NEW YORK/WASHINGTON The Trump administration on
Wednesday proposed changes to the Obamacare individual insurance
market that insurers welcomed as a good start but that raised
the possibility of higher out-of-pocket cost for consumers.
President Donald Trump and congressional Republicans have
promised to scrap the 2010 healthcare law that is a key legacy
of Democrat Barack Obama’s presidency. But they are struggling
to agree on a replacement for the law, which extended health
insurance to 20 million Americans.
The proposed new rule, issued by a division of the U.S.
Department of Health and Human Services, sets out changes that
are meant to shore up the system developed by Obama, and comes
after Humana Inc on Tuesday said it would pull out of
this market in 2018. It is unclear which elements of Obamacare
could survive in the Republicans’ replacement.
The rule does not address changes that must be made by law,
such as for Obamacare’s income-based subsidies.
The changes would tighten enrollment processes and allow
insurers to collect unpaid premium payments, making it tougher
for people to move in and out of insurance plans. Insurers say “gaming the system” has created an unprofitable mix of healthy
and sick customers.
The Affordable Care Act aimed to chip away at soaring
healthcare spending, but data shows costs are still rising. The
U.S. government reported separately on Wednesday that total U.S.
medical spending in 2017 is estimated to rise 5.4 percent to
$3.36 trillion after a 4.8 percent spending uptick in 2016.
The administration on Wednesday also backed off implementing
tougher oversight of the individual mandate, the requirement for
all Americans to have health insurance or pay a fine, that was
due to go into effect for 2016 taxes.
The U.S. Internal Revenue Service said as a result of
Trump’s executive order to reduce regulatory burden, it will not
reject tax filings for the year 2016 that fail to indicate
whether they had health coverage or paid the penalty set under
Obamacare. This is a return to the policy for 2015 taxes, the
The mandate was supposed to bring in healthy customers but
Republicans have vowed to overturn it and insurers say it has
Aetna CEO Mark Bertolini on Wednesday said during a
Wall Street Journal forum that the Obamacare exchanges had
entered a “death spiral” in which rising premiums pushed out the
healthiest customers, which in turn raises rates.
Aetna cut back offering new plans for 2017 and it and Anthem
Inc. have said that without changes, they might not
take part after this year.
Bertolini said in a statement that new Health Secretary Tom
Price and the Trump administration have “taken some good initial
steps with the proposed regulation.” The top two industry
groups, America’s Health Insurance Plans and Blue Cross Blue
Shield Association, echoed that view.
Shares of insurers were mixed in the early afternoon on
Wednesday with Aetna gaining 1 percent to $127.01, Cigna off
less than 1 percent at $146.07 and Humana off 0.3 percent to
$205.34. Anthem fell less than 1 percent to $162.90.
TOUGHER TO ENROLL
The Centers for Medicare & Medicaid Services, which are part
of the Department of Health and Human Services, on Wednesday
proposed the new rule that includes verifying the status of
enrollees outside of the usual enrollment period.
It also proposes insurers can collect unpaid premiums from
members when they sign up with the same issuer again, an
incentive for people to always have insurance.
In addition, it proposed lowering the amount of guaranteed
coverage for some “silver” level plans in the program, which it
said could raise out-of-pocket spending and cut premiums.
It would give the states oversight of doctor and hospital
networks included in the plans, reflecting a Republican theme
that healthcare oversight be reduced at the federal level.
The rule proposes shortening the open enrollment period for
the individual market to Nov. 1 through Dec. 15, similar to
employer-sponsored insurance market and Medicare.
The weakening of the mandate and the new CMS rule making it
tougher for people to sign up would have contradictory effects
on premium pricing, according to Jonathan Gruber, professor of
economics at MIT and one of the architects of the Affordable
“You’re basically saying on the one hand, we have to weaken
the mandate for political reasons but we have to lower prices,
so we have to kick people out of the exchanges,” Gruber said.
Patient advocate Families USA said the new rules would
discourage younger, healthier people from enrolling, reduce
financial assistance for families and make it harder for them to
find networks that include their doctors.
Republican lawmakers, who are working on an Obamacare
replacement, said the rule was a start.
“If we don’t take more steps like that, having an Obamacare
subsidy will be like having a bus ticket in a town where no
buses run, because there will be zero choices to buy,” Senator
Lamar Alexander, chairman of the Senate health committee, told
reporters outside the Senate.
Wall Street said the proposed changes could help insurer
profitability but it was not clear by how much.
“As one would expect tightening special enrollment periods,
shortening the open enrollment period to six weeks and mandating
payment of premiums before coverage should lead to an
improvement in the risk pool,” Leerink Partners analyst Ana
Gupte said. (Additional reporting by Susan Cornwell and Yasmeen Abutaleb in
Washington D.C. and Michael Erman in New York)
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