The continuing saga of Replacement, Repeal or Improvement of the Affordable Care Act (ACA)

We’ve have an eventful week in the discussion on health care and the four biggest items going today:

·        Will the Senate Republicans pass their Better Reconciliation Care Act or default to the American Health Care Act to replace the ACA?

·        Will Donald Trump get his wish to “have Obamacare Die” by his hands?

·        Will the Republicans and Trump attempt to repeal the ACA and return to the 2008 model for our national health care system, which left millions of Americans in an inescapable hole of inaccessible health care options?

This is an interesting week and time in public policy and politics. So, it’s time to continue the dialogue on what do we do next with our healthcare saga. As I discussed in my last article on healthcare and will the ACA be replaced or improved, everything in this dialogue centers on market certainty, financial payors, participant pools and actuarial risk, wrapped around the cone of Governmental involvement in healthcare.

Let’s start with market certainty. As I highlighted before, health care is one of the industries that requires significant certainty within the regulatory, financial contributory and participant & risk pools, to plan for product offerings and pricing for products and financial planning. Prior to the inauguration of Donald Trump, he and the Republican Congressional leadership have continuously taken steps to introduce uncertainty into the marketplace in an effort to decrease offerings and confidence in the ACA. The activity is similar to shortening a stock through negative news about a company to decrease their stock price, while attempting to raise the value of a competitor’s stock. The multifaceted effects of destabilizing the ACA causes uncertainty among the insurance providers, which reduces the number of coverage options, driving up premiums and creating a self-driven crisis of confidence in the ACA. It’s smart business if you want to steer people to your option as the only viable solution, yet it also plays a dangerous game with the marketplace and the consumers that engage within the marketplace. In spite of the ACA’s built in flaws and system issues, here’s a list of destabilization activities by the stewards of the ACA to drive the Congress to their desired policy changes:   

The Center on Budget and Policy Priorities (CBPP) 

Tracking Efforts to Undermine the ACA

President Trump has said that, politically, the best thing to do would be to let the Affordable Care Act (ACA) “explode.” This timeline tracks Administration actions that would sabotage the ACA by destabilizing private insurance markets or reversing the law’s historic gains in health coverage.

January 2017

January 20th: 

Trump issues anti-ACA executive order

Shortly after President Trump’s inauguration, he issues an executive order directing federal agencies to use their administrative powers begin dismantling the Affordable Care Act “to the maximum extent permitted by law.” The order instructs agencies, for example, to do what they can to grant exemptions or delay implementation of ACA provisions that impose a tax, fee, or other costs and to encourage development of a “free and open market” in health care services among states, while Congress works to pass repeal legislation.

February 2017

February 14th: 

IRS scraps its plan to tighten reporting for the individual mandate

Building on the confusion created by the President’s January 20th executive order, the Administration announces a new step to undermine stability in the marketplace by preventing the IRS from using new tools to enforce the individual responsibility provision of the ACA – a crucial part of keeping a healthier pool and keeping premiums affordable. While having coverage is still the law – and the IRS will continue enforcing the provision in the same way it did the previous two years – the announcement creates added uncertainty that could damage the marketplaces going forward.

March 2017

March 14

The Trump Administration sends a letter to governors signaling it is open to considering precedent-setting Medicaid waiver proposals that would make it harder for Medicaid beneficiaries to get affordable care and would potentially increase the number of people who are uninsured.

April 2017

April 12: 

Trump threatens to withhold ACA cost-sharing reduction payments to insurers

President Trump threatens to withhold ACA cost-sharing reduction payments to insurers. The threat has direct inferential impact on industry planning for the upcoming open enrollment period by heighten uncertainty for insurers at the very moment they’re making premium and participation decisions for next year. The cost-sharing reduction payments, which reduce deductibles and other cost-sharing charges for low-income people enrolled in silver-level marketplace plans, have been the subject of a lawsuit by House Republicans since 2014.   If the federal government stopped these payments, the average premium for a silver plan would have to rise 19 percent to compensate, the Kaiser Family Foundation estimates. A decision to stop the payments – or even prolonged uncertainty around these payments – increases the adverse risk assessments that the Administration will keep taking actions that sabotage the individual market in an effort to deter insurers to stop offering plans altogether.

April 13

The Trump Administration finalizes its rule for the individual health insurance market that will raise consumers' deductibles and other out-of-pocket costs, reduce premium tax credits that help millions of people buy insurance, and make it harder for people to enroll in coverage. While the Administration claims the changes are needed to stabilize the insurance market, many of them will reduce market stability by shrinking enrollment and making the pool of people with coverage sicker, on average.

May 2017

May 1

The Trump Administration and congressional Republican leaders fail to include a measure guaranteeing the continued payment of the ACA’s cost-sharing reductions (CSRs) in the fiscal year 2017 spending bill, endangering coverage for millions of people and risking premium increases and marketplace disruption.

May 2

Just weeks before CSR payments are due to insurers for May and as insurers are beginning to submit preliminary individual market rate filings, Office of Management and Budget (OMB) Director Mick Mulvaney says the Administration hasn’t decided whether to pay them.

May 4

House Republicans vote passes the AHCA, which via CBO estimates will add more than 20 million to the ranks of the uninsured, eliminate the individual mandate, slash subsidies in the marketplaces, and end federal standards for benefits and cost-sharing in the private insurance market. The passage of this bill, met with immediate criticism from Republican Senators, adds more instability for the insurers nearer to the onset of the 2018 rate filing season.

May 12

As the 2018 rate-filing season gets underway, initial filings – along with statements from insurers and state regulators — show that the uncertainty is taking a toll. Premiums are higher than they would otherwise be, and insurers cite uncertainty about the individual mandate, whether they will receive cost-sharing reduction payments, and potential changes to federal rules as contributing factors. “Uncertainty breeds higher costs,” said Martin Hickey, CEO of New Mexico Health Connections. See here for more comments from insurers and state officials on the challenges they are facing.

Meanwhile, President Trump continues to state that he may stop CSR payments to insurers through publication of this interview with The Economist. Trump says, “Plus we’re subsidizing it and we don’t have to subsidize it. You know if I ever stop wanting to pay the subsidies, which I will.” He indicates that whether Congress passes health care legislation would impact his decision, saying, “if the bill didn’t pass the Republicans would have let me down. And then I’d have to decide what to do because I want people to have health care.”

May 22

The Trump Administration asks for another 90-day delay in the CSR court case, which would allow the payments to continue temporarily but means insurers will have to finalize marketplace rates in August without any guarantee that these payments will continue to be made. The request comes days after an Oval Office meeting in which President Trump reportedly told aides he wants to end the CSR payments. The Administration has committed to making the payments only through May; later in the week, OMB Director Mulvaney reiterated that the Administration has not decided whether to make the June CSR payments. 

May 23: 

Trump budget proposes large cuts in marketplace funding, hitting consumer outreach and assistance hard.

President Trump’s budget requests 21 percent less funding to administer the marketplace in 2018 ($1,694 billion) than President Obama requested for 2017 ($2,145 billion). More than half the Trump budget’s proposed cuts fall in two categories of marketplace funding: “consumer information and outreach” and “eligibility and enrollment.” These budget items fund the marketplace call center that helps consumers enroll in marketplace coverage, in-person assistance by navigators and assisters, and outreach and marketing to make sure consumers know about the health insurance options available to them. They also fund eligibility determination activities to make sure that eligible consumers get subsidies (and the appropriate subsidy amounts) and ineligible consumers do not.

Moreover, the Trump budget would cut “payment and financial management” — the spending category that covers basic program operations, like advance payment of subsidies and work with insurers — by more than half relative to the 2017 budget request.

June 2017

June 6

Anthem Inc. announces it will exit Ohio's marketplace, pointing to the uncertainty around whether CSRs would be paid and an "increasing lack of overall predictability (that) simply does not provide a sustainable path forward to provide affordable plan choices for consumers." The move leaves at least 18 Ohio counties with no marketplace plans. Little more than a month before, Anthem executives noted the marketplace business was going well and "doing markedly better than it did last year" but that its participation in the marketplaces would hinge on certainty about the CSR payments.

June 8

Health and Human Services Secretary Tom Price refuses to say if the Trump Administration will fund CSR payments in 2018 during questioning at a Senate Budget Committee hearing. Senators note that lack of certainty about the payments is causing insurers to submit higher premiums and even to stop offering coverage.

Next up is the need for stable financial payers within the system.

The expansion of health care beyond our system pre-ACA faced a consistent hurdle to implementation, how to pay for the insurance products and related service cost. A little background on the role of payers in the healthcare market. Payers in theory are responsible to ensure that limited financial resources are used appropriately to create quality of services, broad access to needed services, patient safety, and affordable healthcare coverage. Payers also are charged to ensure that payment is fair, and commensurate with the severity and complexity of each service. The majority of healthcare in the US is paid for by two entities, employers and the government. Roughly 54% to 60% of Americans get their healthcare from their employer. Under employer-paid plans, employees may be required to contribute part of the cost of insurance while the employer is responsible for choosing the insurance carrier and negotiating plans and premiums. The government on the other hand covers about 33% of Americans through Medicare, Medicaid, the ACA, CHIP, VA and other governmental programs. While employers and the government bear almost all of the cost in the system, the actual "payment" often takes place through insurance companies. Insurers are able to negotiate with healthcare providers for reduced fees due to their insured consumer bases and then pay for services.

Why is this background important? Because all discussions on the ACA expansion of health insurance to over 22 million Americans and any efforts to address the 28 million Americans that don’t have insurance and have to pay for services out of their pocket comes back to the payer model. Individual premiums by themselves don’t generate enough revenue to cover the full expenses of health care services.

Healthcare expenditures include spending on health insurance, medical services, drugs, and medical supplies. In 2016, the average National Health Expenditure per person was $10,345-per-person, in 2017, the projected NHE average per person expenditure for health care services is $10,833. For an average family of 4, the cost for providing healthcare related services would average $43,332 per year. A Kaiser/HRET survey, published 9/2016, found that annual premiums for employer-sponsored family health coverage reached $18,142 this year, up 3 percent from last year, with workers on average paying $5,277 towards the cost of their coverage. The premiums and cost sharing payments made by individual families or persons aren’t enough to cover the cost of care, so you need the inclusion of an additional payer to help balance out the revenue pool to cover the related cost. This also must include the fact that every individual spends an equal amount in the health care system. In fact, U.S. health care spending is wildly uneven. Now consider these cost factors:

·        Senior citizens made up 13 percent of the U.S. population but accounted for 34 percent of healthcare-related spending in 2010, a report from the U.S. Centers for Medicare and Medicaid Services shows.

·        In 2010, healthcare spending amounted to $18,424 per person for people aged 65 and older – about five times as much as per-person spending for children ($3,628) and triple what was spent on working-age individuals ($6,125)

·        About 5 percent of the population — those most frail or ill — accounts for nearly half the spending in a given year, according to a separate government study.

·        Meanwhile, half the population has little or no health care costs, accounting for 3 percent of spending.

There must be an additional payer into the individual marketplace and there are only two options, the governmental sector or employers. Without a willingness and level of rational acceptance of this fact, you can’t provide a practical option to provide healthcare to those without.

Participant pools and actuarial risk, wrapped around the cone of Governmental involvement in healthcare

Lastly, the final issue that gets loss in this discussion are the individual persons currently in and outside of the ACA. Health insurance markets require a large pool of participants to positively impact the cost share for each member. The bigger the pool of participants, the more evenly the cost share can be spread within the pool of participants and the payer contributors (employer or governmental sponsor), which reduces the cost for the participants. Additionally, one needs a balanced mix of low utilization to high utilization consumers to reduce the risk aversion rating for cost and frequency of care and claims loss on the participant pool. The only way to achieve these dual aims in any effort to increase coverage is either the individual mandate or an automatic enrollment option, which are very similar in nature. The debate that has swirled around the ACA and the individual mandate has been that Government is forcing people to buy insurance or sign up for Medicaid that they wouldn’t join if they had a choice. Speaker Ryan even made an impassioned argument that the great number of the 22-23 million people that would lose coverage under the AHCA or BCRA would be losing coverage by choice because they don’t want insurance. The data demonstrates that this is not the case. Eliminating the subsidies that encourage participants to join the pool will immediately raise base premiums by 19% as insurers will have to meet the Cost Sharing Reduction (CSR) payment pool gap that reducing the subsidies. The continuing spike in premiums will reduce the headcount in the pool, increase the weight of risk within the pool and force the insurers to increase rates to make up the difference. It becomes a self-fulfilling circle of failure.

So, the free market advocates say, if we can get Government out of the way, we will be ok. There is no truly free market solution for this problem because there isn’t enough of a revenue pool to subsidize the participant pool, mitigate the actuarial risk and create enough reserves to leverage the cost reductions within the provider markets to sustain this market. Government, just like it is with Medicare, Medicaid, CHIP and the VA, must be involved to provide the financial engine to stabilize the market. The reality is that Government will never be “removed from healthcare” because it is the major funder of healthcare. It is a mandatory partner to the private sector and to individuals in need of care.

I have included a number of key items regarding the impacts of repealing the ACA in greater details, if that’s the only item on the table. There’s too many negative impacts that can come from this move, which hurt millions of Americans and don’t offer genuine solutions into the universe for citizens. If we’re going to have an honest discussion on healthcare policy and how to make the markets work, it must start with facts. Facts such as, the continual uncertainty that the political market is introducing into the healthcare market is the major catalyst for today’s current challenges. Facts such as, without realistic focus on market certainty, solidifying the financial payers, increasing the participant pools and reducing actuarial risk, wrapped around the cone of Governmental involvement in healthcare, all other dialogues will continue to fall short.