Linda Blumberg, senior fellow in the Urban Institute’s Health Policy Center, is an expert on private health insurance and health system reform. She has conducted extensive studies on the impacts of the Affordable Care Act (ACA) on families and communities across the country following the law’s initial implementation in 2014.

In January 2017, Blumberg and Institute fellow John Holahan proposed strategies to fix the biggest problems with the ACA, rather than repealing and replacing the law as sought by the Affordable Health Care Act (AHCA) passed by the House in May and the Better Care Reconciliation Act (BCRA) under debate in the Senate.

What, by your estimation, is the ACA’s primary weakness?

A central problem is that 19 states have yet to take advantage of the ACA’s Medicaid eligibility expansion, and that leaves many low-income people in those states without an option for affordable coverage. We suggest allowing states to expand Medicaid eligibility for those with incomes up to 100 percent of the federal poverty, level instead of 138 percent, to encourage more states to expand.

Second, the nongroup insurance reforms of the ACA have faced real challenges in regions that are sparsely populated. These areas have little competition in their insurance markets, health care provider markets, or both. It’s difficult to engender new competition in these areas.

In areas that experience a lot of consolidation among insurers or providers, unsubsidized premiums are high. In markets with only one or two insurers, there is little to no incentive for insurers to be tough negotiators to bring down provider prices (and thus premiums), and in markets with a dominant health care system, even strong insurers do not have bargaining power to bring provider prices down. These situations are most common in rural and other areas with low population density.

Rising premiums have been a primary concern among critics of the ACA. How do you propose lowering them?

First, in many areas of the country, particularly large metropolitan areas where lots of people live, premiums have been low, as has premium growth. The areas of concern are largely outside these population centers. Concerns over whether insurers will be reimbursed for the cost-sharing subsidies they have paid out and are required to pay out in the future is now affecting how insurers set premiums, however, and this uncertainty can be immediately addressed by Congress and the administration committing to pay these bills.    

In addition to that immediate need, we suggest that insurer and provider consolidation and the higher premiums that result from them can be addressed using a strategy employed by the Medicare Advantage program. We propose that provider payment rates charged by nongroup insurers be capped at Medicare rates, Medicare rates plus some percentage, or at some other standard.

These caps would allow insurers to negotiate lower rates with providers if they can, but these insurers would not have to pay more. The caps would take away the pricing power of provider monopolies, allowing insurers to set lower premiums. The caps would also make it easier for additional insurers to enter markets with only one or two insurers because the new entrants could set competitive premiums even in markets where they currently have no market share.

How does “fixing” the ACA differ from the other options on the table? Could the AHCA and BCRA be described as fixing the ACA?

Fixing the ACA requires addressing existing problems such that the ACA’s objectives can better be achieved. An approach that does not share the ACA’s objectives is not a fix. The ACA’s objectives were primarily to do the following:

• Expand insurance coverage.
• Increase access to and affordability of necessary medical care.
• Broaden the way risk is shared in insurance markets, eliminating price and coverage discrimination by health status. The goal was to have the large number of people who are healthy at a given time more broadly contribute to the costs of care for the smaller number of people who have health problems at a given time, thus providing affordable access to necessary care. In addition, competition based on quality and efficiency could be engendered in such an environment, replacing the competition for the healthiest enrollees that dominated insurance markets before reform.

The BCRA and AHCA have different objectives. They would increase the number of uninsured people and would decrease access to care and affordability via decreasing Medicaid funding, eliminating the ACA’s subsidies to lower deductibles and other out-of-pocket costs, and decreasing premium tax credits for many low- and middle-income people purchasing private nongroup insurance today.

Various strategies in the bills would move private insurance markets back toward separating the costs of the healthy from those of the sick, making access to care less affordable when health issues arise. And we estimate that the BCRA would lead to 24.7 million more people uninsured than under the ACA in 2022. The AHCA would lead to an additional 23 million uninsured in 2022.

With such different objectives and outcomes, neither piece of legislation can be considered a fix to the ACA.

The individual mandate is one of the most unpopular provisions in the ACA. Do you have a fix for that?

The individual mandate, though unpopular, is critical. It broadens health care risk by keeping healthy people in the insurance market and attracting more healthy people to enroll.

But it’s difficult to find an alternative to the individual mandate that is equally effective and fair.

In our “fix it” paper, we discussed using late-enrollment penalties, but this strategy has significant downsides relative to the individual mandate. The AHCA proposes a 30 percent premium surcharge for late enrollees. But only people who expect to need substantial amounts of medical care in the coming year are going to be willing to pay that extra 30 percent in addition to their regular premium.

People who experienced a gap in coverage but expect to be healthy would be less likely to enroll because of the higher price. So, that 30 percent penalty would make the insurance pool sicker, on average, and drive premiums up.

This shows that it’s not straightforward to find an alternative to the individual mandate that doesn’t dissuade healthy people from getting insured or make it prohibitively expensive for people who need care to enroll after a coverage gap.

And people’s lives are complicated—difficult situations lead many to experience these gaps. We want to encourage people to get and stay covered, but we should be careful about being overly punitive in a way that will compromise the health of people who have gone through tough times.

What are the most important steps for fixing problems with the ACA?

First, Congress and the administration should commit to fully reimbursing Marketplace insurers for the cost-sharing reductions these insurers have paid and will pay out in the future.

Next, a permanent reinsurance program for the private nongroup insurance market would address markets experiencing disproportionate enrollment of people with high medical needs. The ACA, AHCA, and BCRA include temporary reinsurance programs while Medicare has a permanent one, so there should be bipartisan support for this.

Third, capping provider payment rates for nongroup insurers, at least in low insurer or provider competition areas, should help a great deal.  

Enrollment could be improved in several ways, some less costly than others. Increasing outreach and enrollment assistance is an inexpensive way to get more healthy people to join the insurance market. Uninsured people reached by such programs are more likely to be healthy because they haven’t entered the system on their own knowing that they need care.

Closing loopholes for insurers to sell plans that do not comply with the ACA’s consumer protections would also bring more healthy people into the broad insurance pool, which would help bring average premiums down.

Other important fixes come with a bigger price tag, but even those would represent a small percentage increase in overall health spending.

The ACA has made major advances in making health care affordable through Medicaid expansion, premium tax credits, and cost-sharing reductions for nongroup insurance coverage. But as people go up the income scale and federal assistance decreases, there are people who still look at the cost of insurance and feel that coverage is not affordable or the cost-sharing requirements are too high for their income.

We can do better by improving the premium tax credits and cost-sharing assistance and by encouraging states that have not expanded Medicaid eligibility to do so.