Monday, July 09, 2018

Darned if you do...

We try not to get too political here at IB, so I want to be careful in how I characterize the subject of this post. First, one needs to know that the Cost Sharing Reduction (CSR) mechanism was designed to help offset the higher claims anticipated as a result of implementing ObamaCare. There's some dispute as to their legality (or, rather, how they were actually paid for). Regardless, carriers counted on them when determining rates, and for "cleaning up" their books at the end of a given plan year.

These funds have now been cut off by the folks in charge (ie President Trump's CMS). Now, whether or not this is a good idea is, of course, debatable. What's not at issue, it seems, is the effect this will have on premiums going forward. As FoIB Michael Bertaut has noted, carriers have been counting on these reimbursements (from the 2017 plan year) in their 2019 rate calculations. Absent these funds, rates are going to go even higher.

On the other hand, FoIB Jeanne Bodine calls them "insurance company bailouts."

Contrariwise, co-blogger Patrick says that they're not bailouts, but promises to carriers.

I think that there's room here for everyone, and that the most accurate description is "bribes."

So, you may ask, what's the difference between a "bailout" and a "bribe?"

Well, a bailout is something that occurs after an event, whereas a bribe is an inducement towards a given behavior or action. And there is zero doubt that insurance companies were big proponents of the idea of ACA (hey, the government's going to make people buy my product? Count me in!) but not so much fans of the promise of guaranteed issue and immediate coverage of pre-existing conditions. The CSR's were a bribe to get (and keep) carriers "on board;" if they go away, what then?

Well, it's not as if there's currently a plethora of carriers available, so look for even more market tightening.

And, since there aren't a lot of variables left for carriers to rein in costs, look for narrower networks and more restrictions on prescription drug coverage.

Oh, and the idea that this some kind of "sabotage" by the Trump administration?

Well, not so fast there. As Christopher Jacobs (CEO of a well-regarded policy consulting firm) notes, this actually lies at the feet of one Andrew Slavitt, also well-known but hardly someone to be admired. Mr Jacobs writes:

"The Trump administration took actions to comply with a federal court order that vacated rules promulgated by the Obama administration—including rules CMS issued when Slavitt ran the agency. If Slavitt wants to denounce the supposed “sabotage” of Obamacare, he need look no further than the nearest mirror."

In other words, Mr Trump was simply following the law.

Not that there's anything wrong with that.
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