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Republicans' fingerprints are all over Obamacare premium increases

The GOP plan to replace Obamacare could help define Donald Trump's presidency.

Before the House of Representatives' health care vote on Thursday, President Donald Trump took to Twitter to press his case to repeal the Affordable Care Act. That morning, he tweeted "Death spiral!" over a link to news that Aetna would pull out of the Virginia insurance exchange out of fear of potential losses. A few hours later, he proclaimed, "Insurance companies are fleeing ObamaCare — it is dead."

Readers who picked up The Sun the next morning to read about the narrow victory of the president's health care plan in the House might have thought he was onto something when they glanced lower on the front page and found the headline, "CareFirst seeks rate increases of more than 50 percent." Other insurers are also requesting double-digit increases on Maryland's exchange, as are insurers in Virginia, another state that requires early filing of rate requests.

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But it's not the problems in the Affordable Care Act exchanges that are driving the Republican effort to repeal Obamacare. It's the Republican effort to kill Obamacare that's causing problems in the exchanges.

The dynamic of Republicans undermining the ACA and then pointing to resulting rate increases as proof that it must be repealed predates President Trump. For years, Republicans have refused to fund so-called risk corridor payments at the level required by the ACA. Those payments were designed to help encourage more insurers to offer plans in the exchanges by compensating them for some of the risks associated with setting prices in a new market. If the rates insurers set for their plans were too low to cover their risk pool — for example, if their new customers turned out to be sicker than expected — the federal government would make payments to mitigate their losses. Companies that made unexpectedly large profits would contribute to the fund, and the federal government would make up the rest.

Or that's how it was supposed to work. Republicans didn't appropriate funds for risk corridor payments, and the money collected from profitable insurers only covered a fraction of other companies' losses. Insurers that initially set their rates low in an effort to win market share — and CareFirst appears to fit in that category — were stung by that shortfall. More than a dozen lawsuits are pending over the issue nationwide. But in the meantime, insurers have been forced to increase premiums to make up the difference.

Trump administration policies have made matters worse. Another part of the problem is that younger, healthier consumers did not enter the exchanges at the rates that older, sicker ones did — a phenomenon called "adverse selection" that drives up costs. The Trump administration has compounded the issue by signaling that it would no longer enforce penalties for those who fail to buy insurance. (The IRS is still assessing penalties against people who indicate on their tax returns that they don't have insurance, but under the Trump administration, it isn't rejecting returns that don't say one way or the other.) CareFirst's CEO has specifically cited President Trump's signals that he won't enforce the individual mandate as increasing the pressure for rate increases.

Compounding the issue is uncertainty over whether the Trump administration will continue funding another subsidy for insurance companies to cover costs associated with a program to reduce deductibles, co-pays and other out-of-pocket costs for low-income consumers on the exchanges. The Obama administration funded them, but Republicans in Congress sued, arguing the president didn't have the authority to do so. The Trump administration has cast doubt about whether it will continue the practice, and the funds — which are seen as crucial to maintaining the viability of the insurance exchanges — became a sticking point in last month's budget showdown. If the president cuts them off, rates in the individual market would go up by 15 percent to 20 percent, depending on whose estimate you use.

And all this is assuming the Affordable Care Act stays on the books at all. The health care bill the House passed gets rid of the individual mandate altogether, threatens the Obamacare Medicaid expansion — which could dump more sick people into the insurance exchanges — and changes consumer subsidies in ways that would further wreak havoc on the market. Changes designed to reduce the cost of coverage, such as the elimination of required benefit packages, would be dwarfed at least in the short term by spiking rates — or so said the Congressional Budget Office about the first iteration of Trumpcare. (What would happen under the version that passed the House, we don't know because Republicans didn't bother to wait for updated estimates.)

There's more to the story of health insurance rates than the uncertainty Mr. Trump and the Republicans are sowing, some related to individual firms' business decisions and some related to actual costs of providing care. Moreover, and the increases we're talking about are in the individual market, which makes up only a small piece of the picture. But the insurance business is about charging sufficient premiums to cover assumed risks. The greater the risk, the higher the premiums. The Affordable Care Act was carefully designed to mitigate those risks. President Trump and Congressional Republicans are trying to exacerbate them. No wonder rates are going up.

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