barney Frank, did not even entertain proposing a single-payer system, which would have cut insurance companies out of the business. Some might argue that a single-payer system is still the objective for reformers, but the fact remains that the ACA as its stands ensures the survival of insurance companies.
Some say a post-ACA road would lead to a single-payer system, which Republicans would not want. Would the answer be to go back to the pre-ACA days? Or perhaps, dialing it back even further to everybody is on his or her own. That was suggested by a commenter on my earlier post on this.
I have trouble with this vision for America. I fully understand the arguments against government interference and control, but that should not lead to people not being able to get health care. What kind of work force does that program leave for American businesses?
Could people really be wistful for the Victorian days of oligarchs lording over a poor underclass living and dying in deplorable conditions? I suspect not. Or, I hope not.
So, what is the Republican vision for the future of health care? One of those answers was Romneycare, but that obviously is not acceptable because it is the model for Obamacare. The few proposals so far nibble around the edges and provide some market reforms that probably would not substantially change the system.
We need a better answer than tossing out the ACA and figuring it out later.