The Obama administration stood up the ACA's core programs in the face of a never-ending shitstorm of Republican defamation, disinformation, noncooperation on the state level, total litigation warfare, and fiscal sabotage. For that they deserve our undying thanks.
By the time Obama left office, the ACA had cut the ranks of the uninsured by about 40 percent, mainly through Medicaid expansion. The marketplace and the expansion proved resilient through the Trump years and provided a vital safety net when the pandemic struck. Since February 2020, Medicaid enrollment by those rendered eligible by the expansion has increased by about 5 million, and marketplace enrollment (with a large push by the Biden administration) by close to two million.
In administering the ACA, however, the Obama administration operated under self-imposed restraints. Pre-Trump, and before Republicans passed their $2 trillion tax giveaway to the wealthy in 2017, Democrats had yet to recognize -- or rather, acknowledge -- the full extent of Republicans' economic fraudulence. Without new appropriations by Congress that they knew would not be forthcoming, Obama and administration officials were reluctant to increase spending on ACA programs and so increase the deficit. They declined to take several measures that would make coverage more affordable or credible. These included the following.
Silver loading. The day in October 2017 when Trump cut off direct reimbursement of insurers for the Cost Sharing Reduction (CSR) subsidies they are required to provide to low income ACA marketplace enrollees (read: most enrollees) who select silver plans, he crowed that the ACA was "imploding." In fact, though, state regulators and insurers were prepared for the move, which had long been telegraphed, and its likely effects were well understood by engaged parties: CSR, available in silver plans only, would be priced directly into silver plans only, which would increase premium subsidies (income-adjusted and set to a silver plan benchmark) and create discounts in bronze and gold plans. Two months before Trump cut off the payments, the Congressional Budget Office projected that doing so would increase federal costs by $194 billion over ten years. In the event, silver loading boosted on-exchange enrollment by about 5% by 2019.
Trump ended direct CSR reimbursement with malign intent -- outright stiffing insurers for CSR costs in the last months of 2017, though just in time for them to price CSR into premiums for 2018. But the Obama administration could have ended direct CSR reimbursement in an orderly way, with advance notice and guidance as to how insurers should recoup the costs. Marketplace enrollees would have reaped the benefits.
The administration was aware of this. In a December 2015 brief*, Potential Fiscal Consequences of Not Providing CSR Reimbursements, HHS scoped out the likely consequences:
Based on enrollment patterns reported at the end of the 2015 open enrollment period, about 85 percent of all those selecting silver plans have income levels that qualify them for CSRs, and the average AV of silver plans – taking into account CSRs – is about 85 percent. Hence, even if consumers’ plan choices remained unchanged, silver plan premiums would have to increase by more than 20 percent, in order to cover about 85 percent, instead of 70 percent, of total health care costs for enrolled consumers....
The result would be a new distribution of consumers across Marketplace health plans, with silver plans likely enrolling only those individuals eligible for the two highest CSR tiers. Without enrollees at the 70 and 73 percent AV levels, silver plans would have to be priced even higher to cover insurers’ costs. Specifically, with all enrollees entitled to 87 or 94 percent AV coverage, the new average AV in silver plans would be about 90 percent, and plans would have to be priced accordingly.
That would require, at minimum, a nearly 30 percent increase in silver plan premiums, to cover an AV of about 90 percent, rather than an AV of 70 percent (footnotes omitted).
The opportunity to price CSR directly into silver plan premiums arose when House Republicans sued the administration in November 2014 to stop direct reimbursement of insurers for CSR. This sabotage opportunity arose from one of the ACA's several drafting errors: the law stipulated that insurers provide CSR to qualified buyers, and that the federal government reimburse them separately for the added cost -- but neglected to make the spending mandatory, as they did for premium subsidies. Republicans refused to appropriate the funds. The Obama administration continued reimbursing insurers, finding the money in couch cushions. The Republican House filed suit in November 2014 to stop the funding. In May 2016, a federal district court judge upheld the suit and enjoined further payments, but stayed the ruling pending appeal.
By the time the HHS brief scoping out the effects of CSR cutoff was written, the need to enrich subsidies in the ACA marketplace was well understood. In October 2015, HHS's projection for marketplace enrollment in 2016 came in at half the earlier CBO projection. In August 2015, Urban Institute scholars Linda Blumberg and John Holahan detailed the inadequacy of marketplace subsidies for various income groups and proposed an enhanced subsidy schedule that has provided a template for a long string of Democratic bills, as well as for the healthcare plan President Biden published during the 2020 campaign, and (with significant differences) the subsidy enhancements enacted through 2022 in the American Rescue Plan, passed in March 2021. Indeed, the inadequacy of ACA subsidies was obvious to progressives in the fall of 2009, as the bill that became the ACA moved through the Senate.
As there was no hope of passing subsidy increases through a Republican Congress, the Republican demand -- and the judicial command -- to cease direct CSR reimbursement represented a golden opportunity to pump more money into the underperforming marketplace. Why did the administration decline to do so? The probable answer is embedded in the title of the December 2015 ASPE brief: "Fiscal Consequences of Not Providing CSR Reimbursements." Those consequences literally get the final word in the brief:
Compared to directly reimbursing insurers for CSRs, this approach would be significantly more expensive and that [sic] the total federal cost of Marketplace subsidies would be billions of dollars higher annually than it otherwise would be. Thus, federal deficits would be higher under the counterfactual scenario than under the current structure in which the federal government directly reimburses insurer costs for CSRs.
Perish the thought! Trump of course, could not have cared less about raising deficits in service of what he appears to have thought might be a mortal blow against the ACA marketplace*. In the Obama administration mindset, more spending would require more offsets.
Done right, with the proper preparation and guidance, silver loading could have had -- and now, under Biden, could yet have -- a stronger impact than it has to date. In practice, it has stopped halfway: insurers are underpricing silver plans relative to gold and bronze. The Obama administration, and analysts following its lead, expected that pricing silver plans according to their real AV would make gold plans cheaper than silver, providing a major boost to affordability for enrollees who qualify for no CSR or only the weakest level of CSR -- that is, enrollees with incomes above 200% FPL. That hasn't happened in most states and rating areas, and far more enrollees have taken advantage of discounted bronze plans than discounted silver. The Obama administrative could have required -- and the Biden administration should require -- state regulators to require insurers to price plans in strict proportion to their real actuarial value. CSR at incomes up to 200% FPL renders silver plans roughly equivalent to platinum; if they were priced as such, gold plans would be available below benchmark.
Family Glitch. ACA marketplace subsidies are not available to people whose employers offer "affordable" coverage, defined as minimum essential coverage for which the premium is less than about 10% of income (the threshold fluctuates a bit annually, according to an arcane formula, between 9.5% and 9.9% thus far). In a rule proposed in 2011 and finalized in 2013, the IRS decreed that if individual coverage offered to an employee was priced below the affordability threshold, but the offer of family coverage was above the threshold, no one in that employee's family would be eligible for marketplace subsidies (the children often are eligible for CHIP, however). According to a Kaiser Family Foundation estimate, some 5.1 million Americans are victims of this "glitch" -- i.e. offered family coverage that is unaffordable by ACA standards (often priced at far more than 10% of income) and so ineligible for ACA premium subsidies. By KFF's estimate 85% of them are insured through the employer and paying through the nose; the other 15% are uninsured.
The IRS's reasoning in barring family members in this situation from subsidy eligibility involved a tortured reading of the ACA's affordability standard, which is defined somewhat differently in different contexts. Timothy Jost, probably the country's premier health law scholar, argues that the decision can and should be reversed administratively. I will outsource the argument to Jost -- and, in more detail, to Katie Keith -- and commend it to the Biden administration.
Keith suggests that the primary motive for the IRS's interpretation was fiscal:
Indeed, the IRS’s interpretation was attributed more to policy and political concerns that existed in the early years of ACA implementation, such as a desire to avoid higher federal outlays.
Medicaid Estate Recovery. A 1993 law requires states to seek "estate recovery" from the heirs of Medicaid enrollees over age 55 who obtain long-term care services, whether in nursing homes or home-based care. That is, states must seek to recoup the costs after the death of the enrollee and the enrollee's spouse, and once all surviving children are over age 21. The states do provide hardship exemptions under various criteria. States also have the option of pursuing Medicaid Estate Recovery from enrollees over age 55 who do not receive long-term care services. This population was vastly expanded by the ACA Medicaid expansion.** Upon enactment of the expansion, 24 of the 25 states (including DC) that opted to expand imposed estate recovery on enrollees over age 55 rendered eligible by the expansion. At present, 21 of 38 expansion states still do so.
Pursuit of estate recovery from the ACA Medicaid expansion population undercuts the law's promise of "affordable care." Those who pursue care through the ACA's exchanges -- or to fulfill its "mandate" to carry coverage -- have no option other than Medicaid if their income qualifies them - -that is if it's under 138% of the Federal Poverty Level ($1,482 per month for an individual; $3,048 for a family of four). "Affordable" care should not be a loan. As part of the Medicaid application, prospective enrollees must sign off on an acknowledgment that the state may pursue recovery if they are over age 55.
The Obama administration recognized this problem. In a 2014 letter to state Medicaid directors, CMS declared its intention to “explore options and to use any available authorities” to limit estate recovery to long-term care. In the interim, the letter declared, "CMS encourages states not to pursue estate recoveries against Medicaid expansion populations" and notes that there are special rules limiting recoveries. But most expansion states continue to pursue recovery, and CMS never followed through on this intention.
The common thread running through all these roads not taken is money. All would have increased spending, and so the annual deficit; all would have reduced the uninsured and/or underinsured population and brought the ACA closer to fulfilling the promise of affordable care for all inherent in its name. All remain available to the Biden administration, which so far has acted with administrative vigor to boost enrollment in the ACA marketplace and take advantage of the large subsidy increases enacted through 2022 in the American Rescue Plan.
Starting with a January 28 executive order instructing all agencies to make increasing health coverage a priority, continuing with an emergency Special Enrollment Period launched on Feb. 15 supported by $50 million in advertising, followed up by swift incorporation of the enhanced subsidies in the ACA exchanges and by two rounds of rulemaking to date that have reversed damaging Trump era marketplace rules (1, 2), the administration has shepherded an off-season enrollment surge that raised enrollment as of June to a mid-year high and laid groundwork for continuing gains in 2022.
Good work. Now do maximal silver loading, end the family glitch, end Medicaid Estate Recovery for non-LTSS enrollees, and keep going.
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* The real threat of harm inherent in Trump's cutoff of CSR reimbursement stemmed from the possibility that he would stiff insurers through much of 2017, when their premiums assumed CSR reimbursement and could not be changed. That, coupled with the Republican attempt to repeal the ACA, which failed in July but remained a live possibility through September, raised the specter of insurers exiting the marketplace en masse, convinced that either it would not last or that they would be subject to constant administrative assault. In a prescient post published in May 2017, CSR and the limited time fuse on it David Anderson predicted that the longer Trump waited to cut off CSR reimbursement, the more the risk of mass insurer exist in response would recede. In the event, Trump pulled the trigger just early enough for insurers (with a green light from state regulators) to adjust premiums for 2018, and just late enough that the hit from un-reimbursed CSR (which they will ultimately recoup in the courts) was not too large.
** In New Jersey, for example, as of February 2021, 170,000 Medicaid enrollees were over age 55 -- 17% of the state's adult enrollees. Only 9,200 of them receive long-term care. All are potentially subject to estate recovery. Nationwide, some 40 million adults are enrolled in Medicaid at present. Perhaps 4-6 million are over age 55 and not in long-term care.
"Affordable" Care Should Not be a Loan
Fixing the ACA's Family Glitch
Thanks for the good details on the two issues I spend a lot of time trying to publicize: the Family Glitch and the Medicaid estate recovery on ACA expanded Medicaid. (I was unaware of the Tim Jost post on the "Family Glitch" and its administrative fixability, and am glad to learn about that source.)
ReplyDeleteOtherwise, as you keep doing the good job of shedding light on the Medicaid estate recovery of expanded Medicaid, that the New York Times completely ignores, and the Washington Post has ignored since 2014, I note a little publicity for the issue has leaked through into an unlikely source: verywell health, which is mostly a site giving information on diseases and treatments.
That's here: https://www.verywellhealth.com/health-insurance-options-if-you-retire-before-age-65-5184983
(The article is a little less than lucid in that it doesn't state that expanded Medicaid or other Medicaid eligibility blocks eligibility for subsidized on-exchange plans, and that people just automatically get the potentially estate-destroying expanded Medicaid if incomes are to 138% of the Federal Poverty Level (regardless of assets) if they follow the standard ACA application procedure "I want help paying from the government".