Outlook for 2017: Insurers seek to shape GOP repeal-and-replace plans

The health insurance industry is bracing for the near certain end to the core coverage provisions of the Affordable Care Act, the framework they've been operating under for the past six years.

The industry also is waiting to learn the fate of two multibillion-dollar mergers that could reduce competition and raise premiums in some markets. Court decisions in the Justice Department's lawsuits challenging proposed combinations of Aetna and Humana, and Anthem and Cigna, are expected to come in January.

President-elect Donald Trump and GOP lawmakers have promised to repeal the ACA as soon as possible. But insurance leaders worry a replacement for the law may take several years to put together. That uncertainty, coupled with the potential repeal of policies such as the individual mandate and cost-sharing subsidies for low-income exchange plan members, could prompt insurers to flee the marketplaces.

While consumers aren't likely to see big changes in their health coverage in 2017, the following year is another story. Without knowing what kind of replacement Republicans will enact, insurers will have a hard time setting rates for 2018 individual and small group plans, which are due in the spring.

Asking them to stick around for a few years without an inkling of the new rules is “a pretty tough sell for insurers losing money,” said Erin Trish, a health policy professor at the University of Southern California.

Because they don't want to see the individual market collapse, insurers will be working with Congress over the next year for reforms and safeguards to ensure it stays afloat. They will push for greater freedom to vary premiums by age and to design benefits to appeal to different demographic groups, while retaining some mechanism to maintain a balanced risk pool by pressuring younger people to buy coverage.

Meanwhile, the outcome of the Justice Department's antitrust lawsuits to block the proposed mergers involving the four insurance giants could determine how other insurers seek to combine in the future. A green light from the courts could spur others to combine, further reducing competition and consumer choice in health plans.

A government loss in the Aetna-Humana case in particular “would be a huge signal to go forth and merge to the point of essentially monopolizing” the Medicare Advantage market, said Thomas Greaney, a St. Louis University law professor and former assistant chief in charge of healthcare antitrust enforcement at the Justice Department. Greaney believes the government has a strong case in both trials.

At the same time, insurers and other healthcare industry players will be dealing with cost pressures, notably for prescription drugs.

“So how do they push the Trump administration to deal with that?” asked John Holahan, a health policy fellow at the Urban Institute. “You can't go back to Republican orthodoxy and say the markets will solve this problem. They won't.”

Insurers are also closely watching GOP proposals to dramatically restructure Medicaid and Medicare. They have uncertain implications for insurers but could expand their opportunities for lucrative government business.