EDITORIAL: The surprising way Trump, IRS have made Obamacare worse

Feb. 16--Last year's promises by President Trump and Republican congressional leaders to quickly repeal the Affordable Care Act -- which the Obama administration said provided health coverage to 20 million previously uninsured residents -- are on hold for now for several reasons. For one, insurance companies warned of chaos if the law wasn't simultaneously replaced with a comprehensive new federal health policy. For another, the GOP may have been taken aback by the intensity of support shown for the 2010 law at recent rallies and lawmakers' town hall meetings, and by a Associated Press poll in January that showed just 16 percent of Americans back an immediate repeal.

Yet hopes that the Trump administration would act carefully to replace or repair a law even Obama says needs improving may be for naught. The administration decision revealed Wednesday to loosen some regulations to try to stabilize health insurers got mixed reviews. But a Trump executive order from last month requiring federal agencies to provide relief from provisions of what's widely known as Obamacare has magnified the law's key weakness.

Under the Affordable Care Act (ACA), people cannot be denied health insurance because of pre-existing medical conditions. People who don't have health insurance through their jobs or families are required to buy coverage on their own or through state exchanges in which policies are subsidized based on income. But because federal tax penalties for not buying insurance are minor compared with the cost of a year of premiums -- the median penalty in 2016 was just $330 -- individuals, especially healthy young people, have a large financial incentive to not buy insurance until they get sick.

This has long led to fears that state exchanges will face "death spirals" in which insurers have to pay for the cost of care for the sickest people without benefiting from the premiums paid by healthier individuals who don't use nearly as much medical care -- driving premiums higher and increasing the incentive for people to not buy coverage until necessary.

These fears aren't unfounded. In the 39 states that use the federal health insurance marketplace, ACA premiums for basic coverage were forecast to increase by an average of 25 percent this year. This week, Humana became the first health insurer amid heightened uncertainty over the law to announce it would stop providing ACA policies, beginning next year. Then Mark Bertolini, chief executive of Aetna, an even larger insurer, said he believes more insurers will withdraw this year and "we'll see a lot of markets without any coverage at all."

The president's executive order makes that more likely than ever. Its requirement that federal agencies provide ACA relief has been interpreted by the IRS as meaning taxpayers don't have to confirm whether they complied with the law by maintaining health insurance -- meaning those without insurance could theoretically avoid being penalized. Beginning this year, tax returns that didn't respond to the question on line 61 of the 1040 form were going to be returned as incomplete. Not any more, as first reported by the San Francisco Chronicle and the Reason website. The IRS says "taxpayers remain required to follow the law and pay what they may owe," but its point has been made.

California, with its massive population and its competition among insurance providers, has its own state exchange and doesn't use the federal marketplace. However, the decision to be less strict about federal penalties certainly won't drive enrollment or reduce insurers' risk elsewhere.

It's clear that Obamacare shouldn't be replaced or revamped in a hurry. Still, it's time for the Trump administration and lawmakers of both parties to begin the overhaul of a health care system that's under siege.

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