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| Which risk pool will you land in? |
In a recent post, I argued that JD Vance’s rendition of Trump’s “concept of a plan” for healthcare was mainly a sketch of how a second Trump administration would “build on” (tear down) the ACA marketplace administratively, without repeal/replace legislation.
In brief, that would entail 1) rebuilding Trump 1.0’s alternative market of medically underwritten, ACA-noncompliant plans (so-called Short-Term Limited Duration, or STLD, plans), and 2) prompting states to implement measures like the waiver concepts put forward by Trump’s former CMS administrator, Seema Verma. These “concepts” included 1) replacing ACA premium subsidies with a lump-sum health savings account that could be used to pay premiums for any plan; 2) inviting states to restructure the federal premium subsidy as they wished; 3) allowing states to grant premium subsidies for ACA-noncompliant plans; and 4) creating state high risk pools. Options 1 and 3 could effectively convert the ACA-compliant marketplace as we know it into a high risk pool of sorts, and in combination with option 4, could create the multiple stratified risk pools that Vance described in followup comments.
Vance’s comments could also be read as an outline of repeal/replace legislation along the lines of the failed repeal/replace bills of 2017, which a Republican Congress would probably push through under a more authoritarian Trump 2.0 and a more MAGA Republican caucus than that of 2017-18. (In that case, Vance, the MAGA convert, would have to get on board with the massive Medicaid cuts, beginning with repeal of the ACA Medicaid expansion, which he criticized in the 2017 repeal bills.) But a second Trump presidency with Democrats in control of one house of Congress (if Trump 2.0 does not effectively neuter Congress by extra-Constitutional means) is as likely as a Republican trifecta. And should that scenario play out, Republicans in Congress are laying the groundwork for a third plank in an assault on the ACA marketplace as we now know it — that is, undermining a marketplace that provides plans with guaranteed issue, Essential Health Benefits, and no caps on coverage to virtually all enrollees in the individual market.
That third plank is blocking renewal of the marketplace premium subsidy enhancements originally provided by the American Rescue Plan Act (ARPA) in March 2021 and extended through 2025 by the Inflation Reduction Act in August 2022. ARPA not only reduced the percentage of income required to pay for a benchmark (second-cheapest) silver plan at every income level — it also removed the income cap on subsidies, which was 400% of the Federal Poverty Level ($51,040 for a single person and $104,800 for a family of four in 2021, when ARPA was implemented). Prior to ARPA, given the high cost of unsubsidized ACA-compliant insurance, the income cap left a major hole in the ACA’s “affordable care” promise — especially for older prospective enrollees, since premiums rise with age. The unaffordability of insurance for several million people dependent on the individual market was Republicans’ main cudgel against the ACA for years. Prospective enrollees who were subsidy-ineligible were the primary constituents for Trump’s alternative STLD market — a bad solution to a real problem.
While ACA premiums came in somewhat lower than expected when the market launched in advance of Plan Year 2014, they spiked in 2017 — a major correction triggered in part by expiration of the ACA’s temporary national reinsurance program. Average benchmark premiums rose 20% in 2017 — and then soared another 34% in 2018, in a market roiled by Republicans’ ACA repeal drive and Trump’s threatened cutoff of direct reimbursement of insurers for the Cost Sharing Reduction benefit attached to silver plans for low-income enrollees, which he executed in October 2017. (Starting in 2018, the value of CSR was priced directly into silver plans in most states.) The premium hikes decimated off-exchange and unsubsidized on-exchange enrollment in ACA-compliant plans. According to KFF estimates, unsubsidized enrollment in ACA-compliant plans dropped by essentially half from Q1 2016 to Q1 2019, from 6.7 million to 3.4 million. That created at least a potential market for Trump’s medically underwritten STLD plans — and would again, should the income cap on subsidy eligibility snap back into place (as it will in Plan Year 2026, if Congress does not act).
Premiums stabilized after 2018 — and the Trump administration can take some credit for that, as the administration invited states to establish their own reinsurance programs with partial federal funding (15 states did so by 2020) and, at insurers’ request, tightened the rules by which enrollees could obtain Special Enrollment Periods outside of Open Enrollment. Average benchmark premiums were slightly lower in 2024 ($477) than in 2018 ($481). This year, however, premiums are on course for a substantial increase, averaging about 6%, according to Charles Gaba’s tracking of rate requests. That’s barely noticed in a marketplace where more than 90% of enrollees are subsidized. It would be noticed if the income cap on subsidy eligibility were removed. Substantial increases in 2026 and thereafter would help a second Trump administration sell lightly regulated, medically underwritten alternatives.
Democrats are ramping up calls to extend the ARPA subsidy increases, as the pending expiration of the income tax cuts for individuals in the Republican-created 2017 Tax Cuts and Jobs Act provides some leverage. Prominent House Republicans are digging in against extending the ARPA subsidy boosts, characterizing them as “ massive taxpayer-funded handouts to the wealthy and large health insurance companies.” That’s pretty funny, considering that Republicans relentlessly hammered the ACA in pre-ARPA years for leaving those with incomes over 400% FPL high and dry. In any case, most post-ARPA enrollment growth is in the 100-150% FPL income bracket (which the statement cited above also decries) — and almost three quarters of those 2024 enrollees* would be in Medicaid if ten states (including big enchiladas Texas and Florida) were not still refusing to enact the ACA Medicaid expansion. Since Medicaid is cheaper, Medicaid expansion should be a top priority of purportedly budget-conscious Republicans.
Republican opponents of ARPA subsidy expansion are leaning heavily on a paper by Brian Blase, formerly a special assistant to Trump’s National Economic Counsel, alleging rampant overpayment of subsidies in the ACA marketplace. Blase does have a legitimate complaint in the recent explosion of unauthorized enrollment and plan-switching by unscrupulous ACA brokers. That fraud was stimulated in part by ARPA’s zeroing out of premiums for benchmark coverage for enrollees with income under 150% FPL (currently $21,870 for an individual), in combination with an administrative rule enacted in early 2022 that allows not only year-round enrollment to people below that threshold, but also a monthly Special Enrollment Period (SEP), enabling endless plan-switching. While I agree with Blase that that monthly SEP should be eliminated, and that CMS needs to act aggressively to quell broker fraud (as it appears to be doing), Blase attacks the subsidy enhancements with more dubious claims fraud in ACA enrollees’ income estimates — that is, raising or lowering income estimates to maximize subsidies (or access them at all). To those claims, I responded in detail here. The TLDR:
1) Most of the Post-ARPA enrollment increase in the ACA marketplace, as well as most of the increase at incomes where Blase alleges fraud is concentrated, is in states that have refused to enact the ACA Medicaid expansion, where most adults who estimate their incomes below 100% FPL get no government help at all. If substantial numbers of enrollees do in fact have incomes below 100% FPL, the solution is to…enact the ACA Medicaid expansion. People with income below 100% FPL should not be left with no access to affordable coverage.
2) ACA subsidies are based on an estimate of future income, which is inherently uncertain, especially for people at low incomes, who often work uncertain hours, change jobs, are self-employed, or depend on tips. Mismatches between income reported to the IRS and income projected in ACA applications probably have as much to do with inaccuracies in tax reporting as with inaccurate income projections in the ACA application. As for mismatches between income data based on ACA enrollment and data from the Census Bureau’s consumer surveys, those, like mismatches between IRS data and survey data, are perpetual.
3) Blase misreads CMS figures regarding former Medicaid enrollees, disenrolled in the post-pandemic “Medicaid unwinding,” who enrolled in the ACA marketplace in 2024. In HealthCare.gov states, according to CMS tracking, about a third of Medicaid disenrollees enrolled in the marketplace — not 70%, as Blase claims.
CMS needs to stop the broker fraud; should probably end the monthly SEP (though not year-round first-time enrollment for those with income under 150% FPL); and perhaps ramp up income checks on enrollees who may be underestimating their income (as opposed to overestimating it to get over the 100 % FPL threshold). Killing the ARPA subsidies to quell broker fraud would be throwing the baby out with the bathwater. But of course that baby — affordable insurance for those who lack access to affordable employer-sponsored health insurance — is a perpetual target for Republicans. And killing the ARPA subsidy boosts would further another core Republican goal — undermining the ACA’s protections for people with pre-existing conditions.
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* In 2024, 6.9 million marketplace enrollees reported income in the 100-138% FPL range. In the broader 100-150% FPL category, 9,407,463 enrolled in 2024. The 100-138% FPL bracket was not reported in 2021, the last pre-ARPA year. From 2021 to 2024, enrollment in the 100-150% FPL bracket increased from 3.8 million to 9.4 million. That’s an increase of 5.5 million, more than half of the total increase of 9.4 million from 2021 to 2024. See the Marketplace OEP Public Use Files. To compare all-state totals at 100-150% FPL for 2021 and 2024 I excluded Idaho, which did not provide income breakouts to CMS in 2021.
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