After the Republican health care bill crashed and burned without so much as a vote on Friday, President Trump told reporters that he saw a silver lining in the defeat. “I’ve been saying for the last year and a half that the best thing we can do politically speaking is let Obamacare explode,” he said. “It is exploding right now. Many states have big problems—almost all states have big problems.” Trump went on to repeat the word explode four more times, explaining that once the Affordable Care Act had been sufficiently blown to bits by its own design flaws, Democrats would be desperate to strike a deal and save the health care system, lest voters hold them responsible for the carnage after the blast.
“It’s imploding, and soon will explode, and it’s not going to be pretty,” Trump said, handily if inadvertently describing the detonation of a plutonium bomb. “The Democrats don’t want to see that, so they’re going to reach out when they’re ready. And whenever they’re ready, we’re ready.”
To a careful listener, this might have sounded less like a prediction and more like a threat. It’s true that the health insurance markets created by the Affordable Care Act have yet to stabilize in some states, and the trouble could get worse next year. But the exchanges are not generally combusting, either. The only way Obamacare will explode is if Trump lights the fuse. And unfortunately, he may have the power to do just that, thanks to a court case that’s currently sitting on appeal.
Right now Obamacare is succeeding far more in some parts of the U.S. than others. Large states like California and New York boast healthy exchanges where lots of insurers are competing to offer health plans. But in many smaller, more rural states, the situation is shakier, because there aren’t enough young, healthy customers for insurers to do business profitably. As a result, many carriers have abandoned those markets, leaving residents with fewer, more expensive health plans to choose from. Many liberals seem to be taking comfort in the Congressional Budget Office’s recent conclusion that Obamacare’s exchanges would naturally stabilize as long as the law was left in place. But the report only suggested that would happen in “most areas of the country,” not all of them.1
This year, five states—Alabama, Wyoming, South Carolina, Alaska, and Oklahoma—had just one insurer selling individual coverage. Nationwide, according to the Kaiser Family Foundation, there are more than 1,000 counties with a single insurer, up from 225 in 2016. And while those places tend to be more sparsely populated than the dense metro areas where Obamacare is thriving, they’re still home to millions of customers: In October, Kaiser estimated that about 1 in 5 Americans enrolling on the exchanges this year would have a choice of just one insurer.
The worst-case scenario for Obamacare is that some of these counties might suddenly find themselves without any insurers serving their residents at all. Could that happen next year? Maybe. Humana, which announced last month that it was abandoning the Obamacare marketplaces entirely in 2018, is the only carrier on the exchanges in 16 Tennessee counties. If no company swoops in to the rescue, those places are out of luck.
We won’t really know how many other counties around the U.S. are in similar danger until insurers start filing their requests for 2018 rate increases with state regulators later this spring. That will tell us how many carriers plan to participate on the exchanges, and where. But given that about 500,000 fewer Americans purchased plans during Obamacare’s open enrollment this year compared with last, it’s plausible that more insurers will sour on the whole shrinking endeavor. If those disappearing customers were largely the sorts of young and healthy people carriers count on for profits, it could also mean another round of big premium increases coming up.
“Nationally, [Obamacare] isn’t going to implode next year,” Chris Sloan, a senior manager at the health care consultancy Avalere, told me. “There are states where there are serious concerns about the viability of the exchanges as soon as 2018.”
In the end, if insurance premiums spike again or exchanges collapse entirely in a few scattered counties, I doubt it will doom Obamacare. It will be a political problem, and—more importantly—a policy failure that hurts families. But if the ACA is still basically functioning in 90 percent of the country, Nancy Pelosi and Chuck Schumer aren’t going to be eager to replace it with a Republican scheme that strips coverage from upward of 20 million Americans.
If Trump wants to reduce the whole structure of the ACA into unworkable rubble so that Democrats will have to agree to replace it, the administration will have to sabotage it. Unfortunately, there’s a pretty easy path for them to do it.
According to most health policy experts I’ve talked with, there are really three main ways Trump could realistically undermine Obamacare. Two would make a difference around the edges while the third would be potentially catastrophic. First, the administration could ease or eliminate enforcement of the individual mandate, which forces Americans to buy health insurance or pay a tax penalty. That could lead to fewer young and healthy customers enrolling and would likely scare off some insurers. Second, the administration could cut outreach about open enrollment—some people blame this year’s disappointing numbers on the Trump administration’s decision to pull some last minute advertising—or shorten the window for signing up. “Pulling back on outreach could cripple the marketplaces over time,” Larry Levitt of the Kaiser Family Foundation told me in an email. “There’s a lot of natural churn in and out of the marketplaces, so outreach is necessary each open enrollment period to reach new potential enrollees.”
Then there’s the nuclear option. If Trump wants to throw Obamacare’s exchanges into chaos, he could choose to stop defending a lawsuit filed by the House of Representatives that attempted to halt the government from making what are known as “cost-sharing reduction” payments to insurers. Under the Affordable Care Act, carriers are required to limit how much low-income customers pay out of pocket for things like deductibles and co-pays. In return, the companies are supposed to get direct subsidy payments from Washington to cover the expense. Those checks are worth billions to the industry, since more than half of marketplace enrollees benefit from cost-sharing reductions, and are absolutely essential to making the marketplaces work.
As part of their unyielding efforts to kill the Affordable Care Act in court, Republicans in the House of Representatives sued the Obama administration a few years ago to stop the payments, arguing that because Congress had never technically allocated the money to fund them, the government was disbursing the cash illegally. You can go deep on the legal merits of the case—I did here back in 2015—but the bottom line is that a lower-court judge ruled in the GOP’s favor, which led the Obama administration to appeal. The House agreed to pause the litigation after Trump won the election, and it looked like Obamacare repeal might actually happen. But now that their first effort has failed, Paul Ryan & co. will have to decide whether to continue the case, and Trump will have to choose whether to keep defending it.
If Trump drops the appeal, it could have profoundly damaging consequences for the insurance market. Insurers would still be required to keep offering low-income customers their discounts but wouldn’t be compensated for it. The result would be financially disastrous. In all likelihood, some insurers themselves would intervene as defendants in the case to keep it alive. But with the outcome far from assured, many insurers would likely exit the market rather than risk the outcome. “It would be very devastating to the marketplaces,” Sara Collins, senior vice president for health care and access at the Commonwealth Fund, told me.
Of course, killing the cost-sharing reduction payments would require an active decision on the Trump administration’s part. And that makes it politically tricky. For it to be effective, Trump not only needs to bet that voters really will blame any dysfunction in the health insurance market on Democrats, but that they won’t notice how the administration actively undermined them. It’s possible that would work; the litigation is complicated, which might make it hard for cable news viewers to grasp who, exactly, is responsible for the fallout. But if voters do decide to blame the man in the Oval Office when they discover insurers aren’t selling health plans in their county, the backlash against the White House could be deadly.
So Trump might be able to make Obamacare explode. But his own presidency could get blown away with it.
1 The CBO believes that most of Obamacare’s exchanges are essentially explosion-proof, because the law’s subsidies cap what lower-income Americans have to pay toward their premiums as a percentage of their income. That means no matter how high the cost of coverage rises, buying it will still be a good deal for enough of a critical mass of customers to keep the market afloat. That theory may or may not prove to be true, but it’s worth remembering that “stable” doesn’t necessarily mean “thriving.” You could certainly end up with a situation where families who don’t qualify for aid find themselves totally unable to afford insurance. (Return.)