ACA “Market Stabilization” Update

by Christoper E. Condeluci, Principal and sole shareholder of CC Law & Policy PLLC in Washington, D.C.

The Cost-Sharing Subsidy Saga – The “Score,” “Silver-Loading,” and the Ongoing “Negotiations”

In the embedded link above is an excellent article written by Joe Antos and Jim Capretta with AEI. The article hits on many of the points I have been making ever since August of last year, and every month since then (sorry for the repetition). Why I like the article so much is because it makes all of these points in one place. The article also talks about how the Congressional Budget Office (CBO) should “score” Congressional funding of the cost-sharing subsidies. As I told you last week, it appears that CBO is going to finally include the cost-sharing subsidy payments in the “baseline” (see last week’s update, attached). I won’t go into detail on what the “baseline” is (the article speaks to its importance), but I will say this: Including the cost-sharing subsidy payments in the “baseline” is going to produce “savings” to the government – to the tune of $29 billion over 10 years – according to a recent “unofficial” CBO report.
- Analysis: Why is this new found “savings” (produced by new assumptions adopted by CBO) so important?? Because the “savings” can be used to offset government spending that will occur under the pending ACA “market stabilization” package. In particular, the Federal funds for a reinsurance program or an “invisible high risk pool,” which will cost the government $30 billion over 10 years (in the form of $10 billion available in 2019, $10 billion available in 2020, and $10 billion available in 2021). This is important to the “process” because Congress always likes to “offset” government spending or tax revenue reductions. It will generally keep Republican budget-hawks happy because (should they vote in favor of providing the Federal funds for reinsurance/an “invisible high risk pool”), these Republicans would not be increasing the deficit. And, it will generally make Democrats happy because (should they vote in favor of providing the Federal funds), these Democrats will feel comfortable that they are not adding to the deficit that Republicans just increased by $1.5 trillion through their recent Tax Reform bill. This money is also important because – although the Democrats haven’t asked for it yet – it is a pot of money that Democrats may try to tap to increase the premium subsidies, especially if Democrats agree to funding the cost-sharing subsidies. What I mean is this: As I have told you time-and-time again (and which Joe and Jim explain in their article), by cancelling the cost-sharing subsidy payments – which President Trump did back in October – insurance carriers loaded the unfunded cost-sharing liabilities onto the “silver” Exchange plans, which ended up increasing the premium subsidy amounts for consumers purchasing Exchange plans during the 2018 “open enrollment” period, allowing these consumers to buy free “bronze” plans and no-additional cost “gold” plans. If Democrats agree to funding the cost-sharing subsidies, this “silver-loading” practice will end, thus reducing the premium subsidy amounts for 2019. This will be a bad deal from a “coverage” perspective (as I have also been telling you) because current Exchange plan-holders will be disadvantaged. Interestingly, left-leaning organizations are finally publicly saying that Congress should NOT fund the cost-sharing subsidies so current Exchange plan-holders are not disadvantaged. An interesting turn of events, considering about 6-short-months ago these same left-leaning organizations were claiming that the world-will-end if the cost-sharing subsidies were cancelled. But back to the point that I am trying to make: As part of the negotiations over ACA “market stabilization,” Democrats floated the idea of increasing the premium subsidies. But, that “ask” did NOT make it into the current “market stabilization” package that is under consideration. BUT, will Democrats pivot back to this “ask” as they “horse-trade” with Republicans over the details of a final “market stabilization” bill?? Might Democrats “ask” to tap this $29 billion in savings in exchange for relenting on language preventing the cost-sharing subsidies from being used to fund abortion services (called the “Hyde language”)?? We’ll talk more about the controversy over the Hyde language below. The bottom-line point is this: CBO has yet to “officially” score funding for the cost-sharing subsidies as “savings” to the government. But when CBO does – which I expect the agency will do soon – watch out for this potential pivot by Democrats.

The Ongoing Controversy Over Funding the Cost-Sharing Subsidies and Funding Abortion Services

Again, sorry for the repetition here, but back in December of last year, I – along with many others – thought Congress would fund the cost-sharing subsidies in the end-of-year-spending bill. But, as I told you, concerns over whether the cost-sharing subsidies can be used to fund abortion services surfaced in the 11^th hour, essentially killing the prospects of enacting said funding. Well…that concern remains front-and-center today. Hence my brining the issue up again.
- Analysis: Look, I don’t bring this issue up to be repetitive (which I know I can be), I bring it up because whether or not we see a “market stabilization” package make it into the “omni” hinges on whether Republicans and Democrats can find a compromise on what is referred to as the “Hyde language.” This issue is THAT IMORTANT to the negotiations. Admittedly, I have generally stayed away from this fight over the Hyde language. BTW, I get that this fight is important to both sides for political reasons. But the policy guy in me gets frustrated when social policy issues – like abortion – drives whether or not we see policy changes that will help struggling Americans (namely those people in the “un-subsidized” individual market who cannot afford health insurance). As a result, my post on the controversy over whether the cost-sharing subsidies can be used to fund abortion services will be short (hooray :]). But again, I bring it up because – literally – this is like THE ISSUE. If this controversy CANNOT be resolved over the next 24 to 48 hours, we will NOT see “market stabilization” in the “omni.”

Reinsurance, Premium Increases, and the Mid-Term Elections

CBO has said that the $30 billion worth of Federal funds for reinsurance or an “invisible high risk pool” will reduce premiums by 10% in 2019 and 20% in 2020. An actuarial firm – Oliver Wyman – has said that premiums could go down by as much as 40%.
- Analysis: The bottom-line is this: Federal funds for reinsurance or an “invisible high risk pool” WILL REDUCE PREMIUMS. You can call these Federal funds a “bail-out” (although I disagree with this moniker), but the fact of the matter is that if Congress does NOT approve these Federal funds, premiums for 2019 and beyond are going to be REALLY high. That is BAD for consumers. It is BAD for the markets. And it is BAD for Republicans in the mid-term elections. As I said to you back in March 2017 (see the attached update from March of last year), I think BOTH Republicans and Democrats “own” the ACA. Republicans “own” the ACA because – to me – elections matter. And Republicans won in 2016, due in some part to the concern over the ACA and rising premium costs. But the Democrats also “own” the ACA because at-the-end-of-the-day, a Democratic Congress enacted the ACA’s insurance reforms. But now, this question of “ownership” is much more critical for Republicans than Democrats. Why? Because recent polling shows that health care is top-of-mind for voters. Which means, Democrats can leverage the fact that Republicans have some sort of “ownership” of the ACA, especially after Republicans repealed the “individual mandate” penalty tax (by reducing the penalty to $0). Sooo, if Republicans want to make sure they do not get crushed in November on account of significant premium increases – in addition to insurance carriers running-for-the-door – it would be advisable (at least in my humble opinion) that Republicans do everything they can to reduce premiums. Even if it means “bailing out” the insurance carriers. Last comment on this: Not only can Democrats leverage the fact that Republicans share in the “ownership” of the ACA, but when it comes to “market stabilization,” I think Democrats are in a superior negotiating position. What I mean is this: Many Democrats do NOT want to fund the cost-sharing subsidies – because they want the “silver loading” practice to continue – but they feel they have to be consistent on their insistence that the cost-sharing subsidies be funded (because they have been saying this for almost a full-year now). BUT, Democrats might be able (1) to preserve the “silver loading” practice and (2) save-face on voting against funding the cost-sharing subsidies by blaming the Republicans, and arguing that the reason why they (the Democrats) are no longer in favor of funding the cost-sharing subsidies is because the Republicans are being unreasonable about the “issue of abortion.” So here, Democrats can-have-their-cake-and-eat-it-too because (1) they can blame Republicans for huge premium increases that would result if the “market stabilization” package is jettisoned from the “omni” AND (2) Democrats can justify their new-found resistance to “market stabilization” on the fact that Republicans remain unreasonable on abortion funding (their words, not mine).

Some Ad Hoc Issues Relating to “Market Stabilization” (no news story)

There are a couple of other issues to talk about when discussing the pending “market stabilization” package.
- Analysis: I will briefly discuss them below:

- - Modifications to ACA Section 1332: As I mentioned last week, the proposed modifications to ACA Section 1332 are largely the same modifications floated back in Sept. 2017. For example, one modification would amend 1332’s “cost-sharing guardrail” to say that a 1332 Waiver will only be approved if the Waiver provides cost-sharing protections “that are of comparable affordability, including for low-income individuals with serious health needs, and other vulnerable populations.” As I explained in an Oct. 2017 update (see attached), this change was intended to help Iowa get their 1332 Waiver application approved. In the Iowa Waiver request, the State wanted to re-allocate the cost-sharing subsidies and provide higher premium subsidies for younger consumers, and also to provide consumers above 400% of the Federal Poverty Level (FPL) with premium subsidies. The Waiver request also sought to replace the cost-sharing subsidies with certain out-of-pocket protections for low-income consumers. This change may very well help Iowa, should they decide to re-submit their 1332 Waiver request. But guess who this propose change will NOT help – at least directly?? Answer: IDAHO. Some have recently suggested that the proposed 1332 changes will help Idaho in its efforts to allow the sale of non-ACA-compliant plans. I disagree. In my opinion, nothing can help Idaho, because HHS has already said that Idaho’s proposal violates the ACA. And, even if Idaho tried to get its proposal approved by HHS through a 1332 Waiver, I do not think the State would be successful because the Idaho plan violates 1332’s “essential health benefits guardrail,” which is NOT being modified by the proposed “market stabilization” package. Interestingly – and I think importantly – the proposed 1332 changes currently under consideration appear to direct HHS to develop “model” Waivers for States to adopt. I think this is a GREAT idea because in my experience, many States have been hesitant to pursue a 1332 Waiver because they were unclear on what changes HHS would or would not approve. Providing States with model Waivers will – in my opinion – light a fire under States who have been on the fence when it comes to pursuing a 1332 Waiver.

Short-Term Health Plans: As I told you last week, the White House and Congressional Republicans want to codify in statute the recent change to short-term health plans, which would allow these plans to remain in effect for up to 12 months. Republicans want this type of change because if this requirement is set forth in statute, then future Administrations (i.e., Democratic Administrations) cannot reverse this change by modifying the regulations yet again. The White House and Congressional Republicans also want short-term health plans to be “guaranteed renewable.” But, I do NOT believe that Congressional Democrats would EVER “give” on allowing short-term health plans to be “guaranteed renewable,” even if it meant getting something significant in return (e.g., increased premium subsidies or something like DACA certainty). But, you can never-say-never in this town, so we will just have to wait and see.

HSA Provisions: As I also told you last week, the employer community – and other stakeholders like HSA administrators/banks and agent/brokers – are pushing for the inclusion of HSA-related provisions as a “trade” for (1) agreeing to Federal funds for reinsurance/an “invisible high risk pool” or (2) “giving” on the Hyde language (i.e., the language preventing the use of cost-sharing subsidies to pay for abortion services). The argument goes like this: Conservative Republicans need a “win,” and if Republicans cannot get what they want on the Hyde language, these conservative Republicans should demand that these HSA provisions get included. Alternatively, if Republicans end up agreeing to Federal funds for reinsurance/an “invisible high risk pool” (i.e., they agree to a “bail out”), these conservative Republicans should demand that these HSA provisions get included. I agree with these arguments, and I believe conservative Republicans should make such a push to get these HSA-provisions into the “omni.” BUT, in order for this type of “trade” to even be on the table, conservative Republicans would have to be willing to, for example, “give” on the Hyde language, which is something I do NOT believe conservative Republicans are willing to “give” on yet (or ever). In addition, while I believe the astute political decision is to “give” on Federal funds for reinsurance/an “invisible high risk pool” (because this will reduce premiums, which would help Republicans in the mid-term elections), conservative Republicans may not be looking at it this way. That is a long way of saying this: I believe the HSA provisions – while the right type of policy that should get in the “omni” – will NOT get included due to “politics.” I hope I am wrong.