Editor's Note: In a guest appearance on The Diane Rehm Show, an affiliate of National Public Radio (NPR), Manatt Health's Joel Ario discussed the future of Obamacare under a new administration. Since then, the election of Donald Trump certainly puts that future in doubt. Joel's remarks, however, which focused on the states' role in driving health reform, still provide valuable insights. If attempts at federal reform don't happen or fail, state experimentation could be a central force for change. Joel's comments are summarized below. To listen to the full discussion—moderated by Susan Page of USA Today and also featuring Julie Rovner, senior correspondent at Kaiser Health News; Ron Pollack, Executive Director of Families USA; and Avik Roy, president of the Foundation for Research on Equal Opportunity—click here.
The important thing to highlight about the Affordable Care Act (ACA) is that we now have 20 million new people covered. Though we still have the challenge of stabilizing premiums, we also have important new benefits. For example, people with preexisting conditions now can get insurance—and children can continue their coverage under their parents' plans until age 26.
Of course there are still important issues to deal with, particularly the high rate increases this year. Some states have been addressing the rate issue very successfully and can serve as a model for others.
Alaska and the Reinsurance Solution
Alaska was looking at rate increases in excess of 40 percent in a market that already was the highest priced in the country. Its high costs were driven by a spread-out delivery system across a big state with relatively few people—and an increase that size would have been crushing.
To avoid that huge increase, the insurance commission worked with the legislature and passed a reinsurance program. The federal government had offered this type of program for the first three years of the ACA to help carriers share the cost of the most expensive cases. The fact that the program has now run out as we go into the fourth year is one of the reasons we are seeing the surging prices.
The Alaska legislature picked up the program at the state level, passing a bill to put $55 million into a reinsurance fund based on taxing the insurance companies. As a result, the rate increase plummeted from the low 40s to the single digits—just around 8 percent.
That's good for consumers, for the state and for the federal government—because when premiums go down, the government's costs go down as well. Why? The government, rather than consumers, really is bearing most of the increasing premium costs for people receiving subsidies. For that reason, Alaska is asking the federal government to pass the savings it is realizing back to the state, and the government is considering that idea. The details are still being worked out, but Alaska is an excellent model for other states to follow.
Minnesota Explores the Public Option
Minnesota is another state dealing with soaring rate increases. Its governor, who has been a strong supporter of the ACA, has made it clear that the 50 percent rate increase in his state is not acceptable. He's calling on his legislature to provide short-term aid to people who simply can't afford the higher rates. He also has put a task force in place to explore longer-term solutions, including a public option.
Minnesota would like to extend its program for the low-income population—Minnesota Care—to a larger number of people. It also would like to allow people who don't need financial assistance to buy into the program at full cost, which would require a 1332 waiver from the federal government. (Known as innovation waivers, 1332 waivers allow states to modify parts of the ACA.)
While most people say a public option does not have much chance of passing at the federal level, why not let states experiment? Minnesota always has been a healthcare leader, so it might be the right time to try a public option there, based on the program the state already has and extending it beyond the low-income population.
The Link Between States' Approaches and Their Level of Success
While some governors and legislatures have embraced the ACA, others have been resistant, having their citizens participate in the federal exchange rather than setting up a state exchange. We have seen a relationship between the approaches states took to adopting the ACA and their ultimate level of success.
None of the states that are left now with only one or two insurers have state-based exchanges. Conversely, where states have put in the effort, they are enjoying successful marketplaces, with California being the best example. States that have really dug in and worked with insurers have seen positive results. Those that have tried to resist are experiencing more problems.
Overall, the ACA, so far, has earned a "B" for its performance. It's clearly reached critical mass—but it's not excellent yet.