How the Trump administration handled the ACA marketplace, Part 2

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The Trump administration stretched the clock for short-term, limited duration health plans

This post is Part 2 of an assessment of Trump administration policy with respect to the ACA, most specifically the ACA marketplace. Part 1 overviewed the administration’s early encouragement of state reinsurance programs, Trump’s cutoff of direct reimbursement of insurers for Cost Sharing Reduction subsidies, and the defunding of the Navigator enrollment assister program, paired with considerable support for health insurance brokers.

Below, we’ll look at the effective repeal of the individual mandate penalty (the one legislative initiative considered), and regulations designed to boost an alternative market of ACA-noncompliant plans.

As each part keeps ballooning as I write it, we’ll leave other administrative changes, loosening requirements on insurers and tightening them on prospective enrollees, to a Part 3.

Zeroing out the individual mandate penalty. After the Republican Senate in the summer of 2017 declined to take up the ACA “repeal and replace” bill passed by the House and then failed to pass its own repeal/replace alternative, John McCain famously scotched a final attempt to pass a “skinny” repeal bill that would have simply repealed the individual mandate and brought the Senate into conference with the House, perhaps to make one more run at a more comprehensive repeal/replace alternative. Following those failures, Republicans reduced the mandate penalty to zero in their massive tax cut bill passed in December 2017.

As an expression of intent to dismantle the ACA, the zero-penalty mandate’s chief function was to enable Republicans’ final attempt to void the ACA through the courts. In February 2018, a group of 20 states, led by Texas, sued to have the mandate declared unconstitutional, and the entire ACA statute voided. The suit sought ACA nullification on the ridiculous grounds that a) the 2012 Supreme Court decision upholding the constitutionality of the mandate did so only on the basis that the mandate is a tax, and within Congress’s taxing power; b) a zeroed-out mandate is no longer a tax; and c) since the Democratic Congress passed a resolution in 2010 declaring that the mandate was an “essential part” of the ACA’s overall “regulation of economic activity,” the whole law (including myriad parts unconnected with the ACA marketplace) had to be vacated. In June 2021 a 7-2 Supreme Court majority dismissed the suit, finding that the plaintiffs did not have standing because no one was harmed by a $0 penalty. The litigation did enable the Trump administration, 20 Republican attorneys general, and 126 House Republicans who signed an amicus brief in support of the plaintiffs to display root-and-branch opposition to the ACA for another three years after the legislative repeal drive failed.

Negation of the mandate was expected to drive healthier enrollees out of the market, raising premiums and thus further reducing enrollment. In 2019, CBO forecast (p. 11) that the $0 mandate penalty would increase the uninsured population by 7 million, or a bit more than 2%, and reduce marketplace enrollment by 4 million.

John Roberts, James Joyce, the individual mandate, Medicaid Estate Recovery, and "affordable" care

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A good book about Ireland's history since 1958, Fintan O'Toole's We Don't Know Ourselves: A Personal History of Modern Ireland led me to a second attempt at James Joyce's Ulysses, which I stalled out on decades ago, somewhere after Leopold Bloom emerges from an outhouse. Further I plod. One thing I will say for Joyce's internal babble is it does make you somewhat more mindful -- inclined to track your own perceptions and fleeting thoughts. 

So it was that I caught one lightning round of associations at lunchtime today:

--  John Roberts -- trying to moderate Roe strike-down?

-- Roberts -- headed off one radical conservative decision by saving the ACA's individual mandate "as a tax." 

From those wonderful folks who brought you ACA nullification....

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Does the rogue's gallery of state attorneys general asking the Supreme Court to end American democracy by overturning presidential election results in Georgia, Michigan, Wisconsin and Pennsylvania look familiar? Here are the states that joined an amicus brief in support of the suit filed by indicted Texas attorney general Ken Paxton alleging that all of those states' certified election results are the product of massive but utterly undocumented fraud:

All of these states except Oklahoma and Montana* are plaintiffs in California v. Texas, the suit arguing that when the Republican Congress zeroed out the ACA individual mandate penalty in December 2017, they rendered the entire sprawling law unconstitutional, either by accident or by stealth.

ACA Ok? Once again, Chief Justice Roberts seems to dismiss an argument from intent

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In his June 2015 decision disposing of King v. Burwell, the last lawsuit before the presenting pending one seeking to cripple the Affordable Care Act, Chief Justice Roberts summarily disposed of the plaintiffs' patently fraudulent argument about Congressional intent. 

The suit was based on a drafting error. While the law envisioned states forming their own health insurance exchanges, but gave them the option of deferring to a federal exchange, key provisions referred only to "an exchange established by a state" as the vehicle for allocating premium subsidies to enrollees. The error was a biproduct of the political warfare that affected the ACA's drafting history, preventing an ordinary reconciliation of Senate and House versions.

Recognizing that spotlighting a drafting error would not suffice to convince the courts to cripple the ACA marketplace, the plaintiffs argued that the omission was no error. They claimed that while Congress intended to authorize state-based health insurance exchanges to grant premium subsidies to qualifying enrollees, Congress intended not to authorize the federal exchange to grant those subsidies. (At the time the suit came before the Supreme Court, 37 states were relying on the federal exchange, HealthCare.gov.) Testimony by those involved in the law's creation was unanimous that no one intended to bar the federal exchange from awarding premium subsidies.

Writing for a 6-3 majority, Roberts' disposed of the intent question thusly:

Congress passed the Affordable Care Act to improve health insurance markets, not to destroy them. 

Improving the ACA under gridlock, Part II: Innovation waivers and new revenue sources

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Earlier this week I reviewed the many ways a Biden administration might improve healthcare access and affordability by administrative action, on the assumption that with a Republican Senate majority, major legislation to improve the ACA or revolutionize drug pricing is off the table. The laundry list was courtesy of Elizabeth Warren, except for a final item, maximizing silver loading, would likely have the largest impact on the ACA marketplace.

Now let's think about another non-legislative means by which insurance coverage might be boosted: the ACA Section 1332 innovation waivers available to states. 

Under these waivers, states can propose to change almost any aspect of ACA marketplace coverage -- subsidy structure, metal level, essential health benefits, employer mandate -- in an effort to improve affordability and access. There are tight constraints, however: the proposed alternative must  provide coverage as comprehensive and affordable to as many people as does the existing marketplace design (or rather, will again, with CMS director Seema Verma gone), without increasing the federal deficit. 

That fiscal constraint amounts almost to a Catch-22, as the requirement not to boost spending is on an absolute, not per capita basis. If the state's changes boost enrollment, even while reducing cost per person, the state must foot any excess spending.

I have reviewed potential state innovations many times, e.g., here and here (one major option for states to consider, a Medicaid-like Basic Health Program for enrollees with incomes up to 200% FPL, is enabled by a different ACA provision, Section 1331).

Here I want to focus not on potential alternative schemes themselves, bur rather on fiscal opportunities that have opened up for states in the Trump years and that potentially make waivers more viable. By both accident and design, the federal government has put new money on the table.  Potential revenue sources include:

No mandate penalty, no problem? The jury's still out

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The Kaiser Family Foundation is peerless as a source of data and analysis of the ACA marketplace, and indeed of all U.S. healthcare markets. So it's probably foolish of me to question a simple, unequivocal and important conclusion by KFF president and CEO Drew Altman. Still...

Altman, who has a regular column conforming to Axios' radically short format, begins his latest with this declarative:

The Affordable Care Act’s insurance market has not been materially affected by the elimination of the individual mandate penalty.

Evidence: premiums are down in 2020, marketplace insurers are profitable, the risk pool has not apparently worsened, enrollment is more or less stable, and the Medicaid expansion appears to have been "largely unaffected."

That's a lot of evidence in short space. The marketplace, and the Medicaid expansion are clearly functioning without the mandate. But still, I think it's too soon to declare the effect of zeroing out the mandate negligible.  Caveats:

New enrollment drop in California: Probably the mandate repeal

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Covered California, the state's ACA exchange, recently released its March Active Member Profile, the year's first detailed breakout of enrollment data for all enrollees (repeated quarterly). It follows a prior breakout for new enrollees. The Active Member numbers show some market stability -- they're broadly similar to last year's. They may also support CoveredCA's previous explanation of a drop in new enrollment.

On January 30, CoveredCA put out an analysis  as of the end of open enrollment, emphasizing that while enrollment was virtually flat overall compared to 2018 (down 0.5%), new enrollments had tumbled 23.7%. CoveredCA attributed this worrisome drop (offset by a 7.5% increase in re-enrollments) to repeal of the individual mandate penalty, noting that the new enrollment drop was "relatively evenly spread across demographics." California has since enacted measures intended to reverse the damage, instituting a state individual mandate and state-funded premium subsidies to supplement the federal subsidies.

I wondered whether part of the drop in new enrollment may have been caused by an overall 8.7% average weighted increase in premiums in 2019 and/or by changes in the discounts in gold and bronze plans generated by silver loading (see note at bottom for an explanation). The answer appears to be no -- it was the mandate repeal. Ready for a null-result report?

The shrinking but retentive ACA marketplace

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n.b. the next post constitutes an update.

One feature of the ACA marketplace under Trump administration: as new enrollment contracts, retention has improved. With enrollment down 10% overall since 2016, the market has apparently contracted to its core: those who are renewing know they need or may need care.

Zeroing out the individual mandate for 2019 cannot have helped new enrollment, though new enrollment shrank just as much in 2018 as in 2019, when the mandate repeal went into effect. As the mandate repeal was pending through the fall of 2017 and became law in December 2017, many may have thought the mandate had been repealed as of 2018 -- if not the whole ACA, as Trump kept screaming. At the same time, discounts generated by silver loading (cheap gold and often-free bronze plans*) have probably improved retention. A higher percentage of enrollees are now subsidized, and the 87% of enrollees who are subsidized are paying lower premiums on average, as Charles Gaba has noted. Attrition has for years been much steeper among unsubsidized enrollees.

Better retention is reflected both in year-over-year renewals and in the level of attrition after first payments are due and throughout the year. In the 39 HealthCare.gov states, renewals were up slightly in 2019, while new enrollment shrank 16% (see CMS final snapshots 2019 vs. 2018). In California, the largest state-based exchange (SBE),  renewals were up 7.5% while new enrollment contracted 24%. Overall enrollment was down 4% in HealthCare.gov states and virtually flat (down 0.5%) in California.

Should Democrats seek to kill the anti-ACA lawsuit with legislation? Bagley v. Jost

Progressive legal opinion is divided with respect to how Democrats should fight the latest ridiculous suit seeking to have the ACA declared unconstitutional, Texas v. U.S., The suit was upheld in December by an extremist U.S. District Court judge in Texas, Reed O'Connor, who stayed the ruling pending appeal.

The question: should the Democratic House simply join the defense against the suit in court, which it has opted to do, or also pass legislation that would render the suit moot if it became law? Taking opposite sides are two progressive stalwarts of the ACA's legal wars.

A key factor in state-by-state enrollment performance on HealthCare.gov

Okay, a rather elemental discovery regarding ACA marketplace enrollment for 2019, which was down 4.2% overall in 39 states using HealthCare.gov.

Courtesy of Charles Gaba, here is the enrollment performance by state, 2019 vs. 2018, with a little coloring book intervention of mine in the far-left column. What distinguishes the highlighted states?

Good News in New Jersey: CMS approves state reinsurance waiver

Some good ACA news out of New Jersey: CMS has approved the state's reinsurance waiver proposal, designed to reduce premiums by 15% in 2019.

The bill mandating pursuit of this waiver was paired with a bill establishing a state individual mandate, which according to the state Dept. of Banking and Insurance reduced requested rate increases by about 7%.  Taken together, the mandate and reinsurance program will push 2019 premiums more than 20% below where they would have been absent these two programs and down an average of about 9% from this year. That in the wake of average increases of 22% for 2018.

It's worth tallying the various ways New Jersey has girded its individual market against Republican sabotage.  The state

Six ways New Jersey is fighting off Obamacare sabotage

Since Trump's inauguration, the ACA marketplace has undergone multiple waves of sabotage from the administration and the Republican Congress. Leaving aside some short-term hits, such as the cutoff of advertising at the end of Open Enrollment for 2017, these are the structural elements:

• Radical reduction in federal funding for enrollment assistance and advertising
• Cutoff of direct federal reimbursement to insurers for the Cost Sharing Reduction (CSR) subsidies they are obligated to provide to low income enrollees (now priced into premiums)
• Effective repeal of  the individual mandate, which requires those for whom coverage is deemed affordable to obtain it or pay a penalty (Republican Congress zeroed out the penalty)
• Regulatory promotion of a parallel market in medically underwritten short-term plans and association health plans -- measures designed to worsen the risk pool in the ACA-compliant market.

The ACA was designed to promote state innovation and autonomy, within fairly firm boundaries. While those boundaries have been breached on multiple fronts, states still have leeway to stay within them or actively reconstitute them. Meanwhile, thanks to the failure of Republicans' repeal legislation, federal funding for the core programs remains in place -- and has even been inefficiently enhanced, via the CSR funding cutoff, since reimbursing CSR is more cost-effective for the federal government than paying premium subsidies inflated by CSR.

It strikes me that New Jersey is unique in the degree to which it has acted to fend off the sabotage. Going into 2019 enrollment, the state has:

Four ways states can leverage ACA sabotage

Sabotage of the ACA by the Trump administration and the Republican Congress will partially reverse the ACA's coverage gains, causing hardship to millions. But it differs from Republicans' failed legislative repeal in a fundamental way: The ACA's funding streams and mechanisms remain in place.

Not only can states that retain the will to make the ACA work continue to tap federal funding -- if they're willing to be creative, they can tap revenue streams created and inflated by the sabotage. Each form of sabotage has created new opportunities. There are at least four ways that states can not only fight off sabotage, but leverage funding opportunities that sabotage has created.

Two NJ healthcare bills awaiting Gov. Murphy's signature should reduce premiums by 20-30% in the individual market

On April 12, both houses of the New Jersey legislature passed bills to establish a state individual mandate (A3380) and a reinsurance program (S1878). The bills are designed to work in tandem to stabilize and reduce premiums in the individual market for health insurance.

It is not certain that Governor Phil Murphy will sign the bills. A mandate is a tax, and taxes are hard. The reinsurance program will cost the state some money, though not much -- probably an amount in the low tens of millions each year. But the payoff would be dramatic. Taken together, as outlined below, the bills can be expected reduce premiums in the individual market 20-30% compared to what they would be if neither bill is enacted.

How Phil Murphy can counteract ACA sabotage in New Jersey

I've suggested before that states can protect their individual markets for health insurance by passing their own individual mandates -- and using the revenue to further shore up their individual markets. In NJ Spotlight, I make the case specifically for New Jersey.

Revenue from the mandate

could be dedicated to strengthening the state’s individual health insurance market. One possibility would be direct financial help for people who don’t qualify for ACA premium subsidies — a group hit particularly hard by the premium hikes of the past two years. Another option is to spend the money on enrollment assistance and outreach, which the federal government radically cut in 2017. A third option is to dedicate the funds to a state-based reinsurance program.

Mandate revenue would not fully fund a reinsurance program, and New Jersey is in terrible fiscal shape.

But the state can also seek federal reinsurance funding via an ACA “innovation waiver”, as HHS specifically suggested last spring. Funding may be granted as a “pass-through” of savings derived from lower premiums — since lower premiums mean lower subsidies, which are paid by the federal government.

The rest, once more, is here.

Replacing the individual mandate with auto-enrollment, part II

A week ago, I suggested that the wide availability of free bronze plans in 2018 for subsidy-eligible potential ACA marketplace enrollees opens a window for replacing the individual mandate with auto-enrollment of the uninsured, a measure that's popped up in various Republican bills and conservative repeal-and-replace proposals.

That was tongue-in-cheek, since the House and Senate tax cut bills make it obvious that Republicans are not interested in using current federally budgeted dollars to insure more people. They'd rather give the subsidy money to the wealthy via tax cuts.

That said, a fact brought to my attention by Politico's Dan Diamond does boost the case for auto-enrollment. 80% of the 6.7 million households that paid the mandate penalty in 2016 (for tax year 2015) had incomes below $50,000 -- that is, near the subsidy eligibility threshold for a single person, $48,240. Many of those households with incomes over $50,000 are also doubtless subsidy eligible. (On the other hand, a good number of those with incomes in subsidy range may have been disqualified for subsidies by an offer of insurance from an employer. Kaiser estimates that 3.7 million are rendered subsidy-ineligible for this reason.)

IRS tables show that payers of the mandate penalty in tax year 2015 were pretty heavily concentrated at income levels where free bronze plans are common this year:

Hey, Republicans: Auto-enrollment is within reach

Put it in Chapter 1 of the Annals of Unintended (though not un-forecast) Consequences: Trump's cutoff of federal funds to reimburse health insurers for Cost Sharing Reduction (CSR) subsidies has made free bronze plans widely available to subsidized buyers in the ACA marketplace*.

So available, in fact, that the Kaiser Family Foundation has calculated that more than half of the 10.7 million people who are uninsured and eligible for marketplace coverage can find free bronze plans in the ACA marketplace, and 70% can access bronze plans for less than the cost of paying the penalty for going without coverage.

That paradoxical effect of cutting off funding for a subsidy suggests a political deal -- a second paradoxical effect.  Recall that ever since Democrats included the individual mandate in the various bills that became the ACA, Republicans have cast the mandate as a mortal threat to freedom -- and seek to this day to repeal (and maybe replace) it.

As a substitute for the mandate, several Republican bills and plan outlines included auto-enrollment of the uninsured in a catastrophic plan that would cost the enrollee nothing, since its premium would equal whatever subsidy the enrollee was eligible for.

Compromise maybe a little? Urban Institute's Blumberg and Holahan on what's next for the ACA

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).

What price will Republicans extract for CSR funding and reinsurance?

If the current glimmers of bipartisanship in healthcare legislation take on any sustained shine, the primary agenda for Democrats is obvious: appropriate funding for Cost Sharing Reduction payments and for some kind of reinsurance program to replace the program that expired in 2017.

The first is simply a matter of ending sabotage: CSR is integral to the structure of the ACA marketplace and incorporated in its budget baseline. Republicans have simply exploited a drafting error to destabilize the individual market. As for reinsurance, Republicans made its necessity manifest by including generous "stability funding" in the main House and Senate "healthcare" bills -- in fact, overly generous funding designed to compensate for their various disfigurements of the market (e.g., repeal of the individual mandate and measures to reintroduce medical underwriting and non-comprehensive insurance).

To have any real hope of getting these measures passed in a Republican Congress, however, Democrats are going to have to face up to the question: What pound of flesh will they let Republicans extract as payment for these essential, common-sense fixes? It's a foregone conclusion from a progressive point of view that changes Republicans will demand will not improve the market. What concessions might actually win passage and do less harm than the fixes will do good?

"Not losing, choosing"? - Avik Roy turns up the gaslight on the BCRA

Two weeks ago, I took on the argument of various BCRA proponents that most of the 22 million people forecast by CBO to lose insurance coverage should the bill become law would be "choosing, not losing." That write-off of legions of uninsured was founded on CBO's assertion that most of the first-year coverage loss of 15 million would occur "primarily because the penalty for not having insurance would be eliminated."  Expect to hear more of this, I forecast.

In brief, I suggested that argument depended on  1) conflating the forecast immediate effect of mandate repeal in 2018 with the ten-year effect; 2) ignoring the extent to which, in CBO's own telling, the mandate interacts with other changes in the marketplace and Medicaid; and 3) pooh-poohing the obvious and stated purpose of the mandate, which is to boost the ranks of the insured and reduce premiums by improving the risk pool -- which CBO clearly assumes it has accomplished in some measure.

Now here cometh Avik Roy, chief healthcare apologist for the Republican establishment, making the "choosing not losing" argument in detail.  Roy's addition to the argument hinges mainly on a rather breathlessly presented look at CBO's unpublished estimate of 10-year coverage losses attributable to mandate repeal under the BCRA (provided to Roy by a Congressional staffer). This estimate closely tracks CBO's published December 2016 analysis of the effects of repeal of the mandate alone, with the ACA left otherwise intact. CBO forecast that straight mandate repeal under the ACA would result in a ten-year coverage loss of 15 million, as compared to CBO's forecast that 22 million will lose coverage under the BCRA. Here's CBO's breakout of the losses under straight mandate repeal: