Senators Mike Lee and Jerry Moran said yesterday that they would not vote for the Better Care Reconciliation Act, effectively killing the legislation. As anybody who has been following this story would have predicted, President Trump reacted publicly on Twitter on Tuesday morning, vowing to let the ACA marketplace collapse and then rewrite the plan later.
Senate Majority leader Mitch McConnell attempted a quick punt this morning, calling for an immediate Senate vote on the House bill, a trick card that if it worked, would give Republicans two years to work things out.
The White House sees the failure as saying more about the political establishment in Washington than itself, which shouldn’t be all that surprising. Caught up in the drama of the Watergate-Russia emails-Trump family narrative, major media outlets like the Washington Post and the New York Times see a historic defeat rather than a temporary setback. That may or may not turn out to be true. Predictably, conservative commentators and the alt-right believe the defeat says more about the mainstream media and the Deep State than it does about the Trump Presidency. For their part, Democrats clearly think they have found their issue and can be expected to continue to exploit it using legislative Viet Cong tactics (attack on social media, melt into the jungle, lob snarky public Molotov cocktails) to punish Republicans and keep the story on the front page.
One thing is clear. Instead of repealing and replacing Obamacare, the GOP now has to rewrite and replace its own plan. Doing that would be difficult under the best of circumstances, but in the current climate in Washington it is difficult to see how it would be possible without a major shift in the political landscape.
All of this is bad news for hospitals and health plans and a frightening development for consumers, although not the really bad news some had feared. The President’s threat to let the insurance marketplace die and then “figure it out” sounds good as a rallying cry to the troops on social media, but is not the kind of thing that investors and CEOs like to hear. Realistically though, at this point everybody knew that the uncertainty would likely continue through the year (best case) or a year or longer (worst case) as the gridlock in Washington plays out. As depressing and frustrating as it is that the uncertainty will continue, by this point the industry is used to it. Insiders will continue to look for ways to minimize risk and for business opportunities to capitalize on the uncertainty.
Trump’s plan to allow the insurance exchanges to collapse is the kind of confrontational talk Trump and his advisors relish. In theory, the idea could work. There are in fact signs that it already is, as major insurers leave the marketplace and consumers hesitate before committing to expensive insurance policies. In reality, however, the collapsing exchanges will create a political crisis that is even worse than the current one for the administration, with news cycle after news cycle dominated by stories of terminally ill cancer patients and parents with children with horrible diseases and no insurance coverage. At this point, it will be difficult for the party doing the collapsing to point at the other side and say “It was them. They did it!”
ACA permits people to sign up even if they are already sick. Real insurance cannot work that way.
Imagine an Accountable Fire Insurance Act that required insurers to sell you fire insurance after your home had burned. Homeowner insurance rates would skyrocket. Anyone who carefully read the ACA would see that coming.
The big insurers knew this would happen but played along in the beginning to avoid attracting political fire.
Last week, the Supreme Court heard arguments in the most recent and pernicious attack on the Affordable Care Act – aka Obamacare. In the absence of a dysfunctional Congress, the case would be beneath the dignity of Court: it addresses no complicated legal issues that might guide future decisions of lower courts. Instead, the Supreme Court has been asked to decide whether a drafting error resulting in one unfortunate phrase in the much maligned 2000 page law –“Exchange established by the States” — means that more than 6.3 million citizens would not be eligible for federalsubsidies allowing them to afford commercial (i.e. – non-governmental) health insurance.
Ordinarily, Congress is expected to fix such drafting problems itself. Each year Congress pass dozens of “Technical Corrections” bills to fix such errors in prior legislation. These bills are akin to software patches that are regularly released by companies to fix unanticipated “bugs” previously release programs. But this is no ordinary legislation. Having spent six years vilifying for President Obama and has supporters for passing legislation that improves American lives it is far too late in the day for the Republican Congress to replace demagoguery with common sense.
So this issue is now in the lap of the Supreme Court, with its well-known partisan divide of four liberals, four arch-conservatives, and Justice Kennedy, who as the “swing vote” effectively decides many of the most divisive cases himself. The Court can decide to gloss over this drafting error, as proposed by the Obama Administration, or apply its language to devastating effect. Prior Supreme Court cases—i.e. “precedent” in the jargon of the law—can be found to support either position. In the end, there have been few cases in which the Court has more judicial freedom – assuming precedent ever really binds the Court – to do whatever it wants in keeping with the Justices own political biases.Continue reading…
By now, every reader of THCB must be aware the Supreme Court is hearing arguments this week in a case that could undermine much of Obamacare. Simplifying somewhat, the plaintiffs in King versus Burwell argue that the phrase “exchange established by the state” in the Affordable Care Act’s section 1311 dealing with tax subsidies precludes making such subsidies available to those who enroll through the federal exchange(s). The government argues (a) that other sections of the law make it apparent that all exchange enrollees are potentially eligible for subsidies, and (b) that language in section 1321 providing that HHS shall “establish and operate such exchange within the state,” where a state is unable or unwilling to create their own exchange, essentially establishes a state exchange.
As many media articles have commented, the implications of a SCOTUS ruling for the plaintiffs are huge. Some five to eight million enrollees in the 34 federal exchange states would lose their subsidies, making insurance unaffordable for many of them, and premiums in these states would skyrocket—all while leaving the existing tax fines for being uninsured in place.
House Energy and Commerce Chairman Fred Upton along with Senate Finance Chairman Orin Hatch and Senator Richard Burr have outlined what is, at least for now, the Republican alternative to Obamacare.
Republicans will now argue they have a better health insurance reform plan and that Obamacare should be repealed and replaced by it––particularly if the Supreme Court plunges the new health law into chaos by throwing the subsidies out in 37 states.
They will have an uphill battle. Not because these Republicans don’t have a lot of good ideas, but because they have put a list of big and complicated changes on the table. Lots of people may not like Obamacare but Republicans have now really muddied the waters with a huge take it or leave it alternative that will have plenty of its own reasons to give voters pause. Continue reading…
States in more than half the nation have reported individual market premium rate requests for 2015, making this an opportune time to assess how the second year of the ACA’s new marketplaces is shaping up.
With rate filings in for 27 states plus the District of Columbia, the early word on 2015 appears to be expansion. At least 15 of the 28 jurisdictions in 2015 will offer new individual plans this year. Thirty-seven of the 176 health plan filings are new, according to analysis by PwC’s Health Research Institute (HRI).
Major national insurers such as UnitedHealth Group, as well as newbie Consumer Operated and Oriented Plans (Co-Ops), plan to add both products and states when exchange open enrollment begins in the fall. In Virginia, five new plan bids have been submitted to the state; Washington, Arkansas and Tennessee show three new plans each.
UnitedHealth’s CEO Stephen J. Helmsley estimates that UnitedHealth will sell on public exchanges in about two dozen states. In short, the ACA’s subsidized exchange markets represent growth opportunities for the health sector.
At the same time at least three non-profit health Co-Ops will move into additional markets. As of late April, Co-Ops operating in 23 states had 400,000 members, according to the National Alliance of State Health Co-Ops. Not every Co-Op drew big numbers, especially those in states such as Maryland, where the online marketplace never really got off the ground. And it’s far too early to say how many new entrants will be left standing as plans are forced to pay back $2 billion in federal loans over the next several years.
Today’s 2-1 decision by the DC Court of Appeals striking down federal premium subsidies, in at least the 27 states that opted for the feds to run their Obamacare insurance exchanges, has the potential to strike a devastating blow to the new health law.The law says that individuals can get subsidies to buy health insurance in the states that set up insurance exchanges. That appears to exclude the states that do not set up exchanges––at least the 27 states that completely opted out of Obamacare. Another nine states set up partnership exchanges with the feds and the impact on those states is not clear.The response by supporters of the law, and the IRS regulation that has enabled subsidies to be paid in the states not setting up exchanges, hinges on the argument that the language is at worst ambiguous and the Congress never intended to withhold the subsidies in the federal exchange states.
But in the DC Court ruling one of the majority judges said, “The fact is that the legislative record provides little indication one way or the other of the Congressional intent, but the statutory text does. Section 36B plainly makes subsidies only available only on Exchanges established by states.”
My own observation, having closely watched the original Obamacare Congressional debate, is that this issue never came up because about everybody believed about all of the states would establish their own exchange. I think it is fair to say about everyone also believed a few states would not establish their own exchanges. Smaller states, for example, might opt out because they just didn’t have the scale needed to make the program work. I don’t recall a single member of Congress, Republican or Democrat, who believed that if this happened those states would lose their subsidies.
In January 2013, LIMRA reported that 90% of industry executives it had surveyed believe that insurance companies will continue to form strategic alliances with “non-traditional organizations” to expand distribution. The example cited was MetLife’s trial alliance with 200 Wal-Mart stores. Then Accenture’s “Customer-Driven Innovation Survey” found that more than two-thirds of customers would consider purchasing home, auto and life insurance from businesses other than insurers—23% were open to purchasing from online service providers like Amazon or Google (which acquired auto insurance aggregator BeatThatQuote.com way back in 2011 in the UK).
Amazon has proven leadership as an e-commerce distributor, while Google is seen primarily as an information organization, so I would like to elaborate exclusively on the compelling reasons for insurers and Amazon to create a distribution model to match ever-evolving customer demands.
Every information source and every analyst report on insurance in the recent past points to changes in customer’s preferences. Generation X, Generation Y and Millennials prefer doing business with companies that provide:
Convenience of on-demand buying and self-service, predominantly through digital channels such as web and mobile.
Personalization of product and service delivery, including helping the customer choose the right product.
Building trust through transparency in pricing, simplified products and clear articulation of benefits.
So, insurers must innovate in personalizing products, providing transparency in the value of products and services and demonstrating excellence in on-demand distribution. Innovation must also touch “moments of truth” such as claims and policy changes. It is also critical that the distribution lifecycle should be an iterative process to consistently review the value of benefits and help customers fine tune the products and services they purchase.
Now that consumers can generally make an efficient health insurance purchase at HealthCare.gov and most of the state-run exchanges, we can finally get to the real question.
Are the healthy uninsured going to buy it?
The big health insurance changes Obamacare made to the individual and small group market were arguably done in order to get everyone, sick and healthy, covered in a more equitable system.
To be clear, no one I know of wants to go back to the prior health insurance market that excluded people from being covered because of pre-existing conditions.
But what if most of the uninsured literally don’t buy Obamacare?
Then people will question whether or not all of this change was worth it: Why did those who were in the old individual and small group market have to accept all of the expensive changes, narrower networks, higher deductibles, and fewer choices if the uninsured largely don’t want it?
Are we moving away from a system where only the healthy could buy health insurance to a system where only the sick want to buy it?
The Obama administration released critical data last week on the aggregate levels of enrollment in the various individual Exchanges. Most of the journalistic and blogospheric effort in the aftermath has been in trending: do these numbers portend a massive leap forward in Exchange enrollment such that there can be some confidence that the Affordable Care Act will in fact work?
Might this alternatively be some sort of temporary surge that is both too little and too late? All of this analysis is completely fine; I’ve engaged in it myself. But there are other issues that should be examined.
Here are five questions, mostly about data, I’d like to see other journalists or bloggers start to pursue. I’m doing some of it myself, but I would love company.
1. What is the distribution of enrollment among the various metal tiers?
If a lot of people are purchasing the gold and platinum plans, that is a sign that the people signing up have poor health and do not want to pay higher deductibles. This is particularly true if the same pattern exists among the enrollees receiving income-based subsidies: they, after all, are mostly purchasing gold and platinum because they need it, not because it easily accommodates their budget. If, on the other hand, the distribution is weighted towards the bronze and silver plans, that is some evidence that the people signing up may not be coming as disproportionately from the low or middle expense range.
Unless one’s funds are very limited, it does not make sense for someone who knows they will have high medical expenses to purchase a bronze plan. Disproportionate purchase of gold and platinum policies heightens the potential for adverse selection problems to the extent insurers believed the federal government’s models, which assumed only mild “induced demand” for such policies.
Journalists should also continue pressing at the state and federal level for information on age distribution of enrollees; I can see no legitimate reason to withhold it.