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.
No Health Care Reform In 2021?
- Reports are surfacing that Senate Democrats may by-pass the opportunity to amend the “reconciliation” rules to add a 2nd “reconciliation” bill to the 2021 fiscal year. As I explained previously, IF the Democrats decide to go through with amending the “reconciliation” rules, it appears that this would allow them to pursue 2 more “reconciliation” bills during the calendar year 2021 – 1 more “reconciliation” between now and Sept. 30th (under the 2021 fiscal year) and 1 “reconciliation” bill starting Oct. 1st and presumably getting done by Dec. 31st (under the 2022 fiscal year).
- Analysis: Remember, under the existing rules, you can only have 1 “reconciliation” bill per fiscal year. AND, the Democrats already burned their 1 “reconciliation” chit for the 2021 fiscal year with the COVID Stimulus Package (i.e., the American Rescue Plan), which was enacted back in mid-March. Without an amendment to the “reconciliation” rules to add a 2nd “reconciliation” bill to the 2021 fiscal year, the Democrats would ONLY have 1 more “reconciliation” bill they can process in the 4th Quarter of 2021 (again, under the 2022 fiscal year). Okay, so assuming for a moment that if the Democrats ONLY have 1 more opportunity to enact a “reconciliation” bill by the end of 2021, then the Democrats have a log-jam of 3 very large, wide-ranging, and impactful legislative packages that they would like to enact, namely: (1) The Infrastructure Plan (roads, bridges, public transportation, broadband, etc.); (2) The American Families Plan (free college/pre-school for 2 years, Federal paid leave program, extended child tax credit, permanent enhanced ACA premium subsidies, etc.); and (3) Health Care Reform (a Medicare “Buy-In” Program, a “public option,” Medicaid enhancements, ACA Exchange enhancements, etc.). So it begs the question: Will the Biden Administration and Congressional Democrats seek to jam ALL 3 packages into 1 gargantuan “reconciliation” bill, offset by tax increases, drug pricing reform, and other spending reductions and seek to enact this gargantuan “reconciliation” bill by Dec. 31st?? Maybe. Dating back to the beginning of this year – when we thought we were operating under the existing “reconciliation” rules, which only allows 2 “reconciliation” bills during calendar year 2021, 1 of which the Democrats would be using for the COVID Stimulus Package (i.e., the American Rescue Plan) – I was of the opinion that the Democrats would take the “kitchen sink” approach and throw as much of their policy agenda items together as possible into the last reaming “reconciliation” bill (and process this “reconciliation” in the 4th Quarter of the year). BUT, when talk about amending the “reconciliation” rules to allow the Democrats to pursue 2 more “reconciliation” bills during the calendar year 2021 – 1 “reconciliation” between now and Sept. 30th and 1 “reconciliation” bill starting Oct. 1st and presumably getting done by Dec. 31st – my thinking was forced to change. And that thinking led to my sketching out 3 possible scenarios based on the assumption that we would likely see 2 more “reconciliation” bills this year. As you may recall, this is how I framed things in my last update:
Scenario #1: President Biden continues to say that he wants to work with Republicans on moving the Infrastructure Plan, but all the while President Biden and Congressional Democrats prepare to move the Infrastructure Plan through the “reconciliation” process. Axios even characterized President Biden’s actions this way: “It’s the unspoken Biden formula, talk like a rosy bipartisan; act like a ruthless partisan” (again, Axios’ words, not mine). THEN, once President Biden says to the American public that the Republicans will NOT go along with his Infrastructure Plan, Congressional Democrats – now that they know they are “going it alone” – will push for combining the American Families Plan with the Infrastructure Plan, and BOTH Plans will be processed as 1 single “reconciliation” bill. This preserves the 2nd and last “reconciliation” bill of 2021 to be used for the big-ticket health care policy items. (again, this was assuming the Democrats would amend the “reconciliation” rules).
Scenario #2: The Infrastructure Plan gets enacted through the “reconciliation” process on its own as a free-standing “reconciliation” bill. Then, once Congressional Democrats turn to moving the American Families Plan through the 2nd and last “reconciliation” bill of 2021, Congressional Democrats add big-ticket health care policy items and they run this combined package through the 2nd and last “reconciliation” bill of 2021. We are already seeing Democratic Leadership tee this up. A number of Democrats – led by Speaker Pelosi – are NOT shy in decrying that the American Families Plan does NOT include major health care changes. In my opinion, the volume on this will continue to be turned up over the next few weeks and months, and President Biden will ultimately relent and say, okay, add health care, let’s see where this goes. And viola, the big-ticket health care policy items + the American Families Plan will be processed through “reconciliation” during the 4th Quarter of this year.
Scenario #3: President Biden and Congressional Democratic Leadership affirmatively decide to hold-off on passing health care policy changes in 2021, and instead, opt to using “health care” as a campaign issue for the 2022 mid-terms. This would be a smart play because we have seen how deftly the Democrats have used “health care” as a campaign issue in the past, which has time-and-time-and-time-again produced positive results for them. On the campaign trail, Democrats will say: “Look, we made SIGNIGICANT changes by using the ‘reconciliation’ process this past Congress, but because this process is so limited, we could NOT do everything we wanted to do. Soooooooo, re-elect us in 2022 so we can finally get the job done in 2023. And oh by the way, if you help us increase our majority in the Senate and also help up keep the House, we can enact even more sweeping health care policy changes than we could have enacted had we tried to enact any health care changes in 2021.”
Health Care Reform = A 2022 Campaign Issue Instead?
- The more and more I keep thinking about how 2021 has gone so far – and the more I think about how the rest of 2021 could very well play out – I can’t help to think that Health Care Reform is going to be held back, as the Biden Administration and Congressional Democrats do everything in their power to enact the (1) Infrastructure Plan and (2) American Families Plan.
- Analysis: Look, I am NOT suggesting that Health Care Reform is NOT important to the Biden Administration and Congressional Democrats. Health Care Reform is SUPER important. BUT, I can’t help to think that 2021 is a redux of 2009, but with opposite scenarios playing out. Here’s what I mean: Back in 2009, on the heels of the historic election of President Obama, the Democrats turned to Health Care Reform instead of the “economy.” We all know what happened in 2009 and 2010 as a result. Yes, the Affordable Care Act was enacted, but it took all of 2009 and part of 2010 to get the ACA across the finish line. And, the entire 2009/2010 ACA exercise cost the Democrats mightily in the 2010 mid-term elections. Throughout 2009 and in years post-2010, many Democrats lamented that the Obama Administration and Congressional Democrats should have focused on the “economy” in the 1st year of President Obama’s 1st Term, instead of Health Care Reform. Remember, we were just coming out of the “Banking Crisis” of 2008. Fast-forward to 2021. We are coming out of another crisis – “The COVID Pandemic” of 2020, which hit a number of industries particularly hard and a lot of people lost their job. AND in 2021, we have a newly elected Democratic President (here, President Biden) and we have a Congress controlled by the Democrats (the Democrats controlled Congress back in 2009 too). And, similar to 2009, the President and Congressional Democrats have a decision to make: Pursue more economic-driven policies (here, Infrastructure) as a means to creating jobs and spurring economic activity – OR – pursue Health Care Reform, and seek to enact policies that BOTH President Biden and Congressional Democrats campaigned on in 2020 (and promised they would get done if given the keys to ALL of Washington, DC). Importantly, the majority of the Biden Administration officials are former Obama Administration officials and they – along with the outside Democratic strategists advising the President’s advisers – know the history and they remember how things played out in 2009/2010. Sooooooooo, why make the same decision that was made in 2009/2010 and hope good things happen this time around? Why not go with the “economy” during the 1st Year of President Biden’s 1st Term, and seek to enact job-creating policies through the Infrastructure Plan, along with other non-heath care social policies that make sense in the wake of The COVID Pandemic (which are a part of The American Families Plan and which include social policies that Democrats have also longed-sought to enact)? Another important aspect is this: There is only so much oxygen in the room. What I mean is, if the Biden Administration and Congressional Democrats choose to make (1) The Infrastructure Plan and (2) The American Families Plan their priorities, there might not enough oxygen in Congress to also try to move Health Care Reform. Think about it, if it is indeed true that the Democrats ONLY have 1 more “reconciliation” bill available to them by the end of 2021 (assuming the Democrats by-pass the opportunity to add a 2nd “reconciliation” bill as discussed above), this will force the Biden Administration and Congressional Democrats to jam (1) The Infrastructure Plan and (2) The American Families Plan into 1 huge “reconciliation” bill, offset by tax increases, and drug pricing reforms, and probably other spending reductions. Enacting this last “reconciliation” bill – in-and-of-itself – is going to be a SUPER heavy lift. One last very important aspect it is this: It is becoming more and more clear that while the Democrats may pick up 1 or 3 seats in the Senate during the 2022 mid-terms, the Democrats are going to have a HARD time holding on to the majority in the House of Representatives, due in large part to the slim House majority (currently only 6 seats), the recent census numbers, and re-districting. AND, if the Democrats lose the majority in the House, the golden prize of eliminating the Senate filibuster will be mooted because any sweeping legislation enacted by Senate Democrats with a 51-vote majority will die in the House. The Democrats are loathe to let that happen. Having said all of that, I believe the Democrats are now asking themselves the following question: Why NOT hold back on Health Care Reform in 2021 and use Health Care as a campaign issue in 2022? Again, the return the Democrats have gotten when leveraging the issue of Health Care has been like 100%. And the 2022 mid-term elections are going to be a pivotal election for Democrats if, for example, they want to finally eliminate the Senate filibuster and enact much of their policy agenda, including the substantive Health Reforms they campaigned on in 2020 (i.e., a “public option,” a Medicare “Buy-In” Program, and others). Queue up Eminem Lost Yourself, and stay tuned…
Exchange Enrollment Surges, Adding Fuel to the Argument That the Enhanced Premium Subsidies Should Be Made Permanent
- Reports indicate that ever since President Biden announced the COVID “special enrollment period” back on January 28th – coupled with the enhanced ACA premium subsidies now available on account of the COVID Stimulus Package (i.e., the American Rescue Plan) – about 1 million people have enrolled in a subsidized ACA Exchange. That is a BIG deal for a number of reasons.
- Analysis: First, it means that more people are enrolling in an individual market Exchange plan, so if you are an insurance carrier selling Exchange plans – or if you are a Web-Broker Entity or traditional agent/broker helping consumers enroll in an Exchange plan – you should be benefiting from the increased enrollment. It also means that people are getting covered by some form of health insurance, which is always good. Second, increased enrollment should have a positive impact on the underlying risk pool. Insurance 101 tells us that the more people in the risk pool, the better the likelihood of a more stable risk pool. That is assuming, of course, that the new consumers coming into the risk pool are NOT high-medical utilizers. An argument can be made that the 1 million newly enrolled consumers are fairly “good risk” (i.e., lower-medical utilizers) because if they “needed” health coverage because they were sick, they would have already purchased health coverage (and thus, would already be a part of the risk pool), despite the high cost of a health plan. BUT, an argument can also be made that now that consumers will be paying less for their health plan (on account of the enhanced premium subsidies), high-medical utilizers who were sitting on the side-lines may flood the market. The bottom-line is that it will be interesting to see if the increased enrollment here has a positive – or negative – impact on premiums in 2022 and beyond. Third, and related to my headline above, the Biden Administration and Congressional Democrats want to make the enhanced premium subsidies permanent. And, what better way to justify making the enhanced premium subsidies permanent than having data that is showing how the enhanced subsidies are having a meaningful impact. As I explained in a previous update, the Congressional Budget Office (CBO) estimated that 1.3 million new consumers would enroll in an Exchange plan on account of the enhanced premium subsidies that came in through the American Rescue Plan. As I also explained, I thought CBO’s estimate here was low. BUT, I also acknowledged that CBO’s estimate reflects that the enhanced subsidies are ONLY TEMPORARY, which limits take-up. BUT, what if the enhanced subsidies are made permanent? What would take-up be then? I would argue that the 3 to 4 million people currently in the “unsubsidized” individual market would shift to a subsidized ACA Exchange plan. There are also millions more of the “unsubsidized” currently sitting on the side lines who will likely jump into the individual market and enroll in a subsidized Exchange plan. Also, I believe most small employers would DROP their group health plan, followed by mid-sized and large employers in low-income high-turnover industries. These employers are going to see the generous government subsidies and say, “Why should I pay for my employees’ health coverage when I can get the Federal government to pay for it; I’m sending all of my employees to the ACA Exchanges to get the government subsidies.” Last comment: In the end, I believe the enhanced premium subsidies will only be extended 10 years. This is because the enhanced premium subsidy proposal will be included in what appears to be the last remaining “reconciliation” bill. And, due to the cost associated with making the enhanced subsidies permanent, I believe the “reconciliation” rules will require the Democrats to include a sunset date at the end of the 10-year budget window (because I would think that in years, 11, 15, and 20, these permanent enhanced premium subsidies would increase the deficit, which is a no-no under the “reconciliation rules”). We will just have to wait to find out…
Finally, a New CMS Administrator: Expect Some Policy Decisions to Be Made
- Chiquita Brooks-LaSure was just confirmed by the Senate to serve as the CMS Administrator. With a new CMS Administrator finally in place, we should all expect more policy decisions coming out of CMS/HHS. I will highlight 3 issues below, and discuss additional issues in future updates:
- “Standardized Plans” Could Be Coming to an Exchange Near You
As I have been saying since at least October of last year (if not before), I am convinced that in the next Notice of Benefit and Payment Parameter regulations (for 2023 plan year), we will see a proposal that would require insurance carriers selling individual market plans to offer “standardized plans.” As I have explained, there is history here: The Obama Administration went down the path of incorporating “standardized” plans into HealthCare.gov. More specifically, for the 2017 and 2018 plan years, insurance carriers selling through HealthCare.gov could voluntarily elect to sell a plan with fixed deductibles, out-of-pocket limits, and co-pays for health care services (i.e., a “standardized” plan). This time around, however, I believe the Biden Administration will MANDATE that insurance carriers offer “standardized plans.” My belief that we will see a mandate is driven by the fact the Biden Administration and a majority of Democrats want to add a “public option” to the ACA Exchange markets. BUT, with the slim majority in the House and a 50-50 split in the Senate, getting a “public option” through Congress is going to be SUPER hard. BUT, there are other ways to make policy; namely, making policy through regulations, which is where I think the Biden Administration will go to get 1 step closer to the policy goal of adding a “public option” to the Exchange markets. Also adding to my belief that we will see mandated “standardized plans” is this: As stated, a majority of the Biden Administration officials are former Obama Administration officials, and these officials want to follow-through with much of the policies that the Obama Administration put into place, only to watch the Trump Administration reverse course. Ms. Brooks-LaSure was Deputy Director of CCIIO in the Obama HHS, and was a part of the policymaking surrounding the Obama Administration’s “standardized plan” proposal.
- “Standardized Plans” Could Be Coming to an Exchange Near You
- A State-Based “Public Option” Through a 1332 Waiver?
A few States have already enacted a State-based “public option” (e.g., WA and CO). There are a number of other States that have undertaken efforts/proposed legislation to create a “public option” in their State (e.g., CA, CT, MA, NY, NV). It would NOT surprise me at all if some of these States (and others) may seek to establish a “public option” through a 1332 Waiver. Just like many Republican States sought to change the ACA through a 1332 Waiver (by changing Federal law to make it more flexible than the ACA’s existing rules), Democratic States will likely use a 1332 Waiver to further their own policy goals (which include pursuing a more government-run health care system that is more prescriptive than the ACA). Please note, I am NOT suggesting that States are going to be able to add a “public option” to their State insurance market(s) through a 1332 Waiver. A 1332 Waiver is NOT easy to get approved. And, getting approval involves a long drawn-out process, so NOTHING will happen overnight. BUT, as policy decisions start to get made at CMS, one of those policy decisions might be to work with States to help them pull together a 1332 Waiver for a “public option” that satisfies Section 1332’s “4 Guardrails” and other aspects of Section 1332’s requirements. Again, if the Biden Administration cannot get a “public option” through Congress, there are other ways of getting at this policy goal.
- A State-Based “Public Option” Through a 1332 Waiver?
- The “Value” of ICHRAs Could Take a Hit, But a Policy Decision Would Help
I believe the enhanced premium subsidies could have a negative impact on ICHRAs, especially if the enhanced premium subsidies are made permanent (or at least extended for 10 years). As you know, ever since last October, I have been saying that out of all of the Trump-era health care policy changes, I do NOT believe that the Biden Administration will seek to rescind or modify the ICHRA regulations. Why? Because even ACA supporters agree that ICHRAs will contribute to more lives entering the individual market, which will likely have a positive impact on the underlying risk pool. This was/is a good thing for the “staying power” of ICHRAs. HOWEVER, back in October (and to date), I have never taken into account how the enhanced premium subsidies could impact ICHRAs. But now that the enhanced premium subsidies are here – and if the enhanced premium subsidies are made permanent (or extended 10 years) – I fear that the “value” of ICHRAs is going to take a serious hit. Here’s what I am thinking: Under the ICHRA rules, if the employer contribution toward the individual market plan makes that plan “affordable” to the employee (i.e., the cost of the individual market plan to the employee does NOT exceed 9.83% of employee’s income), this employee is NOT eligible for a premium subsidy. This particular rule is drawn from the ACA’s “employer mandate,” and it was put into the ICHRA regs as a means to prohibit “double-dipping” (i.e., to prevent an employee from getting a tax-free employer contribution and also a government subsidy). BUT now, since the new enhanced premium subsidies are so much more valuable than previously, employees may prefer the government subsidies over their employer’s contributions. AND, because employees with incomes above 400% of FPL can now access a premium subsidy, these mid- to high-income employees may similarly prefer the government subsidies because these employees are only required to pay 8.5% of their income toward a health plan, instead of the 9.83% of their income under the ICHRA rules. Also, the same phenomenon I discussed above about employers DROPPING their group health plan may occur. That is, employers will likely say, “Why should I contribute toward my employees’ health coverage through an ICHRA when I can get the Federal government to pay for their health plan; I’m sending all of my employees to the ACA Exchanges so they can get the government subsidies.” And in many cases, the government subsidy is likely going to be higher than any amounts that the employer is even willing to contribute on behalf of its employees, which will likely lead an employer to say, “Hey, if the Federal government is paying for 80% to 100% of my employees’ premiums – when I am only covering about 60% to 70% with my employer contribution – why shouldn’t I simply off-load my health care liabilities onto the Federal government, where I not only save my contributions (and I can use it for other parts of my business), but my employees are actually paying LESS for their health insurance with the government subsidy as opposed to my employer contribution. A win-win for me, and a win-win for my employees.” Okay, so here is the punch-line: If I was advising Ms. Brooks-LaSure, I would suggest that CMS, Treasury, and DOL modify the ICHRA regulations to allow any ICHRA employer contributions to reduce – dollar-for-dollar – the premium subsidy INSTEAD of forcing the employee to go WITHOUT a premium subsidy if the employer contribution happens to make the individual market plan “affordable.” Stated differently, I would suggest that the Federal Departments eliminate the rule that says that an employee is NO LONGER eligible for a premium subsidy if the employer contribution makes the plan “affordable,” and replace that requirement with a rule that allows an employee to continue to access the premium subsidy, but the premium subsidy amount would be reduced by the amount of the employer contribution. This is NOT an idea I pulled out of left field. This is how Congress structured the QSEHRA rules. As you may know, the QSEHRA rules pre-dated the ICHRA rules, and to a large extent, the ICHRA rules supplanted the QSEHRA rules. That is a long way of saying this: I think that CMS, Treasury, and the DOL should consider adding this QSEHRA rule to the ICHRA regulations. This way, there will still be “value” in offering ICHRAs. AND, the Federal government may actually spend less money on the premium subsidies because any employer contributions will reduce the overall amount of the premium subsidy. The employer can point to their contribution as an “employee benefit.” And the Federal government can point to this as saving taxpayer dollars. A win-win.
- The “Value” of ICHRAs Could Take a Hit, But a Policy Decision Would Help