This week, the government finally confirmed much of the bad news about Obamacare that the health-policy world had been expecting for months. After losing a good deal of money on customers who have turned out to be older and sicker than anticipated, insurance companies are pulling back from the individual market next year and significantly raising their prices: About one-fifth of the country will have just a single carrier to choose from on the Affordable Care Act’s exchanges, and average premiums before government subsidies are increasing 22 percent in the states where data is available.
But those problems aren’t equally severe everywhere. In places like Massachusetts and Ohio, numerous insurers are still competing for business, and premiums have stayed relatively low—in both the Bay and Buckeye states there will be at least 10 carriers offering coverage, and a 27-year-old will be able to buy a benchmark silver plan for less than $230 a month on average. On the opposite end of the spectrum there are cases like Alabama, where only one insurer is set to sell coverage, and a benchmark plan will cost $384.
The fact that Obamacare seems to be working much better in some corners of the country than others has raised an obvious question: Is the health reform law having problems because it’s badly designed? Or is troubled because some states are too busy fighting the law to properly implement it?
Unfortunately, it’s hard to say for sure. Under the Affordable Care Act, the U.S. is still cursed with 50 different, complicated insurance markets, and nobody that I know of really has a complete read on what’s going on in every single one of them. But there is evidence that, yes, some states have sabotaged their own insurance markets by refusing to cooperate with Obamacare’s goals.
Take the law’s Medicaid expansion, which 19 states still have not implemented. In the refusing states, low-income families that would otherwise be eligible for government insurance have been pushed onto the exchanges, where they’ve been some of the most enthusiastic customers, since they qualify for generous subsidies. As the Department of Health and Human Services pointed out in a September report, households that earn between 100 and 138 percent of the poverty line make up about 40 percent of the exchange market in non-expansion states, on average. In states that did expand Medicaid, they make up just 6 percent.
Herding poorer families into the exchanges has almost certainly left insurers with a sicker customer base, since low-income Americans tend to be less healthy. That, in turn, drives up costs for everybody. Controlling for other variables, the Department of Health and Human Services researchers estimated that in 2015, premiums were 7 percent lower in states that decided to expand Medicaid than those that didn’t. It seems entirely possible that difference has grown with time as carriers have had to further adjust their prices to reflect the health of their customer bases.
State governments may have undermined their insurance markets in other, less overtly political ways. The majority have allowed their residents to hold onto so-called grandmothered or transitional plans that they purchased after the Affordable Care Act was passed but before healthcare.gov opened for business. That means people who were healthy enough to obtain affordable insurance back when carriers could discriminate against people with pre-existing conditions have been allowed to stay off the exchanges, leaving insurers with a sicker customer base.
How big a difference did that make? The Kaiser Family Foundation recently looked at this issue by comparing risk scores, which measure how unhealthy the enrollees in health plans are, across different states. They found risk scores were 8 percent lower in states that had expanded Medicaid and banned transitional insurance plans compared with states that had done neither. In states that expanded Medicaid but didn’t ban transitional plans, scores were just 3 percent lower. Now, letting people keep their old insurance isn’t an act of political protest the same way turning down the Medicaid expansion is, since the feds have allowed it. Nonetheless, states that fully implemented Obamacare as it was imagined seem to have more balanced individual insurance markets. (One silver lining here: All Americans will have to relinquish their grandmothered plans after next year, so we can expect some additional healthy customers on the exchanges.)
To be clear, these are not the only reasons why some states are seeing higher prices and less stable markets than others. Some parts of the country, especially the Deep South and Appalachia, are simply older and sicker than others, and would likely face higher insurance costs no matter what in a system like the Affordable Care Act. Unfortunately, those same states have often fought hardest against properly implementing the law, making a troubled situation worse.
In other states, the problems are murkier. Arizona’s Republican-controlled government went ahead with the Medicaid expansion and, as of 2015, had a much lower risk score than, say, Ohio. Yet none of its counties are being serviced by more than one insurer in 2017, and its benchmark premiums are rising by an astonishing 116 percent, to $422 per month for a 27-year-old before subsidies. I’m not sure anybody has a solid theory as to exactly why that has happened.
But the point isn’t that Obamacare would have been a perfect law had every state cooperated, or that every market would have been in shipshape. It’s that health reform almost certainly would have been in a better place had states gone along with plan. Unfortunately, many haven’t—and won’t.