Millennium Post

Uncertainty over Obamacare

With the recent announcement of the White House to cut off payments to insurers that underpin parts of the Affordable Care Act (ACA), better known as 'Obamacare', the US health insurance companies appear having tough days ahead. The announcement would knock the established wobbly markets, subsequently enhancing the delight of President Donald Trump. Interestingly, Trump earlier appeared to extend his support to a bipartisan proposal of some senators of bolstering Obamacare with a guarantee of payments for two years, but later he rejected to reinstate the payments. The money involved in Obamacare apparently compensates insurers for scaling down the amount for which they were liable for each loss or injury before making payments and out-of-pocket costs for the poor buyers on Obamacare's insurance marketplaces. As the insurers would have to the discounts even after stopping the payments, they would obviously increase their premiums and would chalk out a plan to make payments without quittance. And, it would certainly affect the chances of 18 million Americans, who prefer to buy health insurance from the 'individual' markets, because they are not covered from anywhere else like employers or organisations. The scenario, however, varies from state to state. While in densely populated states like New York and Massachusetts, consumers have a wealth of choices and comparatively low premiums, in rural states — Obamacare still appears to be a better option. The insurers have raised the premiums so high in rural areas that such prices are nearly impossible to pay for those who earn just much to qualify for a helping hand in the form of tax credits. These tax credits disappear brusquely at four times of the poverty line.

For people who work for or run small businesses, Trump's new strategy hurts them, at least in the short term. It may be noted that just days ago, Trump triumphantly pronounced Obamacare dead and gone. That was until some senators – cutting across their party lines - leased new life into it with the announcement of a bipartisan compromise to extend funding for cost-sharing reductions, while allowing more flexibility for states to experiment with alternatives to Obamacare, or Affordable Care Act, insurance products. The president, true to form, seemed to praise the deal while simultaneously condemning it, perhaps setting up a scenario in which he can take credit for forcing the parties to come together while buying time to work out a more permanent solution or to find a path to outright repeal. Notably, compromise has been hard, but repeal would be worse: millions of Americans without health insurance, deep cuts to Medicaid and a return to the days where people could be excluded from coverage because of pre-existing conditions. Still, middle-class Americans struggle to buy insurance. The threat of the loss of cost-sharing reductions forced insurance companies to increase premiums. The middle class, who don't get premium subsidies, would bear the full brunt of double-digit premium increases. The Affordable Care Act requires health insurers to reduce consumer cost-sharing requirements, such as deductibles and co-payments for enrollees who earn between 100 percent and 250 percent of the federal poverty level. The Trump administration's decision to end the cost-sharing reduction payments not only disrupts the health insurance market but contradicts many of the health reform priorities expressed this year by both the president and members of Congress. In fact, according to an August 2017 analysis by the Congressional Budget Office, the impact of this action will make oft-cited shortcomings of the Affordable Care Act even worse. The Act, however, has been criticized because, in some areas of the country, only one insurer is offering marketplace plans to consumers.

But, according to CBO, terminating payments for cost-sharing reductions in some states will probably cause more insurers to withdraw from the non-group market, while others may choose not to enter the market at all. Stopping the cost-sharing reduction payments will not increase competition or consumer choice. Even the monthly premiums for many Affordable Care Act plans have increased over the years, by significant amounts in some states. Eliminating the cost-sharing reduction payments will make that problem worse. Since insurers are still required to bear the cost of cost-sharing reductions, even though they no longer receive government payments, they will likely raise premiums to make up the difference. In fact, insurers in some states anticipated the president's action and already increased their rates for 2018. Not only that, for those who worry about the Affordable Care Act's impact on the federal budget, it is important to note that the higher premiums will increase federal spending on premium subsidies that are paid for individuals earning between 100 percent and 400 percent of the federal poverty level, with an estimation of increasing the federal deficit by 194 billion USD from 2017 through 2026. Most important, the cost-sharing reduction payments are often characterized as a "bailout" to wealthy insurance companies. The law requires insurers to reduce out-of-pocket costs for low- and moderate-income enrollees, and the federal government has a contractual obligation to the plans to defray the cost of these cost-sharing reductions. This means that insurers have a legal right to leave the marketplace at any time once the payments cease, which would leave millions of Americans without access to any coverage at all.

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