Trump and the Essential Health Benefits

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On Friday, HHS released a proposed rule that would make a number of adjustments to the rules governing insurance exchanges for 2019. The rule is long and detailed; there’s a lot to digest. Among the most noteworthy changes, however, are those relating to the essential health benefits. They’re significant, and I’m not convinced they’re legal.

By way of background, the ACA requires all health plans in the individual and small-group markets to cover a baseline roster of services, including services falling into ten broad categories (e.g., maternity care, prescription drugs, mental health services). Taken as a whole, the essential health benefits must be “equal to the scope of benefits provided under a typical employer plan, as determined by the Secretary.”

The ACA’s drafters anticipated that HHS would establish a national, uniform slate of essential health benefits. Instead, the Obama administration opted to allow the states to select a “benchmark plan” from among existing plans in the small group market (or from plans for state employees). The benefits covered under the benchmark were then considered “essential” within the state.

At the time, Helen Levy and I concluded that HHS’s approach brushed up against the limits of what the law allowed. We noted, among other things, that the ACA tells HHS to establish the essential health benefits—not the states. And it’s black-letter administrative law that an agency can’t subdelegate its powers to outside entities, states included.

At the end of the day, however, Helen and I concluded that the Obama-era regulation passed muster. Our rationale bears repeating:

Although a federal agency cannot delegate its powers to the states, it “may turn to an outside entity for advice and policy recommendations, provided the agency makes the final decisions itself.” Here, the secretary gave the states a constrained set of options (e.g., choose a benchmark plan from among the three largest small-group plans in the state) and retained the authority to select a benchmark for any state that either does not pick a benchmark or chooses an inappropriate one. As such, the secretary remains firmly in control. Nothing in the ACA prevents her from deferring to states that select benchmark plans from among the few options she has provided. That choice to defer is itself an exercise of her delegated powers.

The Trump administration’s proposed rule would vastly enlarge this Obama-era subdelegation. For starters, the rule would allow a state to adopt another state’s benchmark, or part of a state’s benchmark, as its own. Michigan, for example, could borrow Alabama’s benchmark plan wholesale, or it could incorporate Alabama’s benchmark for mental health and substance use disorder treatment. More significantly, the rule would allow a state to “selec[t] a set of benefits that would become the State’s EHB-benchmark plan.”

You read that right: if the rule is adopted, each state can pick whatever essential health benefits it likes. No longer will it be choosing from a preselected menu; it’ll be picking the essential benefits out of a hat. In so doing, the proposed rule looks like it would unlawfully cede to the states the power to establish the essential benefits.

This extraordinary subdelegation of regulatory authority is subject only to the loosest of constraints: benefits can’t be “unduly weighted” toward any one benefit category or another, and the benchmark must “[p]rovide benefits for diverse segments of the population, including women, children, persons with disabilities, and other groups.” The selected benefits also can’t be more generous than the state’s 2017 benchmark (or any of the plans the state could have selected as its benchmark), but that’s a ceiling, not a floor, so states have lots of room to pare back.

The only meaningful constraint is that the benefits covered by the state’s benchmark must be “equal to the scope of benefits provided under a typical employer plan.” But another portion of the proposed rule would hollow out that requirement:

[W]e propose to define a typical employer plan as an employer plan within a product (as these terms are defined in §144.103 of this subchapter) with substantial enrollment in the product of at least 5,000 enrollees sold in the small group or large group market, in one or more States, or a self-insured group health plan with substantial enrollment of at least 5,000 enrollees in one or more States.

In other words, HHS is saying it will treat as “typical” any employer plan, in any state, that covers more than 5,000 people.

This looks like an innocuous change. It’s not. If the rule is adopted, it means that a single outlier plan can now count as typical, even if it’s way stingier than any other plan in the market. It also makes me wonder if HHS already has in mind some large employer with an unusually narrow health plan—maybe some hospital-based “administrative services only” plan, as Dave Anderson speculates. If so, voilá, the states can all ratchet down their essential benefits to that plan’s level.

I don’t think that’s legal. To know if a slate of health benefits is typical, you have to know something about how many health plans cover those benefits and how many don’t. The proposed rule eschews that comparative inquiry, and instead defines typicality with reference to the number of people who are covered by a single plan. Some random self-insured plan that excludes appendectomies could be treated as typical, even if it’s the only plan in the nation that does so.

In other words, HHS wants to define a “typical employer plan” to include atypical plans—which the agency emphatically cannot do. Yes, plans that enroll 5,000+ people are less likely to be outliers than smaller ones. But in a country as big and complicated as ours, there are bound to be some idiosyncratic quirks even in large plans. Those quirks would all be considered typical under HHS’s rule.

This definitional change, combined with the choose-your-own-adventure option to devise a benchmark, means that states will have wide authority to water down the essential health benefits requirement. Whether that’s good or bad is hard to say. Requiring plans to cover lots of services assures comprehensive coverage, but it also raises the cost of insurance. Because there’s no single “best” way to strike the balance, I think there’s a lot to be said for giving states the freedom to choose for themselves.

Wise or not, however, I’m skeptical that the Trump administration’s effort to hollow out the rule governing essential health benefits is legal. If HHS presses ahead with the rule, it could face tough sledding in the courts.

CMS to allow states to define essential health benefits

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The CMS proposed a rule late Friday aimed at giving states more flexibility in stabilizing the Affordable Care Act exchanges and in interpreting the law’s essential health benefits as a way to lower the cost of individual and small group health plans.

In the 365-page proposed rule issued late Friday, the agency said the purpose is to give states more flexibility and reduce burdens on stakeholders in order to stabilize the individual and small-group insurance markets and improve healthcare affordability.

The CMS said the rule would give states greater flexibility in defining the ACA’s minimum essential benefits to increase affordability of coverage. States would play a larger role in the certification of qualified health plans offered on the federal insurance exchange. And they would have more leeway in setting medical loss ratios for individual-market plans.

“Consumers who have specific health needs may be impacted by the proposed policy,” the agency said. “In the individual and small group markets, depending on the selection made by the state in which the consumer lives, consumers with less comprehensive plans may no longer have coverage for certain services. In other states, again depending on state choices, consumers may gain coverage for some services.”

However, the CMS acknowledged it’s unclear how much money the new state flexibility will save. States are not required to make any changes under the policy.

The CMS urged states to consider the so-called spillover effects if they choose to pick their own benefits. These include increased use of other services, such as increased used of emergency services or increased use of public services provided by the state or other government entities.

The agency in 2017 proposed standardized health plan options as a way to simplify shopping for consumers on the federally run marketplaces. The CMS said it would eliminate standardized options for 2019 to maximize innovation. “We believe that encouraging innovation is especially important now, given the stresses faced by the individual market,” the proposed rule states.

The CMS proposes to let states relax the ACA requirement that at least 80% of premium revenue received by individual-market plans be spent on members’ medical care. It said states would be allowed to lower the 80% medical loss ratio standard if they demonstrate that a lower MLR could help stabilize their individual insurance market.

The CMS also said it intended to consider proposals in future rulemaking that would help cut prescription drug costs and promote drug price transparency.

The Trump administration hopes to relax the ACA’s requirements and provide as much state flexibility as possible through administrative action, following the collapse of congressional Republican efforts this year to make those changes legislatively.

The proposed rule comes after months of calls from health insurers and provider groups for the federal administration to help stabilize the struggling individual insurance market. The fifth ACA open enrollment is slated to begin Nov. 1, and experts have predicted fewer sign-ups in the wake of a series of actions by the Trump administration to undercut the exchanges.

In the proposed rule, the CMS also proposes to exempt student health insurance from rate reviews for policies beginning on or after Jan. 1, 2019. The CMS said student health insurance coverage is written and sold more like group coverage, which is already exempt from rate review, and said the change would reduce regulatory burden on states and insurance companies.

The ACA requires that insurers planning to increase premiums by 10% or more submit their rates to regulators for review. The CMS proposed to increase the rate review threshold to 15% “in recognition of significant rate increases in the past number of years.”

The rule also tweaks a requirement that enrollees need to have prior coverage before attempting to get coverage via special enrollment after moving to a new area. Under the proposal, a person who lived in an area with no exchange qualified health plans will be able to obtain coverage.

Trump tells Senate to fix taxes — not Obamacare

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The bipartisan effort to stabilize insurance markets gets pushed to the end of the year.

President Donald Trump on Tuesday steered Senate Republicans toward tax reform and away from health care, pushing off any deal to fund controversial Obamacare subsidies to the end of the year at best.

Trump joined Senate Republicans at their weekly policy lunch but gave no direction on what he wants to see in a health care bill. He praised Sen. Lamar Alexander’s (R-Tenn.) work on a bipartisan deal meant to stabilize the Obamacare markets, but his emphasis on taxes led senators in the room to believe Trump doesn’t want a stand-alone Obamacare vote anytime soon.

“There isn’t anything else other than taxes,” said Sen. John Cornyn (R-Texas).

A filibuster-proof majority backs the bipartisan deal Alexander brokered with Sen. Patty Murray (D-Wash.), but conservatives and the White House oppose it, meaning it won’t even come up for a vote in the Senate.

Without a clear directive from the president, Republicans are still debating whether to work with Democrats to fund Obamacare’s “cost-sharing” program, which helps low-income people pay their out-of-pocket medical bills. Trump abruptly cut off the subsidies — the subject of a court battle — earlier this month. Insurers still have to make the payments, and many boosted their premiums for 2018 to take those costs into account.

Alexander’s stabilization bid got even more muddled when a pair of top Republicans said they would release a different bill — rivaling the bipartisan proposal — to fund the subsidies. But their version would neuter the individual mandate for five years, a nonstarter for Democrats who would be needed to get a bill through the Senate.

The new version “proves that we should be focused on tax reform right now, because obviously we haven’t gotten our act together on health care,” said Sen. John Thune (R-S.D.).

Republicans are increasingly confident that the subsidies will get rolled into a large, year-end bill to fund the government and raise the nation’s debt limit. But there is no agreement on what exactly that will look like, and leadership-level negotiations on the year-end bill are weeks away.

The lack of clarity left Senate Republicans with enough wiggle room to interpret Trump’s Obamacare comments as they see politically fit.

Cornyn saw a “shoutout” by Trump to Alexander as encouragement for his bill. “He wasn’t specific, but that’s the way I interpreted it,” he said.

But Sen. Ted Cruz (R-Texas) — an Alexander-Murray skeptic — said Trump didn’t offer any clear support for the proposal over the GOP’s competing ideas.

“There was not significant discussion on Alexander-Murray,” Cruz said.

Sen. Orrin Hatch (R-Utah), another foe of Alexander-Murray, walked away with the same conclusion.

“He didn’t get into that in great depth — put it that way,” Hatch said. “All I can say is that he wasn’t too definitive.”

During the lunch meeting, Trump focused more on getting tax reform done so that the GOP can take another shot at repealing Obamacare in the future, instead of what should be done to stabilize the health care law in the interim.

“If we get taxes done, we’ll have momentum for health care,” said Sen. Lindsey Graham (R-S.C.), summing up Trump’s position. “He talked a lot about doing health care again.” Trump has repeatedly stated recently that the GOP now has the votes for repeal in the Senate — but senators say that’s not the case, that no one has flipped.

The meeting marked Trump’s first visit to the Senate GOP’s weekly policy lunch as president, and it came amid a rift with Sen. Bob Corker (R-Tenn.) and growing concern within the GOP that lawmakers will go into the 2018 midterm election without a legislative accomplishment. That’s amped up the pressure in the GOP to do tax reform.

But many Republican senators said after the lunch meeting that there was no discussion of petty politics and that Trump was focused on notching some GOP wins.

“It was the complete opposite of what I thought it would be — the atmosphere in the room and his complete focus,” said one senator.

The conservative Obamacare bill introduced Tuesday came from Hatch, the chairman of the Senate Finance Committee, and House Ways and Means Chairman Kevin Brady.

That bill, which would fund the cost-sharing program for two years, is designed to appeal to Republicans who want to fund the Obamacare program but feel that Alexander didn’t get enough conservative concessions in his negotiations with Murray.

It would eliminate Obamacare’s individual mandate penalties through 2021 and expand the use of health savings accounts. The Hatch-Brady bill would also exempt businesses from the employer mandate for 2015 through 2017 and apply certain “pro-life protections” to the cost-sharing funding.

“We must include meaningful structural reforms that provide Americans relief,” Hatch said. “This agreement addresses some of the most egregious aspects of Obamacare.”

Some of the provisions in the proposal — like the expansion of HSAs and employer mandate exemption — mirror the changes that the White House requested be made to the Alexander-Murray bill.

Alexander said he was encouraged by a growing consensus Congress should fund the payments to insurers for two more years.

“We’ve gone from a position where everybody was saying we can’t do cost sharing to responsible voices like Sen. Hatch and Chairman Brady saying we should,” he said.

But any cost-sharing bill will need 60 votes to get through the Senate, meaning Republicans will have to get at least eight Democrats to sign on. Undoing the mandates in the future would be a nonstarter for many Democrats.

“If it were just a matter of getting Republicans to agree with each other, we would have repealed and replaced Obamacare by now,” said a Senate GOP aide.

CBO: Alexander-Murray Bill Would Trim Deficit, Keep Americans Insured

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Is the Senate’s bipartisan compromise a workable fix or a ‘futile’ stopgap?

The bipartisan Alexander-Murray bill aimed at propping up the Affordable Care Act long enough for more substantial changes to be made is receiving a mixed response from lobbying groups and legislators, with some saying the bill only extends the life of a system that should be allowed to die.

Supporters say the bill would stabilize a volatile healthcare insurance market and preserve coverage for millions of Americans by continuing the cost sharing reduction (CSR) payments that health plans say are essential to helping them survive the ACA.

The Congressional Budget Office (CBO) and Joint Committee on Taxation (JCT) released an assessment Wednesday of the measure, finding that the deal would reduce the deficit by $3.8 billion over the next decade “without substantially changing the number of people with health insurance coverage, on net.” By contrast, earlier proposals to overhaul the ACA lost steam this year after CBO scores indicated that they would likely drive down the number of insured Americans by tens of millions.

“This nonpartisan analysis shows that our bill provides savings and ensures that funding two years of cost-sharing payments will benefit taxpayers and low-income Americans, not insurance companies,” Sen. Lamar Alexander (R-TN) and Sen. Patty Murray (D-WA) said Wednesday in a joint statement.

The CSR payments are intended to compensate insurers for providing coverage to lower-income consumers at below cost, and many say losing those payments will drive premiums higher and force some insurers to leave certain markets.

The compromise

Alexander and Murray developed the compromise bill in a bid to maintain the CSR subsidies that the Trump administration announced October 12 it would halt. The White House argues the CSRs were never authorized by Congress.

California is leading the charge in a legal challenge of President Trump’s stated intention to stop the payments, and the American Hospital Association, along with several other groups representing hospitals and other healthcare organizations, has filed a brief in support of the CSRs. But a federal judge in California sided Wednesday with the White House, ruling that the government doesn’t have to continue making the payments while states challenge the move in court, Reuters reported.

A bipartisan coalition of 24 senators—12 Republicans and 12 Democrats—have signed on to the healthcare legislation as cosponsors. Preserving the CSRs was a major priority of the Democrats, who compromised by agreeing to the Republican push to allow states to seek waivers of ACA requirements in their own states.

Ending the subsidies is expected to result in healthcare plans raising premiums even higher than otherwise planned. But the Alexander-Murray bill would authorize the CSR payments for two years and tie them to the changes in the ACA that give states more flexibility to seek waivers from the law’s requirements.

The proposed legislation also would allow insurance companies to sell less comprehensive plans to all consumers. Republican leaders say the allowance would make more affordable plans available, which, in turn, would encourage more people to buy coverage and help the insurers remain profitable.

“This is a first step: Improve it, and pass it sooner rather than later. Our purpose is to stabilize and then lower the cost of premiums in the individual insurance market for the year 2018 and 2019,” Alexander said.

Bill opposition

The Association of American Physicians and Surgeons (AAPS) opposes the bill, saying it seeks to stabilize the insurance marketplace by forcing taxpayers to pay insurers to lower out-of-pocket costs for certain plan members.

Jane M. Orient, MD, executive director of AAPS, says the ACA actually makes insurance unaffordable.

“The deceitfully named Affordable Care Act did not just destabilize the individual insurance market; it destroyed it by outlawing genuine, voluntary insurance,” Orient says. “ACA-compliant plans are not true insurance, but coercive prepayment schemes for a federally dictated package that might be rejected by most subscribers.”

Orient says the bill being considered should be seen as an inappropriate form of legislative life support.

“Resuscitating Obamacare with Alexander-Murray would only prolong its dying process, but at great expense,” Orient says.

“Instead of running a futile Code Blue on Obamacare, we should be attending to American medicine and the American economy,” she adds.

Bill ‘provides critical stability’

American College of Emergency Physicians (ACEP) President Becky Parker, MD, FACEP, disagrees.

She says ACEP supports the Alexander-Murray legislation because it will provide critical stability for the individual health insurance marketplace, ensuring that millions of Americans have continued access to the health coverage they need and deserve.

“This legislation is a good-faith bipartisan effort that will help limit increases in health insurance premiums and preserve important consumer protections, such as the Essential Health Benefits package that includes emergency services, while also providing additional flexibility for states to implement innovative approaches to coverage,” Parker says.

The President’s Executive Order: Less Than Meets The Eye?

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The executive order (EO) signed by President Donald Trump on October 12 directs the Departments of Health and Human Services (HHS), Labor, and Treasury to develop federal regulations that could allow new and less expensive health insurance options for employers and consumers.

The EO marks a shift in the administration’s strategy on health care. After failing to get legislation through Congress to repeal and replace the Affordable Care Act (ACA), the administration is now attempting to move away from the ACA’s heavily-regulated markets through changes that can be implemented without a change in the law.

The executive order does not itself change any federal regulations. Instead, it sets into motion a policy development process that could lead to new regulations or regulatory guidance within the confines of current law. Although the EO gives general policy direction, the specific content of future regulations depends on legal and technical analysis to be conducted by the agencies.

The policy themes are familiar: expand access to lower-cost insurance outside of the ACA’s exchange mechanism and enhance the use of financing vehicles to help workers pay for their care. The extent of possible changes is limited. For example, the EO seeks to allow the sale of insurance across state lines, but relies on potentially expanding the ability of employers to form Association Health Plans (AHPs) under the Employee Retirement Income Security Act (ERISA). Individuals purchasing their own insurance would continue to be subject to federal and state insurance market rules.

An Uncertain And Potentially Lengthy Timeline

The timeline for producing rule changes is uncertain. The EO gives the agencies 60 days to “consider proposing regulations or revising guidance” without specifying the date when a proposed rule would be released. It typically takes months, and sometimes years, to put a new federal regulation into effect.

The Administrative Procedures Act specifies that agencies must follow an open public process when they issue regulations. Following an often-lengthy internal clearance process, a proposed rule is issued that invites public comments. The final rule taking those comments into consideration must be developed and cleared before publication. Less time is required if an agency determines that it can issue an interim final rule without first publishing a proposed rule. Interim final rules generally take effect immediately.

Even if the federal agencies move expeditiously, it is unlikely that new regulations could affect the marketplace for health insurance in 2018. ACA exchange plans have been finalized in time for this year’s open enrollment period, starting November 1. Most employers will have signed contracts for their insurance plans for next year well before the end of 2017 as well. Most Americans will be required to select next year’s coverage before the end of this year. Realistically, any new rules are likely to be effective starting in 2019 or later.

Major Policy Areas

The EO targets three policy areas for change.

Association Health Plans (AHPs)

Republicans have long supported the use of AHPs to give small employers some of the advantages that large employers have in purchasing insurance for their workers. AHPs potentially could allow small firms to operate as one large employer plan, giving them scale economies and greater market power than they have purchasing insurance as separate companies. In addition, AHPs could be exempted from some of the ACA’s requirements (including essential health benefits and community-rated premiums). However, as the law is now interpreted, AHPs are subject to the same state and federal regulations that apply to the small group and individual insurance markets, largely eliminating their usefulness.

The EO directs the Labor Department, which oversees the regulation of employer plans, to look for ways to make it easier for small businesses to join AHPs. The existing rules for multi-employer insurance plans are complex, but it may be possible that ERISA could be reinterpreted to make AHPs more effective and attractive than they are today. The EO raises the possibility that AHPs could be formed among employers operating in the same geographic area or industry. Details may not be available for some time.

Whatever changes are pursued will be heavily scrutinized and likely challenged in court. Insurers selling in ACA-regulated markets might oppose the new regulations if they expect AHPs to attract healthier individuals from more comprehensive (and more expensive) exchange plans.

It is not clear that AHPs would be a better option for small employers than they have today. Forming larger groups can help spread insurance risk and administrative costs. Larger plans can also use their leverage to push better managed care protocols into their insurance plans, and thus cut costs. However, the voluntary nature of AHPs could result in plans competing for healthier groups of workers rather than investing the resources necessary to make health care more efficient and effective.

Small employers may have the option of joining more than one AHP or staying in the regulated market. Competing AHPs might structure their coverage to attract firms with younger, healthier workers. The press statement accompanying the EO states that employers would not be allowed to discriminate among workers based on their health status. But small employers would not be forced to join AHPs, and the rules for joining might be written in ways that implicitly and subtly target firms with healthier workers.

AHPs could add value to the health system if they moved people out of expensive, unmanaged fee-for-service insurance with high administrative costs into better-run managed care plans that cut expenses through economies of scale and elimination of unnecessary use of services. The Trump administration might find a way within current law to make these kinds of AHPs available without shifting higher premiums onto less healthy workers. But the history of AHPs and related types of organizations is not promising. Many previous multi-employer plans have suffered from undercapitalization, and have gone insolvent. It will not be easy to secure the necessary capital to build a viable AHP in a market in which small employers may have several insurance options.

Short-Term, Limited Duration Insurance (STLDI)

Short-term health insurance policies offer coverage to individuals who are unable to obtain other forms of health insurance but want to be protected for a specific period of time. STDLI plans are not subject to the ACA’s insurance rules. They do not have to cover the ACA’s essential health benefits, they do not cover pre-existing conditions, and they are not required to cover people in poor health. One study found that STDLI plans are one-third the price of exchange plans. These plans have generally been viewed as niche products, sold primarily to people who are between jobs.

The EO calls on HHS, Labor, and Treasury to reverse decisions of the Obama administration that restricted the availability of STLDI plans. A regulation issued on October 31, 2016 limits their duration to no more than three months, and the plans are not renewable. Moreover, enrollment in an STLDI plan does not constitute coverage under the ACA’s individual mandate. It seems likely that the agencies have the authority under current law to allow STLDI plans to cover an individual for up to one year and to be renewable.

STLDI plans are clearly not for everyone but could prove attractive to some customers. Low-cost coverage should be made available to individuals who change jobs and those who are unable to buy exchange coverage after the open season has ended. Consumers enrolled in STLDI plans who develop a serious medical condition would probably not be able to renew their coverage but would have access to higher-premium plans offered on the ACA-regulated marketplace.

An open question is whether the Trump administration will also attempt to exempt STLDI enrollees from the individual mandate’s tax penalties. That would make short-term plans more attractive for healthy people and thus exacerbate the adverse selection that is already driving up premiums for ACA-compliant plans.

Health Reimbursement Arrangements (HRAs)

HRAs allow employers to reimburse workers for their families’ medical expenses, including deductibles and other cost-sharing payments and health items not covered by insurance. Unlike health savings accounts, workers do not contribute to HRAs. Payments made by an employer through an HRA are not treated as taxable income for the worker. The Obama administration required HRAs to be used solely in conjunction with ACA-compliant health plans.

The EO directs the agencies to propose ways to expand the availability and use of HRAs. The EO specifically states an intention to allow HRAs to be used for workers purchasing their own non-group coverage. The administration may be planning to allow HRA funds to be used to pay premiums and cost-sharing in the individual insurance market, including plans that are not ACA-compliant. Those plans might include AHP plans and STDLI, depending on other regulatory changes that might result from the EO.

For some small employers, an expanded role for HRAs may be an attractive way to help pay insurance premiums for their workers without sponsoring an insurance plan themselves. But it is far from clear how much authority there is under current law to make this kind of change. Moreover, even if the administration were able to create a larger role for HRAs, workers in small firms may not be eager to get their insurance through the ACA exchanges instead of through their place of work.

Premature Predictions

Several commentators have said that the Trump administration’s EO would result in risk segmentation that would drive up premiums and could eventually lead to dismantling the ACA exchanges. That prediction seems premature. AHPs as they exist today do not pose a threat to the ACA. It remains to be seen if the administration can make room for a viable AHP option, and whether or not that option will adversely affect the ACA exchanges. The STLDI plans are a niche market today. While it is possible their role could expand, their value is limited and attractive to only a small segment of the market. The administration’s vision for HRAs is not clear enough to predict how any changes would affect the existing ACA markets.

Each of the changes contemplated by the Trump EO would take time to put into effect. Once the rules are changed, the private sector would need to make investments to change their business practices. It is doubtful there would be a rapid transition.

Millions of consumers are enrolled in ACA-compliant plans today. The ACA exchanges face an elevated level of adverse selection. But those markets remain the only real game in town primarily because the ACA’s generous premium subsidies are only available through the exchanges. The President’s EO cannot change this reality. Whatever is done in response to the EO is likely to have a less dramatic effect on the market than some in the administration now hope, and others now fear.


ACA Alterations Will Jolt Health Exchanges for 2018

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The end of cost sharing reductions has insurers trying to raise premiums even higher than planned. Those high premiums and other changes to the Affordable Care Act may drive consumers away from the exchanges.

The loss of cost sharing reductions (CSR) and the presidential executive order altering the Affordable Care Act will combine to significantly shake up the insurance market for 2018, one analyst says.

The effect is likely to include raising rates so high that the number of healthcare consumers who do not purchase coverage will skyrocket.

Health plans are scrambling to raise their rates even higher than already planned, responding to President Donald Trump’s announcement that insurers will no longer receive the subsidies.

Insurers were forced to submit rates for next year while the fate of CSRs was still uncertain—one set of rates is for if the subsidies continued and the second is for a higher rate to be used if they did not.

Some insurers are asking for a chance to revise the rates already submitted, says Julius W. Hobson Jr., an attorney and healthcare analyst with the Polsinelli law firm in Washington, D.C.

The CSR termination comes right after President Trump issued a new executive order he says is designed to increase competition and choice. Critics say it would seriously weaken the ACA, and some say that’s intentional.

President Trump says the order will give millions of Americans more access to affordable coverage and make it easier for people to obtain large-group coverage. Others worry that it could lure healthy young Americans away from the ACA exchanges, leaving those who remain to pay higher premiums.

“The combination of the executive order and the CSR termination wreaks havoc on the health insurance market for all of 2018,” Hobson says. “This also comes just before the open enrollment and with cutting back money for the patient navigators who help people sign up, and with reduced access to the website. That all means there are going to be fewer people who sign up.”

Higher premiums and deductibles already were driving some consumers away from purchasing individual healthcare plans, Hobson notes, and more will follow when the CSR loss forces insurers to raise rates even higher.

If the Trump administration stops enforcing the individual mandate, as it has said it might, that would make even more consumers forgo coverage, he says.

Fewer consumers buying insurance on the ACA exchanges intensifies their existing problems, Hobson says.

Premiums and deductibles will continue to rise as insurers struggle to remain profitable with a smaller pool of older, sicker patients driving high utilization costs. More and more consumers will leave the exchanges if they can, he says.

“People are going to be looking at premium increases they just can’t afford,” Hobson says. “The individual market will take a big hit, but the impact on the group market is harder to predict. We don’t know yet whether the increases in the individual market will bleed over into the group market.”

The recent changes are intended to weaken the ACA, Hobson says.

“The administration has said the ACA is imploding, but also that they’re going to do everything they can to wreck it. It’s not imploding on its own, it’s being shoved down the trash chute,” Hobson says.

“Losing the CSR payments is critical and, at this point, it’s unlikely that even if Congress acted they could do anything in time to affect 2018. There’s no way of looking at this other than it having a negative outcome,” he says.

No rush to stabilize ACA markets


President Trump’s decision to cut off the Affordable Care Act’s cost-sharing reduction subsidies doesn’t seem to have added much new urgency to the push to stabilize states’ insurance markets — which would likely include a guarantee to keep the subsidy payments flowing.

  • Bad sign: GOP Senate leadership didn’t talk about the CSR issue at all last night in their weekly meeting, at least while staff was in the room, a senior aide told Axios’ Caitlin Owens. To them, it’s still all about tax reform.
  • “They’re focused on tax reform,” Alexander, who’s been spearheading the stabilization effort, said of GOP leaders. “What I’ve asked the Republican leadership to do is to give us a chance to see if we can develop consensus among Republicans as well as Democrats.”
  • “The sooner the better,” Alexander said. “We want whatever agreement we have to benefit people in 2018 by holding down increasing premiums and to lower them in 2019.”

Yes, but: Affecting 2018 premiums will be a tough task — the window to begin signing up for 2018 coverage begins in two weeks.

  • Pennsylvania regulators announced yesterday that they’ve approved new premium hikes, more than 20% higher than the increases that were already on the books, because of the loss of CSR subsidies.
  • If Congress reaches a deal in time, one senior GOP aide told Caitlin, states and insurers could look to options such as rate re-filings and rebates to help consumers next year.
  • But the Kaiser Family Foundation’s Larry Levitt said turbulence for 2018 will likely be minimal. Most insurers had already planned for the payments to end, and therefore don’t need to make any changes.
  • The Trump administration appears to be allowing new increases by insurers that didn’t plan for CSR payments to disappear, Levitt said.
  • “Terminating the CSR payments is producing a lot of confusion, but the market will operate reasonably fine and the effect on consumers will be modest,” Levitt said. “If this was intended to end Obamacare, it’s probably not going to work. The real question at this point is the longer term effect of the administration’s overall strategy to undermine the marketplaces.”
One more problem: Even if a deal is struck, and it could muster 60 votes in the Senate, there’s a very real question of how it passes. Voting on the bill by itself, without being part of a larger package, would be difficult for Republicans. Most legislation that needs to get passed before the end of the year is expected to be clumped into one big bill in early December.