A new multi-state lawsuit has been announced to stop President Trump from halting key ObamaCare payments to insurers.
Eighteen states and Washington, D.C., signed onto the lawsuit filed Friday in federal court in California, according to Sarah Lovenheim, a spokeswoman for California Attorney General Xavier Becerra (D).
On Thursday night, Trump announced he would stop making the payments, which led to an outcry from critics saying he was sabotaging the health-care law.
The complaint will seek a temporary restraining order, preliminary injunction and permanent injunction requiring the cost-sharing reduction payments be made.
The administration, on a monthly basis, had been funding cost-sharing reduction subsidies, which compensate insurers for lowering the out-of-pocket costs of certain ObamaCare enrollees.
Trump has repeatedly signaled he might cut them off, while insurers have been pleading for long-term certainty that they would continue.
“Without the Affordable Care Act [ACA] and its subsidies for these families, millions more would be left in the cold without coverage. California isn’t about to turn its back on hardworking families who are fighting to hold onto their ACA health insurance. We’ve taken the Trump administration to court before and won, and we’re ready to do it again if necessary,” Becerra said in a statement Thursday night, before the lawsuit was officially announced.
Additionally, New York Attorney General Eric Schneiderman (D) said he anticipates proceeding with litigation on a case that’s currently been on hold.
The House sued the Obama administration, arguing the White House was illegally funding cost-sharing reduction subsidies payments to insurers.
Earlier this summer, the U.S. Court of Appeals for the District of Columbia Circuit ruled that a coalition of attorneys general — including Schneiderman and Becerra — can defend the payments.
“The fast track for initial relief will be in the case we’re filing in California,” Schneiderman said, referring to the new lawsuit.
The Trump administration announced late Thursday that it would stop paying subsidies to insurers that help cover the cost for about 6 million low-income customers on the Obamacare exchanges. The Department of Health and Human Services said that the cost sharing reduction (CSR) payments “will be discontinued immediately.”
Although eliminating the payments will save several billion dollars in the short run – the payments cost roughly $7 billion in 2017 and were set to rise to $10 billion in 2018 – the federal government will end up spending more on Obamacare subsidies due to the higher cost of health insurance. A CBO analysis from August found that terminating the payments “would increase the federal deficit, on net, by $194 billion from 2017 through 2026.”
Here’s what the controversial decision means:
Trump is clearly looking to destroy Obamacare: Combined with Trump’s executive order Thursday undercutting Affordable Care Act markets, this move represents taking a sledgehammer or a chainsaw to Obama’s signature law. “President Trump left little doubt yesterday that he intends to do as much damage as he can to the Affordable Care Act’s insurance markets,” Axios’s Sam Baker writes. “And he can do a lot.”
Many Americans, and insurers, will be hurt: Insurers have locked in their rates for 2018, but some may try to secure increases or decide to pull out of some markets. “This action will make it harder for patients to access the care they need. Costs will go up and choices will be restricted,” the Blue Cross Blue Shield Association and the health insurance trade association said in a joint statement. If premiums do jump as expected, low-income enrollees who get federal subsidies to cover the cost of their plans won’t feel the pinch, but millions of Americans who earn too much to qualify for the subsidies will face sharply higher costs.
It’s hard to find any winners here: “Trump’s new policy will increase premiums by 20%, cost the government $194 billion, increase the deficit, destabilize insurance markets, and increase the number of uninsured Americans,” Vox’s Ezra Klein tweeted. “There is nothing it makes better; it’s pure policy nihilism.”
Though some call it a win for the Constitution: The administration justified its move by citing a Justice Department decision that the payments were illegal without Congressional appropriation, a question at the heart of a lawsuit by House Republicans. “Today’s decision … preserves a monumental affirmation of Congress’s authority and the separation of powers,” the House Speaker Paul Ryan said in a statement late Thursday.
Not every Republican is pleased: “Cutting health care subsidies will mean more uninsured in my district. @potus promised more access, affordable coverage. This does opposite.” – Rep. Ileana Ros-Lehtinen (R-FL) tweeted. And Nevada Gov. Brian Sandoval said, “It’s going to hurt people. It’s going to hurt kids. It’s going to hurt families. It’s going to hurt individuals. It’s going to hurt people with mental health issues. It’s going to hurt veterans. It’s going to hurt everybody.”
And Democrats want to make sure Trump owns health care now – and “will pay the price for it”: “Sadly, instead of working to lower health costs for Americans, it seems President Trump will single-handedly hike Americans’ health premiums. It is a spiteful act of vast, pointless sabotage leveled at working families and the middle class in every corner of America,” House Minority Leader Nancy Pelosi (D-CA) and Senate Minority Leader Chuck Schumer (D-NY) said in a joint statement. “Now, millions of hard-working American families will suffer just because President Trump wants them to.”
Lawsuits are already in the works: “A coalition of U.S. states lined up on Friday to sue” to prevent the subsidy cuts, Reuters reports. Democratic attorneys general in New York and California are joining with other states, including Kentucky, Massachusetts and Connecticut, to file suit in federal court in California. Insurers, who are required by Obamacare to reduce out-of-pocket costs for low-income enrollees, could also sue to get the compensation the law promises in return.
The pressure will be on Congress to step in: “President Trump is once again the bull in the china shop, telling Congress, ‘I broke it, you buy it,’” ABC News says. Congress can have the subsidies resume by appropriating money for them, and Sens. Lamar Alexander (R-TN) and Patty Murray (D-WA) are negotiating an Obamacare fix that would include that, but they reportedly still have a long way to go to reach an agreement.
And Trump may still be open to a deal: “I will say the Democrats should come to me, I would even go to them,” Trump said Friday. “I’m only interested in one thing: getting great health care for this country.” But Mick Mulvaney, director of the White House Office of Management and Budget, said Friday that Trump would oppose a compromise along the lines of the one being negotiated. The question then is what else Trump might want in return.
Two new decisions would lead to higher health costs for older and sicker Americans.
A new executive order and a subsequent announcement on health care subsidies will shake up the insurance market.
President Trump has delivered a one-two punch to the Affordable Care Act (ACA). Late Thursday he announced the elimination of the subsidy payments to insurers that help lower-income Americans afford health care. That move came just hours after he signed an executive order that he says will promote more competition in the health insurance market.
The payments to insurers help fund subsidies that assist lower-income Americans in paying for deductibles, copays and other out-of-pocket health care expenses. The president had been threatening to cut off the subsidy payments for months.
The nonpartisan Congressional Budget Office had earlier estimated that if subsidy payments were withheld, premiums for individuals who buy the most popular health plans on the ACA health insurance marketplace would soar by 20 percent next year and 25 percent by 2020.
The president’s moves come just two weeks before the start of marketplace open enrollment. Insurers had threatened to abandon the marketplace if the subsidies were cut off. Some states have already signaled plans to challenge that action in court.
Congress has tried repeatedly over the past few months to repeal and replace the ACA. Thursday’s announcements are part of the president’s latest strategy to continue those attempts in the absence of congressional action. AARP has strongly opposed any repeal of the health care law.
The executive order directs the secretary of labor to consider expanding the ability of small businesses to form so-called association health plans. These plans may be able to avoid many state and federal insurance regulations. They could, for example, be exempt from the ACA rules that protect older Americans and people with preexisting health conditions from being charged far higher premiums as well as the ACA requirement to provide essential health benefits — such as emergency room care and mental health services.
The impact of these changes would potentially sting millions of older and sicker Americans. That’s because the new insurance options would likely attract low-risk individuals — who are generally healthier — leaving older, sicker people in the current individual market. Since those plans would be so heavily weighted with sick people, policyholders would pay significantly higher premiums.
“The order aims to create loosely regulated insurance plans that could provide skimpier benefits and cheaper premiums to young and healthy people, but that would make coverage more expensive for older people and those with preexisting conditions,” said Larry Levitt, senior vice president for special initiatives at the nonpartisan Henry J. Kaiser Family Foundation. “However, there are still a lot of unanswered questions about how this would all work and how much legal authority the administration really has.”
The order also paves the way for broader use of short-term policies that are not required to include essential health benefits nor cover people with preexisting medical conditions. Such short-term plans often serve as a bridge for people between jobs. Under the previous administration, individuals could buy the plans for only three months. The order would expand their duration to nearly a year.
And the president is asking the secretaries of labor, treasury, and health and human services to allow more businesses to use health reimbursement arrangements. Under the arrangements, businesses could use pretax dollars to reimburse employees for out-of-pocket medical costs and premiums.
Insurance premiums already are in place for 2018, and most insurers had anticipated the loss of the subsidy payments and set rates considerably higher to take that into account. Those that haven’t may ask state insurance commissioners to allow them to increase premiums.
The Congressional Budget Office recently released an analysis of the potential consequences if the Trump Administration stops funding cost-sharing reductions (CSRs) on Affordable Care Act (ACA) health insurance marketplaces. A lot has already been said about the impact on premiums, federal spending, and consumer plan choice that the CBO projects would result. But what is often missing from the debate and the media coverage is a better understanding of who is helped by CSRs and what that help looks like. As the debate continues to unfold in the coming months, here are a few key facts to remember.
CSRs help working low-income families afford health care. In addition to monthly premiums, most consumers also pay deductibles and copays or coinsurance or both when they see the doctor or use other health care services. These out-of-pocket costs often keep people from seeking needed care, especially those without income to spare. The ACA sought to address this problem by enabling low-income consumers purchasing insurance through the marketplaces to enroll in “enhanced” health plans (we’ll call them CSR plans here). These plans reduce what consumers pay in deductibles, copays, and coinsurance without subjecting them to the higher premiums usually associated with plans that offer lower out-of-pocket costs.
In California, consumers are eligible for a CSR plan (PDF) through the state’s health insurance marketplace, Covered California, if they earn roughly $17,000 to $30,000 a year (for an individual) or $34,000 to $61,000 (for a family of four). (It’s important to note that CSRs are only available when consumers purchase silver tier plans.) The federal government pays health insurance companies directly to provide CSR plans on the exchanges. These are the payments the Trump Administration is threatening to stop.
About 670,000 Californians are enrolled in CSR plans. These are Californians who earn too much to be eligible for Medi-Cal but still may struggle financially. These families may not get health benefits from an employer, or if their employer offers health coverage, it may be unaffordable. According to the State Health Access Data Assistance Center, typical jobs among Californians who earn incomes that would qualify them for CSR plans include administrative assistant, retail and restaurant worker, home health aide, nursing assistant, and child care worker. Many receiving help from CSR plans are self-employed or work at small businesses. Self-employed Californians and individuals working for businesses with 50 or fewer employees disproportionately rely on insurance through Covered California with premium subsidies, according to this analysis from the UC Berkeley Center for Labor Research and Education (PDF). And nearly three-quarters of Covered California enrollees with premium subsidies are also eligible for cost-sharing reductions.
The map below shows the geographic distribution of Covered California enrollees in CSR plans; hover over each county to see the numbers.
CSR plans can shield consumers from hundreds or thousands of dollars in medical expenses in a given year. Some illustrations from Covered California:
On average, CSR plans saved households $1,500 a year (PDF) on health care in 2016.
A CSR plan lowers by $2,000 (PDF) what a consumer would pay for a common injury (a broken wrist), compared to a similar plan without CSRs.
CSR plans are most valuable to consumers when the health threat is most extreme. Out-of-pocket expenses are most damaging when consumers experience a devastating illness or accident that leaves them needing a lot of medical care. Take a look at a Covered California consumer who earned $17,000 in 2016. With a CSR plan, the annual deductible was $75 versus $2,500 (PDF) for a similar plan without CSRs. The total out-of-pocket maximum was capped at $2,350 versus $6,800 without CSRs. In the event of a serious medical emergency or series of high-cost medical events, a CSR plan would have shielded that consumer from another $4,450 in expenses.
CSRs provide a stabilizing influence on the entire health care safety net. Low-income Californians often move back and forth between Medi-Cal and Covered California. In one year, their income is low enough to qualify them for Medi-Cal. In the next, they make a little more money and leave Medi-Cal for a Covered California plan. But to afford marketplace coverage, they need premium support plus the lower out-of-pocket costs provided by CSR plans. CSR plans support a broader system that helps provide a continuum of coverage for low-income Californians through changing life situations. That extra dose of stability not only benefits them, it benefits all of California.
The only question is how much it will weaken the ACA and hurt insurers.
The messy saga of the Affordable Care Act just got even messier.
President Donald Trump on Thursday signed an executive order aiming to make it easier for Americans to buy skimpier and cheaper health insurance. The order isn’t as aggressive as it might have been in undermining the ACA, but that’s scant reassurance for insurers, who face an administration that seems actively hostile to a law it’s supposed to enforce.
The order aims to let association health plans — groups of small employers banding together to buy insurance — offer coverage throughout the U.S. Insurers consistently oppose selling health insurance across state lines because of varying regulations. If plans are permitted to cross state borders, then insurers fear a regulatory race to the bottom, where cheaper and less-comprehensive plans from states with lax rules would attract the healthiest patients, leaving insurers in more-regulated states with a sick and expensive group of enrollees.
Insurers like Anthem inc. have pruned back their participation in the ACA to states where they feel safe. This order could shake up even those stable markets where the ACA is doing relatively well.
Allowing insurance sales across state lines may not make much of a difference. Insurance plans need a network of health-care providers in places wherever they offer insurance, and that’s difficult to create from scratch in a new state. But anything that makes state markets less predictable is a negative for insurers.
Trump’s order has the potential to siphon young and healthy patients from the ACA’s individual insurance markets to less-regulated plans and to raise premiums for sicker Americans, even if everyone stays within state borders. It instructs federal agencies to work to expand access to cheaper insurance that skirts the ACA’s regulations, both through association plans as well as skimpy, short-term insurance plans. Tennessee, where people can already sign up for cheaper association plans, has one of the sickest ACA marketplace populations.
A number of questions remain. An outline of the order suggests access to looser association plans may be limited to employers. But if self-employed individuals can sign up — an option the administration says it’s still considering — then it will be far more damaging to the individual market.
It’s also unclear whether people who purchase cheap, short-term insurance will be able to skirt the ACA’s individual mandate. If they can, then those plans will likely be substantially more popular. And it’s unclear how much power states will have to regulate such plans.
But even in mild form, these efforts will damage an already fragile market over time. And the uncertainty about these questions will have insurers running scared for the foreseeable future as agencies work on rules. Little about this administration suggests it will push for options that will make the ACA more functional.
President Trump will scrap subsidies to health insurance companies that help pay out-of-pocket costs of low-income people, the White House said late Thursday. His plans were disclosed hours after the president ordered potentially sweeping changes in the nation’s insurance system, including sales of cheaper policies with fewer benefits and fewer protections for consumers.
The twin hits to the Affordable Care Act could unravel President Barack Obama’s signature domestic achievement, sending insurance premiums soaring and insurance companies fleeing from the health law’s online marketplaces. After Republicans failed to repeal the health law in Congress, Mr. Trump appears determined to dismantle it on his own.
Without the subsidies, insurance markets could quickly unravel. Insurers have said they will need much higher premiums and may pull out of the insurance exchanges created under the Affordable Care Act if the subsidies were cut off. Known as cost-sharing reduction payments, the subsidies were expected to total $9 billion in the coming year and nearly $100 billion in the coming decade.
“The government cannot lawfully make the cost-sharing reduction payments,” the White House said in a statement.
It concluded that “Congress needs to repeal and replace the disastrous Obamacare law and provide real relief to the American people.”
In a joint statement, the top Democrats in Congress, Senator Chuck Schumer of New York and Representative Nancy Pelosi of California, said Mr. Trump had “apparently decided to punish the American people for his inability to improve our health care system.”
“It is a spiteful act of vast, pointless sabotage leveled at working families and the middle class in every corner of America,” they said. “Make no mistake about it, Trump will try to blame the Affordable Care Act, but this will fall on his back and he will pay the price for it.”
Lawmakers from both parties have urged the president to continue the payments. Mr. Trump had raised the possibility of eliminating the subsidies at a White House meeting with Republican senators several months ago. At the time, one senator told him that the Republican Party would effectively “own health care” as a political issue if the president did so.
“Cutting health care subsidies will mean more uninsured in my district,” Representative Ileana Ros-Lehtinen, Republican of Florida, wrote on Twitter late Thursday. She added that Mr. Trump “promised more access, affordable coverage. This does opposite.”
But Speaker Paul D. Ryan, Republican of Wisconsin, praised Mr. Trump’s decision and said the Obama administration had usurped the authority of Congress by paying the subsidies. “Under our Constitution,” Mr. Ryan said, “the power of the purse belongs to Congress, not the executive branch.”
The future of the payments has been in doubt because of a lawsuit filed in 2014 by House Republicans, who said the Obama administration was paying the subsidies illegally. Judge Rosemary M. Collyer of the United States District Court in Washington agreed, finding that Congress had never appropriated money for the cost-sharing subsidies.
The Obama administration appealed the ruling. The Trump administration has continued the payments from month to month, even though Mr. Trump has made clear that he detests the payments and sees them as a bailout for insurance companies.
This summer, a group of states, including New York and California, was allowed to intervene in the court case over the subsidies. The New York attorney general, Eric T. Schneiderman, said on Thursday night that the coalition of states “stands ready to sue” if Mr. Trump cut off the subsidies.
What the administration has done to weaken the health law.
Mr. Trump’s decision to stop the subsidy payments puts pressure on Congress to provide money for them in a spending bill.
Senator Lamar Alexander, Republican of Tennessee and the chairman of the Senate health committee, and Senator Patty Murray of Washington, the senior Democrat on the panel, have been trying to work out a bipartisan deal that would continue the subsidy payments while making it easier for states to obtain waivers from some requirements of the Affordable Care Act. White House officials have sent mixed signals about whether Mr. Trump was open to such a deal.
The decision to end subsidies came on the heels of Mr. Trump’s executive order, which he signed earlier Thursday.
With an 1,100-word directive to federal agencies, the president laid the groundwork for an expanding array of health insurance products, mainly less comprehensive plans offered through associations of small employers and greater use of short-term medical coverage.
It was the first time since efforts to repeal the landmark health law collapsed in Congress that Mr. Trump has set forth his vision of how to remake the nation’s health care system using the powers of the executive branch. It immediately touched off a debate over whether the move would fatally destabilize the Affordable Care Act marketplaces or add welcome options to consumers complaining of high premiums and not enough choice.
Most of the changes will not occur until federal agencies write and adopt regulations implementing them. The process, which includes a period for public comments, could take months. That means the order will probably not affect insurance coverage next year, but could lead to major changes in 2019.
“With these actions,” Mr. Trump said at a White House ceremony, “we are moving toward lower costs and more options in the health care market, and taking crucial steps toward saving the American people from the nightmare of Obamacare.”
“This is going to be something that millions and millions of people will be signing up for,” the president predicted, “and they’re going to be very happy.”
But many patients, doctors, hospital executives and state insurance regulators were not so happy. They said the changes envisioned by Mr. Trump could raise costs for sick people, increase sales of bare-bones insurance and add uncertainty to wobbly health insurance markets.
Chris Hansen, the president of the lobbying arm of the American Cancer Society, said the order “could leave millions of cancer patients and survivors unable to access meaningful coverage.”
In a statement from six physician groups, including the American Academy of Family Physicians, the doctors predicted that “allowing insurers to sell narrow, low-cost health plans likely will cause significant economic harm to women and older, sicker Americans who stand to face higher-cost and fewer insurance options.”
While many health insurers remained silent about the executive order, some voiced concern that it could destabilize the market. The Trump proposal “would draw younger and healthier people away from the exchanges and drive additional plans out of the market,” warned Ceci Connolly, the chief executive of the Alliance of Community Health Plans.
Administration officials said they had not yet decided which federal and state rules would apply to the new products. Without changing the law, they said, they can rewrite federal regulations so that more health plans would be exempt from some of its requirements.
The Affordable Care Act has expanded private insurance to millions of people through the creation of marketplaces, also known as exchanges, where people can purchase plans, in many cases using government subsidies to offset the cost. It also required that plans offered on the exchanges include a specific set of benefits, including hospital care, maternity care and mental health services, and it prohibited insurers from denying coverage to people with pre-existing medical conditions.
The executive order’s quickest effect on the marketplaces would be the potential expansion of short-term plans, which are exempt from Affordable Care Act requirements. Many health policy experts worry that if large numbers of healthy people move into such plans, it would drive up premiums for those left in Affordable Care Act plans because the risk pool would have sicker people.
“If the short-term plans are able to siphon off the healthiest people, then the more highly regulated marketplaces may not be sustainable,” said Larry Levitt, a senior vice president for the Kaiser Family Foundation. “These plans follow no rules.”
Mr. Trump’s order would also eventually make it easier for small businesses to band together and buy insurance through entities known as association health plans, which could be created by business and professional groups. A White House official said these health plans “could potentially allow American employers to form groups across state lines” — a goal championed by Mr. Trump and many other Republicans — allowing more options and the formation of larger risk pools.
Association plans have a troubled history. Because the plans were not subject to state regulations that required insurers to have adequate financial resources, some became insolvent, leaving people with unpaid medical bills. Some insurers were accused of fraud, telling customers that the plans were more comprehensive than they were and leaving them uncovered when consumers became seriously ill.
The White House said that a broader interpretation of federal law — the Employee Retirement Income Security Act of 1974 — “could potentially allow employers in the same line of business anywhere in the country to join together to offer health care coverage to their employees.”
The order won applause from potential sponsors of association health plans, including the National Federation of Independent Business, the National Restaurant Association, the U.S. Chamber of Commerce and Associated Builders and Contractors, a trade group for the construction industry.
The White House released a document saying that some consumer protections would remain in place for association plans. “Employers participating in an association health plan cannot exclude any employee from joining the plan and cannot develop premiums based on health conditions” of individual employees, according to the document. But state officials pointed out that an association health plan can set different rates for different employers, so that a company with older, sicker workers might have to pay much more than a firm with young, healthy employees.
“Two employers in an association can be charged very different rates, based on the medical claims filed by their employees,” said Mike Kreidler, the state insurance commissioner in Washington.
Mr. Trump’s order followed the pattern of previous policy shifts that originated with similar directives to agencies to come up with new rules.
Within hours of his inauguration in January, he ordered federal agencies to find ways to waive or defer provisions of the Affordable Care Act that might burden consumers, insurers or health care providers. In May, he directed officials to help employers with religious objections to the federal mandate for insurance coverage of contraception.
Both of those orders were followed up with specific, substantive regulations that rolled back Mr. Obama’s policies.
In battles over the Affordable Care Act this year, Mr. Trump and Senate Republicans said they wanted to give state officials vast new power to regulate insurance because state officials were wiser than federal officials and better understood local needs. But under Thursday’s order, the federal government could pre-empt many state insurance rules, a prospect that alarms state insurance regulators.
Another part of Mr. Trump’s order indicates that he may wish to crack down on the consolidation of doctors, hospitals and other health care providers, a trend that critics say has driven up costs for consumers. Mr. Trump said that administration officials, working with the Federal Trade Commission, should report to him within 180 days on federal and state policies that limit competition and choice in the health care industry.
Insurers have said the move will destabilize the individual market and increase premiums by at least 20 percent.
In a move insurers have long said would destabilize the individual market and increase premiums by at least 20 percent, the Department of Health and Human Services late Thursday ended cost-sharing reduction payments.
At least one state attorney general, AG Eric Schneiderman of New York, has said he would sue the decision. The court granted a request to continue funding for the subsidies, Schneiderman said.
California may also sue the administration over the decision.
“I am prepared to sue the #Trump Administration to protect #health subsidies, just as when we successfully intervened in #HousevPrice!” California AG Xavier Becerra tweeted Thursday night.
In May, Schneiderman and Becerra led a coalition of 18 attorneys general in intervening in House v. Price over the cost-sharing reduction payments.
The cost-sharing reductions payments will be discontinued immediately based on a legal opinion from Attorney General Jeff Sessions, said Acting HHS Secretary Eric Hargan and Centers for Medicare and Medicaid Services Administrator Seema Verma.
“It has been clear for many years that Obamacare is bad policy. It is also bad law,” HHS said. “The Obama Administration, unfortunately, went ahead and made CSR payments to insurance companies after requesting – but never ultimately receiving – an appropriation from Congress as required by law. In 2014, the House of Representatives was forced to sue the previous Administration to stop this unconstitutional executive action. In 2016, a federal court ruled that the Administration had circumvented the appropriations process, and was unlawfully using unappropriated money to fund reimbursements due to insurers. After a thorough legal review by HHS, Treasury, OMB, and an opinion from the Attorney General, we believe that the last Administration overstepped the legal boundaries drawn by our Constitution. Congress has not appropriated money for CSRs, and we will discontinue these payments immediately.”
Trump tweeted this morning, “The Democrats ObamaCare is imploding. Massive subsidy payments to their pet insurance companies has stopped. Dems should call me to fix!”
Insurers reached and America’s Health Insurance Plans did not have an immediate comment on the ending of the subsidies.
The move to end CSRs comes weeks before the start of open enrollment on Nov. 1, but many insurers had submitted rates reflecting the end of the subsidies that allowed them to offer lower-income consumers lower deductibles and out-of-pocket costs.
America’s Essential Hospitals said it was alarmed by news of administration decisions that could create turmoil across insurance markets and threaten healthcare coverage for millions.
“This decision could leave many individuals and families with no options at all for affordable coverage,” said Bruce Siegel, MD, CEO of America’s Essential Hospitals. “We call on Congress to immediately shore up the ACA marketplace and to work in bipartisan fashion, with hospitals and other stakeholders, toward long-term and sustainable ways to give all people access to affordable, comprehensive care.”
Today’s CSR decision follows yesterday’s executive order from President Trump to allow for association health plans that could circumvent Affordable Care Actmandates on coverage. The executive order must go through the federal rulemaking process and may also face legal challenges.
“Health plans remain committed to certain principles. We believe that all Americans should have access to affordable coverage and care, including those with pre-existing conditions. We believe that reforms must stabilize the individual market for lower costs, higher consumer satisfaction, and better health outcomes for everyone. And we believe that we cannot jeopardize the stability of other markets that provide coverage for hundreds of millions of Americans,” said spokeswoman Kristine Grow. “We will follow these principles – competition, choice, patient protections and market stability – as we evaluate the potential impact of this executive order and the rules that will follow. We look forward to engaging in the rulemaking process to help lower premiums and improve access for all Americans.”
The American Academy of Family Physicians and five other medical associations representing more than 560,000 doctors have expressed serious concerns over the effect of President Trump’s executive order directing federal agencies to write regulations allowing small employers to buy low-cost insurance that provides minimal benefits.
In a joint statement, the AAFP, the American Academy of Pediatrics, the American College of Physicians, the American Congress of Obstetricians and Gynecologists, the American Osteopathic Association and the American Psychiatric Association strongly rejected the order they said would allow insurers to discriminate against patients based on their health status, age or gender.
Republicans tried to repeal and replace the ACA, and since that failed are trying to end consumer protections under the law, according to U.S. Representative Bill Pascrell Jr., a Democrat from New Jersey and a member of the Ways and Means Committee.
“Republicans have been on the warpath trying to end important consumer protections that the ACA affords, including protections for people with pre-existing conditions and required coverage for services that people actually need, like mental health care,” Pascrell said. “Now that they’ve failed in that endeavor, the Trump Administration is trying to use the back-door with this executive order.”
A Congressional Budget Office analysis released in August said the CSRs, which cost an estimated $7 billion a year, could end up costing the federal government $194 billion over a decade.
President Donald Trump signed an executive order Thursday that rolls back a number of Affordable Care Act (ACA) provisions that set minimum requirements for health plans.
The order will allow small businesses and groups of people to band together and buy insurance as an association. The association health plans (AHP) available to them do not have to meet the requirements of the ACA, such as protection for people with pre-existing conditions and essential health benefits.
In addition, the order expands the use of short-term plans that also have looser requirements and allows plans to be sold across state lines.
Dive Insight:
Broadly, the executive order loosens the requirements health plans must meet and shifts regulation away from federal levels. This could lower out-of-pocket costs for people who don’t use much care, but would likely result in major cost increases for people with pre-existing conditions.
The biggest concern with offering these plans is that it would lead payers to cherry pick young, healthy people who are less expensive for payers. But separating them from people who will need services creates an unbalanced risk pool. That can quickly lead to prohibitive out-of-pocket costs for people who have a pre-existing condition or who unexpectedly need high-cost care.
There are still several steps to be taken before the order could have a real impact. HHS and the Department of Labor have been instructed to write new regulations which will go through the regular notice and comment process. The specifics of those regulations will be important to how the order ultimately plays out. Also, the order will almost certainly see a legal challenge. Still, it signals that Trump’s White House is ready to find ways of undercutting the ACA despite the high-profile legislative failures earlier this year.
It’s far from the first sign, though. HHS has drastically cut back efforts to promote this year’s open enrollment period, which begins Nov. 1. The ACA’s overall advertising budget was slashed by 90%, community groups that receive federal funding to help people enroll have been devastated by cuts and HHS recently barred regional directors from participating in enrollment events.
Short-term plans are inexpensive for people who are healthy, but they can exclude people with pre-existing conditions. They have previously been allowed for a limited stretch, such as three months, but extending that time and allowing these plans to count toward the individual mandate will mean an unstable risk pool.
Allowing plans to be sold across state lines is a staple of conservative health policy, but there is little reason to believe it would actually lower costs. There are also many unanswered questions about how these plans would be relegated.
With a repeal bill off the table, the Trump administration has drafted an executive order that could blow a huge hole in the Affordable Care Act, according to a source with direct knowledge of the plan.
The order would, in effect, exempt many association health plans, groups of small businesses that pool together to buy health insurance, from core Obamacare requirements like the coverage of certain essential health benefits. It would potentially allow individuals to join these plans too, which would put individual insurance marketplaces in serious peril by drawing younger and healthier people away from them.
The draft order is also said to broaden the definition of short-term insurance, which is also exempt from the law’s regulations. Together, these changes represent a serious threat to Obamacare: President Trump seems ready to open more loopholes for more people to buy insurance outside the health care law’s markets, which experts anticipate would destabilize the market for customers who are left behind with higher premiums and fewer insurers.
“This appears to be a backdoor way of undermining the Affordable Care Act,” Kevin Lucia, who studies the markets at Georgetown University, said of the alleged changes.
It’s possible that the order could change before Trump signs it, or never be signed at all, as has happened with other executive orders in the past. The details of the order as described, though, generally match up with what had been expected after Trump said he would soon issue an executive order on health care. Association health plans have been a priority for Sen. Rand Paul (R-KY), who has urged Trump to expand them.
The White House declined to comment when Vox inquired about the pending order. A senior administration official detailed the outline of the executive order to the Wall Street Journalon Saturday evening, which aligns with the description provided to Vox.
On Tuesday morning, Trump promised that his forthcoming actions would provide “great HealthCare to many people.”
But experts have warned they could significantly destabilize the Obamacare markets.
Association health plans, explained
An association health plan, as Vox’s Sarah Kliff has previously explained, is a way for a group of small businesses pool together to buy insurance, giving them more purchasing power and access to cheaper premiums. A group of bakeries, for example, might form a bakers association and purchase health coverage together. The most famous examples have been farm bureaus, which allowed independent farming businesses to band together and get insurance.
Before Obamacare, national associations could pick and choose which states’ insurance rules they wanted to follow and use those rules to guide the plans they offered nationwide. The bakers association could choose to follow the rules for, say, the Alabama insurance market, which mandates coverage of relatively few benefits, for all its bakeries in New York, a state with many mandates.
The result was often health insurance that skirted state rules and was a better deal for businesses with young and healthy employees, who are likely to prefer skimpier health plans. The former insurance regulator described the situation prior to the ACA to Kliff as being “a race to the bottom, with some associations offering lower-cost plans that covered virtually nothing.”
Obamacare changed these rules. Association health plans were treated as small businesses and were therefore required to cover all of the law’s mandated benefits.
Essential health benefits, mandating that insurers cover everything from hospital care to prescription drugs to maternity care, are central to the ACA’s insurance protections: They prevent plans from crafting their coverage to attract mostly young and healthy customers at the expense of older and sicker people, which had been one of the primary problems with the association health plan model before the law.
How Trump’s executive order could damage Obamacare
Requiring association health plans to follow the same rules as small businesses was one of the many ways the Affordable Care Act cracked down on skimpy health plans. Trump is now looking to roll back those changes.
Under the draft executive order as described, new regulations would allow association health plans to be considered large employers when it comes to health insurance. Large employers are not subjected to the same rules as individual or small-group plans under Obamacare. Most notably, they do not have to cover all of the law’s essential health benefits or meet the requirement that insurance cover a minimal percentage of a person’s medical bills.
If that change were made, association health plans would be freed to craft skimpier (and cheaper) health plans that appeal only to businesses with younger and healthier employees. Small businesses left in Obamacare’s marketplace would likely face higher costs and fewer options as the market became less attractive to insurers.
“It will destroy the small-group market,” Tim Jost, a law professor at Washington and Lee University who generally supports Obamacare, told me. “We’ll be back to where we were before the Affordable Care Act.”
The draft order did not specify whether individuals would also be allowed to buy into these associations health plans, as some Republicans like Paul want. But, according to the source, the regulations resulting from the order could potentially be written to allow self-employed people to buy into the now-deregulated association market, which would be an even bigger blow to Obamacare.
The self-employed individuals likely to flee the law’s markets for association plans would probably be younger and healthier, leaving behind an older, sicker pool for the remaining Obamacare plans. That has the makings of a death spiral, with ever-increasing premiums and insurers deciding to leave the market altogether.
“The ability for individuals to purchase health insurance through an association really puts the individual market at risk and destabilizes it over the long term,” Lucia said. “When you have market segmentation, it over time leads to higher premiums and it becomes less attractive to carriers.”
Trump is also eyeing short-term coverage to undercut the health law
Trump’s executive order would also expand what’s called short-term limited duration insurance. These short-term policies typically have higher out-of-pocket costs and cover fewer services than traditional insurance. They were designed for people who, for example, expect to be out of work and therefore without insurance for a limited period of time.
That kind of coverage is totally free from the health care law’s insurance regulations: the mandate to cover essential health benefits, the prohibition on charging sick people more than healthy people or denying people coverage based on their medical history, and so on.
Short-term insurance had previously been allowed to last as long as 364 days. The Obama administration, in an effort to curtail the use of such coverage to circumvent the health care law, shortened it to three months. Trump’s draft order would reverse that rule, once again allowing people to buy this non-Obamacare coverage for almost an entire year, my source said.
The effect would be much the same as the changes to association health plans: Healthier people would be the consumers most likely to use this escape hatch to find cheaper, if far less comprehensive, coverage outside of Obamacare — though they would still be subject to the law’s individual mandate, as short-term insurance is not considered sufficient.
“If you allow them to sell 364-day policies, or policies that are renewable, that’s just going to suck a lot of the healthy people out of the individual market,” Jost said.
And here, again, fewer healthy people in the Obamacare market means higher costs to insurers, which leads to higher premiums and possibly more insurers dropping out.
“Consumers are going to face a less stable, less competitive individual market,” Lucia said.
The ultimate impact on Obamacare will depend on the final language of the executive order Trump signs. But based on the draft described to me, Trump is readying the devastating blow to the health care law that congressional Republicans have so far failed to deliver.
Paul Melquist of St. Paul, Minn., has a message for the people who wrote the Affordable Care Act: “Quit wrecking my health care.”
Teri Goodrich of Raleigh, N.C., agrees. “We’re getting slammed. We didn’t budget for this,” she says.
Millions of people have gained health insurance because of the federal health law. Millions more have seen their existing coverage improved.
But one slice of the population, which includes Melquist and Goodrich, is unquestionably worse off. They are healthy people who buy their own coverage but earn too much to qualify for help paying their premiums. And the premium hikes that are being announced as enrollment looms for next year — in some states, increases topping 50 percent — will make their situations more miserable.
Exactly how big is this group? According to Mark Farrah Associates, a health care analysis firm, as of 2017, there were 17.6 million people in the individual market, 5.4 million of whom bought policies outside the health exchanges, where premium help is not available. Combine that with the percentage of people who bought insurance on the exchanges but earned too much (more than four times the federal poverty level, or about $48,000 for an individual) to get premium subsidies, and the estimate is 7.5 million, or 43 percent of the total individual market purchasers, according to insurance industry consultant Robert Laszewski.
Who are these people?
“They’re early retirees,” says Laszewski. “They’re people working part time who have substantial outside income. They’re people who are self-employed of any age, people who are small employers.”
Melquist is one of those early retirees. He and his wife are both 59. He worked in the defense industry and retired at the end of 2016.
He always planned to retire at age 55 but ended up working longer, in part because he knew health insurance costs were rising. When he did retire and sought to purchase coverage for himself and his wife, he says, “I was shocked to find out how bad it actually was.”
For a bronze-level plan with a health savings account, Melquist says, “we pay $15,000 a year [in premiums] and the first $6,550 [for health care expenses] for each of us comes out of our pocket. So basically you could be looking at $30,000 out of pocket before anything gets covered.”
Insurance is important, Melquist says, particularly if a catastrophic health issue were to hit either of him or his wife. In the meantime, he can still pay the bills. But he’s frustrated. “I’m not eating dog food, but I’m also not able to do stuff for my grandchildren,” he says, like help with college costs. “It’s not that my life is falling apart, but the [Affordable Care Act] has ruined a lot of things I’d like to have done.”
The good news, if there is any, for Melquist is that premiums in Minnesota are going up by only small amounts for 2018, and in some cases going down, because of a reinsurance program passed by the state legislature that will help cover the costs for some of the state’s sickest patients in the individual market. That move will help keep premiums from spiking even more.
But that won’t be the case in Raleigh, where Goodrich and her husband, John Kistle, work as private consultants in the energy industry.
Goodrich, 59, and Kistle, 57, bought insurance through the ACA exchange in their state for three years. When premiums reached $1,600 per month with deductibles of $7,500 each, however, “it was just unbelievable. We decided just not to get insurance,” Goodrich says.
Eventually, they bought short-term plans that cover only catastrophic illness or injury. That insurance is not considered adequate under the ACA, so the couple could be liable for a tax penalty as well.
Goodrich, who volunteers to help people with their taxes in her spare time, says she has run the numbers and thinks that insurance is so expensive where she lives that the couple will be exempt from the penalty. That is because the cheapest insurance would cost the couple more than 8.16 percent of their income. Under the health law’s provisions, the penalty doesn’t apply above that level because insurance is considered unaffordable.
“We try to be good citizens and do the right thing,” she says. “Next year, we’re trying to figure out how to make less than $64,000 so we can get subsidies.” That amount is equal to 400 percent of the federal poverty line for two people, the cutoff for premium assistance because Congress assumed those who earned more could afford to buy affordable coverage.
Sabrina Corlette, a research professor at Georgetown University who specializes in health insurance, agreed that this is a population “that faced big hikes” in premiums when the health law took effect.
But, she says, in many cases, people in the individual market were previously paying artificially low premiums. Some of those old policies had substandard coverage. For others, however, the higher prices are the result of one of the fundamental changes enacted by the health law. “These are folks who were benefiting from a system that was affordable solely because insurers were able to keep sick people out,” Corlette says, adding that they are now being asked “to pay more of the true cost of health care.”
This is a population that is also more likely to vote Republican, says Laszewski, “which is one of the grand ironies now.”
Republicans in Congress and President Trump haven’t been able to “repeal and replace” the health law. But some of their efforts are undermining it — primarily the administration’s threat to stop paying billions of dollars to insurers in subsidies to help some lower-income people pay their out-of-pocket costs. The uncertainty surrounding those subsidies has led insurers to boost premiums next year by an estimated 20 percent. Those who get premium help from the government won’t have to pay more. But those who are paying the full freight will.
Also driving up premiums for next year, says Corlette, are the administration’s threats not to enforce the individual requirement for insurance and its decision to cancel most advertising and outreach for the year’s open-enrollment period that begins Nov. 1. Both of those provisions bring more healthy people into the insurance pool to help spread costs.
“One could argue that the 2014 premium increases were painful, but it was about getting us to a system that was more fundamentally fair and just,” Corlette says. “Now, it’s completely unnecessary price increases for unsubsidized folks that could so easily be avoided by a rational political system.”
HENRY KOTULA 