Next steps – as of Thursday, July 20

Given the pace of developments, I felt compelled to put today’s date in the title.  I hope the contents will continue to be relevant and helpful, but as I’ve said before – I know nothing ¯\_(ツ)_/¯

With that in mind, I’m writing under the assumption that “repeal & replace” and “repeal & delay” are both dead.  Of course, that may yet prove to be false, but if the vote scheduled for next week does fail, we’ll need to be prepared to act quickly – so here is my look at what needs to be done.  

Contrary to what you have heard, the ACA is not failing.  For many people in many places, it’s working well.  According to the Administration’s own report, the markets are not imploding, and health plans are reporting better financial results this year.  That said, there are issues both with the law itself and with how the Administration is doing their administering.

Short of repeal, there are ways the Administration can undermine the law, and sadly it continues to do so. You’ve probably read about the sabotage, but here’s a quick review: Holding the cost sharing reduction payments to insurers hostage (in the announcement yesterday that they would be paid this month, no assurance that would be the case next month), lack of enforcement of the mandate, lack of support for open enrollment, and the release of misleading information (and here’s a story that broke today about using ACA funds to distribute that misleading information).  

The purpose of this post is to address what needs to be done immediately – as identified by both Democrats and Republicans.  For today we’ll forgo more expansive changes to the existing system, but of course, they loom over all our conversations. 

The four issues that can and should be addressed immediately:

Cost sharing reduction (CSR) payments

As you may know, the ACA calls for those earning less than 250% of FPL (federal poverty level) to receive a second subsidy – in addition to their premium subsidy, their cost sharing (deductible, copay, and coinsurance) are reduced.  The law required insurers to provide this benefit, but the funding for the benefit is not “mandatory,” and the Republicans in Congress have sued to prevent payment. The Obama Administration made the payments, and so far, the Trump Administration has as well.  However, the Trump Administration keeps threatening to stop the payments. 

Due to that threat, insurers have been “baking in” the cost of the CSRs in their 2018 premiums.  This, along with mandate issues (discussed below) is being referred to as the “Trump Tax.”  Half of proposed rate hikes for 2018 are due to these actions by the current administration.

Kaiser has estimated that not making payments incurs a net cost of over $2 billion.  That’s because the lack of payments is being built into the premium, and the increase in premium will result in increased subsidy costs of $12 billion vs. the cost of payments of $10 billion.

Needed immediate action:

Funding these payments with certainty for at least the next several years.

Underserved counties

Due to market instability, there are some counties that may have no insurers offering a plan in 2018.  There are also an additional number that will only have one insurer offering a plan.  There are several suggested ways to address this issue quickly.  While I would prefer that these actions are taken if there are less than two insurers present in a market, some action must be taken at least in markets where there are no insurers.

Needed immediate actions (for this issue I provide several alternatives, moving forward with one of the three options would address the issue):

• The Federal Employee Benefit Plan (FEBP) has insurers offering plans in every county in the country.  For underserved counties, require the two largest FEBP plans to offer a silver plan on the marketplace
• Medicaid buy in - Offer a “plan” on the marketplace allowing individuals to receive Medicaid coverage for a specified cost (can be thought of as a stop-gap public option)
• Incentivize insurance companies to participate by requiring those firms in a state bidding for Medicaid contract to offer an exchange plan, or by requiring any insurer that wants to sell off the exchange in a state to sell in every county on the exchange as well. 

Degradation of risk pool

We need young healthy people to buy insurance.  If they don’t, we end up with a higher percentage of older and sicker people in the risk pool, driving up premiums because there are fewer people to cover their costs. 

Needed immediate actions:

• Enforcement of the mandate (there is currently a provision in the House budget to prevent the IRS from spending money on mandate enforcement)
• Sufficient marketing efforts supporting/encouraging enrollment (the administration cut advertising and promotion during the end of the open enrollment period)
• Enrollment support through the hiring and promotion of navigators

Premium level

While making the CSR payments and enforcing the mandate will help lower premiums, it seems clear that more action is needed.  As noted in a recent Huffington Post article:

“The Senate bill that GOP leaders just abandoned included $182 billion for shoring up state insurance markets, including $50 billion dedicated to a reinsurance program. When Hillary Clinton ran for president, her agenda included $250 billion in new tax breaks to help consumers pay premiums or out-of-pocket costs.

Somewhere in there is a compromise. It might not be enough to fix all of the Affordable Care Act’s problems, but it could still mitigate them significantly.”

There is agreement from both sides that we need additional reinsurance/risk adjustment to help lower premiums (remember, the ACA had three risk adjustment programs, but they were temporary and underfunded).  There are several ways to proceed:

• Utilize the bones of the Medicare Part D risk corridor program
• Utilize a reinsurance program modeled on Alaska’s (which just received a waiver from CMS for 2018 to help fund their reinsurance program).
• “Another idea is to require insurers to participate in broad regions, which would limit their ability to selectively work in more profitable ones and shun ones that are less so, like rural areas. This would be consistent with Medicare Part D, which requires insurers that offer stand-alone drug plans to do so in multi-state regions.“ Austin Frakt writing in the NY Times

Regarding reinsurance, note that there are several different methodologies being discussed.  (You may recall the discussion around false claims re Maine’s plan that was part of PL 90.)  The key to all of them is funding.  If you want to provide the same benefits but lower premiums the lost funds must come from somewhere.  There are better and worse ways to allocate that funding, but the bottom line is you need that additional funding.

Needed immediate action:

Pick a methodology, fund it, and implement it. 

That’s the immediate stuff.  While “nothing is easy” in my more optimistic moments I believe bipartisan action on the four items reviewed above is possible.  

Of course, that’s just for now.  Moving forward we need to address costs – both the out-of-pocket costs faced by individuals and the overall cost of care provided by our system.   Those conversations will, in fact, be complicated.

Appendix: Various “fix” proposals

Senator Chuck Schumer:

1. CSR payments
2. In underserved counties, buy from DC exchange (like Congress does)
3. Permanent reinsurance provision

Center for American Progress:

1. CSR payments
2. In underserved counties: a) suspend tax, b) public option c) buy into FEBP
3. Reinsurance

Tim Jost:

1. “Second, Congress should ensure coverage for bare counties. The Federal Employees Health Benefits Program (FEHBP) offers private insurance coverage from multiple insurers in every county in the nation. For 2018 and 2019 only, the largest two FEHBP insurers in any county should be required as a condition of continued participation in the program to offer at least one silver-level plan through the federal exchange in all counties that would otherwise be without coverage. These plans should be eligible for premium tax credits and could otherwise charge actuarially appropriate premiums.”
2. CSR payments
3. Coverage for bare counties (Federal employee health benefit plan)
4. Reinsurance
5. Risk Corridor
6. Mandate enforcement
7. More generous tax credits for young
8. Deductibility of premiums for individuals

The Urban Institute:

1. Replace mandate w late enrollment penalties used in Medicare Parts B and D
2. End employer mandate
3. Replace Cadillac Tax with cap on tax exclusion for employer-sponsored insurance
4. Reduce premium and cost-sharing for low-income individuals, cap premium at 8.5% of income for all
5. Given 4, relax 3:1 age band
6. Reevaluate essential health benefits
7. Increase marketplace enrollment
8. Address insurer/provider concentration by capping rates in those markets (use Medicare or Medicare Advantage rates)
9. Use broad revenue source to fund reinsurance