Trump's ACA plans: Recipe for a death spiral?

Donald Trump speaking at rally
Donald Trump would like to keep the ban on denying consumers coverage due to pre-existing conditions, but that could present problems if he repeals the individual mandate. (Credit: DonaldJTrump.com)

With President-elect Donald Trump saying that he'll consider keeping some provisions of the Affordable Care Act, some are worried that strategy could send health insurance markets into a death spiral.

Trump said in a postelection interview that he would like to keep the popular ACA rules that allow young adults to stay on a parent’s insurance until age 26 and prevent insurers from denying coverage based on pre-existing conditions. 

But if insurers are required to charge all individuals roughly the same price for health insurance—a concept known as “guaranteed issue at community rates”—consumers will game the system, buying insurance only when they need it, columnist Steven Pearlstein argues in an opinion piece published by the Washington Post’s Wonkblog.

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RELATED: Trump says he's willing to keep some portions of ACA

Indeed, if Republicans try to keep the more-popular ban on pre-existing conditions while getting rid of the less-popular individual mandate and subsidies, it would “make the individual market even more dysfunctional than it is now,” Bloomberg View columnist Megan McArdle writes. Insurers would continue raising prices to pay for increasingly sick, expensive customers, ultimately pricing nearly everyone out of the market.

Insurance markets have collapsed in states that have tried the guaranteed-issue-at-community-rates method, the Wonkblog post notes. The only way to prevent this gaming of the system, it argues, is to create an individual mandate and require subsidies to help low-income individuals get insurance—in other words, a system that looks just like President Obama's ACA.

More election coverage:

Trump's healthcare policy: The Ben Carson effect 
Under Trump, Medicaid faces uncertain future 
Experts: ACA repeal would be complex, costly

The ACA itself, though, is not a perfect system, as insurer losses have led some carriers to exit the individual marketplaces. One culprit, according to Forbes contributor Robert Book, is the fact that the law provides subsidies based only on income, not health status.

Therefore, he argues for a risk-adjustment system modeled off of Medicare Advantage, in which the government uses diagnosis codes and other factors to create a risk score for patients that compares them to an average patient. Insurance companies would then receive government subsidies based on their average customer’s risk score.

There have been issues, however, with MA’s risk-score system, as in recent years it led to billions of dollars in overpayments, FierceHealthPayer has reported.

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