State Insurance Official Says Individual Market Would Fail Under Trumpcare

The Obamcare repeal is projected to send individual health market consumers running for the exits, which would leave health insurers stuck covering only the sickest, most desperate people, leading to a death spiral, according to Pat Allen, the director of the Department of Consumer & Business Services.

A top Oregon state health insurance official told reporters on Wednesday that he anticipates Trumpcare would send the individual market into a death spiral if enacted, sending younger and healthier people fleeing and only the most desperate and sickest consumers left buying health insurance.

Patrick Allen, the director of the Department of Consumer & Business Services, which regulates the state health insurance industry, said opponents of the Affordable Care Act claim that the steep annual hikes indicate a death spiral, but he refuted that.

“The market is relatively stable but with unacceptably high prices,” said Allen. “Withdrawing this many people from the market could cause a death spiral.”

In a death spiral, premiums rates would skyrocket each year, prompting healthier consumers to opt out for financial reasons, until only the sickest customers were left in the market, until the last health insurer pulls out, a repeat of a phenomenon that hit Washington state in the 1990s.

The health insurance exchange could lose 70,000 people, or half of its members just next year under the Senate Republicans’ bill. The market would lose an additional 10,000 people each of the next two years. The group market would also drop by 40,000 next year as the Senate version of Trumpcare drops the employer mandate as well as the individual mandate and tax penalty against going uninsured.

The individual market would collapse in this scenario, although passage of Trumpcare was thrown into doubt on Tuesday when Senate Majority Leader Mitch McConnell, R-Ky., canceled a vote on the unpopular bill for lack of votes. The Republican leader hopes to call a vote in July, but an amended bill may be considerably different from the one released last week, which state officials analyzed.

Allen’s remarks Wednesday were in sharp contrast to his assessment of the House version of Trumpcare in March, when he demurred after a reporter asked if it would lead to a death spiral. That plan would cause just as many consumers to leave the market by 2020, but they would flee at a slightly slower pace.

“This will take us back to a place that was before the Affordable Care Act,” said Allen. “We would fairly anticipate that it would eliminate 23,000 jobs. We would be sailing in a significant economic headwind caused by the loss of this massive federal healthcare spending.”

The jobs figure is drawn from an Oregon Health & Science University economic study that showed the Oregon healthcare sector adding 23,000 jobs as a direct result of the expanded access and coverage in Obamacare. By 2026, the state would stand to lose at least $750 million a year in healthcare investments from the Medicaid expansion.

That’s not counting the additional money the state has received to provide enhanced services to disabled people through the Department of Human Services, which would also evaporate.

Obamcare itself is faltering in many states, where much of the country will be down to one or zero health insurers on the marketplaces. Due to the intervention of Allen’s agency, Oregon has mostly avoided that fate, but Eugene is down to just one insurer on the exchange -- Providence Health Plan.

“We are continuing to work with carriers to expand their coverage area,” said Insurance Commissioner Laura Cali-Robison, who said the Division of Financial Regulation plans to announce its rate-setting decisions for the individual and small-group markets next week.

The DCBS estimates were extrapolated from an analysis by the Congressional Budget Office, which estimates that 15 million Americans would lose coverage next year under the Senate Trumpcare plan, rising to 22 million by 2026, as steep cuts to Medicaid take effect that few states would be able to bear.

In addition to young, healthy people dropping out of the market when the penalty goes away, the changes in plans and subsidies would make it very difficult for working and middle-class people over 50 to afford coverage. Health insurers would be able to charge five times as much for these older adults as they charge young adults.

And older adults would be expected to pay up to 16 percent of their income on health insurance before they could receive a subsidy, compared to a maximum of 6 percent for young adults.

 

Reach Chris Gray at [email protected].

 

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