Monday, June 03, 2019

What state laws ratifying ACA marketplace rules can and can't accomplish

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On May 31, New Jersey legislators introduced, with Governor Murphy's support, a raft of bills* that  codify in state law the ACA's coverage rules in the individual and small group health insurance markets, including protections for people with pre-existing conditions

Separate bills maintain a ban on medical underwriting or exclusion of pre-existing conditions (S626), mandate coverage of the ACA's Essential Health Benefits (S562) and a set of preventive services (S3803), and limit age rating -- the degree to which the oldest enrollees can be charged more than the youngest adult enrollees -- to the ACA's 3-to-1 ratio (S3810).**

Many other states with Democratic governors and legislatures have passed or have in progress similar laws that duplicate the ACA's federal standards. Such laws are redundant by definition; they are designed as protection against future further Republican action to undermine the ACA.

I can imagine these laws serving a useful function under two circumstances:

1) If the courts respond to the Texas v. U.S. lawsuit, which seeks to have the entire ACA declared unconstitutional on grounds that repeal of the individual mandate "tax" penalty renders the individual mandate unconstitutional, by upholding the Trump administration's original position in the suit: that only the ACA's protections for people with pre-existing conditions and the mandate itself should be ruled unconstitutional. In that case, the ACA marketplace's income-adjusted subsidy structure, which is based on a benchmark premium that varies only by age in a given rating area, would be rendered incoherent. States would have the authority to maintain that structure, however, enabling the market to continue under its current structure in states that replicated ACA coverage rules.

2) If a future Republican Congress preserves marketplace subsidy funding but fundamentally restructures the marketplace along lines envisioned by CMS administrator Seema Verma, enabling or requiring states to make subsidies available for medically underwritten plans and/or plans that don't comply with ACA coverage rules. Again, a state could potentially maintain current market structure if its laws were not expressly superseded by new federal laws.

State-based ACA-mirroring laws would not mitigate the damage if the Supreme Court strikes down the entire ACA, however -- including the marketplace subsidies and the Medicaid expansion. Guaranteed issue, modified community rating and Essential Health Benefits together would render coverage unaffordable for the majority of current enrollees without the federally funded subsidies, which the states could not afford to replicate.  Pre-ACA, states like New York and New Jersey that had enacted guaranteed issue were prohibitively expensive. New Jersey enacted guaranteed issue in the individual market in 1993; by 2003, enrollment had been halved and stood at 78,000, compared to about 300,000 today.***

The ACA marketplace was founded on the premise that a market in which insurers had to take all comers on equal terms without regard to their health history and current health could function only in conjunction with a requirement that all individuals obtain insurance and with subsidies to render individual market coverage affordable for all who lacked access to other insurance. With the individual mandate zeroed out by Republicans as of 2019, the marketplace has so far limped along and possibly can maintain stasis thanks to the subsidies currently accessed by about 8 million people, almost two thirds of all individual market enrollees. Without those subsidies, the current market structure would not be sustainable.

From a coverage standpoint, the worst fallout from total repeal would be repeal of the ACA Medicaid expansion, which is responsible for the bulk of the ACA's coverage gains. In New Jersey, Raymond Castro of New Jersey Policy Perspectives calculated in late 2016 that ACA repeal would cost the state over $11 billion from 2018 through 2021. CBO forecast in 2017 that repeal of the Medicaid expansion would shrink Medicaid rolls by 14 million over ten years.

State laws that replicate ACA coverage rules do provide a measure of protection against various possible forms of ACA sabotage.  Politicians promoting such laws should be wary, however, of implying that such state action can protect residents against anything Republicans might throw at them. The laws are only useful, or even functional, as long as federal ACA funding remains in place.

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* Two bills to establish a state-based exchange were also introduced. The case for an SBE is compelling, as SBEs have largely escaped the enrollment losses experienced by the 39 states using the federal exchange, HealthCare.gov, in the Trump era. SBEs raise their own funds for advertising and enrollment assistance via assessments on insurers and thus have not been affected by the Trump administration's gutting of federal spending on these vital services. They also have maintained longer enrollment periods after the Trump administration cut the open enrollment season in half in HealthCare.gov states.

** S3810  also bans gender as a rating factor in the small group market. I don't know why it doesn't do so in the individual market; NJ allowed gender as a rating factor as of 2012. I suspect there's a simple explanation.

*** Total individual market enrollment rebounded after 2003 with the introduction of "basic and essential" plans, which all insurers that sold in NJ's individual market were required to offer. These bare-bones plans had 110,000 enrollees by 2013, compared to just 41,000 enrollees in comprehensive plans.

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