Tuesday, January 13, 2015

If King is upheld, what will Congress do?

Congressional Republicans, who have promised and failed to come up with a legislative alternative to the Affordable Care Act for five years, are now promising that they will have a replacement ready in case the Supreme Court upholds the plaintiffs  this June in King v. Burwell.  Here's Reuters:
Representative Tom Price, Republican chairman of the House Budget Committee, told a conservative forum that the high court's anticipated ruling in the case known as King v. Burwell could cause President Barack Obama's signature domestic policy to unravel quickly.

"We need to be ready, willing and able to move forward," said Price, a leading Obamacare critic who replaced Wisconsin Republican Paul Ryan as House Budget Committee chairman earlier this year.

“We believe we are going to get to that point. I believe the president is actually going to be open to a better way,” he added.
A ruling for the plaintiff in King would leave the body of the law intact, albeit in a vegetative state. The exchanges would still exist, though they would be completely dysfunctional in the states covered by Healthcare.gov. Governors and legislatures in those states would be responsible either for finding a way to continue to subsidize the premiums of tens or hundreds of thousands of state residents who have accessed coverage through Healthcare.gov, or for justifying the denial of subsidies to those residents.

Because the law would still be on the books, there is nothing to force the administration to negotiate a full "replacement" that would entail repeal (as in "repeal and replace"). That leaves the question: Are there possible amendments that would meet Republicans' alleged policy goals without shredding the ACA's coverage grant?  Under pressure of abruptly withdrawing coverage from 8 million Americans, is compromise conceivable?

Would "repealing and replacing" the individual mandate and the EHBs be enough?

Republicans excoriate the ACA as a whole as "government-controlled healthcare" -- an oppressive imposition of federal government authority on individuals and the states. When they get down to specifics, the individual mandate is public enemy number 1, followed by the federal rules defining Qualified Health Plans -- primarily the mandated Essential Health Benefits (EHBs) and minimum actuarial value imposed mandated for the cheapest-level bronze plans (coverage of 60% of the average plan holder's yearly medical costs, which in practice amounts to little more than catastrophic coverage).

The mandate and the coverage rules should both be negotiable. In fact, both effectively are, by means of ACA Section 1332 innovation waivers that empower states to propose alternative coverage schemes to HHS, provided they meet the law's coverage and affordability standards. Under pressure of an adverse ruling in King, those standards could be loosened and the requirement to seek a waiver repealed. This essentially federalist law, which intended to devolve design and administration of state insurance marketplaces to state governments, could be made more federalist still.

Let's take the coverage rules first. The EHBs are a favorite Republican whipping post -- one that came ready to hand in the fall of 2013, when many holders of pre-ACA plans purchased in the individual market were faced with plan cancellations and told that new rules required that plans coverage childbirth, mental health and other services that many do not need. Those coverage rules do drive up the price of insurance, though not nearly as much as guaranteed issue, the ban on factoring a customer's health and medical history into the cost of coverage or denying coverage based on that history. Republicans also complain that plans with lower actuarial values should be available to customers in the individual market.

The administration could yield on these points without fundamentally damaging the ACA's extension coverage that provides access to affordable care. As things now stand, the states have a lot of leeway to define essential health benefits: it was up to them to choose a "benchmark plan" from existing state models that would flesh out the EHBs -- though many defaulted the decision to HHS. For two years now, insurers have offered plans that provide minimal essential coverage as defined by the ACA.

A new law empowering states to establish their own EHBs de novo would doubtless lead to coverage options in some states that progressives would not like. But they would not change the basic financial terms under which coverage is offered -- at least, not if the ACA's "loss ratio" requirement that plans devote 80-85% of premiums to covering plan holders' medical costs were left intact.

As for allowing plans with less than 50% actuarial value: personally, I think that the coverage offered by most bronze plans is so crappy that including an option for still skimpier coverage wouldn't matter much. As long as the benchmark silver plans retain 70% actuarial value, and Cost Sharing Reduction subsidies remain in place, most lower income buyers will retain coverage with out-of-pocket costs more or less commensurate with their income.

The individual mandate is a stickier wicket.  Some mechanism is required to make guaranteed issue financially viable for insurers -- that is, if you're going to force them to cover everyone without adjusting price to individual medical history, you have to broaden the risk pool. Many if not most Republicans claim they want to maintain guaranteed issue (though some talk of high risk pools to cover those with pre-existing conditions).  And alternative mechanisms do exist. To enable states to enact such alternatives without recourse to waivers, Republicans lawmakers could draw on the  ACA replacement framework floated in early 2014 by Senators Coburn, Burr and Hatch.  Here's my summary of their mandate substitute:
To replace the individual mandate, CBH kicks off with an open enrollment period in which all uninsured Americans can buy insurance (subsidized if their income is up to 300% FPL) without medical underwriting, i.e., regardless of any preexisting conditions. After that, it is incumbent on everyone to maintain continuous insurance or else be subject to medical underwriting.  To prevent people from breaking that chain in hard times, CBH would auto-enroll everyone who loses coverage in a default catastrophic plan in which the premium does not exceed the subsidy. The auto-enrolled could opt-out (freedom!) -- but would then lose their protection from medical underwriting.  If the loss of that protection seems harsh, one might imagine adding a provision from an ACA replacement plan created by James Capretta and Douglas Holtz-Eakin, on which CBH seems closely modeled: schedule an open enrollment plan every five years.
If congressional Republicans won freedom for the states to bypass the individual mandate and recast the EHBs and some other coverage rules, could they fairly claimed to have "replaced" the ACA? Could they conceptually detach it from the moniker they've pinned on it, "Obamacare"?   Frankly, I doubt it. The Republican party as a body has never evinced any interest in "fixing" the ACA -- making it work better by their lights.  The legislative bloodlust that would be aroused by a ruling against the government in King would probably forestall any fixes.

On the other side of the equation is the prospect of instantly dis-insuring about 8 million Americans and leaving on the books a law that would destroy the insurance industry and otherwise radically distort the economy.

Perversely, the conservative Supreme Court justices' dissent against the 2012 decision that upheld the constitutionality of the ACA now provides a dystopian warning of the consequences of hobbling it. Justices Scalia, Kennedy,Thomas and Alito argued that if the individual mandate were unconstitutional (as the deemed it),the whole law would have to be struck down because all its key provisions were interdependent and many of them would wreak economic havoc if left to operate with a core provision removed.  They were quite specific about the potential consequences of disfguring the law without killing it:
What is known, however, is that severing other provisions from the Individual Mandate and Medicaid Expansion necessarily would impose significant risks and real uncertainties on insurance companies, their customers, all other major actors in the system, and the government treasury. And what also is known is this: Unnecessary risks and avoidable uncertainties are hostile to economic progress and fiscal stability and thus to the safety and welfare of the Nation and the Nation’s freedom. If those risks and uncertainties are to be imposed, it must not be by the Judiciary (NFIB v. Sebelius, dissent, p. 57).
Now those justices, utterly convinced that this interdependent scheme is unconstitutional, are left with the perverse option of imposing such risks and uncertainties on grounds that the law's framers did not intend for that interdependence to work as manifestly designed. As Abbe Gluck has pointed out, they themselves spotlighted not only the overall interdependence but the centrality of federal subsidies:
That system of incentives collapses if the federal subsidies are invalidated. Without the federal subsidies, individuals would lose the main incentive to purchase insurance inside the exchanges, and some insurers may be unwilling to offer insurance inside of exchanges. With fewer buyers and even fewer sellers, the exchanges would not operate as Congress intended and may not operate at all (p. 60).
And, as they wrote with respect to the burdens and benefits the ACA imposes on hospitals (my emphasis):
Responsibility will be shared, as burdens and benefits balance each other. This is typical of the whole dynamic of the Act (p. 57).
If five justices can bring themselves to deny that dynamic and collapse the "system of incentives" now in place, will Republicans be content to "impose significant risks and real uncertainties on insurance companies, their customers, all other major actors in the system, and the government treasury"?  Let's hope we don't find out.

Related: The ACA provision that should have killed Halbig/King

1 comment:

  1. There is an excellent little blog called ACA Death Spiral.......the author is an academic who really studies insurance markets. He has several posts right on this issue.......


    His overall point is that there are numerous ways the government is trying to hold down premiums in the ACA, the individual mandate only being the most visible.