This is how Obamacare explodes

KNOXVILLE, Tennessee — Kerry Reed spent the second week of April experimenting with canned corn and tortilla chips. Tacos were on the menu. She worked some of the corn products into them, just to see how her body would react. For now, anyway, she could still afford the treatment if something went wrong.

Reed, a 46-year-old freelance grant writer, has a rare disease that can make her suddenly and unpredictably allergic to different foods. She has health coverage through the Affordable Care Act, but she might not have it next year. So she is testing herself for allergic reactions while she can still buy her EpiPens and inhalers.

Byrd Pinkerton/Vox

“If I can figure out how to keep my reactions under control and get really stabilized by September, that would be good,” Reed says. “I can’t really be in the middle of some new treatment going into next year.”

Congress is far from repealing Obamacare, but in eastern Tennessee, where Reed lives, the law could vanish next year whether a vote happens or not. Its residents cannot sign up for the law’s Medicaid expansion because the state does not participate in that program. Next year, those residents may not have the option to use Obamacare’s health marketplaces either.

As it stands, no insurers want to sell Obamacare coverage in Reed’s area of Tennessee. Reed’s current health insurer, Humana, recently announced it would quit selling such plans in 2018. The people signing up for the law, the insurer said, were sicker than expected. Humana didn’t think the problem would get any better.

Tennessee is a preview of what an Obamacare collapse could look under President Trump, where the law technically remains standing but people don’t have access to the programs.

The areas most at risk for this type of collapse are those that voted for Trump: places that are lower-income and rural, which aren’t attractive markets to health insurance companies.

These are places that have struggled to attract robust insurance competition both before and after the health care law’s implementation. “In general, rural areas have always been the places where it’s hard to attract a competitive insurance market,” says Aditi Sen, an assistant professor at the Johns Hopkins Bloomberg School of Public Health who has studied the health law marketplaces. “The incentives to enter just aren’t that strong.”

The Obama administration worked hard to recruit health insurers to sell to those areas. The Trump administration, however, seems to want to stand aside and let Obamacare run on autopilot, so it can explode or survive on its own.

In eastern Tennessee, that could have the practical effect of leaving 40,000 current Obamacare enrollees without coverage.

Reed is preparing for that possibility. So it was corn tests the second week of April. It was tomato sauce the week before that, which turned out to be a no-go; it gave her hives. Pineapple, one of her favorite fruits, is next. She tried to do allergy shots, but ironically, she was allergic to a non-active ingredient in the testing strips.

“I’m just trying to create a bubble around myself, and figure out how I can keep myself safe,” she says. “I don’t want to experiment, but I’m also trying to prepare myself for what is the minimum amount of medicine I can live with.”

Insurers are supposed to announce by June 21 whether they’ll sell coverage through the marketplaces. Reed is running out of time.

So is Tennessee.

“It’s a self-inflicted wound”: how Tennessee lost its Obamacare insurers

The stretch of eastern Tennessee where no insurers want to sell coverage includes 6,700 square miles of rolling Appalachian hills and rural roadside towns. It has 16 counties and 1.1 million residents.

Rural areas have long struggled to attract robust health insurance markets. The scarcity of doctors and hospitals makes it hard to build a network. Smaller populations mean there are fewer customers for insurers to sell to than they might find in more urban places.

Byrd Pinkerton/Vox

But this area of Tennessee does have one big urban area, Knoxville, and it had a relatively competitive marketplace before Obamacare launched. In 2014, when Healthcare.gov launched, the eastern part of the state attracted a robust group of competitors. Cigna, Blue Cross Blue Shield Tennessee, and a new nonprofit plan called Community Health Alliance signed up to sell coverage.

Knoxville and its surrounding counties had some of the lowest premiums anywhere in the country that year. A 40-year-old man could get a midlevel health insurance policy for $240 a month.

“It really surprised me that when you compared Knoxville to every market in the country, it was among the lowest you could find even though we don’t have the healthiest population,” says John Graves, an assistant professor at Vanderbilt University School of Medicine in Nashville.

The whole theory of Obamacare relied on both healthy and sick people signing up for marketplace coverage. The healthy people are crucial to balance out the bills of the sicker enrollees.

The Tennessee marketplace ran into trouble because it gave healthy consumers lots of ways to avoid joining the marketplace — a perfect storm of state and federal policy decisions that undermined the business case for insurers to sell Obamacare policies in the region.

“There are state risk factors for an unhealthy market, and one of them is leakage, what do you do to let healthy people out of the risk pool,” says Kathy Hempstead, a senior advisor at the nonprofit Robert Wood Johnson Foundation. “In Tennessee, there was a business climate and policy decisions that encouraged leakage. It’s a self-inflicted wound.”

Democrats who crafted the ACA had been skittish about disrupting coverage for those who liked the previous system. “If you like your health plan, you can keep it,” President Obama famously promised in campaigning for the health care proposal. In order to live up to that guarantee, the law allowed people to keep their pre-Obamacare plans even if they didn’t meet the law’s new benefit standards. The people in these plans tended to be healthy and young — the type of people who were able to get health insurance when plans could still reject sick customers.

David Walker lives in Knoxville and has held on to his pre-Obamacare plan since 2010. He’s a graphic designer who goes to the doctor maybe two times a year, and is okay with a less robust plan.

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“I looked into Obamacare because I thought, great, this might help me,” he says. “But it was going to be double what I’m already paying. So it was like, hmm, no thanks.”

Obamacare included a relatively weak mandate that Americans carry health insurance. The uninsured can choose to buy coverage or pay a $695 penalty, significantly less than what a monthly premium would cost. Compare that with Switzerland, which will dock citizens’ wages if they don’t sign up for a plan — and, unsurprisingly, has achieved universal coverage.

“When I looked into it, it looked like the penalty would be cheaper than paying for it every single month,” says Damen Archer, a 38-year-old bartender at the Par-T-Pub in Maryville, Tennessee. “The penalty is what, $680, something like that? I think the best price I found was $120 a month. So you’re looking at $1,200 versus $600.”

Tennessee layered on other policies that made it easier for healthy people to opt out of Obamacare. It appears to be the only state in the country that still allows some insurers to reject or charger higher prices to sick customers. This practice, called underwriting, was generally banned by the Affordable Care Act. A loophole in Tennessee law allows membership-only Farm Bureau plans to continue offering these products.

Georgetown University’s Sabrina Corlette has researched the Farm Bureau plans and estimates about 55,000 Tennesseans are currently purchasing non-ACA-compliant plans through the insurer. Some of those are grandfathered plans purchased before the law took effect, and some were purchased afterwards.

“Tennessee has about 230,000 people on its exchange,” she says. “When you look at this plan that has 55,000 people sitting outside, that has got to have an effect on the overall risk pool that is in the exchange.”

Tennessee regulators, however, don’t see these Farm Bureau plans as problematic. If those are the plans that Tennessee residents want, state insurance commissioner Julie Mix McPeak argues, then it ought to stay on the market. “If there is a smaller benefit plan that consumers want, I’m not interested in closing down that option,” says McPeak, who has been a critic of the health care law.

The Farm Bureau plans, the weak individual mandate, the “if you like your plan you can keep it” promise — none of these policies on their own could take down the Affordable Care Act marketplace. But taken together, over the course of three years, they made it significantly easier for healthy people to decide not to enroll in the marketplaces. More than anyone, that hurts sick people.

“If this can happen to me, it can happen to anybody”

Reed grew up in a conservative family and for most of her life identified as a Republican. Reed voted against President Obama in the 2008 election and again in 2012. “I was in a different mindset than I am now,” she says.

One of the things that shifted her mindset was her experience with the ACA.

The old individual market in Tennessee did have more competitors than the Obamacare marketplace, about a dozen or so. It still didn’t work very well for someone like Reed.

Reed had a social work job with the state when, in 2002, she began fostering three young children: 3-year-old Katyana, 22-month-old Sydney, and 4-month-old Ethan. She wanted a more flexible schedule to adjust suddenly becoming a single parent and spend more time with her kids. When she officially adopted the children in 2004, she left her job and its health benefits package.

Reed used COBRA coverage for a while and then transitioned to a catastrophic plan in the individual market. She bought a yellow four-bedroom house on a half-acre of land. The kids picked out their own bedrooms. Her son, Ethan, nicknamed the house “Thomas.” He thought it looked like the cartoon train.

(Courtesy of Kerry Reed)

In 2007 the yellow house had an infestation of Asian beetles, which had become invasive in the area. The beetles would leave their secretions around the house, which caused Reed to break out in hives. Her health insurer terminated her policy, claiming the beetle allergy was a preexisting condition she had never reported.

“I’d never met an Asian beetle before, so I had no idea I was allergic,” Reed says.

Reed tried to apply for new insurance, but her applications were declined. She had a preexisting condition and went without coverage from 2007 through 2014. During that time, she had two major illnesses, a rough bout of pneumonia and a staph infection she thinks she caught at a water park. The bills came to $15,000 and wiped out her savings.

Reed refinanced the house to pay off the medical bills, but she ultimately couldn’t keep up with the new mortgage.

“That home was our version of the American dream, but we ended up losing it,” she says. The family of four moved into a two-bedroom apartment in 2012, where they still live today.

When Obamacare launched in 2014, Reed was one of the first in line. She paid $398 for a midlevel plan.

“I cannot tell you the feeling of complete relief being in a doctor's office for a doctor that was there to see me,” she wrote in a Facebook post at the time. “TO SEE ME. It's been so long that I almost didn't know how to fill out the patient forms without filling in information for my kids or Grammy. I almost cried at the relief (a few tears did escape). It's enormous.”

The health care law — her experience with the individual market, and then enrolling in Obamacare — was part of what changed how Reed thinks about politics.

“When I went through this health insurance experience myself, I think it gave me a bit more compassion,” she says. “If this can happen to me, it can happen to anybody. It was like, time out, we need to rethink this.”

We know how the Obama administration would handle the Tennessee situation. We don’t know what the Trump administration will do.

Reed’s first Obamacare plan was through Blue Cross Blue Shield Tennessee, but it dropped out of the marketplace at the end of 2015.

Reed switched to a plan with UnitedHealth, but that insurer left the marketplace at the end of 2016. She switched insurers again, to her current plan with Humana.

Humana was the last plan standing in the Knoxville area. Its exit at the end of 2017 leaves no options for Reed to switch to.

The Affordable Care Act has no backup plan for the type of situation that eastern Tennessee currently faces. There is no section of the law that requires insurers to come into areas where they don’t want to do business. The most the administration can do is ask insurers nicely and repeatedly to stick with Healthcare.gov.

“If there were any [backup plans], nobody told us about it,” says Kevin Counihan, who served as chief executive of Healthcare.gov under Obama. “I sure wish there were some.”

An Obamacare marketplace without an insurer is problematic because it is the only place where enrollees can use government subsidies to purchase insurance. Someone like Reed, for example, gets a $291 monthly credit that covers most of her $471 premium.

Counihan had to confront these “empty shelf” situations during his two-year tenure in the Obama administration. In 2016, for example, no insurers wanted to sell in a county in southern Arizona. Other areas of the country seemed to be at risk too, as big insurers like UnitedHealth and Aetna exited the marketplaces.

“We could not administer this law and not have access,” says Counihan. “So a bare county was not acceptable to us.”

Counihan and his team ended up spending two months last summer crisscrossing the country, checking in with health insurers and regulators to ensure all 3,007 counties would have at least one option. And this wasn’t easy; insurers did not warm to the marketplaces as the law’s drafters and boosters had expected.

“We had a meeting with one insurer and we weren’t sure how it went,” Counihan recalls. “We were sitting on a curb waiting for an Uber to take us back to the hotel, and it was hot and we were perspiring, and we just looked at each other and said, ‘I don’t know this is going to work.’”

Many insurers said no. One of their biggest gripes was that the Obama administration did not pay out funds the law had initially promised to insurers that experienced significant losses on the marketplaces. This was the risk corridor program, which was meant to stabilize Obamacare in its early years by sending payments to the insurers losing lots of money from the health plans making a handsome profit.

But the program didn’t work as planned. Congressional Republicans led by Sen. Marco Rubio (R-FL) dubbed it the “Obamacare slush fund,” and in 2014 they inserted a provision into the 2015 federal budget requiring this program to be revenue-neutral.

Because health insurers experienced significantly more losses than payments, the program was only able to pay out 12.6 percent of the bills it owed. Small insurers like Community Health Alliance, a nonprofit planned that launched with a loan from the federal government, couldn’t survive that hit.

“They sort of knocked the breath out of us by taking away the risk corridor,” says Jerry Burgess, who served as chief executive of that plan. Community Health Alliance quit the marketplaces and went out of business in 2015 after the federal government did not pay millions in risk corridor payments that the insurer had expected.

Even with small insurers bowing out, the Obama administration’s effort did work. The administration was able to ensure, during the four years of Obamacare’s coverage expansion, that no county’s marketplace ended up with bare shelves.

The future of Obamacare under the Trump administration is less certain. Some places, like Florida and California, will be fine. They have big populations and urban markets that are attractive to health insurers.

Other places like Tennessee, more rural and low-income, may struggle. President Trump has given little reassurance to health plans that might be on the fence about entering Tennessee or other markets. His administration has waffled on whether it will continue funding key Obamacare payments. He has said he expects the marketplaces to “explode” on their own.

“Insurers are fleeing the marketplace because Obamacare is fundamentally flawed,” Health and Human Services spokesperson Alleigh Marré said in a statement. “As more Americans are presented with higher healthcare costs and fewer options for coverage, repealing and replacing the law remains the best option. Administrative action alone cannot fix the problems Obamacare created.”

Local observers are skeptical that an insurance plan would want to join up in this environment; the risks are just too great.

I asked Burgess whether he expected someone to swoop in and save the day; maybe the local Blue Cross Blue Shield plan would start to sell. The plan has offered comments to news outlets lately suggesting it hasn’t decided yet.

“On the exchange?” he replied, some what incredulously. “No! They would be crazy.”

“I’m trying to cut things off slowly”

Reed feels like she needs to prepare now for a future without health insurance. In 2016, she was diagnosed with multiple rare diseases.

One is called mast cell activation syndrome, which is the one that causes a laundry list of allergies that continues to grow. Another, Dercum’s disease, causes deposits of fatty tissue to clump on top of her nerves, which is intensely painful.

Physical activity irritates this condition, causing new fatty clumps to form. Even a basic task like grocery shopping is enough to start the reaction. “When they first start forming, it feels like bee stings in different places,” Reed said during a trip to the grocery store, when she had been walking for about 20 minutes. “It presses on my nerves, and then my muscles start to shake.”

She ended the grocery trip early, so she could stop walking.

Reed did start going to a pain clinic earlier this year, which prescribed her Percocet. But she decided to stop going last month, since she was worried about becoming too dependent on a prescription she might not be able to afford come 2018.

Byrd Pinkerton/Vox

“I was getting two per day to help control the pain, which helped me sleep at night,” she says. “But the pain clinic won’t see you without health insurance, and I’m trying to cut things off slowly. If I do it all at once, I could have a really bad reaction.”

And then there are the allergies. EpiPens retail for $600, and Reed estimates her asthma inhaler costs about $200 out of pocket. She doesn’t know how she’d come up with $800 to have those two medications on hand, working part time and caring for her kids.

Her allergies are unpredictable. The last time she went into anaphylactic shock was this past summer. She took a regular Lactaid instead of the typical fast-acting pill she relies on. All of a sudden, she was struggling to breathe and breaking out in hives.

Byrd Pinkerton/Vox

“Her body was swelling up, and every time she had to get up to throw up, I had to get her out of bed,” her son Ethan, now 15, remembers of the incident. “The hardest part was trying to get her to the bathroom so she could throw up.”

Reed has talked to her kids frankly about what they need to do if something like that happens again. The toughest conversations are about what should happen if she has an allergic reaction she can’t survive.

“They see me get worse,” she says. “So we do have the conversation: Who will you go to? What is the backup plan? Some of those things are still up in the air, but some aren’t. Like, they know who they’re going to if something happens to me.”

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