"Are the insurance marketplaces created by the Affordable Care Act really on the verge of collapse, as President Trump and GOP leaders have repeatedly claimed?
Three months ago, this story would have started like this: It depends on where you look and who you ask.
Today, it goes something like this: They are in a fragile state pretty much everywhere.
With Trump threatening to withhold payments to insurers and expressing reluctance to uphold the mandate requiring most people to either buy insurance or pay a penalty, otherwise stable state markets are now in a precarious position. Others are experiencing issues they likely would have anyway, but with a layer of new instability on top. But just because many markets were stable doesn’t mean they were serving everyone well. The messy reality of these two intertwined issues — what keeps the markets stable and who they cover — often leaves politicians on both sides of the aisle telling half-truths about the health of Obamacare’s most public provision. A look at the ways marketplaces are succeeding and failing reveals opportunities for improvement and hints at why the political climate could make those improvements all but impossible.
For the last couple of decades, the term ‘death spiral’ has been used to describe a marketplace spinning out of control. In the face of rising premiums, healthy people bail from a marketplace, causing premiums to rise further, until the prices are unaffordable for everyone and the whole plan falls apart. The Obamacare marketplaces are not in a death spiral, according to various health policy experts, despite numerous Republicans’ claims to the contrary. In fact, the term, at least under its pre-Obamacare definition, is largely obsolete. That’s because the ACA fundamentally changed how the markets are organized. Now that the government is subsidizing health insurance, people with incomes just above the federal poverty line are largely protected from rising premiums — 83 percent of the people currently using the markets receive subsidies to help pay for their plans — and, healthy or sick, they are unlikely to flee the markets amid rising premiums.
However, growing costs in the marketplaces frequently determine whether someone with a slightly higher income1 will buy into the market. That’s because under the current system, those people receive low or no subsidies to offset the cost of insurance — they aren’t immune to the price increases. It’s those people who are at risk of being pushed out of an expensive market, said Robert Laszewski, a consultant to the health insurance industry. It’s a different kind of death spiral, one that leaves middle-income people without coverage options, instead of the sickest and poorest."