Insurance

Uncertainty over the future of Obamacare may drive insurers away

By Kris B. Mamula / Pittsburgh Post-Gazette

Bethel Park health insurance broker Dave Scott tells clients that it’ll be two, three, even four years before the Affordable Care Act is dismantled, which congressional Republicans call a high priority in the new year.

“It’s a very delicate situation,” said Mr. Scott, vice president of Bethel Park-based Arms Insurance Group LLC. “You won’t see any dramatic action until both sides come up with a plan.

“It’s like steering a cruise ship: You just don’t all of a sudden make that 90-degree turn.”

But the federal act requiring everyone to have health insurance could come apart much sooner. What’s more, a complete repeal may not be necessary to upset the market — some experts say that even tinkering with its provisions could push the law into a death spiral by turning the health insurance plan into a fund for sick people.

Insurers have until May to decide whether they will sell the government-subsidized coverage in 2018. The promise of repeal by President-elect Donald Trump and Republican leaders is likely to drive carriers out of the ACA marketplace, according to Sabrina Corlette, senior research professor at Georgetown University’s Health Policy Institute.

“Just the general uncertainty will cause some others to say, ‘I’ve had enough,”’ Ms. Corlette said. “I would expect more insurers to throw up their hands.”

About 20 million Americans have health insurance through the ACA, with Pennsylvania among five states with the heaviest reported enrollment this fall, according to the U.S. Department of Health and Human Services. The deadline to sign up for coverage is Jan. 31.

In the Pittsburgh region, Highmark and UPMC Health Plan say they have no plans to abandon the ACA market, despite staggering losses Highmark sustained in 2015. In 2016, Aetna and UnitedHealthcare stopped selling the coverage in Pennsylvania.

Among the more popular parts of Obamacare has been the prohibition against insurers using a person’s health problems to determine premiums. Tax credits to individuals and insurer subsidies to make policies affordable for people who meet income guidelines also have been embraced.

On the other hand, the individual mandate requiring everyone to have health insurance is among the law’s most disliked provisions, according to Timothy Jost, professor emeritus at Washington and Lee University School of Law in Lexington, Va.

“The first thing to go is the individual mandate, because that’s very unpopular,” Mr. Jost said. “If that happens, fewer healthy people would sign up through the marketplace, which would go a long way toward destabilizing the market.”

An Urban Institute study released in December went further, saying that immediate repeal of the law’s individual and employer mandates would cause “significant market disruption,” with insurers suffering combined losses of about $3 billion while increasing the number of uninsured people by about 4.3 million.

As with all health insurance plans, younger, healthier members allow carriers to pay the medical bills for older, sicker people.

Ending the individual mandate would cause younger people to drop coverage, leaving only a sick fund for people most in need of medical care. And without an individual mandate, more insurers will drop out of the government marketplace, according to a study by Washington, D.C.-based Urban Institute, eliminating competition in many areas of the country.

Regardless of how the law is dismantled, confusion in the market appears likely.

“How does the employer plan? How does the individual plan?” said Rick Galardini, chairman and CEO of JRG Advisors, a Pine insurance brokerage. “The story here is the disruption in the marketplace.”

Ending the ACA has appealing tax advantages for some.

Individuals would no longer pay a 0.9 percent payroll surtax on earnings and 3.8 percent tax on net investment income for people with individual incomes exceeding $200,000 or $250,000 for couples, according to a new Urban-Brookings Tax Policy Center analysis.

Nearly everyone in the highest income 1 percent would see a substantial tax cut, averaging $33,000 or about 2.1 percent of after-tax income, the Washington, D.C.-based Tax Policy Center found.

Others would see lower taxes, too: The demise of ACA would mean the end of certain excise taxes and other levies, cutting taxes by an average of $180 per household this year.

The prospect of lower taxes doesn’t impress Ali Shapiro, a self-employed health consultant who lives in Squirrel Hill. She signed up for ACA coverage after an insurance broker suggested that she omit mention of the Hodgkin’s disease she had as a young teen when completing her application for conventional health insurance.

“I said, ‘I can’t lie about this,’” said Ms. Shapiro, 38. “I wasn’t able to get insurance before the Affordable Care Act.”

The uncertainty about the future of the ACA makes her anxious, she said. Without government subsidies, her health care premiums would skyrocket, possibly putting an end to her 10-year-old business.

“I get emotional,” she said. “Ten years of blood, sweat and tears could be up in smoke. I’m really scared about it.”

Kris B. Mamula: kmamula@post-gazette.com, or 412-263-1699

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