The legislation Republican leaders are pitching as their replacement to Obamacare does little to fix a problem in the individual insurance market that has been a major GOP talking against the Affordable Care Act — and the Republican-proposed alternative may even make the problem worse, health policy experts told TPM.
The prevalence of counties having only one or two insurers has been a constant criticism Republicans — fairly or or not — lobbed against Affordable Care Act and they haven’t stopped now, as GOP leaders beg rank-and-file members to support their controversial repeal legislation, the American Health Care Act.
The shrinking presence of insurers in certain parts of the country — and particularly in rural regions — is a major problem. But the structural issues pushing them out are largely untouched by the Republican legislation. On top of that, the way a key element of the bill, its tax credits, is structured exacerbates the dynamics. The few provisions GOPers can highlight in the legislation that could make insurance cheaper could have the opposite effect in rural areas, health care policy experts tell TPM.
But that hasn’t stopped GOP congressional leaders from harping on the lack of insurer choice as a reason their legislation should be rushed through.
“Over one-in-three counties in America: You’ve got one plan to choose from,” House Speaker Paul Ryan said in his weekly press conference Thursday. “These insurers probably never intended on being monopolists, but they are, in these counties. There is no choice, no competition, one plan to choose from.”
The biggest problem facing consumers in low choice regions is that the GOP bill offers tax credits that remain flat geographically. Not surprisingly, in areas where there are only one or two insurers, premiums tend to be high. For instance, in Alaska, which will have only one carrier in 2017, a benchmark plan for a 45-year-old has an average cost of $12,600 annually, compared to $3,600 in one of the cheapest states, New Hampshire. Under the Republican plan, parallel consumers in those two states would get exactly the same assistance.
While Obamacare set the tax credits it offered according to how much the average premium costs for a consumer, the GOP’s tax credits scale mainly by age. The credit goes a lot farther where insurance is cheap than it does where it is expensive, and in Alaska, for instance, the credit the average consumer would get would shrink by 78 percent under the GOP plan compared to the ACA, according to an analysis by the Center on Budget and Policy Priorities.
All told, consumers in 11 states will see their credits will shrink under the GOP plans to less than half what they received under the Affordable Care Act, according to CBPP.
A key Republican senator shrugged off the problem of the GOP’s tax credits not going as far in certain places.
“That’s true with almost everything in American life, isn’t it?” Sen. Lamar Alexander (R-TN) told reporters last week. But the geography question is just one of many lawmakers from rural states are beginning to raise about the proposed tax credit scheme.
The dynamic doesn’t just place an extra burden on individual consumers. It could force insurers to pull back even further as a result of what is known as “adverse selection.” With fewer people able to afford insurance, the sick will be the most likely to pay more to keep their coverage.
“That makes the market not attractive for insurers: enrollment is not strong so the people who are signing up are maybe going to be the sicker people,” said Cynthia Cox, the associate director for the Program for the Study of Health Reform and Private Insurance at the Kaiser Family Foundation.
The risk pool then gets sicker, costs for insurers go up, and they either must further hike premiums or leave the marketplaces, in a cycle that, if unchecked, is called a “death spiral.”
Republicans’ general argument for their overall health care reform effort is that by allowing insurers to offer cheaper (meaning: skimpier) plans they can increase competition and drive down prices.
Asked by TPM what in the bill would address the choice issue, Rep. Michael Burgess (R-TX), who chairs the health subcommittee under the House Energy and Commerce Committee, pointed to “the flexibility that’s going to be provided to some degree.” He referred to the loosening of the limit (known as the age band) of how much more insurers can charge older people than younger people, as well as the repeal of the so-called “actuarial value requirements,” which set the standard under the ACA for how much of a patient’s care plans have to cover.
In total, the provisions in the AHCA that would make insurance cheaper are undercut by aspects of it — the repeal of the individual mandate, the more meager subsidies — that stand to increase premiums. In rural areas, the provisions that Burgess pointed to may even backfire.
The age band for instance, will make insurance cheaper for young people, but also makes it more expensive for older people, who make up a larger share of the population in rural areas, as CBPP’s Tara Straw pointed out.
“So it’s just so another smack in the face,” she said. “Intentionally premiums will rise, because I guess these Republicans think these astronomical rates in the rural areas are not high enough.”
Indeed, the Congressional Budget Office’s report on the bill found that while eventually it would curb average premium growth slightly overall, older people would see their premiums rise by 20 to 25 percent by 2026 compared to current projections under the ACA.
More generally, allowing plans to offer less generous coverage — which the American Health Care Act does by repealing Obamacare’s actuarial values — means that people who live in areas with only one insurer will have a harder time finding insurance that offers truly comprehensive coverage.
“If you wanted something more comprehensive, you wouldn’t be able to get it,” said Linda Blumberg, a Urban Institute health policy scholar. “My anticipation is that the choice situation is going to worse as a consequence of there not being more comprehensive options to purchase.”
The problem of insurer choice in rural areas arises from a series of compounding factors for which there is no silver bullet for the federal government. Because there is a smaller customer base, insurers have less of a reason to enter these regions. There are also fewer health care providers, so insurers in those areas have to offer broad network plans, which are costlier than the narrow-network plans that have thrived under Obamacare, particularly in urban areas.
With fewer health care providers in the area, insurers can do less negotiating to lower prices, and costs in general are higher. Rural hospitals, for example, are harder to staff, harder to travel to, etc.
Obamacare’s approach was less geared toward addressing these structural realities and more at blunting their effect on individual consumers, by offering tax credits that would rise where premiums were higher and expanding Medicaid. The law did create some mechanisms to provide health-related funding to rural areas, but as choice stagnated in years since the ACA’s implementation, that effect was limited as well.
“Where the ACA failed, the failures in the ACA really were magnified in rural communities,” said Maggie Elehwany, government affairs and policy vice president at the National Rural Health Association, while pointing to the fact that 70 percent of the counties that are down to one insurer are rural.
“That’s what we hoped that the new bill or any modifications to the ACA would address. But we don’t see the Republican health plan doing that,” she said.
Republicans are pointing to a funding structure in their own bill as a potential solution to the choice problem. It provides $80 billion over 10 years for states to set up programs that aim to cover high risk individuals and stabilizing markets.
“Giving the states the flexibility to set up these types of programs and yes providing them some of the money to do that, I think a great deal more expansion in the individual insurance market will be a consequence,” Burgess said.
But other outside health policy experts were skeptical that the funding alone will be enough to counteract the bill’s other effects.
“It seems large, but it in terms of health care dollars, remember it’s a very finite pool,” Straw said. “The problems that they’re creating with this bill are very expensive and I think you could go through that fund very quickly.”