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CBO Update/Single-Payer Update

CBO Update/Single Player Update

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

Why Are CBO Estimates So Important?

  • Some people ask me: Chris, why do you place so much emphasis on what the Congressional Budget Office (CBO) has to say? They further state: It has been proven that CBO is often times wrong. Sometimes, by their own admission. Soooo, CBO is not reliable, sooo again Chris, WHY?
    • Analysis: My response: I agree, CBO has been proven wrong on a number of occasions. CBO often times revises their own assumptions when they finally figure out that they missed the mark when analyzing a particular policy change. And, there are many cases where I disagree with CBO. BUT, I place a lot of weight on what CBO says because members of Congress and their staff are BOUND by CBO’s estimates. In other words, it does NOT matter whether you agree or disagree with CBO. What CBO says “is gospel,” as my former boss Senator Grassley would always say. Here is another thing about CBO: Members of Congress and staff CANNOT have it both ways with CBO. They cannot ignore CBO’s estimates when they don’t like what CBO says, yet shout from the mountain-tops about CBO’s estimates when those estimates fit their political narrative. It is certainly okay to voice your support or disdain for CBO’s estimates. People – including me – do it all the time. But what you CANNOT do is IGNORE what CBO says when writing legislation. As many may know, CBO has foiled many attempts to make major policy changes. Just ask the Clinton Administration back in the early 1990s. Although I wasn’t around at the time, I heard many-a-story of how CBO scuttled the Clinton health care reform exercise when CBO issued a report with estimates showing that the health care reform ideas advanced by the Clinton White House did more harm than good. Also, go ask Congressional Republicans what they think of CBO’s handling of the recent ACA “repeal and replace” exercise. Most of you recall the headlines:  “Repealing the ACA Will Throw 22 Million People Off of Their Insurance.” This doomed the Republican ACA “repeal and replace” efforts. And the irony here is that by CBO’s own admission, the agency finally admitted that they over-estimated the impact of the ACA’s “individual mandate” and the penalty tax’s impact, and thus, reduced the coverage losses by a healthy margin. BUT, this after-the-fact admission could not undo the statistics that members of Congress like Senators Murkowski (R-AK), Collins (R-ME), and late Senator McCain (R-AZ) had to follow at the time to inform their vote. I tell you all of that as a preface to say this: CBO did NOT have a lot of good things to say about single-payer programs.


CBO Considers Key Design Components for Establishing a Single-Payer Health Care System

  • CBO led with the following statement: “Establishing a single-payer system would be a major undertaking that would involve substantial changes in the sources and extent of coverage, provider payment rates, and financing methods of health care in the United States.” Interestingly – but not surprisingly – CBO did NOT provide any spending or revenue “scores.” Nor did CBO come up with any “coverage gains” or “coverage losses.” Why? Because CBO wasn’t really analyzing a particular proposal for a single-payer system. Instead, CBO was merely identifying a number of design questions for members of Congress to consider. But still, leading off with a sentence like that made most if not all single-payer system advocates cringe.

Analysis: Many of the design questions that CBO raised are questions that I have asked in past updates. For example, what type of benefit package will be offered under a single-payer system? Will individuals be required to pay premiums or out-of-pocket expenses? What will the provider reimbursement rates be? Something like Medicare’s reimbursement rates or a blend between private insurance and Medicare reimbursement rates? Who will run the single-payer system? Will it be 100% government run, 100% Federally-run, or a Federal-State government partnership? Will private insurance play any role in such a system? How will the single-payer system be funded? Would there truly be a 1-to-1 replacement of taxes and spending reductions that would equal the premiums and out-of-pocket spending that people pay under the current system? Would the taxes be low for low-income individuals such that they would be paying less than they pay under our current system (because the health coverage would be free with very little or no cost-sharing AND very little or no taxes)? Would coverage be free for higher-income individuals, while their taxes would increase to something much higher than 40%? CBO also asked some questions that I did not think of: How will a single-payer system control costs? And would the system use a standardized IT infrastructure for verifying eligibility and paying health care claims? I have also suggested that a single-payer system will have a significant impact on jobs. Again, whether we like or not, the health care industry employs a-whole-heck-of-a-lot of people.  While I am by no means defending the health care industry, the fact of the matter is that under a single-payer system, a lot of people will lose their jobs. Actually, proponents of Medicare-for-All acknowledge this fact, and have recently called for ways to “re-train” health care workers to do other things, or to transition these workers to early retirement. In truth, I was surprised to hear proponents of Medicare-for-All actually acknowledge that people will lose their jobs under a single-payer system because – politically – this is against their best interests (i.e., admitting that you are going to take people’s jobs away is NOT a good political talking point). BUT, I give them A LOT of credit for trying to come up with ways to mitigate the burdens for these “losers.” That is how policy should always be made! CBO also acknowledged job loss by noting that consideration must be given to how a single-payer system will affect the workforce. The bottom-line is that there are soooo many questions about a single-payer system that it is hard for me to believe single-payer will ever become a reality. BUT, you can never-say-never. As I stated in my last update, if we see something short of Medicare-for-All get enacted – like a “public option” in the individual market, a Medicare-Buy-In program, and/or a Medicaid-Buy-In program – it is highly likely that we end up with a single-payer system over time. And maybe that is all it takes. A slow march to single-payer. Last comment: We cannot ignore the impact the CBO estimates of single-payer are having on the political side of things. We are now hearing from the “moderate” Democrats who are running for President (e.g., former Vice President Biden, Senator Bennett (D-CO), Beto O’Rourke) say: “We support Medicare-for-All but we cannot end private insurance for millions of Americans. We need to come up with a phased-in approach. That is why we support things like a “public option” in the individual market, and/or a Medicare-Buy-In, and/or a Medicaid-Buy-In.” This whole debate will only get more interesting over the next 15 months. Make sure you order a super-sized bag of popcorn.


CBO Update/ACA Update

CBO Releases Report on Health Coverage for 2015 to 2018

  • CBO recently released a report analyzing health coverage, finding that coverage under the ACA – which includes Medicaid expansion, subsidized individual market Exchange coverage, and the Basic Health Program – ALL increased.  Stop right there. Proponents of the ACA should be jumping for joy!! The law is doing exactly what they wanted to the law to do, which is: Increase access to coverage, which would lead to coverage gains. Being a part of the development of the ACA, I am happy about these coverage gains too.
    • Analysis: To me, these coverage gains make sense. More States have expanded Medicaid, and as I have said for a long time now, as long as the subsidies are flowing in the individual Exchange market, people are going to buy an Exchange plan. CBO also found that coverage under employer plans increased. This make sense too. After all, the economy is doing well, and unemployment is it its lowest point since World War II. But what is so super interesting is that despite the coverage gains under the ACA and employer plans, CBO still found coverage losses. These coverage losses prompted headlines like: “CBO Finds 1 Million More People Uninsured Since 2016.” And it led to ACA proponents saying: “See, the Trump Administration sabotaged the markets, and less people have coverage.”  To me, these headlines and political rhetoric are disingenuous because again, there were coverage GAINS under the ACA, which ACA proponents should be shouting from the mountain-tops. So where are the coverage losses coming from? Answer: The “unsubsidized” individual market. CBO found a whopping 31% reduction in individuals enrolled in an “unsubsidized” individual market plan. While this number is somewhat surprising, it is NOT a new finding. This significant reduction in the “unsubsidized” individual market was something outside analysts like Avalere Health found, and HHS’s data from CMS’s Actuary also showed a significant reduction in “unsubsidized” individual market enrollment. We can debate all day long who is responsible for the reduction in enrollment in the “unsubsidized” individual market and why. Yes, the uncertainty Congressional Republicans and the Trump Administration injected in the markets in 2017 had an impact on premium increases. Less of an impact was any of the Trump Administration’s policies, which is why I continue to push back on the “sabotage” argument. But the bottom-line is that Republicans are partly to blame. BUT, so is the previous Administration’s implementation decisions (e.g., the “transitional policy” that segmented the markets, the implementation of the 3 Rs, and the ACA itself), which led to higher premiums. See the attached testimony I gave in front of the Ways and Means Committee back in 2016. But let’s stop playing the blame game, and let’s look to the future and ponder the following question: People are exiting the “unsubsidized” individual market in droves because this market is SOOOOO expensive. How can we help them?? Republicans have answered this question this way: Since Congress cannot solve this problem through legislation, let’s offer these individuals access to a short-term health plan or an association health plan (AHP). Please note, AHPs are NOT short-term health plans. See my testimony in front of the House Education and the Workforce Committee back in March 2018. But what AHPs are – like short-term health plans – is they are an ALTERNATIVE for those individuals struggling to afford health coverage in the “unsubsidized” individual market. In other words, they are another “choice.” Democrats will tell you that their solution to the plight of individuals in the “unsubsidized” individual market – and especially those who have exited the market – is…wait for it…a government-run program. The progressive wing of the Democratic party says Medicare-for-All is the answer. Moderate Democrats, on the other hand, are more inclined to support a “public option” in the individual market, as well as a Medicare-Buy-In. For example, former Vice President Joe Biden – now the leading Candidate for the Democratic Presidential Nomination – publicly announced that he prefers a Medicare-Buy-In program over Medicare-for-All. Candidate Biden said:  “Your choice…if the insurance company isn’t doing the right thing by you, you should have another choice.” I read this as Candidate Biden saying: “Hey, if the unsubsidized individual market stinks, buy into Medicare, that’s my solution.” BTW, if Candidate Biden is such a fan of giving people “choice,” he should also support AHPs as…wait for it…another “choice” Just sayin.’


Employer Update

High-Deductible Health Plans Are Not Working for a Number of Employees

  • In my last update, I explained to you that media outlets like Axios and certain policy analysts are dissecting the employer-sponsored system, with the intent of asking the following question: Are critics of Medicare-for-All over-stating how bad it would be if people lose their employer plan because, after all, the employer-sponsored system is NOT perfect? This question – to me – insinuates that people with employer plans may want to switch over to a Medicare-for-All-type system. Or, the question is at least attempting to nudge them toward supporting Medicare-for-All.
    • Analysis: Again, I see nothing wrong with asking this type of question and dissecting the employer-sponsored system. Why? Because we really don’t know whether people with employer plans – in their heart-of-hearts – want to switch to over to a Medicare-for-All-type system. BUT, we do have survey data. And that survey data shows that when asked if they would support a government-run program that covers their premiums and out-of-pocket costs, 70% of respondents say YES. But then when told that they may lose their current private health plan and/or they would have to pay more in taxes, supports drops to 30%. That is telling, at least in my opinion. BUT, I also believe that we CANNOT ignore the 30% of respondents who are NOT fans of private health plans. Many – if not all – of this 30% cohort are struggling to keep up with the ever-increasing cost of health care that continues to be shifted onto their shoulders. In my opinion, that is NOT a good thing. The LA Times recently ran a story highlighting the unfortunate situation that employees find themselves in when covered under a high-deductible health plan (HDHP). For a long-time now, I have been an HDHP enthusiast. I bought into the theory that requiring people to have “skin in the game” (i.e., some responsibility for paying for their own health care) would reduce health care utilization and make people a better consumer of medical services. BUT, as time has gone on, I have become an HDHP pragmatist, understanding that HDHPs are not for everyone, and accepting the findings of various studies that have indicated that HDHPs are indeed good at reducing health care utilization, but people are foregoing care for “medically necessary” services to the same extent they are foregoing care for “medically UNnecessary” services. This is why I support a legislative (or regulatory) change to the existing Health Savings Account (HSA) rules to allow HDHPs to pay first-dollar for certain chronic care services, while allowing an HDHP-planholder to maintain their ability to contribute to an HSA. Also, allowing tele-health services and access to primary care services to be paid before the deductible is met. These changes are no-brainers, and they will help a number of employees better afford some health care services, while allowing them to save on a tax-free basis. BUT, I recognize that these no-brainer changes may be viewed as window-dressing to a larger problem presented by HDHPs. And that is: The premiums for an HDHP are still pretty high, and the reality is that the deductible under an HDHP is SOOO high that people really do NOT have insurance at all. This is where there “under-insured” moniker is most aptly applied. So what can be done? My response: I am not sure. Employer-sponsors are doing everything they can. Yes, you can chastise these employer-sponsors for continually shifting the ever-increasing cost of health care onto their employees all you want. But the fact-of-the-matter is that the only way for employer-sponsors to keep premiums relatively low for their employees is to increase the out-of-pocket exposure under the health plan. If you go the other way, and you build in greater out-of-pocket protections (e.g., reducing the deductible), the higher the premium rates go. Which in some cases, makes the insurance “unaffordable” to people so they go without coverage. BUT, back to the LA Times story: Look, I get it. HDHPs are NOT for everyone (as stated above).  And, employers are doing the best they can to offer health benefits to their employees at an “affordable” price (as also stated above). HOWEVER, some people are still left behind, struggling to pay for “medically necessary” care.  And, it is these people who may be inclined to switch over to a Medicare-for-All-type system. Last comment: I want to help this 30% cohort who are struggling. BUT, do we help this 30% by shifting to Medicare-for-All to the detriment of 70% of the people out there who don’t want to go there? Or, do we try to come up with policy changes like allowing HDHP-planholders to pay for services to manage their chronic disease before the deductible is met? Or by placing caps that are lower than the ACA’s out-of-pocket maximum limits on health plans for certain low-income employees and individuals? Or, giving these low-income employees and individuals a government subsidy through some type of funding mechanism (call it “Your Money Account,” I don’t care) to pay for out-of-pocket costs? Also, mandating that providers take on more “risk” in a value-based care contracting approach?  This is all doable, without causing disruption and adversely impacting our economy (like CBO warns might happen under a single-payer system).


Association Health Plan Update

DOJ Appeals the DC District Court’s Ruling Invalidating the Final AHP Regulations

  • Maybe I am over-reacting, but I believe that (1) States that are supportive of AHPs, along with (2) organizations that are already operating an AHP or that want to establish an AHP have to prepare for life WITHOUT the final AHP regulations.  Make no mistake, we do NOT yet know whether the final AHP regulations will be overturned at the Circuit Court and/or Supreme Court level. So, we CANNOT jump to the conclusion that the final AHP regulations will be going away. BUT, States and organizations that are already operating an AHP or that want to establish an AHP would be ill-served NOT to prepare for the worst.
    • Analysis: What can be done? Well, no one can control what the Courts do. So, it is anyone’s guess how the Circuit Court and/or the Supreme Court will rule. Both House and Senate Republicans introduced legislation that would codify the final AHP regulations into Federal law. If enacted, the policy set forth in the final AHP regs would remain in effect with or without the regulations. BUT, there is a .01% chance that House Democrats agree to passing such a measure. Sure, there could be opportunities to “horse-trade” codifying the AHP rules with a Democratic priority.  And this increases the percentage of passage in Congress to say 7%. BUT, considering the toxic, partisan environment we unfortunately find ourselves in – not to mention the fact that campaign season has already begun, especially among Democratic Presidential candidates – the percentage of passage falls back down to .05%. Based on all of that, the only ones left here are the States. So what can the States do? I raised a couple of ideas in my update I sent out last month, and I have since refined these ideas a bit:
      • The Self-Insured AHP Angle: First, States can pass a law that allows self-insured AHPs to offer coverage to “unrelated” employers AND self-employed individuals with no employees. There is NO legal jeopardy here because States can regulate self-insured AHPs any which way they want. So, States can do this with or without the final AHP regulations. Interestingly, Ohio’s MEWA law already allows Chambers of Commerce and self-employed individuals to participate in a self-insured AHP. Importantly, Ohio has had this law on the books for years now, and you have NOT heard people complain about Ohio’s law. However, there is a technical ERISA-related issue that limits this option a bit. And that is, if “unrelated” employers are covered under a State-approved self-insured AHP that is NOT “bona fide” under ERISA, ERISA requires the AHP to separately account for each employer-member and to ensure that the premiums paid into the plan by a particular employer-member are NOT used to pay the health claims of the other employer-members. There are a number of these “Non-Plan MEWAs” operating like this today. So, it is doable, although not ideal from an administrative perspective. Importantly, a self-insured AHP that ONLY covers self-employed individuals does NOT have this same limitation (because ERISA will NOT apply to them).
      • The Fully-Insured AHP Challenge: Second, States can challenge the application of the “look-through” rule to fully-insured AHPs sponsored by “non-bona fide groups” (in the event the final AHP regs go away). It is my understanding that NO State has ever pushed back on the previous Administration’s interpretation of the law that the ACA’s “insurance market” definitions pre-empt State laws. So now, maybe a State decides to challenge this ACA pre-emption notion, and they say to HHS they are still going to allow fully-insured AHPs to offer coverage to “unrelated” employers AND self-employed individuals with no employees. States would need to pass a State law first. Note, the following States already enacted a law that would allow fully-insured AHPs to offer “large group” plan coverage to “unrelated employers” and self-employed individuals with no employees: AR, AZ, IA, KS, KY, OK, and SD.
      • AHP Waivers for Fully-Insured AHPs: Instead of pushing back on the “look-through” rule, States could consider submitting a 1332 Waiver to allow fully-insured AHPs to offer coverage to “unrelated” employers AND self-employed individuals with no employees. I believe a State can accomplish this by modifying the definitions under ACA section 1304 (the definitions of “individual,” “small group,” and “large group” markets, as well as the definitions of “large employer” and “small employer”). The State may also need to waive the “single risk pool” requirement, which is allowed under 1332. The State, of course, would have to satisfy the 4 Guardrails for their Waiver to be approved. But, I believe an AHP Waiver could meet the 4 Guardrails. They already offer comprehensive coverage, and they are already subject to the ACA’s out-of-pocket limits as a “group health plan.” CBO tells us that AHPs will be a coverage gain. The only question is would an AHP Waiver increase the deficit? I believe there is a way to make sure that the AHP Waiver does not increase the deficit. The bottom-line that there is a pathway forward for States that support AHPs with or without the final AHP regulations. Some of these ideas have their limitations though. So the best result is that the final AHP regulations are upheld at the Circuit Court and/or Supreme Court level. Stay tuned on how all of this shakes out.


DOL Issues Non-Enforcement Guidance for Existing AHPs Formed In Accordance With the Final AHP Regulations

  • Speaking of “pathways,” as I mentioned in my update from last month, the nomenclature in the AHP world recognizes that there are 2 different types of AHPs: Pathway #1 AHP and Pathway #2 AHPs. This is a VERY important distinction because Pathway #1 AHPs were NOT impacted by the recent District Court ruling. Only Pathway #2 AHPs were affected.
    • Analysis: As I have explained in the past, Pathway #1 AHPs are governed by DOL guidance that has been issued over the past 30 years (i.e., the DOL’s “old rules”), and they can ONLY cover employers in the same industry (i.e., no self-employed individuals are allowed, nor “unrelated” employers). Interestingly, the Judge in the District Court case clearly recognized Pathway #1 AHPs as viable arrangements. And, the Judge clearly recognized that Pathway #1 AHPs can be treated like a “large group” plan. What is even more interesting is that Pathway #1 AHPs – like Pathway #2 AHPs – are NOT required to cover the “essential health benefits” (EHBs), yet Judge Bates did NOT seem concerned over the fact that Pathway #1 AHPs are NOT required to cover the EHBs. Instead, the Judge focused his disdain on Pathway #2 AHPs going so far to say that Pathway #2 AHPs are an “end-run around the ACA” because they are NOT required to cover the EHBs. To me, this just goes to show that Judge Bates misunderstands how the ACA applies to AHPs. What I mean is: If the Judge was pissed off that Pathway #2 AHPs are NOT required to cover the EHBs, why not be pissed off about Pathway #1 AHPs?? Or large employer plans for that matter (i.e., plans that are ALSO not required to cover the EHBs)?? My apologies for being crass. Back to Pathway #1: Again, Pathway #1 was NOT affected by the District Court ruling, nor was Pathway #1 affected by the DOL’s recent non-enforcement guidance. Which leads me to briefly talk about the DOL’s non-enforcement guidance. In short, the DOL’s guidance tells existing Pathway #2 AHPs (not to be confused with Pathway #1) that they can continue their health plan coverage through the plan’s “coverage period.” This means that if the AHP coverage periods ends on Dec. 31, 2019, the coverage is good through December 31, 2019. BUT, if the coverage period spills into 2020 – for example, some fully-insured AHPs have a contract through June 2020 – the coverage will STILL be good all the way through June 2020. In other words, the coverage provided under existing Pathway #2 AHPs are safe until they are not. What I mean by this last comment is this: Once an existing Pathway #2 “fully-insured” AHP gets to a point where they are “renewing” the existing participants coverage (i.e., when “open enrollment” for the 2020 plan year rolls around), the plan CANNOT renew the coverage as a “large group” plan. Rather, small employer plan participants can ONLY renew into a “small group” plan and self-employed individual participants can ONLY renew into an “individual” market plan. In other words, the “look-through” rule that I always talk about will apply to the existing Pathway #2 fully-insured AHPs, which means these now “non-bona fide groups” CANNOT sponsor a “large group” plan. Sadly, small employer and self-employed individual participants of an existing Pathway #2 fully-insured AHP will face a choice: (1) They will have experience a 10% to 30% premium increase (depending on the savings under their existing AHP) OR (2) They will go without coverage. Is this the result the DC District Court Judge and the States seeking to invalidate the final AHP regulations were hoping for? For “self-insured” existing Pathway #2 AHPs, as stated above, a State can pass their own law to allow self-insured Pathway #2 AHPs to continue offering coverage to their existing participants, as well as to new participants. BUT, as I also stated above, there are some ERISA issues that come into play if the self-insured Pathway #2 AHP covers employers. Again, if a State allows a self-insured AHP to cover “unrelated” employers, this AHP will be considered a “Non-Plan MEWA.” As a Non-Plan MEWA, the DOL treats each employer-participant in the AHP as an individual employer-sponsor of an employee benefit plan that is covered by ERISA. Because ERISA applies here, the premiums paid by an employer-participant CANNOT be used to pay for the health claims of any of the other employer-participants. As a result, this type of Non-Plan MEWA/self-insured AHP must separately account for each employer-participant. All of the premiums can still be rolled up into a Master Trust, but there must be separate sub-Trusts for each employer. This takes away a lot of the utility of establishing a self-insured AHP because you can’t create one, big risk pool. But, this can still be done. Note, Non-Plan MEWAs can cover self-employed individuals with no problem because ERISA will NOT apply to these arrangements, but only if employers are NOT commingled with the self-employed individuals.