+1 800.648.4807

ACA Update

ACA Update

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

Oral Arguments In the Legal Challenge Against the ACA Are Heard – Everyone Is Kind of Freaking Out

  • Admittedly, I am loathe to talk yet again about the most recent legal challenge against the ACA. But, since this litigation has recently dominated the headlines, it seems I can’t ignore it. Not surprisingly, there are some things I would like to say.
    • Analysis: But first, let me say this: Can’t we just all get along. I mean come on people, can we move past “repeal” of the ACA and talk about improving the ACA’s current regulatory environment?? We all know it is not working like we had all hoped. Okay, I get it, there is NO WAY improvements are going to be made to the ACA’s current regulatory environment, because it will be a cold day in H-E double-hockey sticks before Congress ever fixes the ACA. Not because Republicans don’t want to improve the ACA (although they don’t), but because Democrats now seem to be more supportive of supplanting the ACA with Medicare-for-All. I’m not saying that all Democrats support some “shade” of single-payer, but I find it interesting that what most Democrats refer to as the “crowning achievement” of past Administration is now being second-guessed by Democratic policymakers. And instead of taking steps to improve this “crowning achievement,” there is support for setting it aside in exchange for some form of a government-run health care system. Even the former President – who championed the ACA and signed it into law – seems to be suggesting that Medicare-for-All is a “good idea” (at least that is was President Obama said in a recent speech at the University of Illinois). This all means that the ACA is NOT going to be improved any time soon…actually never. That’s because if the Republicans can hold on to the House and Senate after the mid-terms, Republicans are likely going to pursue some form of ACA “repeal and replace.” The “replace” will likely be similar to the Graham-Cassidy approach, where Congress gives States all of the ACA “spending” in the form of the block grant, where the States can then develop their own reforms, most likely with some Federal guidelines attached as conditions to receiving the block grant. On the other side of the coin, if the Democrats take back the House after the mid-terms, nothing will happen when it comes to ACA improvements. Senate Republicans are unlikely to play along, and the Democrats in the House will likely be split between support for some form of Medicare-for-All and fixing the ACA. This split will prevent any improvements from happening. Then, if the Democrats win the White House in 2020, I actually think the ACA’s days are numbered.  But, 2020 is a long way away, so we can’t start speculating that far out. Last comment: The ACA is going to limp along for the next 2 years, with no improvements. Yes, it is great to see that “individual” market premiums – at least for 2019 – are not increasing significantly (see below for more on this), but for those individuals in the “un-subsidized” individual market, premiums are WAAYYY too high. It is these people who “lost” under the ACA, and it is these people who need help (in addition to small employers in the many of the “small group” markets around the country). Say what you will about “association health plans” and short-term health plans, but these arrangements are intended to help these “losers” by at least giving them another alternative to the ACA. For the next 2 years at least, States are going to have to decide whether they want to help out these “losers” by allowing them to take advantage of these new alternatives, or whether States want to continue to lock these “losers” into ACA markets that are simply not working for this constituency. If States choose the latter, I believe this will only prolong the inequities these “losers” currently face. For the “winners” under the ACA (i.e., people who now have health coverage under Medicaid and the ACA “subsidized” Exchange plan population), these folks will continue to be happy if there are NO changes to the ACA. They will continued to be covered by health insurance, which is a good thing!


Oral Arguments In the Legal Challenge Against the ACA Are Heard – Are They Sound Arguments?

  • I feel like Al Pacino in Godfather III…“Just when I thought I was out, they pull me back in.”  In the case of this legal challenge, I provided you with some of my thoughts in a prior update (see attached). I was hoping that was the first – and last – time I would have to talk about this case. But now, well, it appears I need to provide some additional comments.
    • Analysis: Now that we have established that the ACA is NOT going to be improved any time soon, what is going to happen to the ACA?  Will the ACA be “repealed” by the courts? Recent reporting of the oral arguments in the latest legal challenge to the ACA indicates that the District Court Judge seemed partial to the arguments raised by the plaintiffs, and these same reports seemed to indicate that the Judge was not buying the defendants’ arguments. What were some of the defendants’ arguments? Well for one, the defendants argued that back in 2017, if the Republicans in Congress wanted to repeal the ACA – and in particular, the ACA’s “guaranteed issue” and pre-existing condition protection provisions – then the Republicans would have gone ahead and repealed these provisions. They further argued that because Republicans did NOT repeal these provisions – rather, Republicans only “zeroed” out the “individual mandate” penalty tax – this is evidence that Republicans wanted the “guarantee issue” and pre-ex protections to stay in the law.  The defendants even quoted senior Republican Senators, including the Chairman of the Senate Finance Committee, Sen. Hatch (R-UT), as saying on the Senate floor that “the Tax Reform legislation does NOTHING to change the ACA, other than the change to the ‘individual mandate’ penalty tax.” Here is the problem with this argument: The defendants fail to understand (or remember) “how” Republicans enacted Tax Reform. The defendants also seem to forget “how” Republicans tried to “repeal and replace” the ACA.  In the case of Tax Reform – and similarly in the case of ACA “repeal and replace” – Republicans were using the Senate’s “reconciliation” process to enact these measures, which only requires a 51 vote margin (instead of the traditional 60 vote threshold in the Senate). As I have explained to you in the past, as a condition to enjoying the luxury of only a 51 vote margin in the Senate, the legislation MUST satisfy the “reconciliation” rules, which generally requires that the provisions of the bill ONLY have a direct “revenue” or “spending” impact. It is important to emphasize that Congressional Republicans wanted to repeal ALL of the ACA’s insurance market reforms, not just the “individual mandate” penalty tax, the “guaranteed issue” provision, and the pre-ex protections. BUT, Congressional Republicans could not repeal ALL of the ACA through the normal legislative process, which required the traditional 60 vote threshold in the Senate. Instead, Congressional Republicans were constrained to the Senate’s “reconciliation” process. Congressional Republicans were further constrained by the Senate Parliamentarian, who ruled that repeal of ALL of the ACA’s insurance market reforms – including “guaranteed issue” and the pre-ex protections – could NOT happen through a “reconciliation” bill. The Senate Parliamentarian also said that Republicans could NOT fully repeal the “individual mandate” through “reconciliation.” But, when it came to the “individual mandate” penalty tax, Republicans pivoted to simply “zeroing” out the penalty tax, which the Parliamentarian actually said was okay. I torture you with the history to say this: If Republicans could have outright repealed (1) the “individual mandate” penalty tax, (2) “guaranteed issue,” and (3) the pre-ex protections, Republicans WOULD have done so. The intent of Republicans was clear: They wanted to get rid of the ENTIRE ACA. BUT, the “reconciliation” rules foiled the Republicans hopes-and-desires, and the only thing Republicans could do at the end-of-the-day was “zero” out the penalty tax (which has the same effect of repeal). So – at least to me – to argue that Republicans intended to keep “guaranteed issue” and the pre-ex protections because Republicans did NOT repeal these provisions does not hold-water. Also, to say that the Republicans purposefully kept the “individual mandate” in the law is a misnomer. Interestingly, media reports seemed to indicate that the defendants finally came around on the above stated points and acknowledged them during oral arguments. BUT, because this argument keeps coming up in news articles as one of the lead arguments made by the defendants, I wanted to take the time to explain why this argument is NOT a sound argument.


Oral Arguments In the Legal Challenge Against the ACA Are Heard – An Argument from the Defendants That I Generally Agree With

  • The defendants did advance an argument that I generally agree with. And that argument is: Simply because the “individual mandate” penalty tax was “zeroed” out, that does NOT mean that the “individual mandate” is actually repealed from the law, and that does NOT mean that the ACA is unconstitutional.
    • Analysis: As I mentioned back in my June 4th update (attached), the plaintiffs in this case argue that the “individual mandate” penalty tax is now unconstitutional because the penalty tax is NO LONGER generating revenue for the government. The defendants have countered that a tax doesn’t have to generate revenue for it to be a tax. I agree with this counter-argument, although I would characterize this argument differently. What I mean is this: I am NOT persuaded by the argument that “a tax doesn’t have to generate revenue for it to be a tax,” but what is most important here is that the “individual penalty” tax is STILL a fixture of the Internal Revenue Code. In other words, while the penalty tax was “zeroed” out, the penalty tax provisions – as set forth in Code section 5000A – still exist in…wait for it…Code section 5000A. Stated yet another way, the Tax Reform bill did NOT eliminate Code section 5000A from the Tax Code. Instead, the Tax Reform bill simply amended the subsection of Code section 5000A (in particular subsection (c)) where the penalty amounts are listed, and the new amendment said that the penalty amounts are no longer $695 or 2.5% of income, rather, the penalty amount is $0 and there is no penalty based on a percentage of income. Why is this significant? Because a future Congress (and future President) can amend the Tax Code – just like Republicans did in Tax Reform – but this time, Congress can “dial back up” the penalty tax amount from $0 to $695 or 2.5% of income, or to a higher dollar/percentage of income amount. Why is this important?  Because, if this case ever gets to the Supreme Court, I believe the Court will find that because a future Congress (and a future President) has the opportunity to make the “individual mandate” penalty tax a revenue-generating tax yet again, the “individual mandate” REMAINS constitutional because the penalty tax is simply lying dormant until a future Congress (and future President) officially amends the law. Which leads me to say this: Based on the District Court Judge’s questioning, it is fair to speculate that the Judge may rule in favor the plaintiffs. I am NOT saying the District Court Judge will rule in favor of the plaintiffs, I am just saying that it could happen (it is also important to note that this particular District Court was chosen because it was believed that it was a “friendly” District Court). BUT – at least in my opinion – even if the plaintiffs win at the District Court level, I believe that the ruling is vulnerable on appeal at either the Circuit Court level, and certainly at the Supreme Court level. So, I think this legal challenge fails at some point. But not before it is politicized to death (which is already has been).


ACA “Individual Market” Update

2019 Premiums Did Not Increase to the Extent CBO and Others Predicted

  • You gotta love politics and political rhetoric. One the one hand, you heard the current President – and a couple of Congressional Republicans – contending that the ACA was dead, imploding and crating under its own weight. On the other hand, you heard ACA supporters – and literally every Congressional Democrat – contending that the current Administration is “sabotaging” the ACA markets and Congressional Republicans are enacting policies that will cause premiums to sky-rocket.
    • Analysis: The ironic thing is this: The political rhetoric on BOTH sides WERE WRONG. With respect to whether the ACA is imploding and cratering under its own weight, recent analysis from Avalere Health – and also data crunched by a left-leaning analyst Charles Gaba (while I do not share his politics or style, is a person I respect for producing objective data points) – have reported that there are NO “bare counties” for 2019 (i.e., each county in the country has at least 1 insurance carrier).  That is an improvement from year’s past. And, an indication that the ACA is NOT dead. With respect whether premiums are sky-rocketing due to “sabotage” and Congressional actions, Avalere Health – and again Charles Gaba – have found that the nationwide average premium increase in the “individual” market is around 4%. This is a SIGNIFICANT reduction from the 30% increase for 2018.  And, it flies in the face of what the Congressional Budget Office (CBO) and other experts predicted would be the average premium increase for 2019 (CBO and other predicted 10% to 15% increases). Sticking with the premium increase issue for a moment, we have to remember that this 4% number is only an “average.” Avalere and Gaba have found that 41 States will see a premium increase below 10%.  In 11 of these States, premiums have actually gone DOWN. There are only 6 States and DC where premiums are going up by 10% to 18%. Again, a HUGE reversal from prior year premium increases, and HUGE difference from what CBO and other experts predicted. As the non-economist and non-actuary that I am, I feel somewhat vindicated for the small premium increases. I have been harping for far too long now on how I thought the impact of the repeal of the “individual mandate” would not be as pronounced as CBO and others were predicting. Interestingly, in the 11 States where premiums went down, I believe 4 of them do NOT have their own 1332 Waiver to establish a State-based reinsurance program. The other 7 States do have their own State-based reinsurance program, which accounts for the premium reduction. Last comment: Again, you gotta love political rhetoric.  Now that it is campaign season, the President and Republicans are radio-silence when it comes to charging that the ACA is imploding (because it’s not). There is also very little rhetoric from Democrats on premium increases. And because Democrats no longer have premium increases as a wedge issue, Democrats are turning to the ACA’s “pre-existing condition protections,” which is now the campaign slogan du jour (Sen. Manchin (D-WV) just released as ad shooting a gun at the legal challenge I spoke about above, arguing that “getting rid of pre-existing conditions protections is dead wrong”). But here is something to remember: If the legal challenge to the ACA somehow prevails, I would bet my house, my wife and my kids that Congressional Republicans would support bringing “guaranteed issue” AND the pre-existing condition protections back into the law. I am that confident it would happen.


Litigation Over Unpaid “Cost-Sharing” Subsidy Payments In 2017

  • The Montana CO-OP recently won its lawsuit for unpaid “cost-sharing” subsidy payments that should have otherwise been made between Oct. 2017 and the end of 2017.
    • Analysis: It has been a long time since I talked about the ACA’s “risk corridor” program, and the fact that HHS only collected about 13 cents on the dollar under the “risk corridor” program. However, that is not how the “risk corridor” program was expected to work. It was expected that the amount of money paid out of the “risk corridor” program would equal the amount of money taken in by the program. BUT, instead of collecting enough money to cover the claims insurance carriers submitted for payment under the program, HHS only collected about 13 cents on the dollar, meaning all of the carriers owed money under the “risk corridor” program received a significant hair-cut in their payment. In the wake of the shortfall in “risk corridor” payments, a number of insurance carriers sued the government, claiming that HHS had a statutory obligation to make the full “risk corridor” payments. And further, that failure to make the full payments created legal claim against the government that is typically satisfied through the Department of Justice’s “Judgement Fund.” The reason I bring the “risk corridor” program and its ensuing legal challenges is to say this:  I have always argued that HHS was NOT obligated under the statute to make the full “risk corridor” payments, but rather, that the “risk corridor” program was intended to operate on a “budget neutral” basis (i.e., whatever money comes in, is the amount of money that goes out).  In other words, I did NOT believe that HHS was contractually obligated to make the full “risk corridor” payments. Fast forward to today and the current “cost-sharing” subsidy litigation. Unlike the “risk corridor” program, Congress never intended for the “cost-sharing” subsidy program to be “budget neutral” (i.e., the “cost-sharing” subsidy program is NOT intended to pay for itself). Instead, the statute explicitly states that HHS MUST reimburse the carriers for their up-front reduction of deductibles and co-pays in form of “cost-sharing” subsidies. To me, the statute is clear on this. So, when I heard that the carriers started suing the government for the cost-sharing subsidy amounts that were NOT paid to the carriers between Oct. 2017 and the end of 2017 – after the Administration decided to cancel the “cost-sharing” subsidy payments – I felt that the carriers actually had a winning claim (again, in contrast to the legal claims to the “risk corridor” payments). Well, it appears that the Federal Court of Claims agrees with me, as the Court of Claims just awarded the Montana CO-OP $5.3 million in unpaid cost-sharing subsidy payments for Oct. 2017 to the end of 2017. I assume that the other pending legal claims for unpaid “cost-sharing” subsidies advanced by other carriers – including the Maine CO-OP, the Wisconsin CO-OP, some of the Blue plans, and other local carriers – will similarly be successful.  I will keep you apprised.