Dearly beloved, I’d like to say a few words today about the demise of the individual health insurance market. It’s not quite dead yet, but thanks to multiple actions by this administration over the last year, and the mandate repeal effort underway in Congress now, it soon will be. It’s worth taking a moment to understand the cause of death, and what it means for the millions of families who rely on it for access to health care and financial security.

Death by a Thousand Cuts

First, there was the effort to repeal the Affordable Care Act (ACA). As we documented at the time, the uncertainty that caused led many insurers to re-think their long term participation in the individual market and raise prices. Then, there were the Trump administration’s repeated threats to cut off cost-sharing reduction reimbursements to insurers. Insurers factored the loss of those funds into their 2018 rates, resulting in projected premium increases averaging 20 percent. Insurers also had to price for the real risk that the Trump administration would not enforce the individual mandate or invest in outreach and enrollment help for the healthy uninsured.

Then, the Trump administration announced via an executive order that it would use its regulatory authority to promote the sale of insurance products that aren’t required to comply with the ACA’s consumer protections and standards. These short-term and association health plans would be allowed to reject people with pre-existing conditions, charge them higher premiums based on their health status, and exclude critical benefits. While rulemaking is still underway, it is inevitable that the availability of these products will require companies offering ACA-compliant plans to increase their prices, to account for the loss of healthy enrollees who gravitate to the cheaper, non-compliant options.

One health expert I recently spoke with called the above efforts the “Great Unwinding.” They’re all part of a concerted effort to roll back the ACA, but they have resulted in serious consequences for working families.

Socking it to the Middle Class: While the ACA’s Marketplaces Survive, Unsubsidized Families Get Priced Out

Who gains from the above actions, and who loses? In some ways, lower income people who are eligible for the ACA’s premium subsidies actually gain. For every dollar of premium increase that occurs, they receive a dollar in premium tax credits. The result, as we’ve observed during this open enrollment season, is that many are finding gold-level plans affordable for the first time, and 54 percent of them can enroll in a $0 premium bronze plan.

Insurers who have largely abandoned the individual market stand ready to gain. For example, both United and Aetna recently told investors they intend to profit from the executive order to expand the sale of short-term and association health plans. They’ll try to siphon healthy people away from the regulated individual market, leaving sicker people remaining.

The primary losers are the working middle class: entrepreneurs who run their own businesses, freelancers and consultants, farmers and ranchers, and early retirees. There are approximately 7.5 million of them around the country who are paying out of their own pockets to protect their families by enrolling in decent insurance. I heard from a few on the recent radio call-in show On Point, such as:

• Larry, from Virginia. He and his wife are 64 and he recently retired from running his own small business. They don’t qualify for subsidies. For 2018 they’ve been told their bronze-level plan premiums will increase 50 percent, with a deductible of $13,300. They project their annual expenses for 2018 to be a whopping $30,000.
• Carolyn, from Florida. Her family doesn’t qualify for subsidies. Thanks to premium hikes they’re projecting their health care costs to balloon to $50,000 in 2018. They can’t afford that, but, as a cancer survivor, she can’t afford to go without coverage, either.
• Matthew, from Tennessee. He’s an independent consultant and his family doesn’t qualify for subsidies. They’ve been buying ACA-compliant coverage and had found it relatively affordable until this year, when they got a notice that their 2018 rates would go up substantially. They decided they just couldn’t stretch the family budget that far, and are now planning to switch to a non-compliant, underwritten plan. Luckily, he and his wife are pretty healthy and they qualify.

Each of these callers is being priced out of comprehensive individual market insurance because of the above-described actions by the Trump administration. Now, Congress is considering legislation that would increase their premiums even more. The Senate has begun debating a tax reform bill that will include a repeal of the ACA’s individual mandate. If enacted, insurers remaining in the individual market will need to decide whether to get out or raise their prices to account for the loss of as many as 13 million healthy enrollees. It will be, in effect, the final death blow for the individual market.

Insurers have already set their prices for 2018 and are actively enrolling consumers into individual market coverage. And many may honor their commitments to those enrollees for the year, in spite of a mandate repeal. But come next spring and summer, when insurers have to decide whether to participate for 2019? It won’t be pretty.

Many consumers will find that there aren’t any more insurers offering plans at all. Everyone else will be priced out of coverage. Where will consumers like Larry, Carolyn, and Matthew go? Some will be healthy and risk-tolerant enough to switch to short-term or other plans that don’t cost much, but don’t cover much either. Older people or cancer survivors like Carolyn will be disqualified from these plans due to their health risk. Others may just need access to benefits these plans don’t cover, such as maternity care, mental health, or substance use treatment. What will they do? So far, there’s no sign that federal policymakers have an answer for that.