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Repeal and Replace Update

Repeal and Replace Update

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

The Graham-Cassidy Bill Does Not Get a Vote – The ACA Still the Law of the Land

  • As you all know, efforts to pass the Graham-Cassidy bill fell short of generating the necessary 50 votes, so instead of bringing the bill to the Senate floor – only to watch it fail – Majority Leader McConnell pulled the bill from the legislative calendar, effectively marking the death of yet another attempt to “repeal and replace” the ACA.
    • Analysis:  For a while there, I am sure you got sick of me saying:  Failure-is-not-an-option (when it came to ACA “repeal and replace”).  I actually stopped saying it because – for some Republican Senators – it became apparent that failure WAS an option, which is why the ACA “repeal and replace” efforts fell apart not once, but twice now.  BUT, it is important to understand that “failing” was only okay for 2 or 3 Republican Senators.  For the other 49 or 50 Republican Senators, failure is still NOT an option.  And for this reason – despite their multiple failures to get ACA repeal-replace across the finish line – Republicans STILL plan to forge ahead to find other opportunities to achieve their ultimate goal, which is “repealing and replacing Obamacare” (their words, not mine). How can Republicans forge ahead on ACA repeal-replace?  I thought their ability to pass an ACA repeal-replace bill ended on Sept. 30th??  Not exactly.  Many House and Senate Republicans have signaled their interest in including ACA repeal-replace in the 2018 Budget Resolution, along with Tax Reform.  Republicans are also eying up the 2019 Budget as a possible alternative to repealing-replacing the ACA.
      • The 2018 Budget Resolution:  In the wake of the failure to get consensus around the Graham-Cassidy bill, 2 of the lead sponsors of the measure – Sen. Graham (R-SC) and Sen. Johnson (R-WI) – publicly stated that they wanted to include ACA repeal-replace “reconciliation instructions” in the 2018 Budget Resolution, along with the expected Tax Reform “reconciliation instructions.”  Sens. Graham and Johnson – both of whom sit on the Senate Budget Committee – went so far to say that they would NOT vote in favor of a 2018 Budget Resolution in Committee if the 2018 Budget blue-print did NOT include ACA repeal-replace “reconciliation instructions.”  A number of House and Senate Republicans also said that they may not accept a 2018 Budget without ACA repeal-replace. But fast-forward to last Friday, when a draft of the 2018 Budget Resolution was released.  Importantly, the draft DID INDEED include “reconciliation instructions” for ACA repeal-replace.  Interestingly though, those instructions were LIMITED to the Senate Finance and the House Ways and Means Committees.  In other words, the draft 2018 Budget did NOT instruct the Senate HELP or the House Energy and Commerce (E&C) Committees to develop ACA repeal-replace “reconciliation” legislation. Why is this a big deal?  Because omitting “reconciliation instructions” for the House E&C Committee means that any 2018 ACA repeal-replace “reconciliation” bill CANNOT include Medicaid reforms.  How do we know this?  Because a “reconciliation” bill can only include provisions that fall within the jurisdiction of BOTH a House AND Senate Committee that receive instructions to develop a “reconciliation” bill.  So, while the Senate Finance Committee – which received instructions under the 2018 Budget – has jurisdiction over Medicaid, the House E&C Committee – which is the only Committee in the House with jurisdiction over Medicaid – was NOT given instructions to develop an ACA repeal-replace “reconciliation” bill.  That means NO Medicaid reforms in a 2018 ACA repeal-replace “reconciliation” bill. In addition, by omitting “reconciliation instructions” for Senate HELP (and also E&C), that tells us that any ACA repeal-replace “reconciliation” bill produced on account of the 2018 Budget will NOT include a Federal reinsurance/Stability-like Fund.  But that shouldn’t come as a shocker. Importantly though, because the 2018 Budget Resolution DID INDEED include instructions for the Senate Finance and House Ways and Means Committees to develop ACA repeal-replace “reconciliation” legislation, that means that Republican Leadership wants to leave open the opportunity to address some or all of the ACA’s taxes in the forthcoming Tax Reform “reconciliation” bill.  We will just have to wait and see whether and what ACA taxes will be addressed.  Individual and employer mandate penalty taxes?  Cadillac Tax?  Medical device tax?  Excise tax on insurance carriers?  Stay tuned.
      • The 2019 Budget Resolution:  I have been told that despite many of the public statements made in the wake of failing to pass the Graham-Cassidy bill, it does NOT appear that Republican Leadership is in the mood to take another run at ACA repeal-replace through a 2018 “reconciliation” bill.  As I understand it, Leadership – along with the tax-writers – are concerned that trying to accomplish ACA repeal-replace in 2018 will just muck up efforts to get Tax Reform done, which is the #1, top-priority at this point (especially because ACA repeal-replace efforts have failed). So instead of forcing the issue in 2018, Leadership will likely look to the 2019 Budget Resolution for full ACA repeal-replace “reconciliation instructions.”  However, the timing on when Congressional Republicans would pass a 2019 Budget is unclear.  It is my understanding that Leadership could pass a 2019 Budget Resolution as soon as January 2018.  If a 2019 Budget is approved then, that would give Congressional Republicans time to pass an ACA repeal-replace “reconciliation” bill by the end of the 1st Quarter of 2018. But, as I have stated in prior updates, enacting major social policy legislation in an election year is risky…very risky.  As a result, it is tough for me to see full ACA repeal-replace happening any time before the mid-term elections.  You can-never-say-never, but I do think that the core features of the ACA – in particular, the coverage expansion provisions and the insurance market reforms – will remain the law of the land all the way through 2018.  However, depending on how the mid-term elections turn out, things may change in 2019 (if Republicans can add to their majority in the Senate).  Or, they may stay the same (because the Democrats won back the House and/or the Senate).  Both very plausible outcomes.  It’s enough to drive you to drink!


Possible Executive Order on “Association Health Plans”?

  • Mid-week last week, we heard both President Trump and Senator Paul (R-KY) suggest that some type of guidance – maybe an Executive Order – would be issued making it easier for “association health plans” (AHPs) to form.  Embedded in those statements were also suggestions about allowing people to “purchase insurance across State lines,” presumably meaning people in the “individual” market could purchase insurance across State lines.  For purposes of the following comments, I want to set aside the issue of people in the “individual” market purchasing insurance across State lines.  That is a totally different issue than expanding AHPs.
    • Analysis:  I also want to wait until the guidance or Executive Order comes out to explain “how” AHPs can be expanded through administrative actions.  But for now, I want to comment on “why” there is interest in expanding AHPs.  Also, I want to make sure everyone understands the regulations that will apply to AHPs – both fully-insured and self-insured AHPs – which I will comment on in the following post.
      • Fully-Insured AHPs – Prior to the enactment of the ACA, there were a number of States that allowed small employers to “band together” to create a fully-insured AHP that was considered a “large group” health plan (instead of an amalgamation of “small group” health plans). But then comes the ACA – and with the new law – specific insurance market reforms for “small group” market plans.  In particular, the “essential health benefits” (EHB) and “actuarial value” (AV) requirements; the new adjusted community premium rating rules; and the single-risk pool requirement.  Importantly, when we were drafting the ACA, we specifically decided NOT to impose these new reforms on fully-insured “large group” plans or self-insured plans (of any size).  Why?  Because we found that fully-insured large group and self-insured plans offered coverage as good as the EHBs.  Also, the average fully-insured large group and self-insured plan was about an 80% AV plan.  And, “experience rating” to develop premium rates for fully-insured large group and self-insured plans generally worked, especially because every employee is charged the same premium despite age or health status. In 2011, however, HHS issued guidance that essentially blew up fully-insured AHPs that were treated as “large group” plans.  In short, the guidance said that an insurance carrier MUST look-through the association to the underlying employer member, determine the size of that employer member, and apply the ACA’s new “small group” insurance market reforms in the event the employer had 50 or fewer employees.  This guidance was issued because HHS was concerned that small employers – those with 50 or fewer employees – would attempt to end-run-around the ACA’s new “small group” market reforms by forming fully-insured “large group” plans. The only exception to HHS’s 2011 guidance is this:  If the “group” of employer members is considered a “bona fide group or association of employers” as defined under ERISA, then a fully-insured AHP sponsored by this “bona fide” group CAN continue to be treated as a “large group” plan.  In this case, this fully-insured AHP would NOT be subject to the EHB and AV requirements, or the adjusted community rating rules, or the single-risk pool requirement. So, the policy behind expanding AHPs is not only to allow small employers to band together to create (1) negotiating leverage based on “economies of scale” and (2) a bigger “risk pool,” but to also allow the fully-insured health plan sponsored by these small employers (provided they are considered a “bona fide group or association of employers”) to be treated as a “large group” plan, especially under the ACA.
      • Self-Insured AHPs – Fortunately for self-insured AHPs, these plans are NOT subject to HHS’s 2011 guidance.  And, as stated above, self-insured AHPs are NOT subject to the EHB and AV requirements, or the adjusted community rating rules, or the single-risk pool requirement.  Self-insured AHPs are, however, subject to State MEWA laws, which I will try to explain to you a different day.  The bottom-line is this:  As discussed more fully below, self-insured AHPs – subject to current regulations – work well, and they currently provide adequate and affordable coverage to millions of employees across the country. Many opponents of the Trump Administration will likely come out in opposition of allowing the formation of more fully-insured and self-insured AHPs.  Why?  Well for one, they will argue that by allowing small employers to band together to form fully-insured AHPs, the “small group” market will suffer because healthier groups will likely look to shift out the “small group” market into the “large group” market.  Same argument will be raised against self-insured AHPs.  I actually think the “small group” market should be eliminated by merging the “individual” and “small group” markets, and also allowing the formation of AHPs (either fully-insured or self-insured).  While there are a lot people out there who agree with me, there are also a lot of people who disagree with me, which is why the “small group” market is still around today.


Regulations Applicable to Both Fully-Insured and Self-Insured AHPs  (no news story)

  • Another opposing argument you will hear is this:  Expanding the formation of both fully-insured and self-insured AHPs will allow small employers to discriminate against their employees and offer them sub-par health benefits.  I would like to inform these detractors that while the EHB and AV requirements, the adjusted community rating rules, and the single-risk pool requirement will NOT apply to these fully-insured and self-insured AHPs, the ACA’s “group health plan” requirements WILL apply, in addition to other laws like HIPAA, COBRA, and ERISA, which carry with them a number of protections for employees as plan participants.
    • Analysis:  The ACA’s group health plan requirements include, among others:  The requirement to cover adult children up to age 26; no annual and lifetime limits; no cost-sharing for certain preventive services; no pre-ex exclusions; and access to emergency services.  Fully-insured and self-insured AHPs – as group health plans – are also be subject to HIPAA.  In particular, HIPAA’s non-discrimination rules and also the prohibition against developing premiums based on a person’s health status.  Fully-insured and self-insured AHPs – as group health plans – will also be subject to ERISA’s fiduciary requirements, and employees covered under an AHP will have a private right of action in instances where, for example, the AHP and/or the employee’s employer are not acting in their best interest. No one can argue that the ACA group health plan requirements, HIPAA, COBRA, and ERISA do NOT provide adequate consumer protections.  Quite to the contrary.  All of these regulatory rules are pro-participant, and they were put in the law by BOTH Democrats and Republicans to ensure that participants of a group health plan are offered an adequate level of coverage.  The fact that the EHBs, and the AV requirement, and the adjusted community rating rules do NOT apply will NOT lead to an erosion of coverage.  IMPORTANTLY, sponsors of a group health plan CANNOT exclude someone from participating in the plan if that person has a pre-existing condition.  In addition, sponsors of a self-insured AHP – and insurance carriers under-writing a fully-insured AHP – CANNOT develop a person’s premiums based on their health condition.  So, NO discrimination against people with pre-existing conditions. Look, employers WANT to offer comprehensive coverage to their employees.  Why?  To attract and retain talent, and to keep their employees healthy to promote presenteeism.  Another important point to stress is this:  If given the flexibility to develop plan designs that may not fit neatly into the EHB box – for example, value-based insurance designs (VBID) that provide coverage for high-value services that is actuarially equivalent to an EHB plan – more employers (especially small employers) will WANT to offer health coverage that provides a level of coverage that is at least as comprehensive as the EHBs.  The cost of these types of plans will likely be more affordable than ACA-compliant “small group,” and even “individual” market plans. Admittedly, there is one difference in the regulation of fully-insured and self-insured AHPs that warrants a conversation.  In particular, fully-insured AHPs are subject to State benefit mandates.  In many cases, the State benefit mandates that apply are just as good if not better than the Federal EHBs.  Self-insured AHPs, however, are NOT subject to State benefit mandates on account of ERISA pre-emption.  In most cases though, although self-insured plans are NOT subject to State benefit mandates, these plans typically offer coverage that is as good or better than fully-insured plans.  BUT, we have seen instances where self-insured plans can be “skinnyed” down to only cover a limited set of benefits.  My hope is that employers joining AHPs will want to offer more robust health coverage than these “skinny” plans, and therefore, there won’t be a market for them. In my opinion, if there is flexibility and creativity that pervades the market, then there will be more demand for VBID models as opposed to “skinny” plans.  But I will say this:  If a small employer wants to participate in an AHP that covers a limited set of benefits, this employer should have to “choice” to offer such limited benefits to its employees through the AHP.  Remember, offering a group health plan is voluntary (i.e., employers don’t have to offer any health benefits if they don’t want to).  In my opinion, if an employer is willing to offer health coverage – even coverage with limited benefits – that is better than offering NO coverage at all.


Fully-Insured and Self-Insured AHPs Offering Health Coverage Across State Lines  (no news story)

  • For the record, I am by NO means an advocate of allowing people to purchase “individual” market plans across State lines.  Based on what I believe I know, it just doesn’t seem to work for a myriad of reasons.  BUT, there is an important distinction to be made between (1) allowing people to purchase “individual” market plans across State lines and (2) providing coverage across State lines through a fully-insured or self-insured AHP.  The distinction is important because in the case of a fully-insured and self-insured AHP, we are talking about a “group health plan.”  And, when you are talking about a group health plan, this whole concern over AHPs searching for a State with the least amount of regulation (i.e., a “race to the bottom”) is not much of an issue.  But why?
    • Analysis:  As stated above, self-insured AHPs are NOT subject to State regulation on account of ERISA pre-emption.  So – by definition – self-insured AHPs are NOT going to “forum shop” for a State with the least amount of regulation.  Rather, self-insured AHPs are simply going to offer coverage across State lines.  What regulations will apply, you may ask?  The regulations I described above:  The ACA’s group health plan requirements, HIPAA, COBRA, and ERISA.  These uniform rules allow an employer to offer coverage across State lines to wherever their employees reside.  And, as stated above, a strong argument can be made that the self-insured coverage that is offered across State lines is adequate and affordable coverage.  NO “race to the bottom.”  Yes, a legitimate argument can be made that self-insured AHPs may offer “skinnyed” down benefits.  But – to me – the market for “skinny” plans will be somewhat limited, and therefore – in my opinion – it is by NO means a reason to oppose the expansion of AHPs.  Others may disagree, however. In the case of fully-insured AHPs, I also do NOT believe that there will be a “race to the bottom.”  Why?  To answer this, we first need to understand how fully-insured group health plan coverage is currently offered across State lines.  According to the NAIC’s “best practices,” when an employer establishes a fully-insured group health plan, the insurance contract for the plan will be “sitused” in (1) the State in which the employer is headquartered or (2) the State where the employer has the greatest number of employees.  Once the “situs” State is determined, the benefit mandates of that particular State will then “follow” the plan, and apply in any State in which the employer’s employees reside.  So for example, if Employer ABC is headquartered in CA and has employees in CT, NJ, and TX, then the benefit mandates for CA must be covered even for employees in CT, NJ, and TX.  In other words, the benefit mandates of CT, NJ, and TX will NOT apply to employees living in these States, but instead, CA’s benefit mandates will apply.  There are limited situations where States have what is called “extra-territorial” benefit mandates, which will apply in cases where the group plan is “sitused” in a different State.  But there are only a couple of these States. I say all of that to say this:  The NAIC’s “best practices” on how State benefit mandates will apply in cases where a group health plan is offering coverage across State lines prevents a “race to the bottom” (and that’s because the 2 factors described above for determining where the insurance contract for the group plan will be “sitused” does NOT lend to the ability to “forum shop”). BUT admittedly though, when we are talking about fully-insured AHPs, we are talking about multiple employers who are participating in the AHP, and therefore, the above stated NAIC “best practices” do not neatly apply.  What I mean is, how should we determine the “headquarters” if we have multiple employers operating in multiple States?  Also, how do we determine the State with the most employees when dealing with multiple employers?  These are legitimate questions.  But guess what??  I will bet you $100 miiillliiooonn dollars that the NAIC will be quick to develop “best practices” for fully-insured AHPs when it comes to the “situs” State for an AHP’s insurance contract.  In other words, the NAIC is definitely going to have a say over how State benefit mandates will apply in cases where the fully-insured AHP group health plan coverage is offered across State lines.  Any such action on the part of the NAIC will mean no “race to the bottom,” so people need to rest easy and stop demogaguing this issue (and yes, those are my words).


“Repair” Update

Chairman Alexander and Ranking Member Murray Re-Kindle Bi-Partisan “Market Stabilization” Talks

  • As expected – once it was determined that the Graham-Cassidy bill was not going to garner 50 votes – Chairman Alexander (R-TN) and Ranking Member Murray (D-WA) re-kindled their negotiations on a bi-partisan “market stabilization” package.  Based on recent reports, it appears that a bi-partisan agreement may include:  (1) Funding for the “cost-sharing” subsidies for 2 years, (2) The ability to sell “copper” plans (i.e., 50% AV plans), and (3) Modifications to ACA Section 1332 to provide additional flexibility in requesting a 1332 Waiver.
    • Analysis:  I remain skeptical that a bi-partisan “market stabilization” package will be enacted any time soon, although such a bi-partisan agreement could be attached to CHIP Reauthorization, which is slowly making its way through the legislative process, and which could be acted upon before December.  If “market stabilization” is not attached to CHIP – or CHIP Reauth itself is held up for any reason – industry stakeholders will likely have to wait until the December spending bill (i.e., at least Dec. 8th). Why will industry stakeholders wait so long?  Based on my observation, there is very little enthusiasm among Republicans for a “market stabilization” package, especially in the wake of failing to repeal and replace the ACA.  In addition, despite all of the uncertainty over the cost-sharing subsidy funding – and the lack of Federal reinsurance money and no resolution on “risk corridor” payments – the insurance carriers generally stayed in the ACA’s individual markets.  Yes, there were some notable exits.  But in the end, there are NO “bare counties.”  So, Republicans are saying to themselves:  “If there was all of this uncertainty and hand-wringing over funding for the cost-sharing subsidies – yet those carriers who wanted to stay in the individual market stayed – why should we change anything?  Everyone seems to be doing fine.” Yes, I recognize that everything is NOT fine, but I think you get what I mean.  And based on this sentiment, I believe Congressional Republicans and the Administration are going to sit-back and watch how the upcoming “open enrollment” period unfolds.  Even if enrollment is flat – or enrollment is lower than in years past – if there are no major headaches, then I do not believe Republicans will be quick to take steps to “stabilize” the markets.  Yes, I do believe that funding for the cost-sharing subsidies will come at some point.  But the-ship-has-sailed on 2018, and Republicans have a couple of months before they have to fund the cost-sharing subsidies for 2019. Here are 2 other reasons why I believe we may never see a bi-partisan “market stabilization” package:  Making “copper” plans available is NOT much of a “win” for Republicans.  And, the modifications to ACA Section 1332 that Chairman Alexander is reportedly agreeing to appear to be changes that HHS can make based on the Department’s own discretion (which the current statute allows).  So, why would Congressional Republicans want to agree to something in legislation that the Administration can do on its own?  Make no mistake, I am NOT trying to throw cold water on bi-partisan action.  I wish we had more of it!!  But what I am trying to do is set expectations when it comes to a bi-partisan “market stabilization” package.  On the one hand, it seems easy to do at this point, especially because the ACA repeal-replace efforts are dead, at least the foreseeable future.  But on the other hand, because all of the carriers – and their premiums – are locked in for 2018, is there any urgency?  Stay tuned.