October 4, 2017

Despite Trump Administration Actions Creating Turmoil, Affordable Care Act Will Insulate Many from Insurance Rate Hikes

The Trump administration has taken numerous steps to hinder the Affordable Care Act and could eventually cause many state insurance marketplaces to collapse, but the majority of Wisconsinites who get coverage through the ACA will be protected from the increased premiums that insurance companies announced for 2018.

President Trump issued an executive order early this year giving federal agencies broad powers to change regulations in ways that undermine the ACA. Trump and administration officials have said that they will not enforce the individual mandate, have created uncertainty about the cost-sharing subsidies that low-income Americans and insurance companies depend on to make coverage more affordable, cut funding that has helped people enroll in coverage, and significantly shortened the open enrollment period. These actions serve to destabilize the Affordable Care Act and could lead to a smaller, less healthy risk pool, which will increase rates.

Because of this uncertainty and disruption, as well as rising medical and prescription drug costs, insurance companies in Wisconsin are increasing their rates for providing insurance on the individual market. Insurance companies have filed paperwork with the state justifying requests for significant rate increases for 2018. Increases range from 10% to 29% depending on the health insurer and geographic area.

Marketplace participants who have income under 400% of the federal poverty level ($98,400 for a family of four) are eligible for tax credits to help pay for their premiums (provided that they don’t have access to affordable employer-sponsored plans).  In Wisconsin, 83% of the 216,000 marketplace participants are receiving tax credits that substantially reduce the cost of their premiums. Tax credits increase as premiums increase, so most marketplace participants will be insulated from the substantial increases in premiums.

Congress should work across the aisle to stabilize the Marketplace and address the uncertainty insurance companies are facing, as well as protect the 17% of Marketplace participants who don’t qualify for premium tax credits. This is a significant number of people (roughly 37,000 this year), and for those individuals and families it is likely to be a serious burden. However, the Affordable Care Act’s structure protects a significant majority of people within the Marketplace from price hikes that would otherwise make insurance unaffordable and lead to millions more people going without insurance.

According to a recent Congressional Budget Office report, eliminating the funding for cost-sharing subsidies would increase the federal deficit by nearly $200 billion, because that change would sharply boost premiums and therefore also the federal spending for tax credits. Also many higher income people who qualify for small tax credits or do not qualify are likely to choose gold or bronze level plans because silver plans – the ones that are now eligible for cost-sharing reductions (CSRs) – are likely to see the largest increases. If Congress decides to appropriate funding for CSR’s, it will help to stabilize the market long-term and cost taxpayers less over the next ten years.

We must resist the Trump administration’s actions that weaken and threaten to destabilize the Affordable Care Act, like eliminating funding to make insurance more affordable and cutting resources that help people enroll in coverage. Congress should move on from its failed efforts to repeal and replace the Affordable Care Act and instead take a bipartisan approach to strengthening our health care system and increasing access to affordable coverage.

William Parke-Sutherland