Consumer advocates say Maryland's increasing rates for health insurance on the Affordable Care Act's individual market are unsustainable. Health insurance regulators say they're unsustainable. Heck, even the insurance companies — which got approval for average increases ranging from 23 percent to 50 percent, depending on the plan and carrier — say so. But with a Trump administration dedicated to proving that the law is a failure and taking whatever steps it can to make it so, is there much Maryland can do about it?
In short, yes. The state's leaders may not be able to stop President Donald Trump from sowing continued instability in the insurance markets or from undermining the law's key provisions. But there are steps other states have taken that could at the least ameliorate the problem.
What's driving the rate increases is a phenomenon health care wonks call "adverse selection," meaning the tendency of people who cost the health care system the most to purchase insurance while those who cost less go without. In an ideal world, an insurance pool would include everybody — young and old, healthy and sick — so that in any given year, the people who pay more into the system than they cost balance out those for whom the opposite is true. But when the ACA barred insurance companies from denying coverage to those with pre-existing conditions and removed lifetime limits on coverage — two extremely popular provisions, and with good reason — it opened the door for sicker and costlier patients to get insurance.
That cost was supposed to be offset by the entry of more healthy people into the market as a result of the individual mandate — a requirement that virtually everyone have insurance or pay a penalty. But many healthy people still went without insurance, opting to pay a fine — in 2017, 2.5 percent of household income or a flat fee of up to $2,085, whichever is higher — that was often less than the cost of insurance. As the problem of adverse selection worsens, insurance carriers losses mount, rates go up, more healthy people drop out and the cycle deepens.
President Trump's signals that his administration won't enforce the individual mandate — already, the IRS has started accepting tax returns in which filers don't answer the question about their insurance coverage — are liable to make matters worse. Maryland regulators cited the likelihood that people will have little fear of being penalized for going without insurance as a factor in the higher rates they approved this week.
The first step Maryland should take to stabilize the system is to adopt a reinsurance plan that would cover insurers' claims beyond a certain point from certain individuals who have expensive medical conditions. Alaska pioneered the approach, spending $55 million from an existing health insurance tax on its reinsurance program in fiscal 2017. Consequently, insurance rates there rose just 7 percent that year, compared to a predicted 40 percent, and they are actually set to decline next year.
Oddly, the Trump administration is bullish on this idea. In March, Health and Human Services Secretary Tom Price encouraged other states to make similar policy experiments, and in July, the Trump administration agreed to cover most of Alaska's costs. It makes sense to do so; Alaska's actions are saving the federal government money by reducing the cost of the subsidies it provides for those who buy insurance on the exchange. Several other states, some liberal and some very conservative, are now pursuing variations on the same idea. Gov. Larry Hogan and the leaders of the legislature should put the creation of a reinsurance program at the top of their agenda when the General Assembly reconvenes in January.
Another idea that has not yet gotten much traction elsewhere is to enact a state-level individual mandate. Massachusetts had one before the ACA, and it still does, levying penalties alongside those under the federal law for those who opt to go without insurance. Maryland should adopt a similar approach so that the financial incentive to purchase insurance remains intact no matter what the Trump administration does. The provision may not be popular, but when enforced properly, it can be effective; Massachusetts reported 96 percent compliance with its mandate before the ACA went into effect.
Unfortunately, the collapse of the attempt in Congress to repeal and replace the ACA hasn't lent much momentum to the effort to improve the law, and the president remains just as committed to its destruction as ever. But Maryland has the opportunity to act alone to shore up its insurance marketplace. It needs to take it.
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