Wendell Potter on Trump’s Health Care Death Spiral

Wendell Potter (Photo by Emily Potter)

On Thursday President Trump signed an executive order paving the way for small businesses to offer cheaper, skimpier health plans to employees, a move that many health policy experts believe will undermine the Affordable Care Act, also known as Obamacare, passed by the previous administration.

The White House claims the order, which directs the Labor Department to develop regulations that make it easier for small businesses to come together to purchase health insurance through association health plans, will offer consumers more choice and flexibility. The order also seeks to expand the use of short-term health insurance intended for people between jobs.

Wendell Potter, a former CIGNA executive who famously became a consumer advocate and fierce critic of his own health-insurance industry, told Capital & Main that the new program’s benefits will accrue primarily to small businesses that merely seek the appearance of offering health insurance to their workers — and that such an approach will siphon away healthy patients from the health-care exchanges, causing more uncertainty about the future of Barack Obama’s landmark health-reform bill.

Since we spoke to Potter, President Trump followed through on an often repeated threat to end a key subsidy to the insurance industry that helps cover out-of-pocket expenses like co-payments and deductibles for low-income participants. That move will likely lead to more uncertainty in the health care exchanges set up under Obamacare. It has also drawn a lawsuit from attorneys general representing 18 states and Washington DC hoping to stop the administration from curtailing the so-called cost sharing reduction payments.

Capital & Main: What does the executive order mean for participants in the health-care exchanges?

Wendell Potter: It’s a talking point that the president and others have used that sounds good: “Why can’t there be more choice?” But the consequences of implementing this [executive order] could be very dire for people [buying plans on the exchange] who really need insurance the most. The coverage could be far more expensive for people who have had a pre-existing condition and, in some cases, it may not even be available.

So it has potential to be incredibly disruptive and to lead to what is known as a death spiral. We could see premiums skyrocket for a big percentage of the population.

Would the roll-out of this plan vary for different markets?

Potter: The regulations remain to be written, but it seems as if it would really undermine the authority of state insurance departments. Theoretically, it would affect every market across the country. Insurance commissioners generally don’t like this at all, because it really could lead to junk insurance, once again.

It has potential to be incredibly disruptive and to lead to what is known as a death spiral. We could see premiums skyrocket for a big percentage of the population.”

It will be interesting to see whether this will result in the proliferation of a lot of fly-by-night insurance companies. Part of this executive order allows for the sale of short-term policies. [Before the ACA,] insurance departments around the country were kind of playing a game of whack a mole, because a lot of companies would be selling policies within a state that were just of so little value.

How would California, which has its own health-care exchange, be impacted by this executive order?

Potter: If it’s a federal executive order, it presumably would supersede state law, which is contrary, of course, to what most Republicans say they favor. A resident of California could enroll in one of these association health plans that does not have to comply with the consumer protections that are currently required of plans that are offered through the California exchange, Covered California.

What could happen is that some people who are currently getting coverage through Covered California plans would see the availability of plans that have lower premiums, [and] buy them, in many cases, probably without understanding what their financial obligations would be if they got sick or injured.

The people who are most likely to buy those plans are healthier and younger. And they would create an imbalance in the market, in which those plans that are left in the exchange, or that would remain on the California exchange, would probably be more expensive and likely attract older and less healthy people. And that would lead to this death spiral I’m talking about.

Who benefits from this?

Potter: Some smaller employers who want to offer the appearance of coverage [in order] to attract workers. My son was, at one point, a waiter at a restaurant that was offering plans with skimpy benefits. I advised him not to sign up because it’s often a waste of money.

Some insurers that sell policies like this could benefit because they don’t have to pay out much in claims. Some insurers that would offer these policies would make out like bandits. And I’m sure people would sign up for these policies, going in unwittingly, thinking that they’re getting coverage that has a value to it.

What does this say about the future of the ACA? What’s next?

Potter: It remains to be seen, because it will take some time for the regulations to be written. They have to have a period of writing regulations, and then a period of public comment. And I suspect there will be litigation that would possibly affect the implementation of the order. So, it’s hard to say. But one of the problems  is the additional uncertainty that this creates for the insurance companies that are currently offering policies on the exchanges.

They won’t know exactly when and how this will be implemented. And how it will affect their current policies. And in times of uncertainty, you’ll see insurance companies jacking up premiums, because of anticipation that the people who will be signing up for their policies will be older and sicker. So the consequences can be felt, I think, sooner than later.

Can the insurance companies increase premiums right away?

Potter: That’s a good question. Whether they will change their premiums that they’re planning to price for 2018, I don’t know. Open enrollment will start fairly soon [on November 1]. Most insurance companies have decided what they’re going to charge for premiums for 2018, so it might not have a bearing on policies for next year, but it certainly could for the following year.

A lot will depend on how this is sold by supporters of this approach. I’m sure that they will spend a great deal of effort, probably money, to sell this as a way to fix Obamacare. We’re going to see a propaganda battle from the supporters of this and from those who don’t think it’s a good idea. And I would certainly be in that camp.

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