Changing Views on the Affordable Care Act
An article in the New York Times on Saturday highlighted the health insurance lobby mobilizing against “Medicare for All”. It noted that the lobbyists’ baseline argument was that “the Affordable Care Act (ACA) is working reasonably well”.
Commentators were quick to point out that the active ACA support from the insurance industry was newfound, insinuating the ACA cheerleading may be disingenous and that the defensive position was probably more anti-single-payer rather than pro-ACA. Margot Sanger-Katz, also a writer for the New York Times, suggested that insurers’ opinions regarding the ACA have become “more enthusiastic over time”. Fiona Scott Morton, a Professor of Economics at the Yale School of Management, went as far as to call the insurers’ position “bizarre”.
Is this criticism fair? Have insurers blindly changed their ACA sentiments? Or has the market changed to their liking? An obvious place to start is insurer profitability. The Kaiser Family Foundation reports that medical loss ratios in individual markets have dropped 20% in the last two years (mid-year results). This means that insurers are now paying 20% less of the premiums they collect to fund medical claims. If you work in the health insurance industry, you know how off-the-charts remarkable this rapid change is for a nationwide marketplace.
It’s past time that we appreciate ACA markets really are different now, and not in the critical way that this is usually portrayed. For starters, the individual mandate penalty, thought to be the linchpin necessary to hold things together, is gone. Rather than flee from fear, insurers demonstrated new confidence and returned to markets in 2019, after a mass exodus in the two prior years, offering lower premiums no less.
More impactful than the exaggerated mandate impact, President Trump’s defunding of cost-sharing reduction subsidies provided a needed market boost (or enrichment as he would call it) in 2018. This has allowed 80% of exchange enrollees to obtain coverage for less than $75 per month. Unsurprisingly, the uninsured rate dropped in 2018 after beginning its post-ACA climb.
The expanded availability of off-markets options in 2019 is attracting people who lacked a solution in the ACA framework. This won’t directly benefit ACA markets, but it will lessen the animus of consumers caught in a rough place (high ACA premiums and no offsetting subsidies). ACA popularity will likely continue to climb with lower premiums, enhanced subsidies, more competition, opportunities for state innovation, and flexible off-market options. A split Congress that lessens the likelihood of legislative repeal doesn’t hurt either.
While “it’s easy to conclude that 2018 has been the ACA’s best year”, 2019 and 2020 may be even better. Insurers speak positively of the market today (with the obligatory "improvements should be made"), but some are salivating at the prospect of states opening the hidden Section 1332 box and finding the treasure that’s inside, not that they really need further "enrichment" at this point.
Insurers and consumers haven’t favorably changed their opinions of ACA markets because the alternative environment has changed. They have favorably changed their opinions of ACA markets because ACA markets have changed. For those who have spent the last few years reflexively reporting on ACA regulatory updates with characterizations of “gutting”, “sabotaging”, and “undermining” without seeking to appreciate the complicated dynamics, the rest of us can appreciate why an improved market environment is so hard to reconcile.