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ACA Update

ACA Update

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

The Supreme Court Finally Ends the Ongoing Speculation Over Oral Arguments

  • Will the Court hear oral arguments in Texas v. Azar – the case involving the constitutionality of the “individual mandate” penalty tax, and by extension the constitutionality of the entire ACA – BEFORE the November election?? Answer: NO.
    • Analysis: A lot of folks out there – the media, policy analysts, and ACA supporters – all suggested that the Supreme Court would indeed schedule oral arguments in Texas v. Azar BEFORE the November election. I am not just saying this now – because I have always held this position – but I did NOT think that the Supreme Court would hold oral arguments BEFORE the election. Why? In my opinion, this case is WAAAYYYY too political for the Supreme Court to give either political party additional fodder to beat each other over the head with. I mean, think about it, depending on the questions asked – and by which Justices – BOTH political parties would pick and choose what was said and blow the commentary out-of-proportion to fit their own political narrative. It would be a mess, and the upcoming election is already shaping up to be a mess. Here’s why I also thought the Supreme Court would NOT hold oral arguments BEFORE the election: I hang-my-hat on what Chief Justice Roberts said when the “individual mandate” penalty tax was first challenged (in NFIB v. Sebelius). Justice Roberts opined that the American people (on election day) should decide the fate of the ACA, not the Supreme Court. And based on this particular statement, I felt that the Supreme Court would NOT want to “influence” the upcoming election by holding oral arguments on such a political issue BEFORE the voters went to the polls. I will note, some people out there will argue that COVID forced the Supreme Court to defer scheduling oral arguments until AFTER the election. To an extent, I won’t disagree with this point. After all, COVID did indeed disrupt the Supreme Court’s schedule, which resulted in the Court pushing back the consideration of existing cases on the docket (thus, resulting is a domino effect of pushing back the scheduling of oral arguments in other cases, including Texas v. Azar). BUT, it doesn’t really matter who is right here. The bottom-line is that everyone must wait until AFTER the election (Nov. 10th to be exact) to try to read-the-tea-leaves on which way the Supreme Court may rule on the future of the ACA (and note, a final ruling will NOT come until 2021…some say Spring 2021…I say June 2021…stay tuned).


What Would the Democrats Do If the ACA Was Struck Down By the Supreme Court?

  • In my update I sent on July 2nd, I opined on how Republicans might respond to a Supreme Court ruling that struck down the ACA.  At the end of my commentary, I said the following: “If the ACA is struck down with a President Biden in the White House, I believe we would see the reenactment of the ACA, but this time with a ‘public option’ and other ‘shades’ of single-payer that Democrats could NOT get into the law back in 2010. BTW, this is something I don’t hear a lot of people talking about, but arguably people should be.” Okay, so let’s talk about it!!
    • Analysis: And, by talking about what Democrats might do if the ACA is struck down, this will allow me to also talk about the health care policy ideas Democrats discussed 2 days ago at the National Convention (note, for consistency purposes, below I am going to generally track the same issue areas that I hit when talking about Republicans and health care back in July).
      • Medicaid: Democrats remain frustrated over the fact that 12 States have still NOT expanded Medicaid coverage as called for under the ACA. That is why Candidate Biden has proposed to allow people who would otherwise be eligible for Medicaid – but who live in a State that did NOT expand Medicaid – to have “free” access to a “public option” (i.e., premium-free buy-in to the “public option”). It appears that this “public option” is the same “public option” that would be made available to individuals in the “individual” market, offered through the ACA Exchanges (we will talk more about this “public option” below). BUT, what if the ACA is struck down by the Supreme Court? The Medicaid expansion – according to the ACA – would be GONE. This would mean that the 39 States (and DC) that already expanded Medicaid would find themselves with NO Medicaid expansion. Would Democrats try to re-enact the ACA’s Medicaid expansion requirements, and couple it with the premium-free buy-in to the “public option” for hold-out States? I doubt it.  If we have a Biden Administration and a Democratic Senate, I believe Democrats would go BIG and allow any person living in any State who happens to be eligible for Medicaid (based on family size and household income) to have “free” access to some sort of “public option” or “government-run program.” This would be championed as the first step toward Medicare-for-All. Am I so crazy to think this??
      • “Public Option” and “Medicare-Like, Public Option”:  Okay, so there seems to be 2 proposals on the table dealing with a “public option.” The first proposal is – as stated above – a “public option” that is available in the “individual” market and sold through the ACA Exchanges. You have heard talk a bunch about how this “public option” would likely be structured (i.e., a health plan covering a prescribed set of benefits that reimburses medical providers at a rate that is currently lower than private insurance reimbursement rates), so there’s NO need to go back over that. HOWEVER, what’s now confusing to me is that based on prior descriptions of who this particular “public option” would be made available to, it appeared that the “public option” would ONLY be available to (1) individuals in the “individual” market and (2) Medicaid-eligible individuals in States that did NOT expand Medicaid. BUT NOW, it appears that the media and some policy analysts are suggesting that the “public option” proposed by Candidate Biden would ALSO be made available to employers where (1) the employer would buy-into the “public option” and make this plan available to its employees – OR – (2) employees would be able to “opt-out” of their existing employer plan and “buy-into” this “public option.” This is a VERY important distinction to clarify because it is one thing to consider a “public option” for people in the “individual” market (about 13 to 14 million people) and 2 million Medicaid-eligible individuals, it is a whole DIFFERENT kettle-of-fish if we are talking about a “public option” that is somehow made available to 160 million Americans with employer-sponsored health coverage. Stay tuned on this… The second “public option” I refer to above – a “Medicare-like, public option” – was unveiled on Wednesday when Candidate Biden and Vice Presidential Candidate Harris both talked about allowing Americans to “buy-into” Medicare at age 60 (instead of 65). Not surprisingly, no details have been provided by the campaign on how this “Medicare-like, public option” would be structured (at least I haven’t seen any), so query how this “Medicare-like, public option” would actually work? I think we can take a guess though: Like the “public option” for the “individual” market, this “Medicare-like, public option” would cover a prescribed set of benefits that reimburses medical providers at a rate that is currently lower than private insurance reimbursement rates. The plan would most likely cover additional benefits not currently covered by Medicare (actually it would probably look more like a Medicare Advantage-type plan). But at this point, who knows.  We’ll just have to wait to find out… In my opinion, a Biden Administration and possibly a Democratic Senate would NO doubt pursue BOTH “public options” irrespective of whether the Supreme Court strikes down the ACA, although these efforts would certainly take on NEW meaning if the ACA was indeed struck down.
      • The Premium Subsidies: In prior updates, I told you about the Democrats’ proposed changes to the ACA’s premium subsidies. In short, Candidate Biden would increase the premium subsidies by pegging the amount of the subsidies to a “gold plan” instead of a “silver plan.” As we all know, the premiums for a “gold plan” are higher than a “silver plan,” and thus, if you peg the subsidy amount to the premiums of a “gold plan,” you by definition are increasing the amount of the premium subsidy relative to where those amounts are today. Both Candidate Biden and the House Democrats would reduce the amount of money a person is required to pay for an “individual” market plan from 9.78% of their income down to 8.5% of their income. This change in the law would effectively increase the premium subsidy amounts for people by decreasing the amount of money a person has to pay on their own for a subsidized plan. While this is certainly good for consumers because it would lower the cost of health insurance for them, this may NOT be so good for employers. Why? Because if the “affordability” test for the “employer mandate” penalty tax mirrors this 8.5% of income test, then employers would be required to contribute MORE money toward their health plans or face a penalty tax. Irrespective of whether the Supreme Court strikes down the ACA, a Biden Administration and possibly a Democratic Senate would NO doubt pursue BOTH of these policy changes. The House Democrats already have pursued 1 of these ideas, and they would gladly pursue BOTH if Democrats controlled Congress AND the White House.
      • The ACA Exchanges: I have said it before, and I will say it again: The idea of an Exchange (i.e., a distribution channel) shares bipartisan support. Where both Democrats and Republicans split is how to structure the Exchange.  As I have explained, Republicans want to rely on private-sector companies to perform the public-facing enrollment functions, while the government still determines things like premium subsidy eligibility behind the scenes. Democrats, on the other hand, want the Exchange to act as a “regulator” and actively manage their State’s insurance market. California (CA) is an example of what I believe Democrats want to see in an Exchange. CA is an “active purchaser” Exchange, which means the CA Exchange has the authority to selectively contract with insurance carriers selling health plans through the marketplace. For example, the CA Exchange can choose not to work with a particular insurance carrier in the State. The CA Exchange can also kick-out an insurance carrier that is currently offering plans through the marketplace if the carrier has a history of charging high premium rates, or in cases where the Exchange is seeking to promote “optimal combination of choice, value, quality, and service.” As you know, back during the ACA debate, a number of Congressional Democrats wanted a “public option” to be sold through the Exchanges. BUT, a number of moderate Democrats did not support incorporating this type of government plan into the private insurance market. In response, the proponents of the “public option” pivoted and sought to allow the Exchanges to regulate the insurance markets. BUT, moderate Democrats resisted this policy change too. As a compromise, moderate Democrats agreed to a statutory provision that would allow a State to voluntarily elect to permit their Exchange to regulate the State’s insurance market (i.e., a State could elect to allow its Exchange to become an “active purchaser,” which CA did). If we have a President Biden and a Democratic Senate, I do NOT believe moderate Democrats will be able to drive the policy like they did back in 2009/2010. Soooo, I believe efforts to give the Exchanges the authority to be “active purchasers” would likely succeed. I also would expect that Congress would endeavor to give Federal funding to States to establish their own State-based Exchange. I believe these efforts would be pursued whether the ACA is struck down or not.
      • The Insurance Regulations: I do NOT think that a Biden Administration or a Democratic Senate would seek to change the ACA’s current “coverage requirements” like the “essential health benefits” or the “group health plan” requirements. I also do NOT foresee a Biden Administration or a Democratic Senate choosing to change the premium rating rules. Maybe the Administration and/or Congress tinkers with the Medical Loss Ratio rules. BUT, I do believe there is one area where the Biden Administration and Congress would seek to make substantive changes: Protecting people from out-of-pocket expenses. Here, a Biden Administration and a Democratic Senate would likely seek to lower the ACA’s current out-of-pocket maximum limits (currently $8,150 for single and $16,300 for family coverage).  This could be accomplished by simply capping the out-of-pocket maximums at a lower amount. The cap could also vary by income level. For example, families making more than $250,000 may be stuck with the ACA’s current out-of-pocket maximum limits. While families with much lower incomes (like families at 100% and 200% of the Federal Poverty Level (FPL)) may only be required to pay ¼ of the current limits, while families between 200% and 400% of FPL are required to pay ½ of the current limits, and families between 400% of FPL and $250,000 would pay ¾ of the current limits. If the ACA is struck down, I think this type of policy change would become a reality. Even if the ACA is upheld, I still foresee a President Biden and a Democratic Senate seeking to lower out-of-pocket costs, even if this change in the law will increase premiums for policyholders.
      • The Risk Pools: The ACA included 3 risk mitigation programs to help stabilize the “individual” market risk pools (which the drafters knew would be flooded by high-risk individuals coming from State high-risk pools (which were going to be disbanded) and individuals who could never get insurance because they had a pre-existing condition).  2 of the 3 ACA programs were temporary. And, these temporary programs had lots of implementation issues. Yes, Republicans helped in throwing a wrench into the implementation of these programs, but the bottom-line is that these temporary programs were NOT overly effective (partly because they were temporary). The 3rd risk mitigation program is permanent (i.e., the “risk adjustment” program), but – at least in my opinion – this program is a mess because it enriches insurance carriers that underwrite higher risks individuals, while carriers that happen to attract lower-risk individuals take a HUGE hit to their bottom-line (only to be required to give that money to the carriers taking advantage of the “system,” which further exacerbates the problem of little to no competition in various markets). Fast-forward to today. A growing number of States are establishing their own State-based reinsurance program through a 1332 Waiver. These reinsurance programs are indeed lowering costs (although in many cases, it’s a one-time savings, as premiums start to increase once again once the initial base-line is set). We even saw Congress try to enact a Federal reinsurance program, although unsuccessfully. If the ACA goes away and/or we have a President Biden and possibly a Democratic Senate, I fully expect the Administration and Congress to enact a Federal reinsurance program, fully funded by the Federal government. We could also see other risk mitigation programs like a new and improved “risk corridor” program that is permanent. I do NOT foresee the “risk adjustment” program changing, although changes should be made (again, my opinion).


Will Any of This Make Its Way Into Law, and If So, How?

  • One word: “RECONCILIATION.” You heard me talk ad nauseam about the Senate’s “reconciliation” process during the ACA “repeal and replace” exercise. As you also know, Senate Republicans used “reconciliation” to enact Tax Reform at the end of 2017. And how can you forget, Senate Democrats used the “reconciliation” process to enact the ACA back in 2010 (I can’t forget, because I lived it).
    • Analysis: Sooooooo, you can bet-your-bottom-dollar that if Candidate Biden is elected President Biden – and if the Democrats take control of the Senate – the “reconciliation” process WILL be used to enact most of what I discussed above.  Why most of what I discussed above, and NOT all? Well, as I have explained before, “reconciliation” legislation can ONLY include provisions that impact revenue (i.e., taxes) and spending. And, while some provisions that are typically thrown out of a “reconciliation” bill do have some impact on revenue and/or spending, they are bounced because the Senate Parliamentarian has determined that the impact is “indirect.” Or, the Parliamentarian may find that the suggested change in “policy” is so great that it outweighs the particular provision’s impact on revenue/spending. Okay, so we know that Medicare is made up of revenue (i.e., payroll taxes) and spending (i.e., direct government spending to pay for health claims). Soooo, we can agree that allowing people age 60 to 64 to “buy into” a “Medicare-like, public option” would certainly impact spending. While there may not be a payroll tax component like we have under traditional Medicare, the government will likely have to generate revenue through taxes to fund this “Medicare-like, public option.” A “public option” in the “individual” market would be in. Here, you have government spending for sure. And you will need to fund the program somehow (for example, through increasing taxes like the corporate tax rate). The changes to the ACA premium subsidies would also make the cut. Once again, we have government spending here. Changes to the ACA Exchanges, however, might NOT make the cut.  In my opinion, there is too much “policy” here. What I mean is, if you want the Exchanges to become an “active purchaser” and a “regulator” of the market, yes, there will be some impact on spending (because the Exchange will negotiate lower premium rates, which will impact government spending on the premium subsidies). BUT, the Parliamentarian would likely find that this impact is too “indirect.” Also, capping out-of-pocket costs won’t make the cut. This certainly helps people who are struggling to pay for the ever-increasing cost of health care. But it does NOT impact revenue or spending. The risk mitigation programs like a Federal reinsurance program is somewhat of a wild-card to me. If the government is the one that is fully funding the program through government spending, then this program is likley in. BUT, if the program is funded by fees imposed on industry stakeholders (like the insurance carriers and employer-sponsored plans, or even TPAs), then you really do NOT have any revenue in the form of taxes collected by the IRS and deposited in the U.S. Fisc. And, you also do NOT have direct government spending. Even if you had partial government spending to fund the program – either in the short-run or the long-run – it still may be a stretch. Having said all of that, let me burst your bubble:  If the Democrats do NOT take the majority in the Senate, then using the “reconciliation” process is clearly OFF the table, meaning mostly everything – if not everything – discussed above won’t happen. If the Democrats have a 1 seat majority, it may still be difficult to get a “reconciliation” bill through the Senate. Just ask Senate Republicans how important that 1 vote that you do NOT have really is. If Democrats have a 2 or 3 seat majority, well then, the odds of getting a “reconciliation” bill through increase.


Last Comment:  What the Heck Happened on the Failed Stimulus Negotiations?

  • A lot of people – including me – were surprised (and mad) that Republicans and Democrats could NOT find common ground on a “4th Stimulus Package” before they left town for the rest of August and part of September. There is talk that some sort of Stimulus Package will get wrapped up in the upcoming “spending bill” that needs to be enacted by September 30th (although this date is typically extended to a future date(s)). Despite all of this talk, I am loathe to think following: I – and some others – are coming to the conclusion that we probably won’t have another round of Stimulus at all this year. Why?
    • Analysis: On the hand, the Democrats have ZERO reason to cut a deal with Republicans. After all, the longer the public health crisis continues – and the longer it takes for the economy to rebound – the better the political environment is for Democrats in the run up to election day. If the Democrats actually cut a deal, that would allow Republicans to claim victory and “message” that despite the public health crisis and economic woes, they are helping small businesses and those industries hardest hit by the pandemic. That is counter to the Democrats’ strategy to win back the Senate and the White House. Just take the Democratic National Convention as an example. There was LITTLE talk about policy changes, but a WHOLE LOT of talk about how the Trump Administration bungled the response to COVID and how people are hurting, not to mention dying (their words, not mine). In addition, Majority Leader McConnell does NOT have all of his Republican Senators in the YES column on any type of Stimulus, let alone a $3.5 trillion package called for by the Democrats. Leader  McConnell is NOT about to get a deal done with Democratic votes, because that would mean he would have to get closer to $3.5T (maybe $2.5T), which would probably result in him losing even more Republican Senators. So to me – and others – it seems like everywhere McConnell turns, he runs into a brick wall. Then, as a very smart friend of mine opined, if you add in the fact that it is looking more and more dire for a Trump 2nd Term – which could very easily result in the Republicans losing the Senate come November – it is likely that Leader McConnell sees the writing on the wall, and he is already plotting for how Republicans can win back the Senate in 2022. The 2022 strategy: Allow the Democrats to enact their “mandates” and spend their $3.5T when they are in control. That way, the Democrats would “own” the damage if and when the bottom falls out. It’s certainly a risk because maybe the Democrats make it all work.  But that’s politics for you