Health Care Policy Update
Health Care Policy Update
by Christoper E. Condeluci, Principal and sole shareholder of CC Law & Policy PLLC in Washington, D.C.
Recent Headlines: Republicans Try to “Repeal” the ACA Through the Courts, While the Democrats Try to “Improve” the ACA Through Legislation
- Call me Captain Obvious, but health care is “political.” For example, Democrats successfully used health care to win back the majority in the House in 2018 by hammering Republicans with the issue of pre-existing condition protections. Republicans successfully used health care back in 2010, and also in subsequent years, to re-gain majorities in Washington, DC – and also in the States – by hammering Democrats with calls to repeal and replace the ACA. Soooo, why would 2020 be any different?
- Analysis: Republicans are continuing their quest to repeal the ACA, now through the courts. We all knew that, but these efforts are back in the news due to a recent brief submitted by the Department of Justice (DOJ) to the Supreme Court arguing that the entire ACA should fall if the Supreme Court finds that the “individual mandate” penalty tax is unconstitutional. BUT, not to be out-done on the “political”-front, House Democrats are using the Trump Administration’s Supreme Court brief and responding with vote on an “ACA improvement bill.” Of note is the fact that this “ACA improvement bill” has been sitting around for more than a year now (for example, House Democrats unveiled many of these proposals back when they gaveled-in as the majority party in Spring 2019). BUT, the political timing was never “just right” for Democrats to bring the bill to the House floor for “messaging” purposes. BUT, with the DOJ’s Supreme Court brief submission, it was no-time-like-the-present. Also, it was no-time-like-the-present to allow Former Vice President Biden to not only seize on the Trump Administration “asking” the Supreme Court to throw out the ACA – but to also leverage the ongoing pandemic – to emphasize how important health care is going to be as a campaign issue. Conveniently – although not surprisingly – some of the provisions included in the House Democrats “ACA improvement bill” are a part of Candidate Biden’s health care proposal (e.g., increasing the existing premium subsidy amounts). By scheduling a vote on an “ACA improvement bill” now gives the former Vice President a megaphone to extol the virtues of the ACA and hammer President Trump for trying to repeal the law.
Republican “Philosophy” on Health Care?
- I was recently asked to provide my thoughts on the Republican “philosophy” on health care in 2020. BTW, it’s a really tough question, but the more I thought about it, here’s where my thinking led me:
- Analysis: The Republican “philosophy” on health care is lowering health care costs and reducing health care spending. Well DUHHH, Democrats want to do the same exact thing. BUT, each political party is seeking to achieve these same policy goals in VERY different ways. When it comes to Republicans, they are seen as wanting to “dismantle” the ACA. And based on the optics – and the actions taken by Republicans – one cannot deny this fact. BUT – at least in my opinion – “dismantling” the ACA is simply a political-means-to-a-political-end. What I mean is: The Republican base has wanted to repeal the ACA ever since its inception because the base could not accept that the Democrats got one of their signature policy goals into law. As a result, repealing the ACA has become “political” for the Republican base, and something that Republicans running for office have always sought to tap into. BUT, when you set aside the “politics” and you think about the practical, NON-“political” reason why Republicans want to – quote-unquote – dismantle the ACA, you conclude that Republicans are just trying to lower health care costs and they believe – for right or wrong – that by getting rid of the ACA, you will lower health care costs. Look, no one can deny that the ACA increased the cost of health insurance. Just ask the Congressional Budget Office (CBO), they told us so. BUT, it is important to remember that CBO’s baseline took into account (1) an insurance market where carriers could DENY people coverage with a pre-existing condition and also (2) insurance regulations that did NOT mandate a specified level of health coverage. We all know that (1) if carriers can NO longer deny people coverage with a pre-existing condition and (2) if a health plan is required to cover more benefits and services than previously required, the health coverage – by definition – is going to cost MORE. Now, am I telling you that Republicans want to change that?? Not necessarily, but YES. Here’s what I mean: I truly believe that if the ACA were to go away (because, for example, the Supreme Court strikes it down), Republicans WILL MAINTAIN the ACA’s pre-existing condition protections. There is NO question in my mind on that. BUT, what Republicans would like to do – which differs from the ACA – is to allow health plans to cover fewer benefits and services. Now stop right there – I am NOT SAYING that Republicans want Americans running around with “skinny” health plans. What I am TRYING TO tell you is that Republicans do NOT want to force people to choose between (1) NO health coverage at all or (2) higher costing health coverage due to the number of benefits and services the plan must cover (which is now required by the ACA). Instead, Republicans want to allow people to choose between (1) higher costing, comprehensive coverage and (2) lower costing, less comprehensive coverage. And this is one of the many ways the Republicans believe that can achieve the policy goal of lowering health care costs. For right or wrong, Republicans are criticized for this policy goal because there is a belief that people need to be protected from themselves – or be protected from unscrupulous actors – and therefore, the law needs to dictate that people MUST be covered by comprehensive coverage (or at least the same level of coverage required by the ACA). And, depending on your ideology, you favor the law dictating the level of health coverage – OR – you favor the ability of people choosing whether they want to enroll in (1) higher costing, comprehensive coverage and (2) lower costing, less comprehensive coverage. Last comment: It’s also NOT all about “coverage.” Another way Republicans believe they can lower health care costs is through increasing transparency of medical prices. I can’t quite say that this policy is political” because if you were to ask Democrats, they would agree that consumers need to know more about the prices of medical items and services. BUT, Democrats would seek to increase transparency through “setting” the price – or reimbursement rate – for a particular medical item or service. Republicans, on the other hand, want to require medical providers, insurance carriers, and self-insured health plans to disclose their negotiated medical prices that are charged to patients. In the case of transparency, this really has NOTHING to do with the ACA, which is why I suggest increasing transparency is NOT entirely “political.” BUT, just ask the medical providers and insurance carriers what they think about either political party’s plan to increase transparency.
A Republican “Replace” Plan If the Supreme Court Throws Out the ACA?
- I was also recently asked, what would Republicans do if the Supreme Court struck down the ACA? It’s another tough question, but here are my thoughts:
- Analysis: As stated above, Republicans want to MAINTAIN the pre-existing condition protections. I believe Republicans would immediately introduce legislation that would ensure that people CANNOT be denied coverage if they have a pre-existing condition. I also believe that to the extent the pre-ex protections can be preserved through administrative means, the Trump Administration would issue guidance or a regulation preserving this all important protection. But what else?? Well, as you know, we have NOT seen a full-fledged plan on how Republicans would “replace” the ACA in the wake of a Supreme Court decision, but there is a reason for that: Why memorialize a plan for your opponents to bludgeon you over? In the absence of any said “replace” plan, here is where I could see Republicans going:
- Medicaid: I do NOT think Republicans are going to try to re-structure Medicaid like they attempted to during the failed “repeal and replace” exercise of 2017. In my opinion, Republicans learned their lesson. I think most Republicans would agree that if they did NOT touch Medicaid during the 2017 “repeal and replace” exercise, the ACA – other than the Medicaid piece – would probably be repealed right now. I do, however, think Republicans would try to codify the “work requirements” various States have been adding to their Medicaid programs. I could also see Republicans codifying things like the recently proposed regulations on value-based purchasing of high-cost prescription drugs, as well as other value-based design changes. Republicans would also seek to give States more flexibility to change their State’s Medicaid program (so the State can be the one to switch to block grants or per capita caps, instead of Congress requiring such a change).
- The ACA Exchanges: I have always told you that 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. Per the ACA, the Exchange is much more of a bureaucratic entity, and the Exchange can actively manage their market (see, for example, California). Republicans, on the other hand, would like 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. Republicans also believe that these private-sector companies can do a better job of marketing and educating the public about enrolling in health coverage, much better than what government-funded programs and entities like Navigators can do. So when it comes to a Republican plan, I could see Republicans (1) leveraging the ACA Exchanges, (2) restructuring them to rely on private-sector companies for the public-facing enrollment experience and also conducting marketing and outreach, and (3) using Enhanced Direct Enrollment to seamlessly enroll consumers while effectively determining premium subsidy eligibility.
- The Premium Subsidies: As I have also told you, Republicans support giving lower-income Americans a tax credit for health insurance. At the end of the day, that is exactly what the ACA’s premium subsidies are: A refundable tax credit, which is the same thing as “government spending through the Tax Code.” A Republican plan would keep the ACA’s premium subsidies, but I believe Republicans would restructure the subsidy amounts to provide a greater benefit to younger individuals (so as to encourage younger, healthier lives to enter the market, something that has NOT happened under the ACA). As you may recall, Republicans proposed this type of premium subsidy structure during the 2017 “repeal and replace” exercise, and I would expect them to do the same if ever required to reintroduce a “replace” plan.
- The Insurance Regulations: When it comes to insurance regulations (and the rules governing what health plans can and cannot cover), I believe Republicans will “go back to the well” and resurrect a provision they tried to advance during the 2017 “repeal and replace” exercise, which was: An insurance carrier can offer at least one health plan in the “individual” market that meets the ACA’s requirements, and all of the other plans offered in the “individual” market can cover a different set of benefits and services (that does not, for example, cover the full suite of the ACA’s “essential health benefits”). Idaho tried to do this, unsuccessfully. This is consistent with the point I made above when I said that Republicans want people to be able to choose whether they want to enroll in (1) higher costing, comprehensive coverage or (2) lower costing, less comprehensive coverage. Again, Republicans do NOT just want people running around with “skinny” plans. BUT, Republicans DO WANT to give people “choice.” Republicans will also want to incorporate value-based insurance designs into the markets as a way of addressing the problems associated with out-of-pocket spending on deductibles and co-pays.
- The Risk Pools: It’s all about risk pools, risk pools, risk pools. In my opinion, the biggest mistake EVER made by those implementing the ACA was to allow ALL of the high-risk individuals who were previously part of a State’s high-risk pool to enter the ACA’s newly reformed “individual” market (because the State high-risk pools were disbanded). It is these high-risk people who are skewing the ACA’s “individual” market, and one of the root causes for why an “individual” market plan costs so much. Yes, it is partly due to the ACA’s coverage mandates (as discussed above), but I attribute much of the higher costs to these high-risk people. These higher costs in turn discouraged younger people from entering the “individual” market, coupled with the disincentive of the 3-to-1 age band, which forces younger people to pay more for their insurance (i.e., a 3-to-1 age band does NOT produce an “actuarially fair” premium). That is a long way of saying this: I believe a Republican plan will attempt to pull these high-risk individuals out of the existing insurance markets. Maybe these high-risk individuals are placed into their own risk pool, with adequate funding. Or maybe there is a reinsurance program that helps carriers cope with these high-risk individuals as they remain in the risk pool with everyone else. Or, maybe these high-risk individuals remain in the risk pool with everyone else, but their high risks are adequately dealt with through an “invisible high-risk pool.” There are questions associated with how to make any or all of these ideas work, but the policy goal is unquestioned. Last comment: All of this will be moot if the politics shift in November. At that point, it won’t matter if the ACA is struck down by the Supreme Court (which wouldn’t happen until 2021). Actually, 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.
There Is a Proposal In the “ACA Improvement Bill” That Employers Should Take Note Of
- The House Democrats “ACA improvement bill” would reduce the amount of money a person is required to pay for an “individual” market Exchange plan from 9.78% of their income down to 8.5% of their income. The government would cover the remainder of the premiums through the premium subsidy.
- Analysis: 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? Well, as you know, the “affordability” test under the “employer mandate” penalty tax is generally tied to maximum limit on the percentage of income a person is required to pay on their own for a subsidized “individual” market plan. Currently, that maximum limit is 9.78% (the original statute said 9.5%, but the limit is indexed, so the limit has increased over the years). Does the House Democrats’ “ACA improvement bill” mean that the “affordability” test under the “employer mandate” would be pegged to 8.5% of income, instead of the current 9.78% of income?? When I read the House Democrats’ legislative language, that language actually appears to preserve the 9.78% maximum for purposes of determining “affordability.” Where the 8.5% limit comes in is on the “schedule” that lays out how much a person at a specified Federal Poverty Level (FPL) must pay toward their subsidized plan. Again, 8.5% being the maximum, and actually – according to the House Democrats bill – 0% for people between 100% and 150% of FPL (a change from the original statute, which requires at least 2% to 4% of income to be spent by people between 100% and 150% of FPL). Look, we have to remember that the ACA’s “affordability” test is really used for determining whether an employee may be ELIGIBLE for a premium subsidy. Specifically, if the cost of the lowest cost self-only employer plan exceeds 9.78% of an employee’s income, then the employee is indeed ELIGIBLE for the premium subsidy. If the employee accesses the subsidy in this case, this triggers the “employer mandate” penalty tax. With this recent 8.5% change suggested by the House Democrats, does this mean that even though a person cannot pay more than 8.5% of their income for a subsidized plan, does an employee remain INeligible for a premium subsidy if the cost of the lowest-cost self-only plan is MORE than 8.5% – but LESS than 9.78% – of their income?? In my opinion, it would seem logical that if you are changing the maximum amount a person is required to pay on their own for a subsidized plan to 8.5% of income, you should similarly change the maximum amount for the “affordability” test to 8.5% of income (instead of the current 9.78%). BUT again, that is NOT how the House Democrats “ACA improvement bill” reads. Why I am making such a BIG deal about this?? After all, this is super complicated, and the House Democrats “ACA improvement bill” is NOT going anywhere in the Senate? My answer: The reason this is a BIG deal is because Candidate Biden is proposing to do the same thing here. That is, Candidate Biden’s health care proposal would lower the maximum amount a person is required to pay on their own for a subsidized “individual” market plan from 9.78% to 8.5% of income. Sooooo, if Candidate Biden becomes President Biden, there is a chance that this suggested change becomes law. As a result, employers should take particular note of this provision because – if this change does indeed become law – it would mean that employers would have to pay MORE for their employees’ health coverage or pay a penalty tax.
Some Quick Hits on COVID and Health Care
- The Federal Exchange Enrolled Around 487,000 Consumers Who Lost Their Job: It seemed to me that the media was making a BIG deal about the fact that around 487,000 people who lost their employer-sponsored plan enrolled in a health plan through the Federal Exchange. Actually, it seemed like the media thought this was A LOT of people. In my opinion, however, I thought this number would have been much HIGHER. It will certainly be HIGHER because the 487,000 does NOT include enrollment from the State-based Exchanges – but again – whatever the final enrollment number ends up being, it will be LOWER than what I would have thought. Why? Well to me, if 15 to 30 million lost their employer-sponsored plan, I would have expected MORE than 487,000 of them (or whatever the final number is) would have enrolled in an Exchange plan. Yes, Kaiser estimates that about half of the people who lost their job are eligible for Medicaid, but these Exchange enrollment numbers tell me that the vast majority of people who lost their job elected COBRA coverage. Or, they enrolled in their spouse’s employer plan. Or, they enrolled in an “unsubsidized” individual market plan because they made too much money to qualify for a premium subsidy. Or, they made the choice to go WITHOUT coverage. Having said all of that though, this is evidence that MORE people are entering the “individual” market. And, depending on their health risk, this should help some markets.
- COVID “Tests” Required By Employers Are Not Free: As you know, the “2nd Stimulus Package” mandated that insurance carriers and self-insured plans MUST pay for COVID “tests” with NO cost-sharing. It was later clarified that for the “test” to be free, the “test” MUST be determined to be “medically appropriate” by a licensed medical provider. Just last week, HHS issued an FAQ explaining that if an employer requires an employee to take a COVID “test” before returning to work, this test is NOT considered “medically appropriate,” and thus, the carrier or plan sponsor is NOT required to pay for the “test” on a first-dollar basis (i.e., cost-sharing CAN be applied). HHS justified this conclusion by restating that COVID “testing” must be fee if the test is recommended by a licensed medical provider as being “medically appropriate,” and HHS noted that a test required as part of a “return to work” program does not meet this standard. To me, this is somewhat of a surprising result because the Trump Administration is trying to do everything it can to “reopen” the economy. If employers – who are trying to “reopen” – cannot adequately do so unless and until they can confirm that their employees are NOT infected by COVID, this will surely limit the speed in which the economy will “reopen.” I will be very curious to see how Congress responds to this interpretation of the law when Congress considers a “4th Stimulus Package” in mid-July/early-August.
- Surprise Medical Bills: The Trump Administration previously announced that those medical providers that accepted Federal COVID-relief funds cannot send patients surprise medical bills. Some interpreted this announcement as saying that NO surprise bills can be sent relating to ANY medical item or service. BUT, others opined that this prohibition on surprise bills is limited to COVID-related services. Regardless of who is right, we are now hearing reports that surprise bills – even those that are related to COVID treatment – are STILL being sent. As you know, Congress still wants to solve the surprise medical billing problem. And the latest news reports about surprise bills being sent – even to patients who suffered from COVID – may be enough to convince members of Congress to buck those medical providers who have spent millions of dollars to stymie the Senate HELP’s/House E&C’s surprise medical bill proposal, and finally enact surprise medical billing protections. BUT – in the end – these medical providers may “win” because there is talk that while Congress may ban surprise bills, the new statutory provision will NOT speak to how much an insurance carrier or self-insured plan sponsor must pay a medical provider for out-of-network charges. In this case, carriers and plan sponsors will likely be left with going to arbitration, which is something loathed by carriers and plan sponsors, but supported by medical providers. BUT, there is talk that the legislative language could stipulate that an arbiter CANNOT use “billed charges” when determining the payment amounts. That could very well be viewed as a “win” by the carriers and plan sponsors. BUT, it depends on who you talk to.