ACA Market Stabilization Push Is On But Success Is Uncertain

A critical test in Congress comes this week in year 2 of the ACA wars. Will lawmakers do the right thing?

It’s up in the air—again. Congress has until this Friday at midnight to pass a budget bill to fund the government through Sept. 30.   That bill is widely considered to be the last “must-pass” legislation before the mid-term elections.

As such, it’s probably the last chance lawmakers will have to enact measures aimed at stabilizing the ACA marketplaces for 2019.   Health plans start pulling their bids together in May and June and the deadline for final submissions is in September.

As of this writing, it’s unclear whether House Republican leaders will even include an ACA stabilization provision in their version of the budget bill. In the Senate Lamar Alexander (R-TN) and Susan Collins (R-ME) have submitted a proposal and are pressing hard for inclusion and a vote. (See details of the bill below.)

According to media reports, President Trump told the two Republicans on Saturday he would support their effort.   And Senate leader McConnell is also said to be supportive. But as drafted, the measure contains a poison pill: a provision that would forbid the use of federal dollars to help pay for insurance policies that provide abortions. Democrats say that’s a deal-breaker.

The renewed push now for ACA marketplace stabilization comes primarily because the repeal of the individual mandate penalty takes affect on Jan. 1, 2019.   That’s projected to trigger premium increases of between 7 and 15 percent, varying by state.   But, on top of that, the Trump administration has proposed policy changes that experts predict will spur additional premium increases—that, in turn will lead to coverage losses.  Namely, the administration wants to permit people to buy and keep short-term “bridge” health insurance for 364 days, up from the current 90 days.   Such plans—designed for purchase outside of open enrollment periods—do not have to meet the requirements of ACA insurance. They can also be sold and bought outside the exchanges. Consumers buying them don’t get subsidies (tax credits).

The Urban Institute estimates that premiums in the ACA marketplaces would increase by an average 18.2 percent in the 43 states that don’t prohibit or restrict short-term plans. The increases would be due to both repeal of the mandate penalty and expansion of short-term coverage.

An estimated 7.6 million people who buy coverage in the non-group market (on and off exchange) would lose coverage—5.5 million due to mandate repeal and 2.1 million due to short-term plan expansion. But the Urban Institute researchers estimate that about 4.2 million would buy short-term coverage, if it’s expanded to 364 days.   (Whether such coverage should be renewable or not, and how, is also hotly debated.) About 200,000 people have short-term plans in 2018.

The net impact on the number of uninsured is not easily predictable amid such market turbulence (which will also include changes in state ACA policies).   It could be as low as 3 to 4 million or as high as 6 to 7 million.

Two additional analyses—released this week—add to the portrait of what could transpire in 2019. Georgetown University’s Center on Health Insurance Reforms (CHIR) and researchers from the Urban Institute asked 10 insurance companies participating in the individual market in 28 states and D.C. what they planned.

All expressed concerns that the administration’s actions would worsen the risk pool in the marketplaces and lead their own companies or others to further reduce their market participation., or drop out altogether.

The online health insurance purchasing site eHealth surveyed 19 insurers.   Sixty percent said they’d stick it out, and might even expand their offerings. The rest were not sure yet what they’d do.

The Trump administration has also proposed expanding association health plans. That, experts agree, will also siphon off low-risk consumers from the marketplaces, leading to premium increases.

The short-term and association health plan proposals are not yet finalized and could be scaled back after stakeholder comments are taken into account. That process is already surfacing many problems and downsides. For example, the association health plan proposal drew 900 comments, most of them negative.

The comment from a coalition of 17 state attorneys general was particularly harsh.   They wrote that the association health plan proposal would open the floodgates for fraudulent insurance schemes and, as drafted, violated federal law (ERISA), according to this account from CHIR.

Alex Azar, the new head of HHS, is very likely to take a fresh look at all this. But notably he has signaled loud and clear that he won’t undermine the White House’s efforts to slay the ACA dragon—this time via death by a thousand cuts. Up next from HHS and the White House, reportedly, are proposed new rules to allow an expansion of health reimbursement accounts.

Adding to the increasingly toxic stew is a lawsuit by 20 red states, filed in February, arguing that the ACA is no longer constitutional following the mandate penalty repeal.   Led by Texas Attorney General Ken Paxton and Wisconsin Attorney General Brad Schimel, the lawsuit claims that without the individual mandate penalty the remainder of the ACA “must also fall” – because the law’s current legality is based on the mandate as a tax.

The Supreme Court upheld the ACA’s individual mandate in 2012. The justices did not agree then with the Obama administration’s main argument that the mandate penalty was valid under the Commerce Clause. Instead, the justices said that the mandate was a constitutional tax.

God only knows where that suit will end up—possibly back in the now-more-conservative Supreme Court in 2019.

Back to this week. After failing last year to help the marketplaces out amid the roiling political turmoil of the ACA repeal effort, Alexander and Collins are pushing a package that includes funding for cost-sharing reduction (CSR) payments (around $8 billion a year) for three years, $10 billion in annual reinsurance funding for three years, additional ACA Section 1332 waiver flexibility for the states, and expanded eligibility for catastrophic plans.

As Katie Keith reports at the Health Affairs blog,

a preliminary analysis from the CBO shows that the Alexander/Collins proposal would reduce premiums by 10 percent in 2019 and 20 percent in 2020 and 2021.

Confusion surrounding the CSR payments—which defray insurers’ costs for eliminating or reducing deductibles and co-pays for low-income enrollees—could also prove vexing.   Trump nixed the payments in the fall of 2018 and thought he was being all “look-what-I-can-do-to kill-the-ACA.”

Whoops.   The end result was insurers manipulated the system and consumers shifted metal levels and got LARGER subsidies. That cost the federal government MORE money because subsidies rose with higher premiums.

Thus, new CSR funding would benefit the federal government, by reducing spending. But some subsidized enrollees might pay high premiums in 2019 if the CSR payments are renewed.   Unsubsidized consumers would pay less for certain plans, however.

In contrast, there’s much broader support for reinsurance. It would lower premiums for everyone, all analysts agree. Reinsurance is a well-established insurance mechanism; the Medicare Part D program has one.   And the ACA marketplaces had reinsurance from 2014 through 2016.

But reviving reinsurance is no slam-dunk either. Far-right conservatives continue to cast ACA market stabilization proposals as “insurance company bailouts.” Senators Ted Cruz (R-TX), and Mike Lee (R-UT) and Representatives Mark Meadows (R-NC) and Jim Jordan (R-OH) lead that charge.

In a piece posted on the conservative National Interest web site, the Heritage Foundation’s Edmund Haislmaier and Robert Moffit say Congressional Republicans should focus “not on giving insurers more and bigger bailouts, but rather on giving their constituents more and better Obamacare opt-outs.”

So, the ACA wars continue.   We expected as much.   But it’s terribly destructive and hurts Americans, with the threat of even greater pain in 2019.

As with climate change, gun control, tax and trade policy, the Trump administration’s approach to health insurance is evidence-free, incoherent and anti-consumer. To borrow a phrase F. Scott Fitzgerald, the conservative’s approach would bear us back ceaselessly to the structure and (dys)function of the individual insurance market—with its crappy “junk” coverage—that existed before the ACA became law.

Democrats will need to dig in for the long fight, and this week push hard for a coherent ACA stabilization measure.

Steven Findlay is an independent health policy analyst and journalist.


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2 replies »

  1. AN UPDATE: For those of you not following the news….the ACA stabilization measure was NOT included in the federal budget bill that is headed for passage on Friday. The abortion provision was the main reason, as expected, but there were several other obstacles. Primarily political. What’s next? Unclear! This failure – and if there’s no federal action before July – guarantees substantial premium increases in the exchanges come open enrollment this fall, for 2019. Some states might be spurred to act….but the state legislation season is 1/2 or more over. I’ll write a follow up in the next few weeks with analysis of what could happen.

  2. The level of silence about all of this from within the leadership institutions of our nation’s healthcare is DEAFENING. From a posture of pursuing market-share dominance, their institutional social responsibility has been delegated to the chaos within the belt-way. Remember, the only workable strategy is to limit increases in health spending to less than economic growth within 5 years.
    Certainly, the Association of American Medical Colleges would have the best standing to form a temporary group for mobilizing the key stakeholders to fix it. Our nation’s medical schools will be required. The Paradigm Paralysis that is strangling our nation’s HEALTH is profound. How many mass shootings or community bombers will it take to finally get started?
    A MISSION TO THE MOON strategy will be required, revised and redirected for the HEALTH of each citizen. The HEALTH of each newborn and their mothers, the homeless and the disabled should be a priority. They await our nation’s resolve to improve the COMMON GOOD of each citizen’s community.

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