Wednesday, April 29, 2020

Insuring the newly uninsured: COBRA or ACA?

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So what about fully funding COBRA for the millions or tens of millions of Americans who lose job-based coverage? That is, bail out everyone -- insurers, employers large and small, employees, and hospitals and doctors, who depend on the commercial insurance gravy train?

It's the most expensive way to keep the ranks of the uninsured from ballooning. It's also the least disruptive way.  Families USA, hardly a corporate water-carrying outfit, supports it.

Thought bubbles:

1. We are not going to transition to single payer in the midst of this crisis. Unless, perhaps, it lasts as long as the Great Depression and pressure for major change builds for years, as it did before FDR took office.

2. Employer-sponsored insurance is not a bad thing -- but in the U.S. it needs reform. A lot of wealthy countries depend on ESI, but in those countries the employer plans don't pay providers twice what government programs pay, and there are solid alternatives, easy to transition to, for people who lose job-based coverage.

3. Instead of subsidizing COBRA, I wish the U.S. were directly subsidizing employment, following European countries by paying 60-80% of furloughed people's salaries, in which case the employer could keep paying the insurance.

4. Medium term, I think the best evolution for U.S. healthcare would be a strong public option affordably available to all, with job-based coverage competing against it and paying more or less the same rates to providers.  The Medicare for America bill is a bid to create this system. Biden's healthcare plan is a light sketch of it.  What feasible measures would move us in that direction? More on that below.

5. At present, the ACA resources -- marketplace and Medicaid -- are only creakily and leakily equipped to absorb those who lose access to ESI. The Urban Institute estimates that 59% of people in industries most vulnerable to job loss who lose access to ESI would be eligible for Medicaid or marketplace subsidies -- if they file for unemployment.  Medicaid is fundamentally a decent option for those with incomes up to 138% of the Federal Poverty Level in the 35 states + D.C. that have enacted the ACA Medicaid expansion. But... a) 15 states to date have not enacted the expansion; b) enrollment is confusing and often difficult, and those who are eligible in many cases won't be aware of it;  c) Medicaid bills are going to crush state budgets unless federal funding is boosted further than in was in the second COVID relief bill, which will lead states to seek cutbacks to services or enrollment; and d) the massive reduction in ordinary medical care during the pandemic is likely to radically reduce access to care in already narrow Medicaid provider networks, unless it's separately addressed.

6. As for the marketplace, it's undersubsidized to begin with, and the $600/week extra unemployment benefit provided for up to 4 months by the CARES Act, which counts toward marketplace subsidies but not toward Medicaid eligibility, is going to further weaken marketplace affordability unless it's separately addressed, i.e. unless the extra benefit is exempted from marketplace income calculations, as it is from Medicaid and CHIP.

7. Shoring up the ACA programs would be a reasonable response to the crisis. That would entail a) exempting the $600/week extra UI from marketplace subsidy calculations, b) opening an emergency Special Enrollment Period open to all uninsured in, the federal exchange, c) simplifying messaging and enrollment processes, e.g. by foregrounding a "check if you're eligible for Medicaid" screener on and state-based exchange home pages; and d) improving ACA marketplace subsidies, as a draft Democratic House bill would do.  During the crisis at least, marketplace subsidies should be based on current income rather than full-year, or income YTD be discounted by some measure, so that people who have earned a fair amount prior to layoff can get something affordable.

8. Republicans hate the marketplace and Medicaid and are likelier to get behind COBRA payment. On the other hand, the Chamber of Commerce, blood enemy of the ACA from the start, has astonished the world by coming out in favor of extending marketplace subsidies to higher earners and opening an emergency Special Enrollment Period (along with subsidizing COBRA). Healthcare providers and insurers also support bulking up ACA subsidies, since doing so would preserve an existing channel of commercial insurance (paying commercial rates) and keep up a kind of dam against further expansions of public insurance (paying government rates). Ergo, perhaps if Democrats put all their weight behind ACA enhancement rather than COBRA subsidization, they could move the earth a bit.

9. For an enhanced ACA marketplace to be sustainable -- and exert reforming pressure on ESI -- it needs cost control. That could come in the form of a strong public option. But a public option would only help enrollees if subsidies are improved-- in the current marketplace, a PO paying something close to Medicare rates might help government finances but it wouldn't help subsidized enrollees, who would still pay the same price for the same actuarial value as at present.  An alternative is to cap the rates that commercial marketplace insurers pay providers, or restructure the marketplace so it's more like Medicare Advantage or managed Medicaid, paying insurers on a capitated basis that assumes provider payment rates at Medicare levels or some modest multiple.

1 comment:

  1. Full funding of COBRA is indeed the quickest solution, but it is pricey as you say. If a total of 40 million persons lose their jobs and 25 million of them had health insurance, and the average employer premium is now $10,000 a year, then the total cost of full funding is $250 billion. (assume some with family coverage, some with individual policies)

    Thanks for including the document where the Chamber of Commerce supports higher ACA subsidies. That is nice to see.

    I had to laugh that the Chamber-endorsed document had "expanding HSA's" as one of its solutions. Talk about tone deaf...who amongst the uninsured has money for an HSA?