Middle Income 50-Somethings Will Be Big Losers From Trumpcare

President Trump’s multi-pronged administrative attack on the Affordable Care Act would sharply increase premiums for middle-aged people who purchase insurance in the individual market, likely driving many to drop coverage.

Most would not feel the effects until 2019, though some will face sharply higher premiums in 2018—rate hikes they’ll see when the open enrollment season begins next month.

The President announced several changes to the ACA this week. They are complicated and address different parts of the 2010 law. But the overall effect will be that millions of older, sicker Americans will be priced out of comprehensive coverage while many younger, healthier people may get access to new low-cost, low-benefit policies. Those who are aged 50-64, just before they are eligible for Medicare, could be among the biggest losers.

Trump’s first step was to order federal agencies to open the door to a broad expansion of those low-cost, low benefit policies. They’d be sold through so-called association health plans, loose groups of businesses that join together to buy insurance.

Because Trump would largely exempt them from the ACA’s coverage requirements, they could sell policies that exclude hospital care, drug costs, or pre-existing conditions. Such policies would be unattractive to older buyers, who would prefer to stick with traditional ACA exchange coverage. But because younger consumers would likely gravitate to the cheap policies, exchange plans—left with an older and sicker risk pool– would become increasingly expensive.

Despite his high-profile signing of yesterday’s executive order, Trump can’t simply establish these plans with the wave of a pen. The changes will require complicated new regulations, a process that could take many months. And it will almost certainly generate lawsuits.  Even if they stand up in court, these new rules are not likely to kick in before 2019.

The more far-reaching  was leaked late on Thursday night. The Administration said it will immediately stop paying $7 billion in cost-sharing subsidies to insurance companies. These government subsidies (which are different from the ACA’s premium subsidies) reduce out-of-pocket costs such as deductibles for low- and moderate-income buyers of individual insurance. Without the subsidy, insurers must provide the discounts on their own—a step that will cause them to withdraw from the individual market or raise their rates. The ACA explicitly allows insurers to stop selling exchange coverage if the cost-sharing subsidies are eliminated.

Because Trump has been threatening to kill that government funding for months, some carriers built their added costs in to their rate applications for 2018. Those higher rates will hit middle-income buyers hardest, since their income is too high to receive premium assistance. A single individual loses premium support under the ACA once her income hits about $48,000.

Insurance companies have warned that Trump’s move will destabilize the non-group insurance market. It comes on top of other White House moves to wreck that market including efforts to shrink the enrollment period, slash funding for marketing of exchange-based insurance, and cut support for local consumer advisers.  All these steps are likely to reduce enrollment, especially by younger people who are less motivated to buy coverage.

All of Trump’s moves will have the same effect: Buyers are more likely to be older and sicker. And as they increasingly dominate the risk pool, their insurance premiums will rise, making insurance les and less affordable.

Trump wants to create separate insurance markets for healthy consumers and for those with chronic conditions—who are often 50 or older. Unlike the failed bills that aimed to replace the ACA earlier this year, these administrative changes won’t allow Trump to directly raise premiums on 50-somethings. But they’d let him do so indirectly, and he seems to be doing everything he can to reach that goal.

 

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