Health Insurance

Repealing Obamacare with no viable replacement ready to go could wreak havoc, health insurance experts warn

Paul Ryan says Obamacare is 'entering a death spiral'

The slogan "repeal and replace Obamacare" could end up being a recipe for disaster if the "replace" part gets delayed.

A top group of experts who analyze the financial risks of insuring people warned Congress on Wednesday that repealing major parts of Obamacare without also enacting a replacement plan at the same time could significantly disrupt the individual plan health insurance market.

The American Academy of Actuaries said that could include more insurers dropping out of that market and ever-increasing premiums, "leading to millions of Americans losing their health insurance."

That sobering caution from the actuary group comes as some congressional leaders have called for quick action in early 2017 to repeal key sections of the Affordable Care Act, while at the same time delaying the effective date of that repeal for up to two years or more so that a replacement plan can be crafted in the interim.

"Delaying the effective date of repeal while a replacement plan is worked out likely won't be enough to assure the stability and sustainability of the individual market," said a letter from Shari Westerfield, vice president of the AAA's Health Practice Council, to House Speaker Paul Ryan, R-Wisc., and Democratic leader Rep. Nancy Pelosi of California.

The academy said that the repeal of major provisions, such as the Obamacare requirement that most Americans have some form of health insurance or pay a fine, and the subsidies that help millions of people buy individual health plans, "would raise immediate concerns that individual market enrollment would decline."

"People who are most at risk of high health care costs would be most likely to enroll, while many healthier individuals decide not to purchase coverage," the letter said.

That, in turn, would "cause risk pools to deteriorate and premiums to become less affordable." A risk pool is insurers' group of customers: a sicker risk pool costs insurers more money to operate.

"Even if the effective date of a repeal is delayed, the threat of deterioration of the the risk pool could lead additional insurers to reconsider their participation in the individual market," said the letter.

"Premiums for the remaining pool would increase as a result, further exacerbating adverse selection concerns. A premium spiral could result, with fewer and fewer insurers and higher and higher premiums."

The letter added that eliminating reimbursements to insurers for subsidies that lower customers' out-of-pocket health expenses "could result in insurer losses and solvency challengers, leading insurers to consider withdrawing from the market."

The letter from the actuaries' group comes on the same day as an Urban Institute report that estimated that the number of Americans without health insurance would more than double, to almost 59 million, by 2019 if Obamacare is partially repealed by Congress. The Urban Institute's estimate did not factor in the effects of any replacement plan.

"This scenario does not just move the country back to the situation before the ACA," that study said. "It moves the country to a situation with higher uninsurance rates than was the case before the ACA's reforms."

A number of Congressional Republicans, as well as President-elect Donald Trump, have said that Obamacare would be replaced by new health-care laws or provisions. But there is no consensus as of yet about what form that replacement will take, or how many people would remain insured under it.

The Obama administration, which implemented the ACA, has said that 20 million Americans have gained coverage under provisions of the law in the past several years.

The ACA expanded coverage by encouraging states to offer Medicaid to more poor adults, by subsidizing the purchase of individual health plans from Obamacare exchange by people with low and moderate incomes, and by allowing people up to age 26 to be covered by their parents' health plans.