Repair Update

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

Senate HELP Committee Hearing on State Flexibility (i.e., Section 1332 Waivers)

Last Tuesday, the Senate HELP Committee held its 3^rd hearing on ACA “market stabilization,” focusing primarily on the following two questions: (1) Should States have the flexibility to modify the ACA’s requirements? (2) And if so, how much flexibility should States be afforded?
- Analysis: As the Committee members and the witnesses attempted to answer these questions, you heard words like “consumer protections” and the “essential health benefits” and the “guardrails.” If any compromise on “market stabilization” is going to be reached, it is imperative that members of Congress and outside stakeholders: (1) Understand exactly what these words mean and (2) Understand how these words fit within ACA Section 1332. Let’s take a moment to talk through these definitions and better understand how ACA Section 1332 works:

- - What are the “consumer protections”? – Technically, they are the ACA’s new insurance coverage requirements. Some of these new requirements include: Insurance companies cannot deny coverage based on a pre-existing condition; Insurance companies cannot develop premiums based on “health status”; Insurance companies cannot rescind coverage absent fraud; Health plans cannot have annual or lifetime limits on certain benefits; Health plans must cover certain preventive services with no cost-sharing; Health plans must cover adult children up to age 26.

- - How are these “consumer protections” treated under ACA Section 1332? – Importantly, ACA Section 1332 does NOT allow a State to waive these “consumer protections” through a 1332 Waiver. So, when you are talking about giving States more flexibility to modify the ACA’s requirements through a 1332 Waiver, you are NOT talking about waiving these coverage requirements.

- - What are “the essential health benefits” (EHBs)? – The ACA statute enumerates a list of 10 medical services and benefits that MUST be covered by an “individual” or “small group” health plan. HHS regulations allow States to add to this statutory list State benefit mandates that were in place as of December 31, 2011.

- - How are the EHBs treated under ACA Section 1332? – States are allowed to waive what’s called the “essential health benefits package” through a 1332 Waiver. Importantly, the Federal EHBs (with the additional State benefit mandates) are considered a part of the “essential health benefits package,” which means States can waive the Federal EHBs through a 1332 Waiver.

- - What are the “guardrails”? – The “guardrails” are four requirements that a State MUST meet before the State can be granted a 1332 Waiver. These “guardrails” require that: (1) The health plans offered in the State provide health coverage that is “at least as comprehensive” as the Federal EHBs; (2) The health plans offered in the State include cost-sharing protections from out-of-pocket spending that are “at least as affordable” as the ACA’s cost-sharing requirements; (3) The State must cover the same number of uninsured citizens that the ACA would have covered had the ACA requirements not been waived; and (4) The State’s proposed modifications cannot increase the Federal deficit.

- - How are the “guardrails” applied under ACA Section 1332? – The statute gives HHS the sole discretion to grant – or deny – a 1332 Waiver. This means that HHS is the “judge and jury” when it comes to determining whether a State’s 1332 Waiver request satisfies – or violates – the “guardrails.” Why is this important? Because while a State is permitted to waive the Federal EHBs through a 1332 Waiver, the Waiver may ONLY be approved if HHS – in its sole discretion – determines that the requesting State’s coverage requirements are “at least as comprehensive” as the Federal EHBs.

Now that we have a better understanding of how words like “consumer protections” and the “essential health benefits” and the “guardrails” fit within ACA Section 1332, I think the two questions the Senate HELP Committee should be trying to answer are: (1) If States are already permitted to waive the Federal EHBs under a 1332 Waiver – and if HHS is the “judge and jury” when determining whether a requesting State’s coverage requirements are “at least as comprehensive” as the Federal EHBs – what does “at least as comprehensive” mean? (2) Can HHS develop its own standard definition of what is “comprehensive” or should Congress?

My reading of the statute leads me to believe that HHS can determine what “at least as comprehensive” means on its own. In other words, HHS does NOT need Congress’s help in developing a standard definition of “comprehensive.” So, it would strike me that it would be in Congressional Democrats’ best interest to work with Congressional Republicans to come up with a Congressionally developed definition of “at least as comprehensive.” This way, Democrats would get a say in the scope of the standard definition. It would also strike me that if Congressional Republicans believe HHS can determine what “at least as comprehensive” means on its own, why would Congressional Republicans want to negotiate with Congressional Democrats to develop a standard definition through legislation? Republicans would essentially be negotiating against themselves, don’t you think?

“Repeal and Replace” Update

Sen. Sanders (I-VT) Introduces a Single-Payer, Medicare-For-All Bill

Among some of the other noteworthy events last week, Sen. Sanders introduced some details on how a single-payer, Medicare-for-all system could work. I say SOME details, because Sen. Sanders did not provide details on how he proposes to pay for the single-payer program, other than to say that taxes would have to be increased for individuals and employers. As some experts have contended, the primary opposition to a single-payer system won’t center on the fundamentals of the program itself. Instead, the controversy over single-payer will center on how to pay for it. I totally agree.
- Analysis: But here is something to consider when it comes to opposition to the fundamentals of a single-payer system. One health policy expert summarized Sen. Sanders’ proposal this way: Once the program goes into effect (for children, on January 1 of the first calendar year after the bill is enacted and 3 years later for adults), most benefits would no longer be available under the traditional Medicare program, the Medicaid program, or the Children’s Health Insurance Program (CHIP).

- - Stop there for a moment. While I recognize that swapping out various public health programs (i.e., Medicare, Medicaid, and CHIP) for another public health program (i.e., the single-payer, Medicare-for-all) shouldn’t cause too much disruption for current beneficiaries, the perception that coverage under these public programs will be taken away is a REALLY BIG deal, in my opinion. After all, you have heard seniors decry: “Hands off my Medicare.” And, during the recent ACA “repeal and replace” exercise, we saw how difficult it is to take away Medicaid coverage. Please note, I understand that the government is NOT taking away health coverage for these beneficiaries under a single-payer system. Medicare and Medicaid beneficiaries will likely be held harmless. BUT, the problem for single-payer advocates is that it won’t be perceived that way, at least at first. And, this point can easily be demagogued by opponents of a single-payer system. Those scare tactics will have a significant impact. This health policy expert goes on to say this: Sen. Sanders’ proposal would also end the Federal Employees Health Benefits Program (FEHBP), TRICARE, and the ACA Exchanges. And, the proposal would prohibit the sale of private health insurance and employer-sponsored insurance.

- - Picture heads exploding here. While some Federal employees support a single-payer system, many others like their FEHBP health plan. As a result, I cannot see a majority of Federal employees being cool with their plans being taken away in exchange for coverage under a single-payer program. Actually, another health policy expert familiar with the State of Vermont’s failed attempt at a single-payer program said this: One of the main reasons why single-payer failed in Vermont is because the State government employees did NOT want to give up their private health plan. The Vermont State employee plan is a 94% “actuarial value” (AV) plan. I believe the FEHBP Basic Plan is around 85% AV. I only cite these numbers to say this: The fact that Vermont State employees bristled at the notion of taking away their rather generous health plan – to me – is instructive when considering how FEHBP plan participants may react to a single-payer program. The ACA Exchanges will also go away?!? I would love to hear former CMS Administrator Andy Slavitt’s response to this. Note, I don’t mean to single out Mr. Slavitt, but I only do so because he has been one of the more vocal opponents of the ACA “repeal-replace” exercise, and an even louder critic of the Trump Administration’s decisions to, for example, cut funding for Exchange enrollment outreach and marketing and the President’s constant threats to ending the “cost-sharing” subsidy payments. Maybe Mr. Slavitt rationalizes that people will get better coverage under the Sanders single-payer system (and they likely will, considering most Exchange plans now have narrow networks and high out-of-pocket costs). I just find it interesting to think of the commentary we will hear from those who staunchly support the ACA Exchanges. Last-but-not-least, ending employer-sponsored insurance?!? Heck, members of Congress – both Democrats and Republicans – can’t even get a limit on the tax preference for employer-sponsored insurance to go into effect, how will Congress ever get a single-payer system to replace employer plans? Enough said! Please know, I am not trying to pan Sen. Sander’s single-payer proposal for partisan reasons. I just think – objectively – it is reasonable to believe that there will be little support for taking away the various types of health coverage that people currently have. This is just the tip-of-the-iceberg, because we have yet to talk about how to pay for a single-payer program. Stay tuned.

Where Cassidy-Graham Collides With “Market Stabilization” Efforts

What’s really consuming everyone these days is whether or not the Cassidy-Graham bill can get 50 votes in the Senate. And if the Cassidy-Graham bill does have 50 votes, whether the bill can get through the House as-is.
- Analysis: Policy analysts – including me – are also trying to gauge how the recent talks of a bi-partisan “market stabilization” package will impact support for the Cassidy-Graham bill. Some analysts are suggesting that the recent bi-partisan hearings in the Senate HELP Committee – coupled with statements of support for the bi-partisan “market stabilization” bill from hold-out Senators like Sen. McCain (R-AZ) – show that getting 50 votes for Cassidy-Graham is unlikely. I – however – look at things from a different angle. In my opinion, the Cassidy-Graham repeal-replace effort is being set up as a way to triangulate the efforts of Chairman Alexander (who is trying to pass measures to help “stabilize” the individual markets) and Chairman Hatch (who is critical of agreeing to a “market stabilization” package without corresponding ACA reforms). What I mean is this:

- - Cassidy-Graham and “Market Stabilization”: When it comes to “market stabilization,” the Cassidy-Graham bill on its own includes a number of “market stabilization” provisions. First and foremost, Cassidy-Graham creates a temporary reinsurance fund. While the bill does not set aside a lot of money for the reinsurance fund, the bill could be augmented with additional funds before it hits the floor. As I told you last week (see the attached email), everyone and their mother has been asking Chairman Alexander to include Federal reinsurance dollars in his bi-partisan “market stabilization” package. But, as I also told you, Chairman Alexander does NOT have the money to pay for any reinsurance funds. Importantly…wait for it…the Cassidy-Graham bill does. In addition, in the 4^th and final Senate HELP Committee hearing on “stabilization,” Chairman Alexander explained that – based on what he heard from the Committee members and witnesses during the past 3 hearings – he would suggest the following proposals for his bi-partisan “market stabilization” package: (1) Funding for the cost-sharing subsidies, (2) Allowing people of any age to purchase an ACA-defined “catastrophic plan” or a 50% actuarial value plan known as a “copper plan,” and (3) Granting States more flexibility under ACA Section 1332. Note, the Cassidy-Graham bill – if a “reconciliation” bill – CANNOT include funding for the cost-sharing subsidies (because the Parliamentarian already told Republicans that they cannot include an appropriation for the cost-sharing subsidies in “reconciliation” legislation). But interestingly, the Cassidy-Graham bill DOES allow individuals at any age to purchase an ACA-defined “catastrophic plan.” The Cassidy-Graham bill also allows State flexibility. Actually, I would characterize the Cassidy-Graham bill as a 1332 Waiver on steroids. This is because States can modify the ACA’s insurance market reforms fairly substantially. Soooo, while you don’t have cost-sharing subsidy funding, you do have reinsurance funds. You also allow anyone to purchase an ACA-defined “catastrophic” plan, and you provide State flexibility that is in line with how Republicans would like to modify Section 1332 if they didn’t have to negotiate with Democrats. In all, Cassidy-Graham sounds a lot like the bi-partisan “market stabilization” package Chairman Alexander suggested at his final Committee hearing, no?

- - Cassidy-Graham and ACA Reforms: The Cassidy-Graham bill essentially calls for re-distributing to the States the Federal money spent through the ACA’s Medicaid expansion, premium subsidies, and cost-sharing subsidies. In other words, the Cassidy-Graham bill repeals the ACA’s Medicaid expansion, the premium subsidies, and the cost-sharing subsidies, but the money would be preserved and then re-allocated to the States based on a particular formula. Medicaid would also be converted into a per-capita cap program. That’s a lot of “reform” that should make Chairman Hatch and other Republicans happy. The Cassidy-Graham bill also makes significant changes to the HSA rules. In particular, the bill increases the HSA contribution limits to the ACA’s out-of-pocket maximums, allows the tax-free purchase of over-the-counter medicine with HSA dollars, and allows both spouses to make catch-up contributions to the same HSA (all similar to previous drafts of Republican repeal-replace bills). But unlike prior Republican repeal-replace bills, the Cassidy-Graham bill allows the use of HSA dollars to pay for the premiums of a high-deductible health plan (HDHP) and also allows the use of HSA dollars to pay for concierge primary care-type services. Again, lots of “reform” that Chairman Hatch – and especially conservative Republicans – would like. Lastly, as stated, the Cassidy-Graham bill is like a 1332 Waiver on steroids. States could allow their carriers to develop premiums based on a person’s health status (although a State must first show how it is mitigating any adverse effects of health status under-writing before being permitted to engage in this practice). States could also develop their own State-specific “essential health benefits” (EHB) standard (instead of following the Federal EHB standard) and the ACA’s Medical Loss Ratio rules could be waived. Again, “reforms” that Republicans believe in, and “reforms” that get to the core of what Chairman Hatch – and most of the conservative Senators – have been asking for. So in the end, is support among Republican Senators for a bi-partisan “market stabilization” bill going to be the down-fall of the Cassidy-Graham bill? It would appear not, due in large part to the fact that there is about the same amount “stabilization” in the Cassidy-Graham bill as there would be in Chairman Alexander’s bi-partisan “market stabilization” package. Yes, the cost-sharing subsidy funding is NOT in Cassidy-Graham, but as the bill is being passed on the Senate floor, the President and Republican Leadership could come out with a specific statement saying something like: “When the spending bill comes up again in December, funding for the cost-sharing subsidies WILL be enacted into law…we GUARANTEE IT.” You may also be asking: What about Sen. McCain who has said he wants “regular order” before he can vote on anything? Good question, because it is true that the Cassidy-Graham bill has not been the subject of a Congressional hearing. BUT, that is about to change. The Senate Finance Committee recently announced a hearing on the bill scheduled for next Monday the 25^th. I believe this scheduled hearing will go a long way with Sen. McCain and other Senators like Sens. Murkowski and Collins. But here is what I also believe: I think Sen. McCain will support the Cassidy-Graham bill regardless, and he will justify his support this way, “I think regular order is paramount. I’ve been saying it all along. But, the Parliamentarian told us we are out of time, and I am not going to blame my good friend Sen. Graham for the way Leadership has bungled this whole debate by refusing to follow regular order, so I am going to vote for his bill.” I’m not saying it’s going to happen, but it’s got a chance.

The Cassidy-Graham Bill: It Will All Come Down to the CBO Score

We can talk about political “triangulation” all day long, but whether the Cassidy-Graham bill can pass the Senate or not will come down to the CBO score and (1) How many people will be uninsured and (2) Which States will LOSE money relative to current law.
- Analysis: The Cassidy-Graham bill repeals the “individual mandate” penalty tax. CBO says that repealing the mandate increases the number of the uninsured substantially, especially in the first year in which the penalty tax is repealed. You have heard me say that most industry stakeholders believe that CBO is over-estimating the impact of the individual mandate. You have also heard me explain that the coverage number losses (i.e., the number of people who would be uninsured) are due to people CHOOSING NOT to obtain health coverage. That is different than someone LOSING their health coverage. BUT, repeal of the penalty tax is NOT being explained this way. Rather, the “spin” is that millions of people are “being kicked off of their insurance.” Unfortunately for Sens. Cassidy and Graham, I do NOT foresee CBO changing their economic assumptions when the agency ultimately develops a score of their bill. The only benefit I can see for Cassidy-Graham is that unlike the CBO scores produced on prior ACA repeal-replace bills, CBO will likely use an updated “budget baseline.” Why is this important? Because CBO’s updated budget baseline assumes less people will be covered through, for example, the ACA Exchanges. So, if less people are getting private coverage under the ACA, less people will be CHOOSING NOT to obtain health coverage, which should reduce the overall number of people who might be uninsured under the Cassidy-Graham bill relative to prior ACA repeal-replace bills. I say all of that to say this: If CBO says that between 10 and 15 million people will become uninsured under the Cassidy-Graham bill, that will be a marked improvement from previous ACA repeal-replace bills. While I certainly wouldn’t call that a victory (because increasing the uninsured rate – regardless of how it happens – is not good), the new coverage numbers may be reasonable enough to maintain support of certain Republican Senators (e.g., Sens. Collins and Murkowski?). Again, please note that my use of the word “reasonable” is a relative term. Another BIG DEAL is this: What States will CBO find are “losers” under the Cassidy-Graham bill? While the forthcoming CBO score may not enumerate what States are indeed “losers,” I believe Senators who will want to know whether they are a “winner” or “loser” will be able to find out. Not from an outside group (like the left-leaning Center on Budget Policy Priorities), but from CBO itself. And if States like Alaska, Maine, Ohio, and/or West Virginia are “losers” under the Cassidy-Graham bill, Sens. Murkowski, Collins, Portman, and/or Capito will NOT be supportive, unless of course, some sort of accommodation can be made to mitigate the bill’s negative impact on these States. Again, I’m not saying it’s going to happen, but it’s got a chance.