Controversy swirled last week when Republican legislators pulled out of the proposed American Health Care Act (AHCA), meant to overhaul the past administration’s Affordable Care Act (ACA).
Many Republicans had expressed discontent over the measure put forth by Paul Ryan, especially after a report by the non-partisan Congressional Budget Office estimated that 24 million of those insured will lose their coverage over the next 10 years.
Insurance lawyer and partner at Foley and Lardner Kevin Fitzgerald told
Insurance Business in a phone interview, however, that the public may not have seen the last of the administration’s repeal efforts.
“The GOP may be waiting for another bad year under the ACA to use that as ammunition but it’s hard to say,” Fitzgerald observed.
“Obamacare unfortunately will explode. It’s going to have a very bad year,” President Trump said in a
New York Times report. As premiums go through another round of increases, he was quoted as saying, “Democrats will come to us and say, ‘Look, let’s get together and get a great healthcare bill or plan that’s really great for the people of our country.’”
Fitzgerald said that AHCA is proving unpopular because of the highlighted loss of coverage for millions of people, but it has some sound provisions.
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One of the proposals under the healthcare bill was to revise the ratio of coverage on elderly people versus young people.
“The three to one ratio of elderly people versus young people is not based on sound actuarial science. The five to one ratio mentioned in the AHCA is more consistent with what actuaries would tell you is the true cost to insure a 64-year-old versus a 24-year-old,” he explained.
In addition, Fitzgerald noted, “So if the five to one ratio were adopted and it brought down the cost for the younger population maybe there’d be a higher uptake. But that’s a prediction, that’s not guaranteed.”
He added that the AHCA proposes to bring federal spending on Medicaid back to “historical” rates of 60% to 65%, which the ACA hiked to 90% as membership was expanded.
However, a report from the Center for Budget and Policy Priorities said that this means President Trump’s version of healthcare will shift $370 billion in Medicaid costs to the states, which could be forced to cut coverage and services. These cuts would also make healthcare less affordable in states that are already dealing with high costs.
Still, Fitzgerald said that the medical loss ratio (MLR), which is a sore point for insurance agents selling on ACA marketplaces, will likely remain in place, as it appears to be effective in controlling costs.
MLR requires insurers to spend 80% to 85% of premium dollars on actual healthcare costs, which is eating into broker commissions.
He added that increasing commissions is not as simple as jacking up premiums.
“They can’t jack up premiums to get more commissions or administrative expenses,” he explained. “In straight numerical dollars, they can, but in order to jack up the premiums, they have to pay more in claims, they have to pay more doctors’ bills, more hospital bills and if they don’t pay enough in medical expenses, then they have to pay a dividend back to the policyholder.”
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