The Health Care Industry Is in a Panic Over Obamacare Repeal
Policy + Politics

The Health Care Industry Is in a Panic Over Obamacare Repeal

REUTERS/Nate Chute

The pledge by President-elect Donald Trump and congressional Republicans to swiftly repeal the Affordable Care Act -- followed by months or even years of deliberation over a replacement – is no doubt troubling news to many of the roughly 20 million Obamacare beneficiaries.

House Speaker Paul Ryan (R-WI) and Senate Majority Leader Mitch McConnell (R-KY) have vowed to jam through legislation as early as January to dismantle the heart of President Obama’s signature 2010 health insurance program, while leaving the question of precisely how they would replace it and when that new system would be put in place unanswered.

Related: GOP Cuts in Medicare May Be Next After Dismantling Obamacare

But the GOP’s crusade to finally destroy Obamacare has the health care industry in an uproar, with strong indications that major insurers could accelerate their departure from the ACA exchanges. At the same time, hospital administrators are in a panic, fearing that they will incur massive financial losses if millions of Americans lose their health care coverage under Obamacare or expanded Medicaid.

To be clear, Obamacare already is reeling from a high profile exodus of major insurers, including Aetna, UnitedHealthcare and Blue Cross-Blue Shield, which suffered millions of dollars in losses during the first few years of the program’s operation. But health care experts and state insurance administrators say that insurers would have even less incentive to stick around beyond the upcoming 2017 season without knowing precisely what to expect at the end of the transition.

"The discussion right now about repeal and replacement is making the market very, very nervous," Washington Insurance Commissioner Mike Kreidler, a Democrat, said at a press conference last week organized by the liberal Center for American Progress. "I would not be surprised to see the potential for a stampede to exit the market."

CAP officials contend that even if the Republicans delay the effective date of repeal as part of expedited budget legislation in January, that approach would still cause “massive disruption and chaos” in the individual market for health insurance and a “complete unraveling” of the market by the end of 2017.

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Health and Human Services Secretary Sylvia Mathews Burwell predicted in an interview with The Huffington Post on Monday that health insurers would abandon the Obamacare markets in droves by 2018 if they don’t know how Republicans intend to replace the system.

She said that the GOP leadership’s current strategy of postponing the effective date of the repeal to give the incoming Trump administration and Republicans time to devise an alternative would do nothing to calm the insurance companies jittery nerves. “This idea of repeal and wait two years to replace – that is repeal,” Burwell said. “The uncertainty that gets created for consumers, for insurers, for states by having that is very, very damaging.”

While major insurers may continue to retreat from the Obamacare market to avoid more losses down the road, the biggest loser may be the hospital industry, which counted on a major expansion in business with a flood of newly insured patients under Obamacare and Medicaid.

Charles Kahn, chief executive of the Federation of American Hospitals, told Kaiser Health News this week that his industry was caught by surprise by Trump’s victory over Democrat Hillary Clinton and that the “working assumption” had been that “we had a program that wasn’t going anywhere.”

Related: Ryan Declares GOP Has a ‘Mandate’ to Enact Sweeping Changes

As part of the negotiations that led to passage of Obamacare, hospitals agreed to substantial cuts in Medicare and Medicaid reimbursement for seniors and the poor, with the expectation that those cuts would be more than offset by increases in the volume of paying customers who were newly insured.

If that expanded insurance coverage now begins to fade away, Kahn indicated, those cuts in Medicare and Medicaid reimbursements will have to be restored or else the hospitals will take a substantial financial beating.

Sheryl R. Skolnick, director of research at Mizuho Securities USA, warned clients Tuesday to avoid investing in hospitals because of the growing uncertainty over the future of the health care system. She said in a note that the combination of a repeal of Obamacare and a likely GOP overhaul of Medicare and Medicaid makes hospitals “dangerous ground for investing.”

Even as they have pressed for over six years to undermine Obamacare, House and Senate Republicans have been unable to come close to agreement on a replacement package. Trump, Ryan and House Budget Committee Chair Tom Price (R-GA) have offered differing approaches that rely largely on market forces, tax credits, enhanced inter-state competition and encouraging more employers to provide coverage.

Trump said recently that he would favor preserving portions of Obamacare, including keeping children on their parents’ policies until they turn 26 and the ban on insurers discriminating against people with chronic health problems. But some, including Sen. Lamar Alexander (R-Tenn.), chair of Health, Education and Labor Committee, warn that it will take many more years – perhaps beyond Trump’s first term – to finally reach a consensus on the future of the U.S. health care system.

Related: Obamacare Suffers Another Big Blow as Aetna Pulls Out of 11 States 

Joseph Antos, a health care expert with the American Enterprise Institute, said Wednesday that insurers and hospital administrators may be jumping the gun in their angst-ridden reaction to an emerging GOP policy. “It’s premature,” Antos said. “Trump hasn’t named his chief health people yet, so until that happens, we really would have a hard time doing anything other than speculate about what might happen.”

“All of this talk about a quick repeal and then waiting two years to replace leaves out what happens during the intervening two years,” he added. “And the one thing Trump has actually said is he doesn’t want to have any gaps. So that implies to me,  at least, pretty much a steady-as-you-go in terms of financing health insurance until the new system – whatever that specifically means – is ready to go on line.”