Uncertainty Alone Could Kill Obamacare

Federal exchange enrollment is down, and insurers are threatening to pull out, as Republicans debate how to address the law.


Paul Hennessy/Polaris/Newscom

Obamacare is shrinking. But Republicans are struggling—predictably—to figure out what to do about the law. Over the last week, number of the party's legislators have quietly switched from talking about repealing and replacing the law to talking about repairing it. The once-rapid timeline for repealing the law has been extended. In an interview over the weekend, Trump, who just last month said that a replacement was "very much formulated down to the final strokes," suggested that the process of reforming the law could take a year or more.

The reason it could take that long is that the legislative process is not conducive to swift movement, especially on something as complex as health care policy. As Trump awkwardly explained last night to Fox News host Bill O'Reilly, "It statutorily takes awhile to get." But, Trump said, "We're going to be putting it in fairly soon, I think that, yes, I would like to say by the end of the year at least the rudiments but we should have something within the year and the following year." That does not sound like a plan that is or ever was formulated down to the final strokes.

Yet even in the absence of legislative action to repeal Obamacare, a key part of the program could simply wither away. Regardless of whether Republicans take steps to eliminate the law, the current dynamic of Republican opposition, policy uncertainty, rising premiums, insurer losses, could drive away both insurers and customers from its exchanges, leaving only an empty husk of a program in its place. It is a dynamic that reveals just how fragile the law is—and also how difficult it is to fix.

We're already seeing some signs that participation in the law is falling. Late last Friday, the Trump administration released this year's final enrollment figures. For the first time, total enrollment in the federally run exchanges is down, dropping from about 9.6 million to about 9.2 million.

Last year, supporters of the program pointed to indications that the program might be growing as a measure of its overall health. The drop in enrollment may not by itself be a death blow, but it should be understood a clear sign of its weakness.

Some of the law's supporters are blaming the decline on a decision by the Trump administration to not run about $5 million worth of ads (out of a total $60 million campaign) during the final days of sign-ups, when there is usually a spike in enrollment. This year the spike was smaller than normal—about 376,000 in the last two weeks of January compared to about 687,000 last year. Was the decline a result of the ads being yanked? Perhaps in part, but it's also worth noting that the decline started before the ads were pulled. And the Trump administration partially reversed the decision to yank the ads after a single day. In addition, some of the ads were run anyway by a left-leaning digital advertising firm.

Causality is always difficult to prove when it comes to advertising. I would not be surprised if the decision to pull the ads at what is usually a key moment for sign-ups played some part. But it seems unlikely that the ads themselves were the critical factor. Instead, it is more plausible that the decline was a result of the combination of significantly higher premium prices and general uncertainty surrounding Obamacare's future. Why sign-up for something that may not exist—at least not in its current form—six months or a year from now?

In any case, any program that can be undermined by the partial retraction of 8 percent of its advertising budget is not one that is obviously healthy and sustainable.

Customers aren't the only ones who look increasingly wary of Obamacare either. Major health insurers have already scaled back their participation in the law's exchanges. And some have hinted that they may pull back further out of caution about the program's uncertain future. The head of Aetna, which last year ended participation in some state exchanges, said the company many take further steps to pull out of the program, "given the unclear nature of where regulation's headed."

The underlying logic for insurers is similar to the logic for consumers: Why participate in a program that may not be around for much longer? That question is especially pressing for insurers, since they need to develop prices and plan offerings for the 2018 coverage year over the next few months.

This is the essential Obamacare conundrum for Republicans: Thanks to its unified control of Congress and the executive, the party can take steps to unwind the law relatively rapidly, either through legislative or executive action. But that would mean destabilizing the individual insurance market, unless some replacement could simultaneously be put in place. But there is little to no agreement on what a replacement should look like—what its goals should be or what policy mechanisms it should employ—hence Trump's admission that the legislative process could take a year or more. Yet proceeding down that slow path could result in insurers bailing on the exchanges, and further destabilization of the exchanges along with disruptions in coverage, even in the absence of any concrete action. Because the law's insurance regulations would still be in place, the result would not be a return to the pre-Obamacare status quo, but be a dysfunctional and largely empty individual marketplace, one that would arguably be worse than either Obamacare or its predecessor.

It is at least possible, then, that Republicans may end up unwinding a major part of the law almost by accident—or at least through disorganization rather than any thought-out plan—by doing little more than talking about the possibility of repeal. The entire episode, meanwhile, is a reminder of both the health law's fundamental political and policy weaknesses, as well as the hollowness of the GOP's opposition, and the party's utter unpreparedness to follow through on its own promises.