Friday, September 09, 2016

Give Republicans this: They know how to make insurers happy

After Aetna's threat to pull back from the ACA marketplace if its merger with Humana was contested by the Justice Dept came to light, I noted that even in CEO Mark Bertolini's Springtime for the ACA aria last April, there was an equivocal note. That is, 'this market can work if Congress does its work':
we see this as a good investment, hoping that we have an administration and a Congress that will allow us to change the product like we change Medicare every year, and we change Medicaid every year.

But we haven't been able to touch this product because of the politics. But if we can get to that point, we believe we are in a very good place to make this a sustainable program (my emphasis).
Why Bertolini might have thought "we can get to that point" in the foreseeable future, barring a Democratic blowout in the November elections, is anyone's guess.  Notwithstanding, that "if" gave him at least rhetorical pivot space. When Elizabeth Warren, Bernie Sanders and allied senators challenged the Aetna pullback this week, Aetna neatly foreclosed on the "if":

“We are one of many insurers, large and small, that has been forced to reduce its public exchange participation due to an increasingly unstable marketplace. This isn’t a recent development, as more than 40 companies exited certain geographies for the 2016 plan year,” Aetna spokesman T.J. Crawfrod wrote in an email to HuffPost. “Singling Aetna out may be politically convenient during election season, but this letter ignores realities and takes the focus away from needed reforms. The ACA is not sustainable without bipartisan action that improves access, affordability and quality of care for consumers” (my emphasis).
There's a similar subtext, if not so dire a forecast, in Sabrina Corlette and Jack Hoadley's Lessons from Medicare for the ACA marketplace, published late last month. Along with a menu of possible reforms and tweaks for the marketplace, some which would require legislation and money and some of which wouldn't, the report suggests these overarching messages:

1) With the possible exception of the young Medicare Part D drug benefit, every public health insurance program has had periods of instability and required shoring up. That includes Medicare Advantage, the Federal Employees Health Benefit Program, and state managed Medicaid programs.

2) When the predecessor program to Medicare Advantage was in remission, losing more than half its plans from 1998-2002 and a quarter of enrollees from 1999-2003, the GOP Congress showered it with new money in the Medicare Modernization Act of 2003, as well as creating new kinds of plans that allowed for more robust provider networks.

3) The ACA could sure use some love of that kind, but it isn't going to get it.

Timothy Jost makes a similar set of points in a comparison of risk adjustment programs attached to Medicare Part D and the ACA marketplace. The GOP Congress in 2003 bequeathed to the fledgling program not only premium subsidies that go way up the income chain, but also  a "3R" program in which each element -- risk adjustment, reinsurance and risk corridors -- is permanent, guaranteed a funding stream, and more richly endowed than the 3Rs attached to the ACA -- two of which expire this year. In short, Part D was a sweet proposition for insurers and therefore for policyholders:
the Part D premium stabilization programs have played a key role in allowing insurers to keep premiums low and profits high, even though insurers have had to return some of the profits to the program. Low premiums (and premium increases) and high profits have made the program popular both with consumers and insurers...

The Part D program also has remained affordable and popular because of the large subsidies the program enjoys. As already noted, federal subsidies cover 74.5 percent of program costs for individuals with incomes up to $85,000 and $170,000 for couples. This has made Part D affordable for almost all moderate and higher-income eligible enrollees...

in the end, Part D’s generous premium stabilization programs and subsidies explain much of its success, while the limits placed on the ACA 3Rs and subsidies undoubtedly have contributed to many of the program’s problems.
There's an irony in these historical contrasts. Republicans, committed to privatizing existing public programs and creating new subsidized private markets, have created can't-lose markets for insurers that also work for policyholders, if not for taxpayers -- funded by deficit spending. Democrats, under GOP fire for creating a major new program funded by new taxes, and locked in frenmity with the insurance industry, underfunded their program and can't buy a fix.

The ACA marketplace will have to limp along until Democrats either regain control of both houses of Congress or wear Republicans out to the point where their love of industry overmatches their hatred of a Democratic program. Barring a Trump catastrophe, I suspect that some combination of A and B will occur. But it's going to be a slog.

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