At an Oct. 3 Democratic rally in Flint, Mich. former President Bill Clinton stated, "...the current system works fine if you're eligible for Medicaid, if you're a lower-income working person, if you're already on Medicare, or if you get enough subsidies on a modest income that you can afford your health care.
But the people who are getting killed in this deal are small business people and who make just a little bit too much to get any of these subsidies. Why? Because they're not organized. They don't have any bargaining power with insurance companies. And they're getting whacked. So you've got this crazy system where all of a sudden 25 million more people have health care, and then the people out there bustin' it sometimes 60 hours a week end up with their premiums doubled and their coverage cut in half. It's the craziest thing in the world."
While the actual number of Americans that have gained healthcare coverage under the Affordable Care Act (ACA) is less than what he claimed—20 million, per the U.S. Department of Health and Human Services, and not 25 million—his statement raises two valid questions. How are the health insurance exchanges of this "crazy system" doing? And what's happening to people who don't qualify for insurance premium subsidies?
Clinton was charitable in saying that the "system works fine" for those who get subsidies. In the past week alone, insurance regulators in multiple states have used terms such as "near collapse," "emergency situation," "dire straits," and "financial death spiral" to describe the condition of their exchanges. In aggregate, the health insurance exchanges are way over budget and have garnered much smaller, higher-risk enrollment populations. The latter development has pushed many health plans to request huge premium increases, and when those requests are not granted by regulators, insurers are opting to leave the exchanges or are resorting to cost shifting by raising premiums for non-exchange insurance policies, especially employer-sponsored health insurance. The population paying for those policies include the people Clinton described as "bustin' it sometimes 60 hours a week."
After the ACA's passage in 2010, the Centers for Medicare and Medicaid Services projected that the federal government would spend $136 billion from 2015-2019 on health insurance exchange subsidies. However, as more states than expected opted to have the federal government run their exchanges and because of the higher-risk pool of individuals participating in the exchanges—which led to premium hikes—the Congressional Budget Office (CBO) in August projected $278 billion in federal outlays for health insurance exchange subsidies for that same five-year period, leading to an overspending or budget deficit just for the subsidies of $142 billion for 2015-2019. That is a staggering amount, considering that it would basically cancel out the projected 10-year budget surplus for the entire health reform law. With sizable average premium hikes expected for 2017—24 percent for the non-group market, almost four times projected medical cost inflation—the CBO's projection is clearly conservative and will certainly be revised upward.
Several states have approved individual market rate premium increases in 2017 well above the aforementioned national average. Minnesota's approved increases range from 50 to 67 percent. Blue Cross Blue Shield of Tennessee will raise its rates by 62 percent. Golden Rule Insurance Co. in Kentucky received approval for a 47.2 percent rate increase, while Wellmark in Iowa will raise its rates by 42.6 percent. In Delaware, Highmark Blue Cross Blue Shield received approval for a 32.5 percent average rate increase, and Utah's individual exchange health plans will rise on average 30 percent.
What's driving these increases?
First, the health insurance exchanges have a smaller-than-expected enrollment population. The CBO originally projected exchange enrollment of 24 million people by 2016, but more recently, it has reduced its projection by about 40 percent to 13 million individuals. Furthermore, the CBO projects exchange enrollment to peak at 16 million in the next decade, a third less than the 24 million it predicted in March 2015.
Second, the exchanges have attracted an older, disproportionately sick, less-healthy risk pool. This has led to huge losses for many health plans, most notably a few national carriers, despite sizable premium increases. As a result, since the spring, three national health plans—UnitedHealthcare, Humana, and Aetna—and at least 15 other carriers have said that they are exiting exchanges across 36 states in 2017. Obviously, these insurer departures will significantly reduce consumer choice and competition, leading to further premium hikes and probably reduced enrollment, which could in turn result in the previously mentioned financial death spiral.
Seeking to clarify his comments, Clinton argued for the expansion of Medicare into the exchanges—basically the public option—which his wife, former Secretary of State Hillary Clinton, has recently championed.
With smaller-than-expected, higher-risk pools, it's become clear that the health insurance exchanges are generally unhealthy, unable to function as a normal, broad-based market for health insurance. The public option would not alter that fundamental reality, and with Medicare reimbursement rates considerably lower than commercial rates, hospitals would need to brace themselves for yet more financial pressure under a Hillary Clinton administration.
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