The tax-reform provision repealing the penalty on those who refuse to participate in ACA has freed millions of Americans to escape a system that exploits them. But while Americans can escape ACA, they still can’t buy insurance in the individual market independent of ACA because private insurers are prohibited from selling it. If this prohibition can be removed through the granting of state waivers by the Department of Health and Human Services, or by the passage of a new federal statute, ACA will collapse into a high-risk insurance pool for the seriously ill rather than become a stepping stone to socialized medicine.
The politics of the ACA debate changed dramatically when the Congressional Budget Office determined (see PDF) that repealing the coverage mandate would save an astonishing $338 billion over 10 years. The saving would come from undisbursed subsidies, as lifting the tax penalty would induce an estimated 4.6 million people to flee from the exchanges. The number of Americans enrolled in ACA plans is projected to plummet to 7.4 million by 2021, a mere 2.2% of the population.
The repeal of the tax penalty will progressively worsen ACA’s risk pool as healthy enrollees who currently pay more into the system than the expected value of their coverage to exit the exchanges. Premiums will rise at an accelerating rate for those who stay in the exchanges, forcing Democrats to find new funding or watch the program implode.
There are two ways to restore Americans’ freedom to buy health insurance independent of ACA. First, HHS could grant waivers to states that want to let private insurers offer state-approved plans exempt from ACA’s coverage mandates and rigged risk pool, enabling these states to expand health-care freedom inside their own borders. Second, Congress could amend the ACA to permit insurers to sell individual policies outside of the exchanges that are totally independent of ACA regulations, which would dramatically increase the options available to every American.
Idaho is the first state to allow plans that stray from ACA’s coverage mandates, and Blue Cross of Idaho has proposed five “Freedom Blue” plans outside the state exchange. The plans provide coverage like what is available on the exchange, but many are listed at about one-third the price because premiums are set to match individual health-risk profiles rather than subsidize the riskiest enrollees. The new plans also boost affordability by offering higher deductibles.
To attain administration’s blessing for state-approved plans, states must make them renewable every 12 months. This allows them to qualify for the limited-duration exemption recently expanded by HHS.
Some in Congress recognized that Idaho’s plan to grant health-care freedom to its citizens posed a threat to ACA. Since Idaho has shown no sign of backing down, this battle is certain to escalate. If Idaho does market its “Freedom” insurance, as many as 30 other states will follow its lead. Health-care freedom in Idaho could lead to the de facto end of ACA throughout America.
The administration has also been working to expand health-care freedom nationwide. In 2016 the administration reversed then ACA policy of making cost-sharing payments to keep insurance companies in the exchanges, prompting insurers to raise the price of their federally subsidized benchmark insurance options. This premium triggered an automatic increase in the subsidies, all of which were funded by federal taxpayers.
In 2017, state insurance regulators ‘looked the other way’, but ACA specifically granted the federal government rate-review powers to prevent insurance companies from gaming the system. The benchmark ruse is unlikely to pass HHS scrutiny in 2018.
As healthier families flee the exchanges and premiums spiral, most deciders will want to boost the subsidies since it will be very difficult to deny people who have voluntarily left the exchanges the freedom to buy their own health insurance independent of ACA regulations.
State and federal action to restore health-care freedom would then allow new health-care initiatives (such as the partnership among Amazon, Berkshire Hathaway and JPMorgan Chase) that would likely increase innovation in the insurance market.
If more than 40% of people enrolled in the exchanges are expected to flee – even when the only alternative is to become uninsured – the number exiting the exchanges would grow substantially when private alternatives are made available.
This accelerated exit will reduce ACA to a high-risk insurance pool. At that point a real debate about how high-risk care should be structured and funded, and whether it should be administered by states or the federal government will occur.