Should-Read: Nicholas Bagley: Health Insurance Market Implosion

Should-Read: The Republicans think they can take a vote to dismantle ObamaCare in January without passing a replacement–and then postpone the dismantling until after the 2018 midterm. But in most states insurers are only participating in the exchanges–and incurring current losses from adverse selection–in order to build market position for a future in which the system is stabilized. The most likely outcome is exchange collapse unless states commit to stabilizing their own exchanges. That will happen on the west coast. That will happen in most of New England and New York. Elsewhere? We are in all likelihood facing yet another Trump-Republican policy disaster come next January:

Nicholas Bagley: Health Insurance Market Implosion: “The big risk of [ObamaCare] repeal-and-delay (well, one big risk) is that the individual insurance market will unravel before repeal takes effect. As Robert Laszewski tartly noted…

…Republicans are being awfully naïve. They seem to be ignoring the risks in the transition period, particularly because they need insurance companies to provide insurance during the transition…

Robert Laszewski: Interviewed by Sarah Kliff: “The Republicans are being awfully naive. They seem to be ignoring the risks in the transition period…

…particularly because they need insurance companies to provide insurance during the transition. Unless we have some miracle, and the exchanges become profitable, why would they stay around for two years? I think Republicans are overlooking this. Medicaid would be fine in the transition; states will continue taking that funding. But for the exchanges, having the subsidies in place isn’t enough. It helps the customer, but why should the insurance company stick around?…

You’ve got an exchange where insurers have been losing money already. Why should insurance companies continue to subsidize Obamacare for Republicans? And we’re not talking $2 million in losses, we’re talking hundreds of millions. I’ve got these small state plans I advise, and they’re losing more than $100 million this year. They don’t have the money to stay in. One plan’s board director told me recently that under heavy political pressure, they decided to stay in at 2017. And this is a nonprofit plan…. They stayed in… under the presumption that Clinton would come and fix the things…. I think you’ll have a lot of plans decide not to participate or participate with extraordinary high rates….

North Carolina Blue Cross Blue Shield… decided to stay in 2017, and the CEO admitted openly it was a very hard decision. They’ve lost $400 million so far. That’s what he said before Trump won. That plan can’t continue to lose that kind of money in a market that is closing. My guess… when it comes to contract signing in September, if Congress is deadlocked and hasn’t come up with the replacement yet, many will have no choice but to say, “I’m not participating,” or ram through extraordinarily high rates so they can guarantee they won’t lose money. This doesn’t necessarily hurt low-income people because they’re subsidized, and only have to pay a certain percent of their income….

The things… Republicans have hated… call an insurance company bailout… keeping them around is the only way to maintain a viable market. The problem is when you have an insurance market and the new administration declares it DOA, it will go into death throes. It will be a death spiral. The Trump administration will have put it in a death spiral. The only way to fix that is if you subsidize the market. If you just subsidize the consumers, that doesn’t do any good….

What they have to do, and I don’t think they’ll do, is take the defunding bill they use to repeal Obamacare and reestablish the risk corridors and reinsurance fund. They have to do it inside the budget bill; otherwise they’ll need 60 votes…. They have do is reestablish… the so-called insurance company bailout, because if they don’t, they’re going to have a catastrophic result come 2018…. I think Republicans need to reimplement the risk corridors by February or March. That is the only chance they have. I don’t think there is a single Republican member of Congress who has thought about this. I’m reading all these quotes and they’re completely blind to the fiasco on the individual market that they’re about to create.