In August 2015, Urban Institute healthcare scholars Linda Blumberg and John Holahan acknowledged that ACA marketplace subsidies were too skimpy to do all they were intended to and came up with a comprehensive proposal to enrich them. In January 2016, staring down the barrel of Republican repeal vows, they remixed those improvements in a compromise package that included several concessions to conservative priorities. These included:
- Repeal the employer mandate (requiring employers with more than 50 employees to offer insurance or pay a penalty)
- Repeal and replace the individual mandate (with a premium penalty for those who did not maintain continuous coverage)
- Examine the Essential Health Benefits and look for responsible ways to lighten them
- Allow states to drop the income threshold for Medicaid eligibility to 100% of the Federal Poverty Level (FPL). At present, the threshold is 138% FPL in states that have accepted the ACA Medicaid expansion.
As I noted recently, these concessions were embedded with offsets: reinsurance to mitigate the premium hikes likely to be triggered by individual mandate replacement, and lower out-of-pocket costs to cushion the substitution for enrollees in the 100-138% FPL range of private insurance for Medicaid (richer subsidies across all income levels would also offset the ill effects of a weaker mandate substitute).
Eight months later, perhaps to everyone's surprise, after at least temporarily exhausting themselves in repeal efforts, Republicans in both the House and Senate are talking seriously about taking steps to counteract their own sabotage and stabilize the ACA marketplace. The most urgent and obvious step is to appropriate funds to reimburse insurers for the Cost Sharing Reduction subsidies they are obligated to provide to low income enrollees. There is also talk of federal funding for reinsurance, which Republicans heaped generously onto their ACA repeal bills in the House and Senate. Reinsurance helped to stabilize premiums in the ACA marketplace's first three years; the program's expiration contributed to 2017's premium spikes.
Yet those basic rescue measures are sure to face stiff Republican resistance, and at best will likely be conceded only at a price. Here's how Senate Majority leader Mitch McConnell responded to an initiative by Senate HELP Committee chair Lamar Alexander (R-TN) and ranking member Patti Murray (D-WA) to initiate stability legislation: "If the Democrats are willing to support some real reforms rather than just an insurance company bailout, I would be willing to take a look at it."
What might the price be? What should Democrats be willing to give up for stabilization measures? I asked Blumberg and Holahan this week to assess current prospects and revisit their January proposal.
We began by discussing the ACA's Section 1332 "innovation waivers," which allow states to propose variations on ACA marketplace structure to HHS. Loosening these waivers in various ways is an often-bruited area for potential compromise, Under Section 1332, states can propose alterations to almost any ACA marketplace feature -- including repealing the individual and employer mandates, changing subsidy structure and eligibility, and altering the Essential Health Benefits (EHBs) that every insurance plan is required to offer. The catch is that the state seeking a waiver must demonstrate -- and convince the Medicare actuary -- that its alternative scheme will cover as many people as comprehensively and as affordably as the default structure -- and do so without increasing the deficit.
xpostfactoid: Is there any acceptable way to open up the 1332 waivers?
Blumberg: It's challenging. The notion of giving any extra space is attractive, but it's hard to come up with an approach that isn't going to compromise access to necessary care without violating those guardrails.
Holahan: With respect to the EHBs, I was inclined to perhaps give on them a bit. But you have problems every place you look.. If you compromise on mental health you have all kinds of problems. You could cut out physical therapy but that seems to be a pretty standard piece of how people recover from hospitalization now ---
Blumberg: and those pieces aren't that expensive.*
Holahan: Yeah, there's no money in those -- all the money is in hospital inpatient and outpatient services, emergency rooms, physician services and drugs. What we've really done in this country is reduce the benefit package by increasing deductibles.
It's hard to do anything useful without more revenues or running up the deficit. We tried to make the case one time that the whole ACA effort was seriously underfunded, in an effort to keep the total ten-year cost under $1 trillion. A whole lot of compromises were made along the way that resulted in the high deductibles...it seems like a lot of this really needs to be fixed, and it's hard to see compromise going in the other direction.
Blumberg: I could imagine rejiggering some of tax credits. For example, in Massachusetts, prior to the ACA [in the state's universal coverage program that prefigured the ACA] subsidies were more generous, and they had higher enrollment, but subsidies only went up to 300% of the Federal Poverty Level [as opposed to 400% FPL in the ACA]. You could imagine a sweet spot where you're getting just as much enrollment, improving affordability, but cutting out people in the 300-400% FPL....it's a matter of what you're willing to trade off.
We worry about risk pooling and impact on low income people before we worry about anything else. If you start cutting EHBs, the things you're willing to cut don't have much impact on premiums, but the impact on people who need those services is really large. It's tough, especially when you feel like overall the system was underfunded.
And that's been the complaint from the right and the left: the high out-of-pocket costs. It's kind of amazing, when you go down and testify before these guys -- as we did prior to the change in administration -- Republicans were complaining about having people not eligible for Cost Sharing Reduction [available up to 250% FPL]. Out-of-pocket costs are too high for people who don't get CSR. That seems like a universal complaint -- but then obviously the ACA replacement plans that came out would have made that significantly worse.
xpostfactoid: What kind of measures are desirable and realistic in the short-term? [e.g., in legislation to be considered in September, before 2018 premiums are set in stone.]
Blumberg: As we wrote on the day the last Senate bill collapsed, four things need to be done immediately to stabilize markets: 1. commit to paying the CSR subsidies; 2. re-establish the ACA's reinsurance program [which expired in 2016]; 3. enforce the individual mandate penalties; and 4. reinvest in outreach and enrollment assistance, that expands coverage and improves the risk pool.
xpostfactoid: To get those four desirables, what might Democrats have to give up? What should they give up -- what's realistic? What do you think of the Problem Solvers' package?
Note: The Problem Solvers are a bipartisan group of about 40 House members who have floated a compromise package that would 1) make the CSR payments; 2) establish a reinsurance program; 3) limit the employer mandate to employers of at 500 or more workers; 4) eliminate the medical device tax; and 5) allow states more flexibility in ways so far rather vaguely defined.
Blumberg: I would give on employer the mandate if that's what it took. I'm not in favor of getting rid of medical device tax because I like to pay for things, but that's a concession also.
xpostfactoid: It wouldn't kill anyone.
Blumberg: But wouldn't they have to then come up with another source of revenue? I'm not sure what that would be.
Holahan: Well, it is a frustration that we can't cap the employer exclusion [rendering employee health benefits tax-free] at a level that would bring in enough revenues to fix other problems, but I think that's...
Blumberg: it's controversial. Yeah, it would take a lot longer.
Holahan: One place where Democrats might give is allow states expand Medicaid only to 100% FPL.** People with incomes between 100% and 138% FPL would go into the marketplace. We proposed this to encourage other states to come in [and accept the ACA's Medicaid expansion]. At the same time, we have made the point that the marketplace is just not big enough [and so could use the extra enrollees]. Note: Arkansas has proposed making this eligibility change via waiver, and other states are likely to follow suit.
Blumberg: That would bring more people in. It's tough on people who were in Medicaid because it increases their costs. Ideally you would do that while also improving the subsidies for those folks at the bottom.
xpostfactoid: Is Medicaid to just 100% FPL attractive to Republicans?
Blumberg: We thought it might be, because in early years, you heard Republican governors at least paying lip service, saying, it's: not right to expand Medicaid to the non-poor. While we could look at it and say, well, people at this income level [100-138% FPL] are incredibly low income...
Holahan: Conservatives like Gail Wilensky raise the point that 100% FPL is where it should be.
Blumberg: Truthfully it would have been set at 100% FPL, except that it was cheaper to go 138% FPL [Medicaid coverage is cheaper for the federal government than marketplace coverage] .
xpostfactoid: Would you agree to this even if you can't get improved CSR (lower out-of-pocket costs) for those in the 100-138% FPL income band?
Blumberg: Leave it at states' option. Some states currently at 138% FPL wouldn't decrease it because it would leave those people worse off. In those 19 states [that have refused to expand Medicaid] we already have a good amount in that 100-138% FPL range enrolled in the marketplace with the current Cost Sharing Reductions, and it's not great, and they don't use as much care as they would if they had Medicaid -- but it's better than nothing.
Holahan: If it got a good chunk of the 19 states [to accept the Medicaid expansion], I would say it would be worth it.
Blumberg: Right now, those people have nothing, the coverage [marketplace coverage without subsidies, which begin at 100% FPL] isn't affordable for them . It's a tradeoff: you'd get much more coverage, but some people having higher costs relative to what they have today.
xpostfactoid: In January, you suggested replacing the individual mandate with another means to push people into the risk pool: a premium penalty for those who have a lapse in coverage. What about that now?
Blumberg: We continue to struggle with that. We don't always agree.. we are trying to recognize this is the single most unpopular component of the law -- the only feature of the ACA that a majority doesn't support. We were trying to recognize that and be thoughtful and creative about what to do about it. The problem is, I remain concerned that the surcharge we proposed would lead to more adverse selection. The AHCA [the American Health Care Act, the ACA repeal bill passed by the House in May], had a 30% one-year premium surcharge. If you're looking at enrolling, and you have to pay 30% extra, who's more likely to do that? [Sick people.] I'm worried that the structure of it is inclined to increase adverse selection.
Holahan: There's no good answer -- I think it's going to plague the ACA for a long time unless something is in place. Linda and I were involved in the Massachusetts reform in 2004- 2006, and it's amazing how easily accepted this idea was -- people's responsibility to get health insurance. There weren't going to be free riders...[then-Governor Mitt] Romney articulated this pretty well, and we never heard people complaining how outrageous it was. Maybe if it's in place for a while, Americans will accept it.
Blumberg: What you want is a situation where the penalty that's imposed doesn't affect the price of coverage. Waiting periods fall into that category, but I don't think any of us think that a waiting period like what was in BCRA [the Better Care Reconciliation Act, which failed in the Senate] would be as effective as the mandate.
Holahan: There have been a lot of compromises in the ACA already. If you think about where Democratic voices are right now, talking about some version of single payer.. I find it pretty hard to compromise further. Thinking back again to the Massachusetts effort, the whole way of thinking about this initially was either single payer or employer mandate. The sell was instead to put responsibility on individuals, and it wasn't an easy sell. Compared to that world we used to live in, this is very much a compromise already.
xpostfactoid: So should Democrats hold fast, and say to Republicans, "You own this, do what's necessary to make it work?
Holahan: I would say [by way of compromise] Medicaid to 100% FPL, repeal the employer mandate --
Blumberg: give 'em the device tax, maybe do something with the Cadillac tax.
A lot of this hinges on whether Republicans see themselves as being held responsible if things tank. It's a real risk for them to decide we're not going to do it about something written in this law [such as reimbursing insurers for CSR payments, or enforcing the individual mandate]. They've made it very clear they know that has implications for the stability of these markets. There's compromises you can make that we've discussed -- but at least some Republicans are clearly concerned that it's going to be on them if these markets fall apart.
--
*In a July 2017 analysis, Blumberg and Holahan found that of the EHBs most often targeted for cuts, maternity and newborn care accounted for 6% of total individual market premium; habilitative/rehabilitative care for 2%; and pediatric dental and vision care for 1%.
** As originally enacted, the ACA extended Medicaid access to all adult citizens (and noncitizens otherwise eligible) with incomes up to 138% FPL. In 2012 (prior to implementation), the Supreme Court made the expansion optional for states, and to date, 19 states have refused to implement it. In those states, eligibility for marketplace subsidies begins at 100% FPL, as opposed to 138% FPL in the expansion states. In addition to premium subsidies, marketplace enrollees in this category are eligible for CSR subsidies that raise the actuarial value of a silver plan from 70% to 94% -- that is, the plans are designed so that these enrollees will pay about 6% of their medical costs out of pocket on average, which translates to an average deductible of about $250. For low income people, that's a lot -- research shows that even small copays induce people at this income level to forgo needed care. CSR is available only with silver plans. For a person in the 100-138% FPL range, a benchmark silver plan premium is subsidized so that it costs 2% of the person's income.
We began by discussing the ACA's Section 1332 "innovation waivers," which allow states to propose variations on ACA marketplace structure to HHS. Loosening these waivers in various ways is an often-bruited area for potential compromise, Under Section 1332, states can propose alterations to almost any ACA marketplace feature -- including repealing the individual and employer mandates, changing subsidy structure and eligibility, and altering the Essential Health Benefits (EHBs) that every insurance plan is required to offer. The catch is that the state seeking a waiver must demonstrate -- and convince the Medicare actuary -- that its alternative scheme will cover as many people as comprehensively and as affordably as the default structure -- and do so without increasing the deficit.
xpostfactoid: Is there any acceptable way to open up the 1332 waivers?
Blumberg: It's challenging. The notion of giving any extra space is attractive, but it's hard to come up with an approach that isn't going to compromise access to necessary care without violating those guardrails.
Blumberg: and those pieces aren't that expensive.*
Holahan: Yeah, there's no money in those -- all the money is in hospital inpatient and outpatient services, emergency rooms, physician services and drugs. What we've really done in this country is reduce the benefit package by increasing deductibles.
It's hard to do anything useful without more revenues or running up the deficit. We tried to make the case one time that the whole ACA effort was seriously underfunded, in an effort to keep the total ten-year cost under $1 trillion. A whole lot of compromises were made along the way that resulted in the high deductibles...it seems like a lot of this really needs to be fixed, and it's hard to see compromise going in the other direction.
Blumberg: I could imagine rejiggering some of tax credits. For example, in Massachusetts, prior to the ACA [in the state's universal coverage program that prefigured the ACA] subsidies were more generous, and they had higher enrollment, but subsidies only went up to 300% of the Federal Poverty Level [as opposed to 400% FPL in the ACA]. You could imagine a sweet spot where you're getting just as much enrollment, improving affordability, but cutting out people in the 300-400% FPL....it's a matter of what you're willing to trade off.
We worry about risk pooling and impact on low income people before we worry about anything else. If you start cutting EHBs, the things you're willing to cut don't have much impact on premiums, but the impact on people who need those services is really large. It's tough, especially when you feel like overall the system was underfunded.
And that's been the complaint from the right and the left: the high out-of-pocket costs. It's kind of amazing, when you go down and testify before these guys -- as we did prior to the change in administration -- Republicans were complaining about having people not eligible for Cost Sharing Reduction [available up to 250% FPL]. Out-of-pocket costs are too high for people who don't get CSR. That seems like a universal complaint -- but then obviously the ACA replacement plans that came out would have made that significantly worse.
xpostfactoid: What kind of measures are desirable and realistic in the short-term? [e.g., in legislation to be considered in September, before 2018 premiums are set in stone.]
Blumberg: As we wrote on the day the last Senate bill collapsed, four things need to be done immediately to stabilize markets: 1. commit to paying the CSR subsidies; 2. re-establish the ACA's reinsurance program [which expired in 2016]; 3. enforce the individual mandate penalties; and 4. reinvest in outreach and enrollment assistance, that expands coverage and improves the risk pool.
xpostfactoid: To get those four desirables, what might Democrats have to give up? What should they give up -- what's realistic? What do you think of the Problem Solvers' package?
Note: The Problem Solvers are a bipartisan group of about 40 House members who have floated a compromise package that would 1) make the CSR payments; 2) establish a reinsurance program; 3) limit the employer mandate to employers of at 500 or more workers; 4) eliminate the medical device tax; and 5) allow states more flexibility in ways so far rather vaguely defined.
Blumberg: I would give on employer the mandate if that's what it took. I'm not in favor of getting rid of medical device tax because I like to pay for things, but that's a concession also.
xpostfactoid: It wouldn't kill anyone.
Blumberg: But wouldn't they have to then come up with another source of revenue? I'm not sure what that would be.
Holahan: Well, it is a frustration that we can't cap the employer exclusion [rendering employee health benefits tax-free] at a level that would bring in enough revenues to fix other problems, but I think that's...
Blumberg: it's controversial. Yeah, it would take a lot longer.
Holahan: One place where Democrats might give is allow states expand Medicaid only to 100% FPL.** People with incomes between 100% and 138% FPL would go into the marketplace. We proposed this to encourage other states to come in [and accept the ACA's Medicaid expansion]. At the same time, we have made the point that the marketplace is just not big enough [and so could use the extra enrollees]. Note: Arkansas has proposed making this eligibility change via waiver, and other states are likely to follow suit.
Blumberg: That would bring more people in. It's tough on people who were in Medicaid because it increases their costs. Ideally you would do that while also improving the subsidies for those folks at the bottom.
xpostfactoid: Is Medicaid to just 100% FPL attractive to Republicans?
Blumberg: We thought it might be, because in early years, you heard Republican governors at least paying lip service, saying, it's: not right to expand Medicaid to the non-poor. While we could look at it and say, well, people at this income level [100-138% FPL] are incredibly low income...
Holahan: Conservatives like Gail Wilensky raise the point that 100% FPL is where it should be.
Blumberg: Truthfully it would have been set at 100% FPL, except that it was cheaper to go 138% FPL [Medicaid coverage is cheaper for the federal government than marketplace coverage] .
xpostfactoid: Would you agree to this even if you can't get improved CSR (lower out-of-pocket costs) for those in the 100-138% FPL income band?
Blumberg: Leave it at states' option. Some states currently at 138% FPL wouldn't decrease it because it would leave those people worse off. In those 19 states [that have refused to expand Medicaid] we already have a good amount in that 100-138% FPL range enrolled in the marketplace with the current Cost Sharing Reductions, and it's not great, and they don't use as much care as they would if they had Medicaid -- but it's better than nothing.
Holahan: If it got a good chunk of the 19 states [to accept the Medicaid expansion], I would say it would be worth it.
Blumberg: Right now, those people have nothing, the coverage [marketplace coverage without subsidies, which begin at 100% FPL] isn't affordable for them . It's a tradeoff: you'd get much more coverage, but some people having higher costs relative to what they have today.
xpostfactoid: In January, you suggested replacing the individual mandate with another means to push people into the risk pool: a premium penalty for those who have a lapse in coverage. What about that now?
Blumberg: We continue to struggle with that. We don't always agree.. we are trying to recognize this is the single most unpopular component of the law -- the only feature of the ACA that a majority doesn't support. We were trying to recognize that and be thoughtful and creative about what to do about it. The problem is, I remain concerned that the surcharge we proposed would lead to more adverse selection. The AHCA [the American Health Care Act, the ACA repeal bill passed by the House in May], had a 30% one-year premium surcharge. If you're looking at enrolling, and you have to pay 30% extra, who's more likely to do that? [Sick people.] I'm worried that the structure of it is inclined to increase adverse selection.
Holahan: There's no good answer -- I think it's going to plague the ACA for a long time unless something is in place. Linda and I were involved in the Massachusetts reform in 2004- 2006, and it's amazing how easily accepted this idea was -- people's responsibility to get health insurance. There weren't going to be free riders...[then-Governor Mitt] Romney articulated this pretty well, and we never heard people complaining how outrageous it was. Maybe if it's in place for a while, Americans will accept it.
Blumberg: What you want is a situation where the penalty that's imposed doesn't affect the price of coverage. Waiting periods fall into that category, but I don't think any of us think that a waiting period like what was in BCRA [the Better Care Reconciliation Act, which failed in the Senate] would be as effective as the mandate.
Holahan: There have been a lot of compromises in the ACA already. If you think about where Democratic voices are right now, talking about some version of single payer.. I find it pretty hard to compromise further. Thinking back again to the Massachusetts effort, the whole way of thinking about this initially was either single payer or employer mandate. The sell was instead to put responsibility on individuals, and it wasn't an easy sell. Compared to that world we used to live in, this is very much a compromise already.
xpostfactoid: So should Democrats hold fast, and say to Republicans, "You own this, do what's necessary to make it work?
Holahan: I would say [by way of compromise] Medicaid to 100% FPL, repeal the employer mandate --
Blumberg: give 'em the device tax, maybe do something with the Cadillac tax.
A lot of this hinges on whether Republicans see themselves as being held responsible if things tank. It's a real risk for them to decide we're not going to do it about something written in this law [such as reimbursing insurers for CSR payments, or enforcing the individual mandate]. They've made it very clear they know that has implications for the stability of these markets. There's compromises you can make that we've discussed -- but at least some Republicans are clearly concerned that it's going to be on them if these markets fall apart.
--
*In a July 2017 analysis, Blumberg and Holahan found that of the EHBs most often targeted for cuts, maternity and newborn care accounted for 6% of total individual market premium; habilitative/rehabilitative care for 2%; and pediatric dental and vision care for 1%.
** As originally enacted, the ACA extended Medicaid access to all adult citizens (and noncitizens otherwise eligible) with incomes up to 138% FPL. In 2012 (prior to implementation), the Supreme Court made the expansion optional for states, and to date, 19 states have refused to implement it. In those states, eligibility for marketplace subsidies begins at 100% FPL, as opposed to 138% FPL in the expansion states. In addition to premium subsidies, marketplace enrollees in this category are eligible for CSR subsidies that raise the actuarial value of a silver plan from 70% to 94% -- that is, the plans are designed so that these enrollees will pay about 6% of their medical costs out of pocket on average, which translates to an average deductible of about $250. For low income people, that's a lot -- research shows that even small copays induce people at this income level to forgo needed care. CSR is available only with silver plans. For a person in the 100-138% FPL range, a benchmark silver plan premium is subsidized so that it costs 2% of the person's income.
I fully realize that discussing changes to the ACA is a lot like musical chairs. No matter what we can come up with, someone will be left without support.
ReplyDeleteHowever, I want to add my own opinion that the crushing premiums for older-age off-exchange persons are just as great a problem as CSR's for the poor.
Today I quoted ACA plans for a 62 year old in semi rural Nebraska. The premium for a silver plan was $1,454 a month, and of course there will be an increase for 2018.
This person makes $50,000 a year. After taxes that comes to about $3,200 a month.
His insurance premium would thus be over 40% of his income.
This to me is worse than CSR problems, because high premiums hit you every single month, versus a high deductible only hurts you when you are sick.
Under the current subsidy schedule, if this person got his income down to about $45,000 a year, he would get a subsidy of $1,050 a month toward this premium.
I would place top priority on getting rid of these horrible "cliffs". Just put a cap of 9% of income for everyone.
What is rather amazing is that this would benefit a major Trump demographic-- older persons in rural America.
But the Republicans were so fixated on getting a tax cut that they would do nothing for this group, in fact a 5:1 young/old ratio would make things worse.