The ObamaCare Exchanges are Racing Toward a Crisis

Anthem’s reported plan to withdraw from many of the ObamaCare markets where it does business is the clearest sign that the exchanges face a near-term crisis. Yet even before Thursday’s news about the for-profit operator of Blue Cross and Blue Shield plans, there was plenty of reason to expect a white-knuckled, high-stakes showdown over ObamaCare’s future.

The official exchange sign-up data for the 2017 open enrollment period that ended Jan. 31 tell part of the story. The exchange population this year is smaller and tilts older than it did last year, both bad signs for the overall health of the risk pool and 2018 premiums. As the number of people signing up for exchange coverage unexpectedly fell by 463,000, or 4%, from 2016, the number of young adults (18 to 34) shrank by 230,000, while enrollees 55-and-up rose by about 19,000, an IBD analysis finds.

What happens in the ObamaCare-compliant off-exchange market is almost as important as what happens on the exchanges. The Congressional Budget Office says there are about 8 million individuals with unsubsidized off-exchange coverage, and most of those are lumped in the same risk pool as those why buy on the exchange. (Those who have grandfathered policies or buy from carriers that don’t offer exchange policies are in a separate pool.)

Besides pulling the plug on advertising to encourage people to enroll in late January and using his bully pulpit to criticize ObamaCare at every turn, Trump has taken one action that fundamentally undermines the operation of the exchanges. As reported by Reason’s Peter Suderman in February, the IRS acted on Trump’s executive order to ease compliance with ObamaCare regulations by undoing its rule to reject tax forms on which individuals fail to declare whether they had insurance coverage during the prior year.

Now that lax enforcement has been embraced by the Trump administration and publicized by the news media, the big risk for insurers is that ObamaCare will come to resemble the failed markets in states that passed rules requiring insurers to offer the same price to the sick and healthy but didn’t have a mandate to compel people to get coverage. Insurers likely already have felt some impact from lax enforcement of the mandate as customers who signed up for coverage opted not to pay their premiums.

There’s little question that the exchanges were in need of shoring up, regardless of who was elected, but now the situation has become more dire. The Kaiser Family Foundation’s Cynthia Cox noted that there are 200 counties — where Anthem is the only insurer — that could be left without an exchange option if it exits.