Presidential “Politics” Update

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

The Labor Unions and Medicare-for-All

In my last update, I opined that Former Vice President Biden will win the Democratic Presidential nomination because of (1) the Labor Unions and (2) Candidate Biden’s opposition to Medicare-for-All. While I obviously cannot predict whether Candidate Biden will continue his string of so-called gaffes – which is calling into question his electability – I remain confident that the Labor Unions are going to react negatively to Medicare-for-All.
- Analysis: Now, it is easy for me to think that my comments back on Aug. 7^th (when I sent out my last update) induced media outlets like POLITICO to write a story about the Labor Unions and Medicare-for-All. For example, POLITICO ran a story on Aug. 11^th contending that Labor Unions actually support Medicare-for-All, contrary to claims that “Medicare-for-All is anti-labor,” as POLITICO put it. It would also be easy for me to think that my comments induced Senator Sanders (I-VT) – on Aug. 21^st – to spell out in further detail how and why his Medicare-for-All plan would NOT hurt Union workers when he added a new plank to his Medicare-for-All proposal. In short, Candidate Sanders would require employers of Union workers to “give back” the wages that are currently being used to pay for the Union workers’ health plan. The National Labor Relations Board would be tasked with ensuring that Union workers either see this additional money in the form of increased wages or increased benefits. I do NOT think that my commentary had any impact – BUT – the POLITICO story and Candidate Sanders’ new plank to his Medicare-for-All plan under-scores the points that I made on Aug. 7^th, which were: Union workers like the “rich” benefits they have fought hard for, and even though these workers understand that they have conceded on wage increases, they are comfortable with the fact that they – in some cases – have a no premium, no deductible health plan that covers an EXTREMELY wide-range of medical benefits and services. Based on this fact, it is reasonable to ask: Can a Medicare-for-All program replicate this very “rich” no premium, no deductible Union health plan? Under most Medicare-for-All proposals, a Union worker would pay NO premiums and deductibles. Soooo, you can check-the-box there. BUT, will a Union worker covered under this type of health plan have to pay MORE than they do under the current system? One of the main arguments for Medicare-for-All is that people pay a TON of money on premiums and deductibles under our current health care system. BUT, under Medicare-for-All, people will NO LONGER have to pay premiums and deductibles, which Medicare-for-All supporters argue will save people a TON of money. While Medicare-for-All supporters concede that people will have to pay MORE in taxes than they currently do (to fund a Medicare-for-All program that has no premiums and no deductibles), for most – they argue – these taxes will be relatively modest, and therefore, on NET, people (other than the wealthy) will be BETTER off because their tax increase will be less than the money they currently spend on premiums and deductibles. BUT, what happens when a Union worker is NOT paying a TON of money on premiums and deductibles under our current health care system (because their current health plan has no premiums and no deductibles)? AND, what happens when this Union worker is required to pay MORE in taxes than they do now? On NET, won’t this Union worker be WORSE off (because this Union worker’s tax increase will NOT be offset by savings under a no premium, no deductible Medicare-for-All plan)? More importantly, will a Medicare-for-All plan cover the EXTREMELY wide-range of medical benefits and services that some Union workers’ health plan currently cover? If not – again – won’t the Union workers covered under these types of “rich” health plans be WORSE off? Last comment: I believe that Candidate Sanders and his campaign staff understand the stark reality of what I explained above, and Candidate Sanders is trying to argue that the workers (in my example above) will still be BETTER off because they will have higher wages. Maybe in the end, Candidate Sanders is right about the higher wages – BUT – will the new taxes employers will have to pay to fund a Medicare-for-All plan with no premiums and no deductibles eat-up – or at least eat-into – the wage increases Candidate Sanders seems to promise? There are a TON of questions here. Hence the pushback from the Unions. And hence the increased attention around (1) the Labor Unions and (2) Medicare-for-All.

Self-Insured Health Plans and “Private Insurance”

As I also explained in my last update, most Union health plans are self-insured “employer plans.” Meaning, the Labor Union does NOT contract with an insurance company, rather, the Labor Union sets up a Trust and acts as the plan’s third-party administrator (TPA). The Labor Union then manages the health risks of the Union workers covered under the plan by, among other things, incorporating value-based care strategies into their benefits offering that range from reference-based pricing to entering into a negotiated agreement with primary care health clinics (for example, see this article in Modern Healthcare).
- Analysis: Medicare-for-All supporters say they want to “eliminate private insurance.” Is a self-insured health plan “private insurance”? On the one hand, when you hear Medicare-for-All supporters say they want to “eliminate private insurance,” you think of commercial insurance companies and fully-insured plans. After all, Medicare-for-All supporters often times say that health care costs are so high because of the “big-bad insurance companies.” They also contend that “commercial insurance companies don’t care about you…all they care about is their profits and the premiums you pay them.” In the case of private fully-insured “individual” market plans, maybe I would agree. There is evidence that “individual” market insurance carriers do NOT actively manage the health risks of their insured population. Instead, the insurance carriers simply raise their premiums if their insured population has a lot of “health claims” in a particular year. Soooo, over the course of a few years, the insurance carrier gets out of the red and into the black through premium increases. BUT, Union self-insured health plans are NOT the same as fully-insured health plans. For example, Unions – and the employers contributing toward the health plan – take a fairly active role in ensuring that all of the Union workers participating in the plan remain relatively healthy. The Unions and the employers attempt to do this through wellness programs and other value-based care strategies. In other words, the Unions and their contributing employers care about the worker-participants, and they are NOT in the health care game to make a profit. Actually, a Union self-insured health plan is a non-profit entity. This is also the case when you have a non-Union self-insured health plan. What I mean is, the single-employer that is sponsoring the non-Union self-insured health plan cares about the health and well-being of their employee-participants. And, these non-Union employers go to great lengths to manage the amount of “health claims” incurred by their employee-participants in a particular year. Similar to Unions, these non-Union self-insured employers are NOT in it for the money. Their self-insured health plan is a non-profit entity too. Despite these differences with fully-insured health plans under-written by the “big-bad insurance companies,” it appears that Medicare-for-All supporters STILL want to characterize non-Union employer self-insured plans as “private insurance” (and thus eliminate this coverage). HOWEVER, I would venture to guess that – if given the opportunity – Medicare-for-All supporters would like to characterize a Union self-insured plan as something OTHER than “private insurance” (so these plans would NOT be eliminated). What if I told you there is a way that they can? Back in the day when the previous Administration was developing the rules for the ACA’s temporary “transitional reinsurance program,” the Administration came up with a way to carve out certain Union self-insured health plans from the “fee” that Congress imposed on ALL self-insured health plans to pay for the reinsurance program. This “carve-out” exempted self-insured health plans that were “self-administered.” As stated above (and in my last update), many Union health plans are “self-administered” by the Union itself (i.e., the Union serves as its own TPA). Non-Union employers, however, typically NEVER “self-administer” their own self-insured plan, rather they contract with an independent TPA or an insurance company to serve as the TPA. As a result, non-Union self-insured employers were required to pay the reinsurance “fee,” while those Union self-insured plans that were “self-administered” were exempted out. Why not say that self-insured health plans that are “self-administered” are NOT “private insurance”? Here, Medicare-for-All supporters could carve out those Union self-insured plans that are “self-administered,” thereby allowing these Union plans to continue alongside Medicare-for-All (where Medicare-for-All would cover everyone else, including people covered under any type of fully-insured plan and employees covered under a non-Union self-insured plan). Maybe if I see this idea floated by POLITICO, Candidate Sanders, or any of the other Democratic Presidential Candidates, I will know where they got it

Health Care Policy Update

What Can We Expect for the Rest of 2019 on Health Care?

As I have explained before, for right-or-wrong, I am not a prescription drug/pharmaceutical guy. As a result, I cannot really speak to what will happen on the drug pricing-front. I can, however, say this: We know that House Democratic Leadership is poised to release their proposal to “lower drug prices” once Congress comes back from recess on Sept. 9^th. In conjunction with action in the House, we will also see the Senate Finance Committee prescription drug bill that was favorably approved by the Committee before the August recess start to move.
- Analysis: Whether the Senate Finance Committee bill gets floor time remains to be seen. But, if Republican Leadership is going to want to bring the Senate HELP Committee’s “Lower Health Care Costs Act” to the floor, I can’t see how the Finance Committee bill is not paired with the Senate HELP Committee bill. In other words, I would be surprised if the Senate HELP Committee bill moves and the Senate Finance Committee bill does NOT move along with it. Having mentioned the Senate HELP Committee’s “Lower Health Care Costs Act,” I do expect this bill will move in the Fall/Winter. What would this bill do? Among other things, the bill will create a national “all-payers claims database” for self-insured health plans. Way back in March, April, and May of 2016, I talked about how the Supreme Court ruled that a State “all-payers claims database” law does NOT apply to a self-insured health plan. And, I argued that from a health care policy perspective, self-insured plans – like fully-insured plans – should be required to share their “health claims” data with a “trusted” third-party so researchers and other experts can review this wide-array of “health claims” data for cost trends, trends in utilization, etc., all in an effort to find ways to, among other things, better manage chronic conditions and lower health care costs overall. BTW, I like what I see in the Senate HELP Committee bill. The bill would also increase the disclosure of compensation paid by an employer health plan to agents/brokers and employee benefit consultants. The bill would also require PBMs to provide quarterly reports to the employer/plan on costs, fees, and rebates from drug manufacturers, and PBMs would be required to pass along to the employer/plan 100% of the value of any rebates, discounts, or other compensation received from drug manufacturers. And most importantly, the Senate HELP Committee bill includes a proposal on “surprise medical billing.” In my last update, I tried to give you a sense of where things might go on “surprise billing.” I am including that post once again (immediately following this post) because we will no doubt see action on “surprise medical billing” this Fall, which could very well slip into an end-of-the-year legislative package. When it comes to efforts to increase “transparency,” the White House’s second “health care” Executive Order (EO) that was released back in June directed HHS to release a Request for Information (RFI) soliciting comments on a proposal to require providers, insurance carriers, and self-insured health plans to disclose information about out-of-pocket costs for certain medical services prior to a patient undergoing a medical procedure. I would expect we will see this RFI between now and the end of the year. I also think we might see guidance increasing the current $500 carry-over limit for Flexible Spending Arrangements, which was also a part of the June EO. Will there be a Cadillac Tax repeal vote in the Senate? I have already informed you about my skepticism. Yes, the House passed Cadillac Tax repeal with 400+ votes. And, there is bi-partisan support in the Senate to repeal the Cadillac Tax. BUT, is Senate Majority Leader McConnell ready to hold a vote on Cadillac Tax repeal that is UNoffset? I lean toward, NO. Could an UNoffset Cadillac Tax repeal be included in a larger, end-of-year legislative package? Sure. But might it get stripped out in the 11^th hour? At this point, I am betting, YES. Instead, I am only betting on another “delay” of the Cadillac Tax. BUT, I am also betting against a “delay” this year because Congress has until 2021 to get its act together on the Cadillac Tax. We’ll have to wait and see if I am right or I am wrong.

“Surprise Medical Billing”

When I last talked about the “surprise medical billing” issue, I noted that at first, the employer and insurance communities were winning. What I meant was, the employer and insurance communities successfully got what they wanted in the House Energy and Commerce (E&C) and Senate HELP bills, which was: For purposes of determining how much money an employer or insurer has to pay a provider in a “balance bill” situation, a “benchmark” rate equal to the median negotiated rate for a particular medical service in a geographic area would be used. An “arbitration” process was specifically excluded.
- Analysis: BUT, I explained that the provider community was making some serious head-way through their lobbying efforts, and I suggested that we would likely see a compromise proposal where a “benchmark” rate is used up to a specified dollar amount, and then the provider and the employer/insurer would have to go to “arbitration” if the cost of a particular medical service was above that specified dollar amount. Well, I was right. A week before the House recessed for 6-weeks, the House E&C Committee changed the E&C’s original proposal to this compromise approach of (1) a “benchmark” rate and then (2) “arbitration” if the cost of the medical service exceeded a specified dollar amount. HOWEVER, my naivete seems to know no bounds because I had previously suggested that this specified dollar amount could be like $10,000. Admittedly, I was exaggerating a bit, and arbitrarily picking a high dollar amount. BUT, I did honestly think that any compromise would contemplate a fairly high dollar amount (maybe $5,000). BUT, the agreed upon dollar amount is ONLY $1,250. And, it is my understanding that the provider community wants to lower this number even further to say $600. So, the $600 question is: When Congress comes back from recess after Labor Day, will BOTH the House and Senate agree to the E&C compromise? AND, if BOTH the House and Senate do agree to the compromise, what will the specified dollar amount be? Will it be $1,250? Will it be $600? Will it be $750, which is the number that showed up in the Senate HELP Committee’s discussion draft of its “surprise billing” proposal? Last comment: To me, the “surprise billing” issue too difficult to predict. The provider community has A LOT of muscle, and I can see them prevailing in the end. But here is a consideration that not a lot of people are talking about: The Congressional Budget Office (CBO) has indicated that the E&C’s original “benchmark” rate proposal (which is STILL the lead proposal in the Senate HELP bill) saves between $20 and $25 billion. As a former Committee staffer who was responsible for finding legislative changes that produced savings, I can tell you that that $20 to $25 billion is a HUGE amount of savings that both Republican and Democratic Leaderships would LOVE to use to offset other priorities. An “arbitration” approach, on the other hand, will NOT save this much money (I currently don’t know how much the compromise proposal will save, but it will no doubt save LESS money than the “benchmark” rate approach). What I am driving at is this: The BIG savings that comes from the “benchmark” approach could carry-the-day in the end, and despite the significant lobbying on the part of the providers, we could see the “arbitration” process jettisoned. HOWEVER, I believe the compromise will stay intact. And, the $1,250 could very well be “dialed up” to a higher amount so as to achieve the greatest amount of savings as possible. Or, we could see $600 because the providers are so powerful. We will all just have to wait and see.

Association Health Plan Update

North Carolina Enacts an AHP Law

North Carolina’s (NC’s) General Assembly recently passed a law – with a fairly large number of Democratic Assembly members also voting YES – to allow AHPs to cover employers in different industries, as well as self-employed individuals with no employees that meet certain wage and hour requirements. This is the same policy that is set forth in the Department of Labor’s (DOL’s) final AHP regulations. This past Sunday, NC’s Governor allowed the bill to go into law without a signature. While AHP proponents would have liked to have seen a Democratic Governor actually sign an AHP bill, the fact that NC’s AHP bill is now law is significant. Why?
- Analysis: There are now 10 States that have enacted a law that allows AHPs to provide health coverage to employers in different industries, as well as self-employed individuals with no employees (these States include: AZ, AR, FL, HI, IA, KS, KY, NC, OK, and SD). In addition to these 10 States, 19 States have issued guidance or have taken actions also allowing AHPs to cover employers in different industries as well as self-employed individuals with no employees (e.g., AL, AK, GA, IL, IN, LA, MI, MN, MS, MO, NE, NV, ND, OH, SC, TN, TX, UT, and WV). Among these 19 States, AHPs that cover employers in different industries and self-employed individuals with no employees have been formed in AL, GA, MI, MO, MN, NE, NV, TN, TX, and WV (most of these AHPs being effective Jan. 1, 2019). That amounts to 29 States that appear to hold the position that the DOL acted reasonably when developing and issuing the final AHP regulations. This is compared to the 11 States (CA, DE, KY, MA, MD, NJ, NY, PA, OR, VA, WA) and DC that contend that the DOL acted unreasonably. And it is these 11 States, along with DC, that sued to invalidate the final AHP regulations. Here is something that I find fascinating, and it is something that should make a reasonable person question why these 11 States and DC are seeking to invalidate the DOL’s final AHP regulations: Currently, each of these 11 States and DC – with the exception of KY – ALREADY prohibit certain AHPs from operating in their State. Let me say that again: Except for KY, these 11 States and DC are ALREADY saying NO to AHPs. For example, CA has prohibited the formation of self-insured AHPs for 24 years now. WA has similarly prohibited self-insured AHPs for 14 years now. DC, DE, MA, and NY require a self-insured AHP to be licensed as an insurance company, which is a significant deterrent to self-insured AHP formation. NY, the lead counsel in the litigation, ALREADY has a law that prohibits a fully-insured AHP from being treated as one, single “large group” health plan, regardless of what the final AHP regulations may allow. Specifically, NY law provides that a small employer member of a fully-insured AHP can only enroll in coverage that is subject to the “small group” market rules and that individual members of a fully-insured AHP can only enroll in coverage that is subject to the “individual” market rules (i.e., NO “large group” AHPs). Like NY, DE, MA, and NJ have laws that ALREADY prohibit fully-insured AHPs from being treated as a “large group” health plan. At the beginning of this year, DC enacted a law prohibiting fully-insured “large group” AHPs, and MD enacted a law last Fall that also prohibits fully-insured “large group” AHPs. OR and PA, while not having specific laws in place, have simply adopted a regulatory position that fully-insured “large group” AHPs formed in accordance with the final AHP regulations cannot operate in their State. And, it appears that VA has adopted a similar position without issuing any guidance or enacting any laws.

These 11 States and DC Can Outright Prohibit Any Type of AHP Without Invalidating the Final AHP Regulations

Now here is the “real” kicker: Federal law allows these 11 States and DC to augment their existing laws to prohibit ANY and ALL AHPs from operating in their State. No one – and no law – is preventing these States and DC from taking this action. Sooooo, isn’t it reasonable to ask: Why are these 11 States and DC suing to invalidate the DOL’s final AHP regulations when these 11 States and DC can outright prohibit ANY and ALL AHPs if they wanted to?
- Analysis: I think it is also reasonable to ask this: Should these 11 States and DC be permitted to dictate how 29 other States should regulate their insurance markets? After all, don’t ALL States have the exclusive authority to regulate their own insurance markets the way they see fit? This last question goes both ways. That is, the 11 States and DC should have a right to regulate their insurance markets in such a way where they can outright prohibit ALL AHPs. And similarly, these 29 other States should have the right to allow AHPs that cover employers in different industries and self-employed individuals with no employees to operate in their State. It’s that simple. The bottom-line is this: Statistics show that roughly 30,000 individuals living in the various States listed above are covered by an AHP formed in accordance with the final AHP regulations. If the DC Circuit Court – like the DC District Court – finds that the final AHP regulations are invalid, these 11 States and DC will effectively take away health coverage for tens of thousands of individuals who do NOT live in their States. Again, this is despite each State’s authority to independently regulate their own insurance markets. In the end, employees of small employers and self-employed individuals with no employees currently enrolled in an AHP formed in accordance with the final AHP regulations will face a choice: (1) they will experience a 10-percent to 30-percent premium increase (depending on the savings under their existing AHP) or (2) they will go without coverage. I expect we will see a final ruling from the Circuit Court as early as Sept. 30^th and as late as Nov. 15^th. At that point, we will know whether the 19 of the 29 States will need to pass a State law if they want to allow AHPs to cover employers in different industries, as well as self-employed individuals with no employees. We will also have to determine whether HHS’s “look-through” rule preempts these State laws, and whether these States will need to submit a 1332 Waiver to allow AHPs to cover employers in different industries, as well as self-employed individuals with no employees. I believe an AHP 1332 Waiver is yet another pathway for these types of AHPs to be able to operate in a State. A pathway that I believe would withstand any legal challenge, so long as the Waiver satisfies Section 1332’s statutory requirements, including the “Four Guardrails.” Stay tuned.