Health insurers came under pressure Tuesday after the Trump administration asked the courts to completely overturn the Affordable Care Act, going beyond its prior position in a Texas lawsuit pending in the court of appeals fifth circuit.
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The biggest decliners were Molina Health, which fell nearly 10 percent during Tuesday’s session, and Centene which fell nearly 5 percent. The two insurers are among the most highly exposed to the Obamacare Medicaid and individual exchange markets.
In December, a federal judge in Texas ruled that the ACA was no longer valid, after Republicans in Congress overturned the individual mandate tax penalty for not having insurance. Previously, the Trump administration had argued that only the law’s pre-existing conditions and coverage requirement were invalidated. But the Department of Justice changed course in a filing Monday, saying the whole law should be thrown out.
“We said before that the district court’s decision was misguided and wrong. So, too, is the government’s reversal to now support it,” said Matt Eyles, the president and CEO of America’s Health Insurance Plans said in a statement, criticizing the administration’s position.
The government’s move won’t have an immediate impact on market regulations, because the case will likely make its way to the Supreme Court.
However, the renewed questions about the fate of Obamacare comes as insurers are preparing to file rates for 2020.
“Increased uncertainty around the outcome of pending court cases may impact rates,” said Dave Dillon, a fellow of the Society of Actuaries, adding ” If the markets are perceived as being more volatile… carriers could increase rates to help address these uncertainties.”
Repealing and replacing Obamacare was a key campaign promise by President Donald Trump, but the administration’s efforts to pass legislation came up short in 2017.
Analysts say it would be difficult to undo all the pieces of the law in one fell swoop if the courts overturned it, but the administration’s new legal position comes in the midst of aggressive regulatory reforms on drug prices which is already creating uncertainty.
The Affordable Care Act gives the Health and Human Services secretary tremendous discretion over health care market matters. The Trump administration has used Medicaid waivers built in the legislation, to allow Republican states to add work requirements for Medicaid recipients.
The Centers for Medicare and Medicaid Innovation is one of the law’s key creations, which allows the administration to experiment with new payments models, like President Trump’s proposal to base Medicare Part D drug prices on international prices for pharmaceuticals.
“CCMI is the most powerful tool that an executive has right now to reform health care … If you repeal the ACA, that would go away,” said professor Craig Garthwaite, of Northwestern University’s Kellogg School of Management.
Without the measure, the Trump administration might lose the executive authority to carry out one of its proposals to bring down drug prices, basing Medicare Part D pharmaceutical reimbursement rates on lower international drug prices.
“That’s a pretty big administration initiative to reform how we pay for all Medicare Part D drugs,” explained Garthwaite. “Technically, it’s a pilot. Half the country would have it, and half wouldn’t to start with. CMMI is supposed to be a vehicle for testing these things … They would lose the statutory ability to do that,” he said.
While legislation repealing the ACA would likely build in a transition period for moving to a new system, if the law were overturned, that time frame might not happen in the same way.
“Could you reset the clock and go back to the status of federal payment … pre-ACA?” asked Katherine Hempstead, senior policy advisor at eh Robert Wood Johnson Foundation. “The ACA is very interwoven into many aspects of the health care financing and delivery system now, in ways that I think are pretty hard to unravel.”
She notes that the law changed payment models to hospitals and Medicaid funding for states that expanded the safety net program to the working poor.
President Trump, meeting with Republicans on Capitol Hill, defended his administration’s decision, declaring “The Republican party will be known as the party of health care.”
The party’s failed efforts to repeal the ACA in 2017 in many ways helped make health care a top concern for voters last year, leading to the Democrats winning a majority in the House of representatives.
“Be careful what you wish for, because I think people are really holding their federal and state policy makers accountable to improve the situation,” when it comes to health prices, said Hempstead.