“Shades” of Single-Payer Update
“Shades” of Single-Player Update
by Christoper E. Condeluci, Principal and sole shareholder of CC Law & Policy PLLC in Washington, D.C.
Medicare-Buy-In and the ACA Exchanges
- In my last update, I told you that I think a Medicare-Buy-In program would adversely impact the ACA’s “individual” market and the ACA Exchanges. I went so far as to say that I think a Medicare-Buy-In program would kill the Exchanges. A couple of folks asked me why? They asked: Wouldn’t a Medicare-Buy-In program actually help the “individual” market, and by extension, the Exchanges?
- Analysis: Here’s why I think a Medicare-Buy-In program will adversely impact the ACA’s “individual” market and the Exchanges: Unlike a “public option” for the “individual” market, a Medicare-Buy-In program is going to be a separate risk pool relative to the existing “individual” market risk pool. In cases where you have separate risk pools, Insurance 101 tells us that if a whole host of “lives” in risk pool #1 move over to risk pool #2, risk pool #1 will be impacted. The impact on risk pool #1 will depend on how many “lives” exited for risk pool #2. The impact will also depend on the “health risk” of the people who exited risk pool #1 for risk pool #2. In my hypothetical here, the “individual” market is risk pool #1 and the Medicare-Buy-In program is risk pool #2. We already know that risk pool #1 (i.e., the “individual” market) skews older. For example, statistics show that at least for enrollment in the ACA Exchanges: 28% of enrollees are ages 18 to 35, 16% of enrollees are ages 35 to 44, 21% of enrollees are ages 44 to 55, and 26% of enrollees are ages 55 to 64. This tells us that enrollees between age 44 to 64 amount to 47% of the Exchange enrollment. Let’s assume for a moment that about 50% of the “unsubsidized” individual market is also between the age of 44 to 64 (this is certainly a reasonable assumption). This means that roughly one-half of the current “individual” market (both the subsidized and “unsubsidized” market) is between the age of 44 and 64. Now, out of this age 44 to 64 cohort, we have to assume that not all them will exit for a Medicare-Buy-In program because the minimum age for a Medicare-Buy-In program will most likely be age 50. BUT, it is reasonable to assume that close to 40% +/- of the Exchange enrollees and close to 40% +/- of the “unsubsidized” population fall into the 50 to 64 age cohort (totaling about 40% +/- of the current “individual” market). If these “lives” exit the “individual” market (i.e., risk pool #1) for a Medicare-Buy-In program (i.e., risk pool #2), that is a whole-heck-of-a-lot of “lives” the insurance carriers would NO longer be selling insurance to. Do you really think that the existing insurance carriers in the “individual” market – like say Centene or a Blue Plan – can sustain a 40% reduction of their market-share? I would argue that the loss of premium revenue due to this exodus would no longer make the “individual” market attractive to these carriers. And if you don’t have carriers willing to sell insurance in the “individual” market, you will NO longer have a viable “individual” market. AND, you certainly will have NO need for a distribution channel like an ACA Exchange. But let’s say I am wrong. Let’s say that less than 40% +/- of the current “individual” market shift over to a Medicare-Buy-In program. Or, let’s say insurance carriers will still find the “individual” market attractive even though a huge chunk of insurable “lives” exited. In this case, the “individual” market would no doubt improve. How? By pulling out “old” enrollees (who statistics show consume more health care than younger enrollees), the overall “health risks” remaining in the “individual” market will be much better, resulting in lower utilization. Lower utilization typically means lower premiums (at least in the form of low premium increases year-over-year). Soooo, yes, there is a chance that a Medicare-Buy-In program actually helps the “individual” market, and by extension, the Exchanges. BUT, I lean more toward the first part of my analysis above, which led me to say last week – and continues to lead me to say this week – that I believe a Medicare-Buy-In program is bad news for the “individual” market and the Exchanges.
- Like Republicans who had a “pre-existing condition” problem when it came to “repealing and replacing” the ACA, Democrats have a “tax increase” problem when it comes to Medicare-for-All. What I mean is, “repealing and replacing” the ACA sounded good, until people started hearing about what it actually meant if the ACA was actually “repealed and replaced” (e.g., people with pre-existing conditions would be impacted). Same is true of Medicare-for-All. Medicare-for-All sounds good, until people hear what it will mean to get Medicare-for-All (i.e., tax increases). But let’s say that unlike Republicans – who could never convince people that they would indeed protect people with pre-existing conditions – the Democrats can brush off the tax increase issue by arguing that they will simply tax the top 1% of taxpayers and/or re-allocate spending so any tax increase is minimal (and still impose any needed tax increase on the top 1%).
- Analysis: Unfortunately for the Democrats, they have yet another problem…and actually a BIGGER problem: The prospect that people will lose their private health insurance plan that people generally like. Namely, losing their employer health plan. In my opinion, this is a MUCH tougher issue for Democrats to explain away. Now, supporters of Medicare-for-All or some other “shades” of single-payer (like a Medicare-Buy-In program, coupled with a “public option” for the “individual” market, coupled with a Medicaid-Buy-In program for people below age 50) will say that people with an employer plan will not lose that plan. Rather, employers can continue to offer their employees a private health insurance plan side-by-side with these “shades” of single-payer, or at a minimum, employers themselves could “buy-into” a single-payer-type program. BUT, as they say in politics, if you need to “explain,” you are losing. Just ask Republicans on the “pre-existing condition” issue. Soooo, now that the Democrats are experiencing some difficulties when it comes to talking about Medicare-for-All and other “shades” of single-payer, Democratic Leaders are trying to pull their members back. And fast. Their pivot point? Pivoting back to the ACA, and announcing that Democrats want to “improve” the ACA first. Then, once Democrats try – and possibly fail – to shore up the ACA, Democrats can pivot back to trying to move our health care system closer to Medicare-for-All and some other “shades” of single-payer.
- Dating back to October of last year, I have told you that – despite all of the “noise” around Medicare-for-All and other “shades” of single-payer – I believe Democratic Leadership will try to use the next 3 to 4 months to “improve” the ACA. It appears that Democratic Leadership is finally starting that process. And – at least in my opinion – I think it is well-timed because Democrats need to pivot away from talking about Medicare-for-All and other “shades” of single-payer, at least for a couple of months.
- Analysis: Soooo, the strategy among Democrats seems to be: Let’s turn our attention to a different “shiny object” (like trying to “improve” the ACA), and re-think how we can “message” Medicare-for-All and other “shades” of single-payer later this Summer and Fall. Making good on this strategy, the House Energy and Commerce (E&C) Health Subcommittee will hold a hearing to discuss legislation that would restore funding to Navigators and for Exchange enrollment marketing and outreach, and also legislation that would over-turn the “short-term health plan” regulations and HHS’s guidance explaining how States can now satisfy the 4 “Guardrails” under ACA section 1332. Interestingly, not on the list of legislative proposals to “improve” the ACA are things like fixing the “family glitch” or over-turning the AHP regulations. BUT, not seeing legislation on the “family glitch” is not surprising because the “family glitch” is a tax issue and the Ways and Means Committee has jurisdiction over taxes, not the E&C Committee. Also, the Education and the Workforce Committee has jurisdiction over AHPs. I do, however, expect we will see legislation on the “family glitch” at some point, but I am not sure we will see legislation over-turning the AHP regulations. Here, I think the idea is that the AHP regs may be over-turned through the courts, so why try to over-turn the AHP regs through legislation (or at least why try now before we know how the courts are going to rule). Also, I do not believe that Congress can reach the AHP regulations through the Congressional Review Act (which is the tool House Democrats are trying to use to over-turn the “short-term health plan” regulations and the 1332 guidance). Also not on this list of “improvements” to the ACA is Federal funding for a State reinsurance program. I am somewhat surprised because E&C has jurisdiction over the “individual” market, and the Republican E&C Committee championed a similar type of proposal last year (i.e., Federal funding for a reinsurance program or an invisible high-risk pool). Maybe this means that Democratic Leadership is not interested in pursuing a proposal to give reinsurance money to the States? Maybe Democratic Leadership thinks that by pursuing Federal dollars for State reinsurance programs they will step on their message that: “Republicans stink, and so does the Trump Administration…just look at their efforts to ‘sabotage’ the markets that we are now trying to over-turn.” That would make some sense because Democrats could expose themselves to the “taxpayer bailout of the Obamacare” argument that Republicans will surely counter with. Alternatively, maybe House Democratic Leadership knows that the Senate is NOT going to agree to Federal funding for a State reinsurance program because the same issue that brought down last year’s ACA “stabilization” bill remains unresolved: Namely, abortion funding. You may recall that one of the reasons why an ACA “stabilization package” cratered was because Republicans were concerned that the Federal funds could be used to pay for certain abortion services, and the Democrats were unwilling to agree to adding certain safeguards to the law to ensure that no Federal funds could be used (i.e., Democrats did not want to touch the existing “Hyde language” and Republicans felt that additional safeguards were needed). Again, there has been no resolution to this conflict over abortion funding, and most think that it will never get resolved. Soooo, some Democrats may be saying internally: “Why open ourselves up the ‘taxpayer bailout’ argument, and why re-litigate the abortion funding issue when we know Republicans are not going to budge on the issue (and nor will we).” Last comment: We will have to wait and see how this exercise to “improve” the ACA plays out. It is likely that nothing happens, and the only reason why Democratic Leadership is going down this path is to continue hammering Republicans over “sabotage” and pre-existing conditions, both of which were winners for the House Democrats in last year’s election. BUT, now that calls to “repeal and replace” the ACA are no more, I do believe that there are a number of Republicans in both the House and Senate that want to “improve” the ACA in some way. The question is what “improvements” will Republicans agree to. Stay tuned.
- There’s been some increased attention around “association health plans” (AHPs) of late. First, at a Ways and Means Committee hearing on pre-existing conditions, Republican Committee staff invited the Nebraska (NE) Farm Bureau as their witness to talk about the NE Farm Bureau’s fully-insured AHP. The hearing was relatively benign, at least as it relates to any scrutiny of AHPs. I submitted the attached Statement for the Record on behalf of the AHP Coalition I am spear-heading. On the heels of the hearing, an article in the Washington Post popped up discussing a recent report issued by a very smart guy – Kev Coleman – that examined a number of AHPs that are currently up and running (you can find Kev’s report here and the WaPo article here). Then we saw an opinion piece in the Washington Post on AHPs, which you can read by clicking the link in the title above. Lastly, the Congressional Budget Office (CBO) released a report analyzing the premium and coverage effects of (1) AHPs and (2) short-term health plans. I want to spend time analyzing the CBO report (which I do below this post), but first, I want to say this:
- Analysis: A very interesting – and important – aspect of the final AHP regulations is this: Even if the final AHP regulations were to be invalidated by the courts, groups of employers in the same industry, trade, or line of business can STILL establish a fully-insured or self-insured AHP. This is because prior to the release of the final AHP regulations, there is about 2 decades worth of DOL Advisory Opinions describing what requirements these industry-specific groups need to meet to sponsor a fully-insured or self-insured AHP (i.e., requirements for qualifying as a “bona fide group or association of employers” under ERISA). The final AHP regulations preserved these “old rules,” and these “old rules” have now become known as “Pathway #1.” Again, Pathway #1 is important because if the final AHP regulations actually go away, the “old rules” will most likely remain. This means that industry-specific organizations that qualify as a “bona fide group” can continue pursuing the establishment of an AHP, and these industry-specific organizations can endeavor to offer their AHP coverage in multiple States. BUT, industry-specific organizations won’t be able to establish an AHP in EVERY State. This is because – in the case of a self-insured AHP – some States outright prohibit self-insured AHPs. If the final AHP regulations are invalidated, I do NOT see States changing their laws (actually, even if the regs are upheld, I would find it hard to believe that these States would be willing to change their laws). Offering a fully-insured AHP is a bit of a different story. What I mean is, back in 2011, the Obama Administration issued a CMS Insurance Standards Bulletin explaining that if a group of employers qualify as a “bona fide group,” this “bona fide group” will be treated as an “employer” – and actually a “large employer” – if the “bona fide group” includes 51 or more employees. How does this work? As you have heard me explain before: If a group of multiple employers banding together qualify as a “bona fide group” as defined under ERISA, all of the employees of all of the employer members of the “bona fide group” are to be aggregated and counted together as if the employees are employed by one, single employer. If – upon aggregating the employees employed by all of the employer members of the “bona fide group” – it is determined that the “bona fide group” includes 51 or more employees, the insurance carrier and the State must treat the fully-insured health plan as a “large group” market plan (and thus apply the “large group” market insurance rules to the health coverage). Attached is a bullet-pointed analysis that walks through these rules in more detail. Having explained that, let me say this: Some States are refusing the follow the Obama Administration’s 2011 CMS Bulletin. Instead, these States are simply saying: “If you are a group of small employers banding together, our State is going to subject you to the ACA’s small group market rules, regardless of whether you are a ‘bona fide group’ or not.” Some States have an actual law on their books that stipulates that if an employer-member is a small employer, then the “small group” rules apply. Other States, however, have simply adopted a regulatory position that just says NO to fully-insured “large group” AHPs. I tell you all of that to tell you this: If the final AHP regulations go down – and if industry-specific organizations continue to pursue AHPs under the “old rules” (or Pathway #1) – then States can still prohibit fully-insured “large group” AHPs from operating in the State. The irony I see is that it was the Obama Administration that developed the rules that would allow industry-specific organizations to operate a fully-insured “large group” AHP in multiple States, NOT the current Administration. Yet, the States saying NO to fully-insured “large group” AHPs are blue States that are often times adopting this regulatory position because they do not want to agree to anything that comes out of the Trump Administration. Notwithstanding the politics around AHPs or the legal future of the final AHP regulations, in time, I do foresee some of the anti-AHP States warming up to AHPs – at least warming up to fully-insured “large group” AHPs. This is due in large part to the fact that the AHPs that have been popping up since Jan. 1, 2019 – whether under Pathway #1 (i.e., the “old rules”) or what people call Pathway #2 (which is the final AHP regulations) – these AHPs are offering comprehensive coverage, and the cost of this comprehensive coverage is lower than the existing ACA’s “small group” market (evidenced by the reporting I discussed above, and evidenced by the CBO report I talk about below).
- In my attached Statement for the Record on AHPs, I begin by explaining that AHPs are NOT the same as short-term health plans. I do not start out this way to throw short-term health plans under the bus (although, as I have told you, I am not a big fan), but I purposefully make this distinction because for the longest time, critics of AHPs – and critics of the Trump Administration as whole – conflated these 2 different types of plans and describe them as one-in-the-same. But, as you can see from the Statement, AHPs and short-term health plans are vastly different.
- Analysis: I mention all of that to say this: CBO looked at the premium and coverage effects for BOTH AHPs and short-term health plans. Because CBO combined its analysis, it makes it a little more difficult to figure out how AHPs are impacting coverage and premiums in the “individual” and “small group” markets. I will, however, try to parse things out for you. I will first note this: CBO did attempt to explain the differences between AHPs and short-term health plans. While CBO did not go into as much detail as I did in my Statement for the Record, CBO did explain that AHPs must cover eligible members who have a pre-existing condition (by saying “insurers cannot refuse coverage to association members”). I hope CBO’s statement here FINALLY puts to bed the question of whether AHPs can deny people with pre-existing conditions. They CANNOT. Just as important, CBO states: “Although neither [AHPs and short-term health plans] must cover all essential health benefits, AHPs tend to cover most of them.” I believe this is important because it is telling the critics that AHPs are going to offer comprehensive coverage, even if they don’t cover all 10 EHBs. Now, I would argue that AHPs will indeed cover all 10 EHBs, either through offering plans that cover all 10 EHBs or offering multiple plans, some which cover all 10 EHBs and some which do not. Here, the AHP is guaranteeing access to EHB plans for those participants that want an EHB plan, but the AHP is also providing flexibility to participants who want to obtain a health plan that best fits their needs. Sticking with the issue of “comprehensive coverage,” CBO goes on to say that: “CBO and JCT expect that the coverage provided by the newly offered AHPs will be similar to that under AHPs sold before the new rule, many of which will not cover all of the EHBs but still offer coverage that is similar to comprehensive employer coverage.” This is consistent to what I have always been saying about AHPs, which is: An AHP is the same thing as a large employer plan, and because the market demands an offer comprehensive coverage by large employers (to attract and retain talented workers), the same offer of comprehensive coverage is going to be made available by AHPs. CBO also said: “[A]lthough AHPs may exclude some benefits that are required in the individual and small group markets, they sometimes offer wider provider networks or lower deductibles than are available through other types of individual and small group market coverage.” With respect to offering broader provider networks, this is definitely something that we are seeing when it comes to AHPs that are popping up, and the type of coverage they are now offering. CBO then went on to analyze the impact AHPs will have on premiums. Interestingly, CBO estimates that premiums for AHPs will be roughly 30% lower than premiums in the “small group market.” Yes, 30% lower! That is higher than I would have expected CBO’s estimate to be, and it is even higher than what we are seeing so far. That is, AHPs that have been established as of Jan. 1, 2019 are showing upwards of 25% savings, but not 30%. CBO then goes on to say that the availability of AHPs will result in premiums in the ACA’s “small group” market to go up by 3%. But – at the same time – CBO says that: “[B]ecause premiums for AHPs will be lower than premiums small employers are currently paying, premiums for the small group market as a whole are projected to decline.” Huh?!? It appears CBO is saying that premiums will go up because of AHPs, but CBO is also saying that premiums will go down because of AHPs. I am assuming that premiums will go down because insurance carriers in the “small group” market will need to compete with AHPs, which will require these carriers to lower their premiums. As we all know, competition is good, but I am disappointed that CBO did not quantify the premium reductions, nor does CBO net out the 3% premium increase the agency projects. I would argue that the new competition for insurance carriers in the “small group” market would result in – at a minimum – a 3% reduction in premiums, thereby negating any premium increase in the “small group” market. If this is the case, critics of AHPs have to stop saying that AHPs are going to increase premiums for those small employers that remain in the “small group” market because CBO seems to be telling us something different. CBO also said that over the next 10 years, 1 million more people will become insured due to the availability of AHPs and short-term health plans. When it comes to AHPs, CBO estimates that 400,000 people will be employed by small employers who will decide to offer health coverage for the first time. I tend to think the newly insured number will be higher than 400,000, but we have to follow CBO here. Lastly – and I saved the best for last – CBO expects that out of 6.9 million individuals who are currently receiving a premium subsidy through an ACA Exchange, ONLY 200,000 of them will exit the Exchange market for an AHP or a short-term health plan. And, it appears that out of this 200,000 number, 150,000 of those people enrolled in a subsidized Exchange plan will shift to an AHP. Whether you agree or disagree with CBO on their estimate that ONLY 150,000 people enrolled in a subsidized Exchange plan will shift to an AHP, all of the critics who continue to say that AHPs are going “destroy the Exchanges” are WRONG. And, to those critics of AHPs who are supporters of a Medicare-Buy-In program, I say this: 150,000 people is NOTHING compared to how many people will exit the ACA Exchanges for a Medicare-Buy-In program, even if I cannot quantify the exact number of people who will exit for a Medicare-Buy-In program (as discussed above).