A new survey out this week tells us that “31 percent believe Trump has repealed the Affordable Care Act, 49 percent say he hasn’t, and 21 percent are unsure.” To paraphrase Mark Twain: reports of the ACA’s death have been greatly exaggerated.
While the penalty for not having health coverage (the mandate) has been zeroed out starting in 2019, despite the constant attack, most of the law (Medicaid expansion, insurance subsidies, protections for those with preexisting conditions, etc.) remain the law of the land.
However, that doesn’t mean 2018 and beyond will be smooth sailing for the continued expansion of health coverage. Below we’ll talk about the future of health coverage and the ACA – both nationally and here in Maine.
Specifically, we’ll cover the following:
- Open-enrollment results
- Impact of zeroing out the mandate penalty
- Short-term plans
- But wait there’s more…
Open-Enrollment Results
Let’s start with the preliminary results of open enrollment for 2018 coverage. Going into open-enrollment, most observers (including me) were “sure” that the numbers would be significantly worse than last year due to the shorter enrollment period and the Administration’s sabotage. With open-enrollment over for much of the country, the results have been a very pleasant surprise. The final enrollment numbers will end up very close to last year’s total. It turns out the law is very much alive, and people really do want health insurance.
What happened? The shorter enrollment period was always part of the long-term plan for the ACA. The idea is that there would be several weeks each Fall when just about everyone in the country was enrolling in health plans: Medicare, the Marketplace, and employer coverage enrollment periods would all roughly coincide. To me, the shorter time frame itself wasn’t the problem, the reason for the concern was the cut in the advertising and outreach budgets. Luckily, I was wrong - there seem to be several factors that made up for the budget shortfall: 1) The very public fight over the ACA in the summer and fall made people more aware of open-enrollment 2) Insurance companies increased their advertising budgets 3) Heroic efforts by advocates and assisters to get people signed up, and 4) the increased subsidies resulted in many being able to purchase coverage for less than they paid last year (more about this below).
So, we’re starting 2018 with about the same number enrolled as last year – what happens next?
Impact of zeroing out of mandate penalty
As part of the tax bill recently signed by the President, the penalty for not having health coverage will be zero dollars beginning in 2019. For 2018 the penalty remains in effect and the IRS has announced they will reject tax returns for 2017 that don’t report coverage or claim an exemption (so even if you’re so inclined, don’t cancel your coverage yet).
The CBO estimates that eliminating the mandate would result in 13 million fewer insured. That translates to 50,000 fewer insured here in Maine if the CBO is correct. Although there is a growing feeling that the numbers may be overstated, there is no question that millions fewer will have coverage and premiums in the individual market will rise precipitously.
The greatest fear is that elimination of the mandate will lead to the dreaded death spiral. The ACA relied on both carrots and sticks to keep people in the market, zeroing out the mandate penalty eliminated the stick. Without the push to coverage, the theory goes that fewer healthy people will buy insurance, so the pool of people with insurance is “sicker” driving up premiums. The increasing premiums then drive even more healthy people out of the market, making the pool even sicker, driving up premiums even more. Hence the death spiral.
The reality is that the situation is more complicated than the theory (isn’t it always). The premium subsidies available to those earning less than 400% of the Federal Poverty Level (FPL) are based on the second to lowest cost silver plan premium in an individual’s market – as the premiums go up, so do the subsidies. So those who are subsidy-eligible will be shielded from the increases and still be able to afford the insurance – meaning there is a floor of subsidy-eligible individuals who will not abandon the market.
In fact, given the elimination of the cost-sharing payments to insurers and the resulting increase in silver plan premiums, the subsidies were more generous beginning this year, allowing for individuals to get a better deal. (One of the side effects were many people receiving subsidies were able to purchase bronze plans for just a few dollars a month.)
So, while the stick has been eliminated, for some the carrot has been enhanced; counteracting some of the expected market erosion. However, because the carrot is not available to everyone, it won’t eliminate all the erosion. The people who will face a dire situation are those earning more than 400% of FPL who receive no assistance. As premiums increase, they will be left without affordable options.
Some who voted for the tax bill and the elimination of the mandate penalty claimed to want to protect their constituents from the premium spike. Maine’s Senator Susan Collins made a “deal” to get two bills passed that she claims will mitigate the damage of eliminating the penalty. Let’s see if that’s true (spoiler alert – it’s not).
The first bill to consider is Alexander-Murray. This piece of legislation was designed to addresses the elimination of the cost-sharing reimbursement (CSR) to insurers. However, the bill was written months ago before we saw how the market would respond. As I reviewed above, the unintended consequence of the President cutting CSR reimbursement is that premium subsidies have risen providing a better deal for many who shop on the ACA marketplace.
This bill does nothing to mitigate the elimination of the mandate penalty – as the Democratic Sponsor Senator Murray noted, it would be like fighting fire with penicillin – have no impact at all. Additionally, many would be worse off if Alexander-Murray passed due to the change in silver plan premiums and the resulting change in subsidies.
The second bill is the Collins-Nelson Reinsurance bill (or possibly some other reinsurance bill). If adequately funded both in dollars allocated per year and in the number of years it will be funded (a big if), the bill could address one of the mandates policy goals – providing a stable insurance pool. But can the bill pass the House? Many conservatives are opposed to the bill, and Speaker Ryan has said he wasn’t part of that deal.
Even if it is adequately funded and does pass, it does not address other goals of the mandate such as increasing the number of insured.
We must also consider how insurance companies will respond to this further destabilization of the markets. Several insurers have already pulled back from participation in the marketplace, and I think it’s fair to say that trend will continue. Here in Maine, while I’m confident Community Health Options (one of the last remaining co-op plans) will remain, I think it’s an open question how Harvard Pilgrim (our other marketplace insurer) will respond.
There has been some talk of states imposing their own mandates as a response to the Federal change – in fact, Massachusetts still has theirs on the books from when Romney Care was implemented. While there is nothing legally preventing this from happening, we must acknowledge it would be a hard sell. There is no denying the mandate is the most unpopular part of the ACA, and it would be a heavy lift in most states to try and institute one.
Perhaps Margot Sanger-Katz of the New York Times summed it up best: “The end of the mandate will establish a sort of natural experiment, in which its influence will become much more clear.”
Short-term plans
Adding to the market instability that will be brought about by the elimination of the mandate penalty is the upcoming loosening of regulations around short-term health plans and association health plans. These plans are not subject to the ACA – so they don’t cover the essential health benefits, and they don’t have any protections for those with pre-existing conditions. What they do have is medical underwriting.
Even before the ACA, these products were problematic. Only healthy people could buy them, and they usually found that if they got sick, the benefits were insufficient. The ACA and accompanying regulations helped to marginalize these products. However, the President signed an executive order in the Fall instructing that the regulations be loosened for these plans.
If these proposed changes proceed unchecked, these plans could further drain healthy people from the ACA compliant plan insurance pool (note we are expecting the new regulations early in January).
This is one area where states can effectively prevent the damage. These are insured products and so subject to state regulation. I encourage states to consider instituting additional consumer protections and limiting the damage these plans can do.
But wait there’s more…
Before we wrap-up, a few more items to note as we think about access to health coverage in 2018. Please don’t take the brief mentions below to signify that these issues are any less important than what we’ve already discussed – if I wrote as much as I wanted about each of these; I’d never stop.
Medicaid Expansion
Here in Maine voters passed a referendum to implement Medicaid Expansion. Governor LePage is against the idea and has put in place arbitrary roadblocks to the implementation. While I know the Democrats in the State Legislature will do everything they can to implement the referendum, I fear that it will be the new Governor who takes office in 2019 will be the one to implement expansion. The LePage Administration will drag its feet, and it’s possible the issue ends up in court – delaying the implementation even further. I hope I’m wrong about this one but…
Medicare/Medicaid/Social Security
Let’s start with a bit of good news. As part of the continuing resolution passed at the end of December, the “Paygo” provision that would have led to an automatic $25 billion Medicare cut was overruled by House and Senate.
However, while those automatic cuts won’t happen, Speaker Ryan has already said he wants to work on cutting Medicare/Medicaid/Social Security in 2018. Stay tuned.
CHIP / Community Health Centers
CHIP still has not been fully funded. While the Continuing Resolution included some short-term funding, it was inadequate. It included just $2.85 billion for CHIP through March 31. How important is CHIP? “From 1997, when CHIP was enacted, to 2012, the uninsured rate for children fell by half, from 14% to 7%.”
The lack of CHIP funding is a national embarrassment – but if possible, it’s even worse considering the recently passed tax bill. It will cost $100 billion to extend CHIP for five years compared to the unfunded $1.5 Trillion tax cut just passed.
In addition to not adequately funding CHIP, funding has not been assured for Community Health Centers. I’ll let the Commonwealth Fund describe the implications:
“If Congress does not act, community health centers will lose nearly 70 percent of the federal dollars they rely on to operate. The U.S. Department of Health and Human Services estimates that the significant funding cut would lead to one-quarter of community health centers sites closing, 51,000 workers being laid off, and 9 million people — more than one-third of all community health center patients — losing the comprehensive, high-quality, and low-cost care they need.”
Conclusion
As I try and peer into the health coverage landscape of 2018, I can’t help but invoke my spirit animal, shruggie: ¯\_(ツ)_/¯ We can make certain predictions about how things will play out, but if 2017 has taught us anything, it’s how silly we all were to think we could predict the future.
With that qualification in mind, here’s my best guess.
First the good news, the Medicaid expansion remains the expansion will be implemented in more states (including eventually Maine). Also, the subsidy-eligible will continue to be able to access the individual insurance market with products that if not as affordable as we’d like, will remain within reach. The existence of the subsidy-eligible population will mean that some (but not all) insurers will continue to participate.
Now the bad news, the law may effectively disappear for those who earn over 400% of FPL and have no access to employer-sponsored insurance. Many will be at risk who have protection today. Tim Jost, professor emeritus of Washington and Lee law school, summed it up this way: "The exchanges will essentially become a home for consumers for qualify for premium tax credits and a high-risk pool for everyone else, and a very uncomfortable place for insurers to be. The number of uninsured will shoot up, as will the uncompensated care burden for hospitals."
Additionally, while the law as currently configured will protect those earning less than 400% of FPL, the spike in premiums and the resulting spike in subsidy payments helps to draw a target on the subsidies as described by Sara Rosenbaum at George Washington University: “This, of course, sets the stage for terrible reductions in subsidies along with Medicare, Medicaid, and CHIP subsidies, ultimately.”
For today, despite continued frustrations, we must keep fighting the good fight as we stay aware of the dangers that lie ahead.
