by Christoper E. Condeluci, Principal and sole shareholder of CC Law & Policy PLLC in Washington, D.C.
The $1.75 Billion Question: Will the Latest Iteration of the “Soft Infrastructure” Package Get Enacted?
- I’m not sure where to begin. Maybe I will start with a direct statement: Progressive Democrats are pissed. Much of what progressives wanted to see in the “Soft Infrastructure” Package have been jettisoned.
- Analysis: For example, NO 2-years of free college; NO Federal Medicaid Program in Non-Expansion State; NO raising corporate tax rates and income tax/capital gains rates on high-income earners; NO National Paid Leave Program (although 4 weeks of paid leave was just added back in); and there’s also been quite a bit of whittling down of the climate change reforms. What remains are things like 2-years of free pre-school; a 1-year extension of the Child Tax credit; some climate change reforms; some spending on elder care and other safety net programs; and time-limited health care reforms. Further complicating the entire exercise, Sen. Manchin (D-WV) recently questioned whether he would support the current iteration of the “Soft Infrastructure” Package, contending that the Package is full of “budget gimmicks” and “shell games” and that the “real” cost of the spending programs is closer to the original $3.5 trillion when you project these spending programs out 10 years (BTW, Sen. Manchin is assuming that the time-limited extensions of the Child Tax credit, the health care reforms, and other measures will be extended once they expire). Add in the fact that just yesterday (Tuesday), a 2-page description of a “compromise” on various proposals to lower prescription drug costs was released. We do NOT have legislative language for this “compromise,” so it is unclear whether all 50 Democratic Senators – and all but 3 House Democrats – are going to even support this “compromise.” Progressive Democrats have certainly voiced their displeasure that the proposals do NOT go far enough. This has led a number of Democratic Senators – not just Sen. Manchin – saying that there is A LOT more work that needs to be done before any votes in the Senate could even be scheduled. Pssssssstttt, remember when I said that fighting over “the details” is going to take a LONG TIME. This is what I was talking about. Last comments: Political pundits of all political stripes – along with media outlets on both the left and right – are calling Virginia’s and New Jersey’s Governor races a reflection of the disapproval of the Biden Administration and Congressional Democrats and a rebuke of the left-ward direction that progressives are taking the Democratic party. Again, these are their words, not mine. Sooooooo, where do the Democrats go from here? Will moderate Democrats – particularly in the House – turn up the volume on their concerns about the “Soft Infrastructure” Package and demand changes? After all, if these moderate House members are asked to vote on what is being perceived by the electorate as a progressive-leaning legislative package, this vote may come back to haunt them in Nov. 2022. Also, why would a vulnerable moderate Democrat put himself/herself “on record” as a YES on this perceived progressive-leaning package when the Senate – or at least Sen. Machin and Sen. Sinema (D-AZ) – may pull the package further to the middle. On the other hand, will Tuesday’s election results and exit polls put more pressure on Sens. Manchin and Sinema to get to YES. Reports indicate that Democratic Senators are voicing their displeasure directly in Manchin’s and Sinema’s ear, which is NOT the typical of the decorum in the Senate. Keep that popcorn, bourbon, and maybe even some Halloween candy at-the-ready. It’s going to be an interesting couple of weeks before the Thanksgiving holiday arrives.
Health Care Policy Update
Only a 3-Year Extension of the ACA’s “Enhanced Premium Subsidies”
- Despite all of the disagreements over “the price tag” and “the details,” I think that the health care reforms aimed at improving and building upon the ACA will remain intact if and when we actually see a final vote on the “Soft Infrastructure” Package in the Senate. If I am right, this means that we will see millions more ACA Exchange planholders, at least through 2025. Here’s what I mean:
- Analysis: s you know, the “COVID Stimulus Package” (known as the American Rescue Plan) effectively (1) increased the ACA premium subsidy amounts and (2) eliminated the income limitation on premium subsidy eligibility so consumers at any income level could access a premium subsidy if they purchased an “individual” market plan through an ACA Exchange. In addition, unemployed individuals are able to enroll in a $0 Exchange plan. However, as you also know, the (1) increased premium subsidy amounts and (2) expanded premium subsidy eligibility are only available through the end of 2022. Also, the provision assisting unemployed individuals is only available through the end of 2021. Interestingly, the recently introduced legislative text for the “Soft Infrastructure” Package ONLY extends these ACA “enhancements” for 3 years. In other words, the (1) increased premium subsidy amounts and (2) expanded premium subsidy eligibility are extended through the end of the 2025. Similarly, allowing unemployed individuals to enroll in a $0 Exchange plan would be extended through 2025. This time-limited extension is NOT surprising to me. As you know, I have said from Day 1 that the “enhanced premium subsidies” would only be EXTENDED as opposed to being made PERMANENT. BUT, I expected at a minimum a 4-year extension. BUT, this 3-year extension would allow whoever wins the White House – and controls Congress – after the Nov. 2024 election to work on another extension throughout 2025 (a non-election year).
New Subsidy Eligibility for Low-Income Individuals In Non-Expansion States
- As I – and others – have reported, House Democrats wanted to create a Federal Medicaid Program in those States that have NOT expanded their Medicaid programs in accordance with the ACA. However, this idea ran into a buzz-saw in the Senate, not just Sen. Machin.
- Analysis: As a replacement for the Federal Medicaid Program, the most recent iteration of the “Soft Infrastructure” Package includes a proposal that would allow individuals whose income are below 100% of the Federal Poverty Level (FPL) to access the premium subsidies. This means that low-income individuals in States that have NOT expanded their Medicaid program would now be eligible for a premium subsidy if these individuals purchase an “individual” market plan through an ACA Exchange. Effective starting in 2022, this ACA “enhancement” would also ONLY run through 2025, so ONLY 4 years. Note, the extension for the “enhanced premium subsidies” discussed above are only for 3 years because the start date is 2023. BUT, the end result is that ALL of these proposals run through 2025.
What Does This Mean for ACA Exchange Enrollment?
- The Congressional Budget Office (CBO) has yet to officially “score” and estimate the “coverage gains” for the most recent iteration of the “Soft Infrastructure” Package. However, CBO has provided estimates of prior versions of the proposals discussed above.
- Analysis: For example, when analyzing a similar proposal to allow individuals whose income are below 100% of FPL to access a premium subsidy, CBO estimated that roughly 2.3 million more individuals would purchase an Exchange plan each year starting in 2022, 2023, and 2024. Of this 2.3 million, 1.7 million would be uninsured, 300,000 would shift from an employer plan to an Exchange plan, and 200,000 people currently on Medicaid would shift to a subsidized Exchange plan. When analyzing a proposal to make PERMANENT (1) the increased premium subsidy amounts and (2) the expanded subsidy eligibility, CBO estimated that 3.4 million more people would purchase an Exchange plan over 10 years. Of this 3.4 million, 1.4 million would be uninsured, 1.6 million would shift from an employer plan to an Exchange plan, and 600,000 would come from the “unsubsidized” individual market into the now fully-subsidized market. First point to make: I am still surprised that ONLY 600,000 people would shift from the “unsubsidized” individual market into the now fully-subsidized market. After all, folks like Kaiser and Avalere Health have estimated that there are 3 to 4 million people in the “unsubsidized” market. Second point: 1.6 million employees would lose their employer plan as employers discontinue their “group health plan” and direct their employees to purchase a subsidized “individual” market plan. This is consistent with my suggestion that if the “enhanced premium subsidies” are even just extended, a good number of small employers – and even some mid-sized to large employers in low-income, high-turnover industries – would seek to off-load their health benefit spending onto the Federal government. Last point: I’m not good at math (that’s why I went to law school), but I don’t need to be good at math to say that millions of more individuals will be enrolling in a subsidized Exchange plan if these ACA “enhancements” are enacted into law. Yes, the numbers will NOT be quite as high as you see above because the most recent iteration of the “Soft Infrastructure” Package only EXTENDs the “enhanced premium subsidies” out to 2025 (instead of these “enhancements” being made PERMANENT). BUT, it will still result in LOTS of new Exchange planholders.
Premium Subsidy Eligibility for Low-Income Employees
- According to most recent iteration of the “Soft Infrastructure” Package, employees with income below 138% of FPL would be eligible for a premium subsidy even if these employees are offered an “affordable” employer-sponsored health plan. Under current law, if an employee is offered an “affordable” employer plan, the employee is NOT eligible for a premium subsidy. Again, this prohibition would be gone if the “Soft Infrastructure” Package is enacted into law.
- Analysis: Interestingly, in addition to the above stated change, the spouse and dependents of an employee with income below 138% of FPL would ALSO be eligible for a premium subsidy. This well-known “family glitch” currently PREVENTS the spouse and dependents of an employee offered an “affordable” (and “minimum value”) self-only employer plan from accessing a premium subsidy. Here, the “family glitch” would be eliminated, at least for low-income employees. Of significant importance for employers is this: Employers otherwise subject to the “employer mandate” would NOT be required to pay the “employer mandate” penalty tax if any of their employees with income below 138% of FPL actually access a premium subsidy. This change makes perfect sense to me because you CANNOT penalize employers for employing low-income employees. Let me take a step back to say this: Remember back in Oct. and Nov. 2020 when I was analyzing then-Candidate Biden’s health care proposals. I noted that President Biden was calling for the elimination of the “employer firewall,” which is something that the drafters of the ACA added to the law to prevent employers from “dumping” their employees into the “individual” market. Well, this “affordability” test that is now being eliminated for low-income employees IS this “employer firewall.” Back in Oct./Nov. 2020, I also explained how BIG of a deal it would be for employers if the “employer firewall” was eliminated for ALL employees, because I believe that eliminating the “employer firewall” would result in a large number of employers dropping their coverage. Importantly, this particular proposal here is a “mini” elimination of the “employer firewall.” In the grand scheme of things, however, this “mini” elimination of the “employer firewall” is NOT a big deal for employers. Heck, some employers with low-income workforces will welcome this change, especially if they are NOT required to pay the “employer mandate” penalty tax. BUT, does this change in the law set a precedent that the employer community should push back on? It is reasonable to look at this and say: Camel, nose, tent…
Changing the “Affordability” Percentage Threshold for Employees = Employers Paying MORE (or a Tax)
- Here is something that employers should REALLY be concerned about:
- Analysis: For at least 2022 through 2025, employees would be able to access a premium subsidy if the cost of the employee’s portion of a self-only employer plan exceeds 8.5% of their income (a reduction of the current law threshold of 9.83% of income). To me, this is a BIG deal. Why? When the drafters of the ACA developed BOTH the premium subsidy rules AND the “employer mandate” penalty tax, we attached the same now-9.83% threshold to the “affordability” test under each provision of the law. In particular, we connected these 2 provisions together through a statutory cross-reference, where the “employer mandate” penalty tax provision simply cross-refences the “affordability” test under the premium subsidy rules. The way that I read the current iteration of the “Soft Infrastructure” Package, the language is amending the “affordability” test under the premium subsidy rules. And by doing so (i.e., by operation of law), the language is effectively changing the “affordability” test under the “employer mandate.” This means that if an employee has income above 138% of FPL and this employee is required to pay more than 8.5% of their income toward their employer’s self-only plan, this employee would be eligible for a premium subsidy. AND, if this employee actually accesses a premium subsidy, their employer WOULD BE subject to a penalty tax. The only way the employer can avoid a penalty tax is if the employer contributes MORE money toward their employer plan to ensure that the employee’s cost of a self-only plan does NOT exceed 8.5% of their income. Also, when it comes to satisfying the “employer reporting” requirements and completing the 1095-C Forms, I believe that employers – and their service providers – will have to start using the 8.5% threshold when populating those Forms (e.g., I would argue that if you use the W-2 income “safe harbor” under the “employer mandate” regs, the threshold would be 8.5% of W-2 income, instead of the current 9.83%).
Surprise Medial Billing Update
- The Texas Medical Association (TMA) recently filed a lawsuit to invalidate the Sept. 30th IFR, which details how the Federally-developed arbitration process will work.
- Analysis: One of the TMA’s arguments is that the Federal Departments violated the Administrative Procedures Act by issuing an “Interim Final Rule,” as opposed to following the traditional notice-and-comment process which is: (1) issue proposed regs, (2) accept public comments, (3) consider those public comments, and (4) then issue final regs. The problem with this argument is that Congress enacted the surprise billing requirements on December 27, 2020, with these new rules taking effect 1 year and 3 days later (i.e., the effective date is Jan. 1, 2022). As a result, the Federal Departments ONLY had about 1 year to implement a newly enacted statute, which by the way, is a pretty complicated and poorly written statute. An unattainable task if the Federal Departments followed the traditional notice-and-comment procedures. Importantly, the Administrative Procedures Act allows the Federal Departments to skip the (1), (2), and (3) above in cases where the Departments “find good cause that the notice and comment procedures are impracticable, unnecessary, or contrary to the public interest to delay putting at least an Interim Final Rule in place until after a full public notice and comment process has been completed.” That’s what is going here (in the context of implementing the surprise billing rules), and I believe a court of law would agree. The TMA also argued that the Federal Departments failed to effectuate Congressional intent and mis-interpreted the statute when the Departments said (1) that a “certified arbiter” must assume that the “Qualifying Payment Amount” (i.e., the in-network median rate for a medical items or services furnished is a geographic area) represents a reasonable market-driven value and (2) that the arbiter must choose the “offer” (submitted by, for example, the payer) that is closest to the QPA (i.e., the in-network median rate) as the final payment amount for the disputed items or services. As I explained in my last update (see below), if “credible information” is presented to the arbiter that demonstrates that the QPA is “materially different” than what an appropriate payment for the out-of-network service should be, the arbiter may choose a payment amount that is HIGHER than the QPA. But again, without this additional information to rebut the presumption that the QPA is the appropriate payment amount, the arbiter MUST select the offer that is closest to the QPA. As I also explained in my past update (again, below), the provider community has been going NUTS, NUTS, NUTs over the Sept. 30th IFR because the in-network median rate is typically LOWER than a provider’s billed charges, which is the amount of money providers want to be paid (or at least an amount closest to billed charges). BTW, I also think that TMA’s argument here is a LOSER. Based on my read of the statute, it is clear to me that the QPA (i.e., the in-network median rate) is indeed the primary factor that an arbiter must consider and that any “additional criteria” submitted is secondary to the consideration of the QPA, meaning that any “additional criteria” submitted merely influences whether this base-line QPA should be increased (or decreased) when a final payment determination is ultimately made. BUT, the court will obviously have to decide if my read is the correct one. Last comment: As stated, the surprise billing rules go into effect on Jan. 1, 2022. That’s a mere 2 months away. With this lawsuit, TMA is hoping to get a “temporary injunction” so as to delay the effective date of these new rules. As you may recall, in response to lawsuits filed against the requirement to publicly disclose a carrier’s/plan’s in-network rates and out-of-network allowed amounts (as required under the Transparency In Coverage regulations), the Federal Departments unilaterally decided to delay the original Jan. 1, 2022 effective date to July 1, 2022. Could the Federal Departments decide to do that same thing here? That is, could we see guidance in the near future telling us that the effective date of the surprise billing rules are delayed until July 1, 2022? I am certainly NOT advocating for a delay, but it might actually make some sense because I believe that the requirement to publicly disclose in-network rates and out-of-network allowed amounts will help make the surprise billing rules work better (and give the “certified arbiters” helpful information that can be used when making a final payment determination). Stay tuned…