Tag Archive: Patient Protection and Affordable Care Act

Trump administration adopts market-based statement of health care policy

Nearly nine months into his administration after many months of policy debate in Washington, President Donald Trump has issued an official statement of his administration’s health care policy in an October 12, 2017 Executive Order.

Trump’s policy is essentially not much different than that of his predecessor, Barack Obama, insofar as it retains one of the nation’s largest private sector financing mechanisms: employee benefit medical care plans. Like the managed competition principle of Obama’s Patient Protection and Affordable Care Act, Trump’s policy is market-based and aspires to harness competitive market forces to reduce medical costs and increase access to coverage.

It also mirrors the Affordable Care Act insurance market reforms by concentrating on the small employer group and individual (non-group) market segments where medical care cost pressures hit hardest. The order suggests (not orders) his administration explore allowing small employers to participate in association health plans traditionally used by large employer groups. In addition, Trump suggested his administration consider proposing regulations or revising guidance to increase the use of Health Reimbursement Accounts (HRAs) and expand employers’ ability to offer HRAs to their employees and allow HRAs to be used in conjunction with non-group coverage for employees.

The latter element closely aligns with recent legislation signed into law late in the Obama administration that enables employers to use a new type of HRA to subsidize premiums on a pre-tax basis for employees obtaining coverage in the non-group market. Effective January 1, 2017, employers of 49 or fewer employees that do not offer group coverage can fund up to $4,950 annually for single employees and $10,000 for an individual plan covering an employee and their family members.

Various observers expressed concern at the executive order’s suggestion (once again couched as a request, not a directive) that the administration consider reversing an Obama administration restriction limiting short term individual medical insurance policies to a maximum term of three months and expanding the limit to 12 months or even longer. The concern is well placed because doing so would put short term plans in competition with non-group and small group plans sold with the standard 12 month coverage term.

The Affordable Care Act established ten essential benefit categories with the goal to put small group and non-group coverage on a par with large group plans. But the tradeoff for these more generous plans is high and rapidly rising premium rates and deductibles, particularly painful for households earning too much to qualify for premium and cost sharing subsidies for individual plans sold on state health benefit exchanges. However, short term plans offering skimpier coverage for lower cost won’t comply with the Affordable Care Act’s minimum coverage mandate for individual taxpayers, subjecting them to a tax penalty.

Finally, Trump’s executive order reinforces market-based approach to mediate medical care costs by requiring the Health and Human Services Department in consultation with the departments of Treasury and Labor as well as the Federal Trade Commission to produce a report by April 12, 2018 and every two years following outlining where existing state and federal policy hinders market competition. The report must also identify policy actions to reduce barriers to market entry, limit excessive consolidation and prevent abuses of market power.

 


Need a speaker or webinar presenter on the Affordable Care Act and the outlook for health care reform? Contact Pilot Healthcare Strategies Principal Fred Pilot by email fpilot@pilothealthstrategies.com or call 530-295-1473. 

Final 2017 bid to temporarily stabilize non-group market includes reinsurance revival — and public option

In what is likely to be a final, last minute effort this year to temporarily bolster the challenging market that is non-group or individual medical coverage, two elements involved in the crafting of the Patient Protection and Affordable Care Act are being revived. One – reinsurance — was enacted as part of the law’s insurance market reforms but expired in 2017. Another – the so-called “public option” – wasn’t.

On August 30, a group of eight state governors called on Congress among other measures to restore reinsurance to protect health plan issuers wary of high cost claims and worse than expected statewide risk pools as part of a federal stability fund that would help states fund reinsurance programs in 2018 and 2019. Additionally, seven states have applied to the Trump administration for state innovation waivers under Section 1332 of the Affordable Care Act to establish reinsurance programs in 2018 to help stabilize their non-group markets. Two other states enacted authorizing legislation for such a waiver, according to a chart prepared by the law firm Faegre Baker Daniels LLP.

The proposal by the eight state governors – notably both Republicans and Democrats – would fortify the non-group coverage by allowing individuals to buy coverage via the Federal Employee Health Benefit Program in counties where only one commercial non-group plan is offered. This in effect would provide a “public option” in the form of a government-run plan that was considered but rejected in the development of the Affordable Care Act. It also is in line with a suggestion by former President Barack Obama during his final year in office to create a public plan to address constrained choice among plans in some parts of the nation. Using the FEHBP for the public option could raise objections that as a large employer group plan, it’s not actuarially and administratively suitable for covering non-employees.

Those objections as well as declining affordability for plans sold off the state exchanges jeopardizing the non-group risk pool could help fuel a proposal expected this month by Vermont Senator Bernie Sanders to extend Medicare to those under age 65. Look for this proposed Medicare expansion to serve as a starting point for debate on a possible successor to the Affordable Care Act’s individual and possibly small group market reforms going into 2018-20. In the meantime, both Congress and the Trump administration will likely go along with some of the proposals to help stabilize non-group including extending — at least for 2018 — out of pocket cost sharing subsidies for low income households purchasing silver level plans on state health benefit exchanges. Uncertainty surrounding that funding has drawn widespread concern from states, the exchanges and plan issuers, and consumer interests with no one standing to gain politically if they are not continued.

A key element of the Medicare expansion proposal will likely be some form of presumptive eligibility and/or automatic continuous enrollment, accompanied by payroll and self-employment taxes to help fund the expansion for those under 65 and ineligible for other private or public coverage – along with a possible opt in for those eligible for employer sponsored plans. Policymakers on both sides of the aisle with the support of states, plan issuers and consumer groups will likely conclude the Affordable Care Act’s annual enrollment period used for employer group plans does not translate well to the non-group market. Annual enrollment is a very well established and administratively supported process for employer group plans. But it has proven challenging to implement in non-group due to the market segment’s characteristic high churn and part year enrollment by consumers that makes it difficult to risk rate.

Conventional political wisdom would hold expanded Medicare might be a non-starter among majority Republicans in Congress. But it stands a chance of advancing since it would with automatic enrollment potentially reduce the need for the Affordable Care Act’s individual and employer shared responsibility mandates that have proven among the most unpopular provisions of the statute. A Medicare expansion might well include statutory authority allowing the federal government to negotiate prescription drug prices for the program, addressing concerns shared across the political spectrum over high medication costs.

 


Need a speaker or webinar presenter on the Affordable Care Act and the outlook for health care reform? Contact Pilot Healthcare Strategies Principal Fred Pilot by email fpilot@pilothealthstrategies.com or call 530-295-1473. 

Majority Republicans lack votes, time to reform ACA, Medicaid via reconciliation bill

The dispute within the Republican Party over health care widened further Friday as President Trump joined with two conservative senators in calling for an outright repeal of the Affordable Care Act if the party fails to agree on an alternative plan by the end of the July Fourth recess. The reemergence of what has for much of the year been a fringe idea within the GOP revealed not only the party’s philosophical divide over how to revise Obamacare, but also senators’ growing anxiety that they are headed home to see their constituents with little to show them.

Source: Republicans grow increasingly anxious about heading home without a health plan – The Washington Post

The Republicans are back to square one of their years long challenge of repealing the Patient Protection and Affordable Care Act without any Democratic votes. It’s an exercise in the Einsteinian definition of insanity as doing the same thing over and over and expecting a different result. For example, see this article Republicans Divided on Replacement Legislation for Health Reform Law  — from May 1, 2012.

Majority Republicans must understand the limits of their policymaking power. Repeal or a rewrite of the enormous 10 title Affordable Care Act will require bipartisan cooperation and far more time than the remaining three months of the current fiscal year via a budget reconciliation measure that constrains major policy changes under the Byrd Rule. They also are facing strong blowback from constituents worried that attempting rapid and far reaching reform using the budget reconciliation process — including overhauling the five-decade-old Medicaid program — will disrupt their access to medical care.

 


Need a speaker or webinar presenter on the Affordable Care Act and the outlook for health care reform? Contact Pilot Healthcare Strategies Principal Fred Pilot by email fpilot@pilothealthstrategies.com or call 530-295-1473. 

Medicaid politics imperil Senate Better Care Reconciliation Act

Senate Republicans’ Obamacare repeal effort is on track to blow up before it even gets started.The GOP is well short of the votes needed to bring its bill to the floor, and party leaders and President Donald Trump are kicking into overdrive to save their imperiled health care overhaul.At least four Republican senators, Susan Collins of Maine, Rand Paul of Kentucky, Dean Heller of Nevada and Ron Johnson of Wisconsin, have signaled they could oppose a key procedural vote that will occur either Tuesday afternoon or Wednesday. A number of other senators, like Shelley Moore Capito of West Virginia and Marco Rubio of Florida, are undecided.

Source: Senate Obamacare repeal on brink of defeat – POLITICO

Imperiling the Better Care Reconciliation Act of 2017 is the politics of Medicaid. In the House, majority Republicans faced an uphill but less steep task in passing their version of the reconciliation bill because proposing to reform Medicaid into a federal block grant program affected far fewer constituents. Because members of the Senate represent their entire states, scaling back Medicaid affects a lot more people and consequently has far greater repercussions and political peril. Since the federal share of Medicaid makes up a large percentage of state budgets, governors are also understandably concerned over the loss of federal share funds.

The backers of the House and Senate bills have bitten off more than they can chew by proposing wholesale reform of the five-decade-old Medicaid program. They’ve made their job even harder by trying to substantially overhaul Medicaid funding at the same time as the Patient Protection and Affordable Care Act’s insurance market reforms — all within the narrow procedural confines of a budget reconciliation bill that make it questionable it would pass parliamentary muster.

 


Need a speaker or webinar presenter on the Affordable Care Act and the outlook for health care reform? Contact Pilot Healthcare Strategies Principal Fred Pilot by email fpilot@pilothealthstrategies.com or call 530-295-1473. 

Iowa files urgent ACA 1332 waiver request to preserve 2018 non-group market

Facing the prospect of no health plan issuers offering coverage in the individual, non-group medical insurance market in 2018, Iowa is urgently asking the federal government for a state innovation waiver under Section 1332 of the Patient Protection and Affordable Care Act. The proposed stopgap measure by the state’s Insurance Division requests federal premium and cost sharing subsidies be used to fund the Proposed Stopgap Measure (“PSM”) Plan. The plan would offer a single standardized benefit plan with an actuarial value of 68 to 72 percent with premium subsidies determined by age and household income. It also proposes the federal Affordable Care Act funding support a reinsurance program for individuals incurring medical expenses greater than $100,000.

 


Need a speaker or webinar presenter on the Affordable Care Act and the outlook for health care reform? Contact Pilot Healthcare Strategies Principal Fred Pilot by email fpilot@pilothealthstrategies.com or call 530-295-1473. 

Return to high risk pools implies failure of ACA’s single statewide risk pool

The return to state high risk pools encouraged by Trump administration executive action and as proposed in the American Health Reform Act pending in the Senate — mechanisms phased out with the Patient Protection and Affordable Care Act reforms of the non-group segment effective in 2014 — carries with it a critical implication. Specifically, the individual market even with single statewide risk pools mandated by Section 1312(c) the Affordable Care Act are too small —  in some less populous states at least — to achieve a sufficient spread of risk. Therefore, the logic implies, individuals with conditions who use largely disproportionate amounts of medical care must be excluded from the statewide pool and cordoned off in high risk pools in order to maintain the pool’s actuarial viability and ward off adverse selection in the individual market.

That cuts against a core assumption of the Affordable Care Act — that by having all individuals and family members in a given state treated as one large risk pool, a sufficient spread of risk would be achieved. In addition, the law’s premium stabilization programs and an ongoing risk adjustment mechanism to compensate health plan issuers who take on members with costly, complex chronic conditions would act as buffers to ensure the actuarial integrity of the pool and reduce the likelihood of adverse selection. The proposed revival of high risk pools would suggest that’s not the case and the amount of medical care utilized by some pool members is so costly that it skews an entire state’s risk pool.

This in turn leads to a far larger implication. If 5 percent of the pool population account for 50 percent of the costs — or 1 percent accounting for 20 percent to use another expression of the ratio cited in this National Institute for Health Care Management data brief — then medical care may not be an insurable risk due to insufficient spread of risk. If that’s the case, it could result in plan issuers ceding most or all of the loss risk to the government as is currently the case in Medicare and Medicaid managed care. Notably, Aetna CEO Mark Bertolini reportedly suggested just that, according to this account at Reason.com, with nominal insurers taking on the role of plan administrators handling “back room” transactions:

The government doesn’t administer anything. The first thing they’ve ever tried to administer in social programs was the ACA, and that didn’t go so well. So the industry has always been the back room for government. If the government wants to pay all the bills, and employers want to stop offering coverage, and we can be there in a public private partnership to do the work we do today with Medicare, and with Medicaid at every state level, we run the Medicaid programs for them, then let’s have that conversation.

Note the second condition in Bertolini’s statement: If employers want to stop offering coverage. Complain as they may about rising premiums in group coverage, there’s no indication that the highly entrenched employee benefit model of covering medical care for the non-elderly is going to be abandoned by employers anytime soon. Even if the Affordable Care Act’s mandate on employers of 50 or more to offer coverage is repealed given favorable tax treatment of employer-sponsored medical care plans.

 


Need a speaker or webinar presenter on the Affordable Care Act and the outlook for health care reform? Contact Pilot Healthcare Strategies Principal Fred Pilot by email fpilot@pilothealthstrategies.com or call 530-295-1473. 

Morale hazard raised in debate on GOP debate on individual medical insurance

In 2013, I pointed out morale hazard as a major risk facing issuers of medical insurance. Morale hazard has now come up in the current debate among majority House Republicans on the Patient Protection and Affordable Care Act’s non-group medical insurance reforms. Here’s the context from a Yahoo News item:

Though the GOP leadership is insisting those with preexisting conditions will be covered under its bill, some individual lawmakers are telegraphing a different message. Rep. Mo Brooks, R-Ala., a member of the Freedom Caucus, told CNN Monday that the provision will allow those who have lived “good lives” to pay less for health care, by taking unhealthy people out of the insurance pool. “They’ve done the things to keep their bodies healthy, and right now, those are the people who have done things the right way, who are seeing their costs skyrocketing,” Brooks said.

Morale hazard is tied to the perception that medical care and insurance are consumable commodities. The more they are used, the greater likelihood of good health the flawed reasoning goes. In fact for most people, these resources are – and should — be used as little as possible. Fortunately that’s the case according to a recent Health Affairs analysis that found most Americans use few health care resources and have low out-of-pocket spending. The outliers who use a lot of care are driving medical utilization.

Some policymakers such as Rep. Brooks argue their premium rates should be medically underwritten to ensure they are proportional to the risk they pose. Or excluded from the insurance pool and placed in high risk pools that violate the basic insurance principle of risk spreading. The challenge is how to identify and distinguish these folks from those who have congenital predispositions to chronic medical conditions whose risk to insurers is far less prone to morale hazard as well as those who engage in health promoting lifestyles that reduce their likelihood of needing medical care for chronic conditions. Some have suggested the rapid growth in genomics along with wearable biometric monitoring devices provides a possible solution. Time will tell.

 


Need a speaker or webinar presenter on the Affordable Care Act and the outlook for health care reform? Contact Pilot Healthcare Strategies Principal Fred Pilot by email fpilot@pilothealthstrategies.com or call 530-295-1473. 

Complaints over high deductibles call into question future of individual medical insurance

President Donald Trump’s complaint that high deductible medical insurance plans are a bad deal because people can’t use them to cover medical expenses subject to the deductible reflects a fundamental conceptual conflict over medical insurance. Here is what Trump had to say in a Sunday interview with the CBS News program Face the Nation:

We’re going to drive down deductibles because right now, deductibles are so high, you never — unless you’re going to die a long, hard death, you never can get to use your health care–because the deductibles are so high.

Insurance is a mechanism to transfer and share risk. In the case of high deductible medical insurance plans, the risk is high medical bills exceeding the deductible amount is transferred to the plan issuer. The idea of the deductible is that the insured assumes some level of risk. It’s not intended to be “used” or otherwise consumed in exchange for paying a premium. In fact, this mindset can even drive up utilization since people will be motivated to burn through the deductible in order to get their plan to begin paying their medical bills.

Underlying this perception is the transition in the 1970s and 1980s from “major medical” coverage – a true insurance offering designed to cover catastrophic medical costs – to prepaid managed care plans. These are not pure insurance products but are hybrids. The plan assumes a degree of risk of catastrophic care needs such as a major injury or illness. But it also is designed to cover everyday primary care needs. The proliferation of managed care plans and particularly integrated plans where the plan’s own staff providers provide medical care naturally have led people to expect not to have to pay much if anything out of pocket for relatively lower cost care. To them, that’s consuming the coverage they paid for, particularly since the plans they purchased include primary care as they must under the Patient Protection and Affordable Care Act.

When their individual medical plan doesn’t permit that until they’ve racked up several thousand dollars of medical expenses, from their perspective their premium dollars have been wasted even though those premiums insulate them against the risk of large medical bills. However “large” is relative. In a period of declining widespread economic prosperity, medical bills of several thousand dollars that aren’t covered because they fall within the deductible limit are indeed seen as forbiddingly large. Ironically, they even lead to personal bankruptcy – something insurance is specifically intended to prevent.

Ultimately, public policymakers are faced with a question far larger than repairing or replacing the Affordable Care Act. The question is whether financing medical care with an individual or non-group insurance plan makes sense both from an actuarial and public perception standpoint. Or whether it should be a publicly financed mechanism paid though self-employment and income taxes.

 


Need a speaker or webinar presenter on the Affordable Care Act and the outlook for health care reform? Contact Pilot Healthcare Strategies Principal Fred Pilot by email fpilot@pilothealthstrategies.com or call 530-295-1473. 

Non-group market faces decidedly mixed outlook for plan year 2018 — and possible demise in 2019.

Several recent positive developments point toward plan issuers staying in the non-group or individual market next year.

  • The Trump administration finalized its Market Stabilization rulemaking intended to build confidence among plans by affording them more predictability and reducing the possibility of consumer gaming that plans say have increased their loss exposure.
  • On April 7, Standard & Poor’s opined that the individual market is showing signs of stabilizing in its fourth year based on its analysis of Blue Cross Blue Shield plans that found loss ratios declined from 106 and 102 percent for 2015 and 2014, respectively, to 92 percent for 2016.
  • This week in a closely watched move, Anthem tentatively committed to the individual market in 2018, but warned it could change its mind or raise premium rates by 20 percent or more depending on the outcome of pending litigation over cost sharing reduction subsidies that the Patient Protection and Affordable Care Act makes available to households earning between 100 and 250 of federal poverty levels for silver actuarial value plans sold on state health benefit exchanges.

Which brings us to the negatives. If the litigation, House v. Price, is not resolved by early June, Anthem could execute the aforementioned steep rate increases and possible state market withdrawals. The likelihood is high. The reason is neither the House of Representatives nor the Trump administration has sufficient motivation to resolve the case. The House prevailed when the U.S. District Court where the case was brought issued a ruling one year ago agreeing with the House that the Obama administration unconstitutionally infringed on the House’s appropriation powers by funding the cost sharing reductions administratively.

The district court held the ruling in abeyance pending appeal by the administration. That decision is likely to become final and go into effect following a status conference with the parties late next month. The Trump administration isn’t likely to appeal the decision and would be happy to see a final ruling “blow up” the Affordable Care Act’s individual insurance market reforms in President Trump’s words. The House for its part isn’t likely to dismiss the case because it sees the ruling in its favor as an important precedent to check executive branch authority from impinging on its powers of appropriation.

In addition, Congress and the Trump administration are unlikely to moot the case by enacting their own health care reform legislation in place of the Affordable Care Act’s insurance market reforms in the current congressional term due to heavy reliance on the limited scope budget reconciliation process, intra-party squabbling, lack of bi-partisan support and the inability or unwillingness of the Trump administration to articulate clear guiding policy principles.

The loss of the cost sharing subsidies would blow a hole estimated at $10 billion in exchange finances. That could well prompt Anthem and other plan issuers to head for the exits just as their plans must be finalized for 2018. That could effectively end the exchanges and the individual market as a whole next year. The more likely scenario is the plans as Anthem indicated it would price in the loss of the cost sharing subsidies in their final premium rates.

That would keep the individual market alive and on life support for 2018. But it would face a possible demise in 2019, with shrunken statewide risk pools and increased risk of the dreaded death spiral of adverse selection. The number of covered lives would decline both inside and outside of the exchanges. Outside the exchanges, the 401 percenters – households earning more than 400 percent of federal poverty levels and ineligible for premium tax credit subsidies for qualified health plans sold on the state exchanges – would likely bolt from the individual market after getting notice of another 20 plus percent premium increase for the second consecutive year. (California’s exchange, Covered California, estimates the loss of reduced cost sharing subsidies would boost premiums for silver level plans double that amount, 42 percent on average and as many as 340,000 Californians would drop out of the individual market in 2018.) They will file for exemptions from the individual mandate based on unaffordable premiums, seek alternatives such as health sharing ministries or simply go bare in the hope the Internal Revenue Service under the Trump administration won’t enforce the individual mandate penalties for not having coverage.

 


Need a speaker or webinar presenter on the Affordable Care Act and the outlook for health care reform? Contact Pilot Healthcare Strategies Principal Fred Pilot by email fpilot@pilothealthstrategies.com or call 530-295-1473. 

California single payer bill would amalgamate federal, state health program funding

A California state lawmaker this week fleshed out proposed legislation that would create a single payer scheme of medical care financing in the Golden State named Healthy California. The proposed legislation would create Healthy California Trust Fund to fund medical care for all Californians and combine federal funding for health programs (Medicare, Medicaid, Children’s Health Insurance Program, Patient Protection and Affordable Care Act) as well as state funds. Waivers would be sought from the federal government as needed to redirect funding from the federal programs to the Healthy California Trust Fund.

A key part of the funding under the measure is federal approval of a waiver under Section 1332 of the Affordable Care Act that allows states to set up their own medical care financing schemes using federal dollars that would otherwise be available under the ACA such as subsidies for health plan premiums and out of pocket costs in the non-group market and expanded Medicaid eligibility. Vermont took a similar tack with a single payer plan but ultimately concluded it would require substantial state funding to an extent the program would not be politically feasible.

 


Need a speaker or webinar presenter on the Affordable Care Act and the outlook for health care reform? Contact Pilot Healthcare Strategies Principal Fred Pilot by email fpilot@pilothealthstrategies.com or call 530-295-1473. 

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