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Trump order may throw Obamacare exchanges into “death spiral”

by Alex Thompson
Oct 12 2017, 12:53pm

President Donald Trump signed an executive order Thursday that some healthcare experts worry could split the market between the healthy and the sick, throwing Obamacare exchanges into a “death spiral.”

Speaking from the White House’s Roosevelt room, Trump described the order — which would allow individuals and small businesses to band together in “association health plans” — as saving people from the “Obamacare nightmare” that would result in “such great prices for such great care.”

Many healthcare experts disagreed.

“If loosely regulated association plans are allowed, insurers will leave the ACA marketplaces as soon as they can or hike premiums a lot,” Larry Levitt, the senior vice president of Kaiser Foundation, said on Twitter.

The changes could “cause a bifurcation of the market,” Cori Uccello, senior health fellow at the American Academy of Actuaries, told the Wall Street Journal earlier this week.

READ: Trump is destroying Obamacare without repealing it

These experts fear that association plans — which would not be subject to the same benefits requirements as the plans under current law — will be appealing to young, healthy people who do not need as much coverage and will be attracted to the lower premiums. If they flock to these plans, experts say the older and sicker people remaining in the Obamacare marketplace will see their healthcare premiums spike since the young and healthy are no longer subsidizing them. They will be caught in what is known as a “death spiral.”

This dynamic would be accelerated if the executive order allows the self-employed to classify themselves as small businesses. This would allow young freelancers to join these association plans, for example, further dividing the market between the young and the old.

Obamacare prohibited these plans precisely for this reason, and it’s still unclear how the Trump administration will get around that prohibition. Depending on how the plans are structured by the Treasury and Health and Human Services departments, some insurance executives expect legal challenges to prevent the new plans from going into place.

“I believe this is the biggest free market reform of health care in a generation.”

Many conservatives, however, defended the move and argued that a freer market would result in better health results than the regulated Obamacare marketplace.

“Today is a big day,” said Republican Sen. Rand Paul of Kentucky, who spoke just before Trump at the White House. “I believe this is the biggest free market reform of healthcare in a generation.”

But Democrats said the executive order was just another way of trying to undermine the Obama-era health law after the Republican-led Congress failed to pass Trump’s reform earlier this year.

“The policies President Trump is announcing today are the latest and worst in his yearlong effort to create Trumpcare by sabotage,” Democratic Sen. Patty Murray of Washington, who is also the highest ranking Democrat on the Senate Health Committee, said in a statement to VICE News.

The Trump administration has taken a series of moves that together seem aimed at further destabilizing the Obamacare marketplaces. Trump has said that Obama’s healthcare law is “failing.”

Some Democrats believe he’s taking actions to make those assertions a reality.

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