Next Steps in Healthcare Reform
Republicans’ long-discussed plans to replace the Affordable Care Act with significant reforms stalled on March 24, 2017 when the American Health Care Act of 2017 (AHCA) was withdrawn from consideration. While the AHCA’s withdrawal leaves the Affordable Care Act (ACA) in place for the immediate future, there are many options that will be considered. In Congress, Speaker Paul Ryan is currently reevaluating the scope of the legislation and could restart the floor action and Senate Majority Leader Mitch McConnell could devise a proposal for consideration. But in the immediate future, the Trump administration has indicated it will begin exercising its ability to exercise changes to the ACA through regulatory reform and discretion. The ACA gives the Secretary of HHS, Tom Price, significant discretion when it comes to enforcing regulations imposed on the insurance marketplace. Price has already used his authority to extend the deadline for health insurers to submit rate plans for 2018 until June.
Secretary Price has also already proposed stricter enrollment rules for individuals seeking to enroll in an ACA marketplace plan to prevent people from enrolling in a plan, incurring high medical costs, and then not paying premiums. Some of the key areas for possible reform include:
Essential Health Benefits
The ACA requires marketplace insurance plans to provide coverage for 10 “essential health benefits” (EHBs), which include free preventive care, mental health, and pregnancy coverage. Republicans have argued that requiring insurers to cover all of these services drives up premium prices and forces consumers to buy services they do not want. While EHBs are defined by statute, the ACA gives broad authority over the level of coverage defined within the categories. States select the benchmark plan that determines specific coverage requirements under the benefit categories. One likely move by HHS will be to convert the state requirements to a single national standard that requires less coverage within the categories. Despite this, the law provides that the EHBs must be comparable to the majority of employer-sponsored insurance plans, so HHS’s ability to re-define EHBs is fairly narrow.
A pillar of the Affordable Care Act is cost-sharing subsidies which assist low-income individuals with purchasing insurance coverage. House Republicans won a lawsuit against the Obama administration in May 2016 on the grounds that Congress had not appropriated funds for the subsidies. While considered unlikely, House Republicans could allow the order, which is presently on hold, to take effect and withdraw funding for the cost-subsidies. Such a move would create upheaval in the insurance marketplace, prompting health plans to raise their prices or drop out entirely.
Section 1332 State Innovation Waivers
The ACA allows states to seek waivers from federal requirements on implementing provisions of the ACA, within statutory boundaries. In order to have their waivers approved, states must demonstrate that the care provided and cost of insurance plans will be comparable to those under federal requirements. Earlier this month, Secretary Price sent a letter to state governors to encourage them to use the ACA Section 1332 state innovation waiver program to get permission to set up high-risk pools, reinsurance programs, and other programs to help stabilize their health insurance markets.
Secretary Price vowed in the letter to expedite applications and to help states pay part of the cost of high-risk pools and reinsurance programs. Secretary Price suggested that a 1332 waiver application pending review from Alaska may serve as a model. As a result of being left with only one insurer and premiums rising more than 40% in 2016, Alaska created the Alaska Comprehensive Health Insurance Fund (ACHI). The ACHI was designed to reinsure the one remaining insurer for costs to treat people with life-threatening, chronic conditions. As a result, the health insurer scaled back 2017 premium increases to 7% percent. Alaska funded the program by using $55 million generated in 2015 from a 2.7 percent tax on health insurance premiums. The new law expanded the premium tax base to all insurance premiums – not just health insurance. Alaska’s Division of Insurance has presented the federal government with data showing how the investment in reinsurance lowered premiums (thus lowering the cost to the federal government for advanced premium tax credits (APTC)). With lower premiums, Alaskans needed less APTCs in order to be able to afford their premiums. Alaska’s 1332 waiver is seeking funds from the federal government for funds that HHS would have been spent on APTCs, to instead reinvest in the reinsurance plan to maintain premium stability and reduce the state’s liability for those costs.
On March 14, 2017, prior to the AHCA being withdrawn, Secretary Price and Centers for Medicare & Medicaid Services Administrator Seema Verma urged governors to use Section 1115 waivers to work requirements, co-pays, cost-sharing, and other requirements to their Medicaid programs. This may allow states to cover fewer people with more eligibility restrictions. The guidance appears to give expansion states the option of rolling back the eligibility limit for childless adults enrolled in Medicaid expansion from 138 percent to 100 percent of poverty. As a result, more states might seek to expand their Medicaid programs, but only up to 100 percent of poverty rather than the 138 percent required by the ACA.
Before the election seven of the 19 states that had not expanded their Medicaid programs had begun considering opting in to the expansion. The Kansas legislature appears to be on the verge of expanding its Medicaid program, although the governor has suggested he will veto the measure. Supporters of Medicaid expansion in Maine are seeking to have the proposal added to the ballot this fall. Democratic governors in Virginia and North Carolina are also urging their Republican-led legislatures to expand Medicaid as well.
Future Health Care Legislation
President Trump has stated he would like to work with Democrats to reform health care but the two sides appear to be miles apart on where the reforms begin. President Trump has stated that he believes the ACA will soon “implode” and at that time Democrats will seek to work with him on its replacement. Democrats believe that the ACA, while imperfect, requires repairs and will not consider any legislation that repeals the law. Earlier this year Sens. Bill Cassidy (R-La.) and Susan Collins (R-Maine) introduced a bill in the Senate which would give states the ability to choose whether to keep the ACA or to opt-in to a new system. The legislation has not gained any traction in Congress but may provide one possible framework for future reform.
Contact the experts at PartnerRe by phone at 415-354-1551 or by email at email@example.com.