The ObamaCare doomsday scenario that many Republicans and Democrats predicted for 2018 is unlikely to come to pass, with insurers having adapted to the uncertainty that marked President Trump’s first year in office.
Insurers who decided to stick with ObamaCare after a tumultuous 2017 are likely to have a relatively profitable year, analysts and experts predict, for reasons including higher-than-expected enrollment.
“I think the fact that enrollment is better than expected is good for insurers that really concentrate on the subsidized population,” said Katherine Hempstead, who directs the Robert Wood Johnson Foundation’s work on health insurance coverage.
“I would think those insurers are feeling good. … It’s good for all the carriers that stayed in the market, but especially good for carriers that focus on subsidized people in the market,” she said.
Democrats and Republicans had starkly different reasons for predicting an ObamaCare collapse in 2018.
Trump canceled key ObamaCare payments to insurers called cost-sharing reduction subsidies, which reimburse them for giving discounted deductibles and co-pays to low-income customers.
The administration also slashed ObamaCare’s marketing budget for open enrollment by 80 percent and cut funding to local and state groups responsible for helping people sign up for coverage.
Democrats accused Trump of purposely sabotaging ObamaCare and predicted that enrollment would drop substantially.
Republicans also predicted the collapse of ObamaCare, but on the grounds that the Affordable Care Act (ACA) as a whole is a failure.
So far, both parties look to be wrong. 8.7 million people signed up for ObamaCare plans for 2018, half a million fewer than the previous year.
Insurers adapted to changes, raising premiums to make up for the expected loss of the payments.
And because ObamaCare’s subsidies are designed to increase with premiums, the federal government actually ended up spending more on subsidies for canceling the payments.
Now, analysts at Goldman Sachs, S&P Global Ratings and A.M. Best are predicting a profitable and stable 2018 for insurers.
“We expect more insurers to see positive margins in 2018,” S&P concluded in a recent report.
A.M. Best revised its outlook on the insurance industry to stable from negative, noting that insurers have adapted to recent challenges and improved earnings.
The insurers most likely to see gains are Centene, CareSource and Blue Cross Blue Shield, which stepped in to offer ObamaCare coverage in counties that would have otherwise been bare of an option.
“The ones that are in the market after a lot of exits are more comfortable, more stable and understand, and [they] are not as easily shaken,” Hempstead said. “You’re getting down to a more experienced, committed group of insurers. … If there’s an individual market, they’re going to serve it. They’re going to figure out how to make it work.”
A profitable and stable 2018 would continue a trend seen since early 2016.
A Kaiser Family Foundation analysis of recently released third-quarter data found insurers were regaining profitability and the markets were continuing to stabilize. While that analysis was conducted before Trump canceled the subsidies, it’s likely that insurers had, overall, a profitable 2017.
“It’s likely [canceling subsidies] would diminish their profits, but that insurers will still end up with a more favorable year in 2017 than they had in any of the previous years of the ACA marketplaces,” said Cynthia Cox, director for the Program for the Study of Health Reform and Private Insurance at Kaiser.
“We’re still expecting 2017 to end up being a profitable year for many insurers in the individual market despite the loss of cost-sharing payments,” she said.
Insurers could also stand to benefit from an effort in the Senate to include cost-sharing reductions in an upcoming spending deal. The effort, led by Sens. Susan Collins (R-Maine) and Lamar Alexander (R-Tenn.), would fund ObamaCare’s cost-sharing reductions for two years and provide billions of dollars to states to help establish reinsurance programs, which help insurers with the costs of covering high-risk individuals.
While analysts predict a positive year for ObamaCare’s insurers, some warn of the potentially negative effects recent and future action could have on the markets.
The tax law Trump signed at the end of last year eliminated ObamaCare’s mandate for everyone to have insurance, which could cause problems in the marketplaces.
Insurers could decide they don’t want to participate in ObamaCare’s exchanges in 2019 without the mandate, which was intended to lower costs and prevent people from waiting until they are sick to buy coverage.
Still, some experts doubt the repeal of the mandate will have much impact on the marketplaces or the number of people who enroll.
Two administrative rules are also expected this year that some argue would draw healthy people from the markets, potentially resulting in higher premiums and insurer exits.
“I don’t think [2018] will be as chaotic as last year, with the constant repeal-and-replace legislation and major policy changes, like the elimination of the individual mandate and end of cost-sharing reductions,” said Chris Sloan, a senior manager at Avalere, a health-care consulting firm in D.C.
“But continued reductions in the market and substantial premium increases year after year is not sustainable. The market has weathered it, but given the trajectory that we’re on, it’s not a healthy trajectory for the exchange,” Sloan said.