U.S. markets closed
  • S&P 500

    +0.34 (+0.01%)
  • Dow 30

    -74.15 (-0.22%)
  • Nasdaq

    +88.45 (+0.67%)
  • Russell 2000

    -28.28 (-1.58%)
  • Crude Oil

    -0.28 (-0.32%)
  • Gold

    -2.30 (-0.12%)
  • Silver

    -0.17 (-0.77%)

    -0.0091 (-0.86%)
  • 10-Yr Bond

    +0.1100 (+2.41%)

    -0.0110 (-0.90%)

    +0.4860 (+0.33%)
  • Bitcoin USD

    -329.04 (-1.18%)
  • CMC Crypto 200

    -9.91 (-1.64%)
  • FTSE 100

    -97.36 (-1.28%)
  • Nikkei 225

    -97.72 (-0.31%)

Op-Ed: Here's the ‘worst case scenario' for Obamacare now

Op-Ed: Here's the ‘worst case scenario' for Obamacare now

The American Health Care Act (AHCA), the Republicans' answer to Obamacare, is dead. President Trump says he's walking away, while Paul Ryan hints that he's presenting a new plan soon and others seem hopeful that a bipartisan bill can still be created.

Considering the lack of support from virtually all parties for the AHCA, it seems unlikely that a new bill will fare any better. For his part, Trump has said that he wants to simply let Obamacare die of its own inherent flaws and rebuild from there.

But Obamacare isn't in a "death spiral," and although Trump can take steps to weaken it, he'll be unable to destroy it the way he and other Republicans would like.

Obamacare helped insure a record number of people, but it wasn't without its problems. There are three main issues that need to be addressed if it's to remain as the health-care law of the land:

High premiums

Health insurance premiums saw a huge spike in 2016, rising an average of 22 percent. Were these sky-high price increases a regular occurrence or a one-time course correction? Trump hopes it's the former, and that rising premiums will turn people against Obamacare.

He can try to make this hope a reality by not backing various support measures designed to bring down the costs borne by health insurers and passed onto consumers. The government's reinsurance program, put in place to help cover costs during the first few uncertain years of Obamacare, has recently expired. The AHCA proposed a similar assistance program, with a "$100 billion fund over nine years to help states cover a range of contingencies, including caring for the most expensive patients, lowering the premiums and out-of-pocket costs for people 50 to 64 years old and other health care related expenses."

Trump could help alleviate rising premiums by backing a measure similar to either of the above. Or he can let premiums run their own course, without government cost assistance, and hope they continue to go up.

Unfortunately for him, there's little to suggest that premiums will keep increasing. Most observers, including the CBO, lean toward the "course correction" attitude: Premium rates were set too low initially and this was a way for the market to catch up.

And truthfully, most people don't feel the impact of these rate increases. Despite the high average increase, the Kaiser Family Foundation reported that, thanks to government-provided subsidies, the rates consumers paid were effectively the same as the previous year.

If the CBO is correct and skyrocketing premiums were a one-time issue, and most people are shielded from increases anyway, this is much ado about nothing.

"Empty shelf" counties

The other big headline from open enrollment was the lack of insurer choices in some counties. Unlike with high premium increases, this doesn't seem to be a one off. One-third of counties have only one insurer offering individual & family plans, and 16 counties in Tennessee have no insurers at all thanks to Humana exiting the market.

The Obama administration worked out this issue on a case-by-case basis. In Pinal County, Arizona, the administration convinced Blue Cross Blue Shield to re-enter the market after the departure of Aetna left the county with no insurers. The Trump administration could hamstring Obamacare by doing the opposite: nothing at all. Don't work with insurers. Don't persuade them to re-enter counties that have no other options.

This, of course, presumes that insurers won't re-enter counties on their own; without any competition, and with Obamacare around for the foreseeable future, they might be willing to take a chance there.

The opposite situation might not play out any better for Trump. The rising number of uninsured people would hurt Obamacare, but Trump might risk taking the blame himself for not helping people who need coverage – especially since many of them are his own voters.

Low millennial enrollment

Insurance works by pooling risk, and sharing the costs to cover that risk. Young people are less likely to use their health insurance, but they're still paying for it, helping to spread out the costs. Having more people enrolled helps stabilize a carrier's risk pool and lower the overall premiums.

Trump may be able to do the most harm here by cutting advertising to promote awareness, thereby decreasing the number of young adult enrollees. The number of ads shown is related to the number of enrollments overall, and the Trump administration killed health insurance enrollment advertisements during the last week of open enrollment – the period when these desired young people most often sign up. It's a step he's shown he's willing to take (though they later walked this back).

But consider this: the Obama administration wanted people aged 18 and 34 to account for one-third of enrollees but, even with advertising in effect, that number has remained around twenty-five percent of enrollees. Pulling advertisements might curb the number of young enrollees, but if numbers were already below expectations (a problem on its own), will that make a drastic difference?

Is Obamacare in a death spiral?

The popular narrative (or at least Trump's narrative) is that Obamacare is dying. Left to its own devices, it will burn itself out and from the ashes a new Republican healthcare system can grow.

However, it doesn't seem to be the case. There's little to suggest that the above actions will actually kill Obamacare. Premiums likely won't keep rising; problems with no-insurer counties are compounded by large exits that may lessen as insurers acclimate to the new permanent Obamacare environment; and young adult enrollment has, at worst, stayed disappointingly constant. There's nothing pointing to any of these destroying Obamacare.

The worst case scenario – especially for Trump – is that Obamacare isn't killed, but is increasingly less effective for people. As much as Trump will want to pin the blame on Democrats, the culprit will be clear: his own inaction.

Commentary by Jennifer Fitzgerald, the CEO and co-founder of PolicyGenius, an independent digital insurance company for consumers. Previously, she was a junior partner at McKinsey & Company where she advised Fortune 100 financial services companies on marketing and strategy. Jennifer launched PolicyGenius in 2014 to solve the pain points millions of Americans face when researching and shopping for insurance -- providing plain English decision support, unbiased advice and policy comparisons for online shoppers. She is a graduate of Columbia Law School and Florida State University. Follow her on Twitter @jenlfitzgerald.

For more insight from CNBC contributors, follow @CNBCopinion on Twitter.

Watch: What happens to Obamacare now