PLEASE NOTE: This is an unedited transcript. Please refer to the video of the webinar to confirm exact quotes.
Karl Eisenhower: Good afternoon. My name is Karl Eisenhower. I’m the Communications Director at the Alliance for Health Reform. We’re glad you could join us for our webinar today on What’s Next for Health Policy. Today’s webinar is a project of the Alliance for Health Reform and the National Institute for Health Care Management Foundation in collaboration with the Association for Health Care Journalists. We appreciate the support we’ve gotten from the NIHCM Foundation and from AHCJ. Today’s panelists, we’re very fortunate to have Joel Zinberg from the American Enterprise Institute, Timothy Jost from the Washington and Lee University School of Law, Julie Rovner from Kaiser Health News as our panelists today as we discuss what we can expect in the rest of 2017 in health policy.
Given the goal of the Trump administration and congress, congressional Republicans to replace the Affordable Care Act and given the problems with the ACA that need to be addressed especially in the individual market, we want to take a look at what the public policy options are and what all of us should be watching for to understand what is likely to happen this year.
A few logistical things. At the top right of your screen you’ll see a little toolbar with an orange arrow. If you click on the arrow to open up the toolbar, you’ll be able to adjust your audio settings. There are also some handouts that are available there. That’s how you’ll send questions to us for the Q & A portion of our presentation today. Handouts that are available in this tool are also are on website later today. We will be posting a video on the website and probably Wednesday or Thursday we’ll have a transcript as well.
When you come to our website, you also can access our sourcebook, the Essentials of Health Policy, which will give you background on many of the issues we’ll discuss today and other issues in health policy. We hope you’ll take a look. Thanks for the support of the NIHCM Foundation. We are keeping that updated with fresh data and changes in the health care environment.
Now we’re going to begin with Joel Zinberg who is going to do the first presentation.
Joel Zinberg: Okay good afternoon. Thanks Karl. I think its worth remembering now that it’s tough to make predictions, especially about the future. While the author of this saying is uncertain. I think it is a particularly relevant saying in these times when we’re discussing healthcare reform and what’s going to happen to the Affordable Care Act. I thought that the House Republican’s healthcare act, while no means perfect, would probably have some amendments and pass in a close vote. But you have to remember a surgeon and during my training we had a saying, the enemy of good is better. I didn’t expect that the Freedom Caucus would scuttle a bill that appealed most to the ACA, accomplish many of their objects and for the first time in history, seriously try to rein in the growth of one of our largest entitlements just because it wasn’t a perfect reflection of their ideological views. Shows you what I know.
What I’m going to try to talk about are issues that I think are very likely to be addressed in the coming year and must be addressed in the coming year regardless or not if there is a new Repeal and Replace Bill. I think it’s helpful to remember who’s insured and how they’re insured.
You can see that the ACA didn’t change the fact that about half of Americans get their coverage through their jobs, more than a third are covered under medicare and medicaid, another 2% get military or Tricare coverage and despite all the attention, debate over the Obama Care exchanges, only about 7% of the population is covered through the individual and small group markets. And only half of them obtain insurance on the ACA health exchange. You still have 9% uninsured.
What did the ACA do? Well it affected all parts of the pie. But first and foremost, the ACA moved power and authority over healthcare from consumers, employers and the states which it previously regulated heath insurance to the federal government though a combination of new insurance regulations, mandatory participation by individuals and employers, subsidies and expansion of the medicaid program.
You can see on this slide the key elements of the law. People with pre-existing conditions were covered through guaranteed issue coupled with community rating, premiums could only be adjusted for the consumer’s age, tobacco use and geographic location and the adjustment between old and young was restricted to a 3:1 ration instead of the 5:1 range that prevailed prior to the ACA. The ACA also established an essential benefits package and set up a system os state healthcare exchanges or marketplaces to sell plans that contained them.
There was a premium tax credit for people with incomes between the medicaid threshold and 400% of the federal poverty line and cost sharing subsidies for people with incomes up to 250 of the federal line. These were instituted to make insurance more affordable. But you have to remember that these subsidies are only available for plans purchased on the exchanges.
To combat the possibility that people would wait until they got sick and then purchase insurance under guaranteed issue, the ACA included the individual mandate and penalty. It also included an employer mandate. Another provision required employers to offer insurance coverage to the dependence of their insured employees up to age 26.
Lastly, the ACA expanded medicaid eligibility to anyone up to 1338% of the poverty line. Supreme Court held that the government could not force states to participate in this expansion. They had the option to expand and 31 states took it.
Finally, to keep insurers in the market the ACA created three risk mitigation programs so that insurers who enrolled sicker and more costly patients than expected would be able to recoup their losses.
So how did it work out? You had about 20 million people getting coverage. More than half of that increase was due to medicaid enrollment. What’s little appreciated is that about 70% of that medicaid increase was from people who met eligibility requirements before the ACA but failed to enroll. They came out of the woodwork so to speak and they could have been covered had the ACA never been enacted.
Another 2.3 million people between the ages of 19 and 25 got coverage under their parents’ plans. Exchanges I think were something of a bust. Only 16 states and the District of Columbia set up their own. The remainder relied on the federal exchange whose rollout problems are legendary. The exchanges never enrolled as many people as expected. The CBO had predicted 25 million would gain coverage on the exchanges by 2017 and less than half that figure enrolled.
As you can see on this next slide, the exchanges basically only attracted people with incomes under 400% of the federal poverty line who were eligible for subsidies. In addition, the plans attracted older, sicker people than anticipated. The extensive minimum coverage requirements and the inability of insurers to adjust for risks left insurers unable to offer cheaper, less comprehensive plans. The limitation on adjusting for age meant that premiums for healthy, young people were higher in order to subsidize the premiums of older and sicker people. Younger people resisted buying more comprehensive and expensive plans than they want or need. And insurers found it difficult to make money and have been leaving the exchanges and hiking premiums.
The health insurer changes survived their near-death birth experiences but they’re teetering on life support. 43% of exchange enrollees have only two or fewer insurers to choose from. Five states have only a single insurer participating on their exchanges. Humana’s announced exit will leave multiple Tennessee counties with no exchange plans. Anthem which operates Blue Cross plans in 14 states and is the only carrier in nearly 300 counties, has announced it may pull out in 2018.
The individual mandate was undermined by lax enforcement of enrollment periods, a plethora of exemptions from the requirement to buy insurance and weak penalties that are low compared to the cost of premiums. One of the architects of the ACA, economist Jonathan Gruber, concluded that the individual mandate had no significant impact on enrollment. In 2016 11 million people received exemptions from the mandate and 5.6 million paid the penalty rather than purchase insurance. Far more than CBO had projected.
So what can and should be done going forward? Secretary Price testified before the House last week and reiterated that the administration is intent on dismantling the ACA. I certainly don’t know if the administration congress can get it together to pass a full-fledged bill but there are areas that can be addressed and will have to be addressed with less comprehensive actions.
Let’s go back to the slide dealing with the key ACA features. The protection of pre-existing conditions and the coverage of dependants up to 26 is popular. Those are going to remain, I believe. But the ACA give the HHS secretary substantial discretion in administering the essential benefits package. He can relax its _____ [00:09:46] administratively but cannot abolish them. Legislation is necessary to move the decision making out of the federal government and back to its historical home in the states. It could be combined with legislation rescinding the ACA’s 3:1 premium age adjustment limits and turning the determination back to the states as well. Such legislation might attract bipartisan support and would allow for cheaper, less comprehensive plans that would appeal to the younger people the ACA has failed to attract.
One area that can be approach administratively though is enforcing the individual mandate. Insurers have complained they’re being gamed by people who avoid signing up while they’re healthy and then sign up during special enrollment periods when they need medical care. In February CMS proposed a rule to tighten enrollment periods, shortening them from three-months to 45 days, limit exemptions and increase pre-enrollment verification for special enrollment periods. If implemented, this should limit the de facto adverse selection that has occurred. The same proposed rule loosens actuarial value requirements for exchange plans in the hope of attracting more insurers, putting downward pressure on premiums and attracting younger consumers.
Also in the administrative front Secretary Price and CMS Chief Seema Verma had indicated that they would be open to state medicaid waiver requests for experiments like work requirements or co-epays.
But I think most focus this year will be on the healthcare exchanges. Whether they die a slow, agonizing death or a more acute demise depends on two issues. First, as we can see in the final slide, two of the three programs that that ACA established to mitigate the risks, the two columns on the right, were temporary and they’ve ended. Leaving only the risk adjustment going forward. Insurers have already claimed that the unreimbursed losses are driving them out of the market and they have little confidence that risk adjustments alone will be adequate. Continued loss of exchange insurers reduces the competition consumer choice. But it also impacts affordability because the ACA subsidies are only available on the exchanges. It would be far better if subsidies were available on and off the exchange as with the Republicans proposed tax credits were and it might be coupled with expansion of health savings accounts.
Second upcoming issue is an arcane legal case. House v. Burwell in which the House of Representatives claim that the Obama administration unlawfully made billions of dollars of payments to reduce ACA insurance costs without an appropriation from congress. ACA Section 14.02 requires insurance companies to reduce the out-of-pocket costs of enrollees in silver plans who earn less that 250% of the federal poverty level. There are approximately 7 million people or 57% of exchange enrollees receiving these reductions. Section 14.02 also directs the federal government to compensate the insurance companies via cost sharing reduction payments. But the ACA doesn’t include an appropriation to pay for them.
When the Obama administration’s fiscal year 2014 budget request asked for a current appropriation for the cost reducing payments, congress turned it down. Instead congress passed and the president signed an appropriation act that failed to appropriate any moneys for cost reduction payments. Undeterred, the administration spent $2.8 billion to reimburse insurers in 2014 and the house sued. After a finding in 2015 that the house has standing, that is that it suffered a concrete particularized injury giving it the right to pursue judicial remedy, District Court Judge Rosemary Collyer last year found that the administration had violated the constitution’s appropriations clause. She _____ [00:13:40] the administration for making further payments but stayed her ruling pending appeal.
So the case imposes two important issues for the Trump administration going forward. The first is what to do about a ruling that gives congress standing to sue the executive branch. This is the first time a single house of congress has been granted standing to sue the executive. Will the president leave this potential curb on presidential power and prerogative intact? If the administration withdraws the appeal, Judge Collyer ruling stands but the decision of a District Court is of limited precedential value. If Trump sues the appeal, the standing decision might be reversed but it could also be affirmed creating a more important court of Appeals or Supreme Court precedent.
The administration must also consider what to do with the cost sharing reduction payments. CBO estimates that subsidies will cost about 9 billion in 2017 and more than 10 billion next year. If Trump wants to expedite the collapse of the ACA markets, he could withdraw the appeal leading to huge losses for insurers. Insurers could sue the federal government to recover the subsidies but that’s an expensive, time-consuming burden with uncertain results. Insurers might try to leave the market or increase premiums but this may not be allowed under 2017 marketplace contracts and state laws. Regardless, it’s a safe bet they won’t stick around for 2018. At the moment, the administration seems content to continue making the cost sharing reduction payments.
The best strategy is probably to withdraw the appeal and obtain a 2017 appropriation for these reduction payments from congress. Speaker Ryan recently indicated the administration should continue making the payments while litigation is pending. He and other Republicans have hinted the government should continue paying through 2017 and possibly 2018. They might try to draw democratic support for expanding health savings accounts by committing appropriation money to these payments. A deal to withdraw the appeal, coupled with congressional appropriations will give the administration time to hammer out an appeal and replace strategy without insurance market upheaval and financial fallout. It will also allow the president to sidestep establishment of an appellate court precedent on congressional standing that could come back to hamper him or future presidents while preserving a judicial will for the congress.
With all the foregoing in mind, I will boldly venture a prediction. It’s going to be a rocky year in which anything can and probably will happen.
Karl Eisenhower: Joel, thank you. We’ve gotten a couple questions about people who would like to access the presentations. If you go to our website Allhealth.org and click on the link for this webinar, you will see downloadable PDFs of all of the presentations.
Our next presenter is Tim Jost.
Timothy Jost: Thank you Karl. As this webinar began at 1:30 the Republican American Health Care Act remains still dead in the House although it is showing stirrings of life this afternoon. The question remains, therefore, what happens next to healthcare and in particular the individual insurance market which Joel has just been talking about.
It should be acknowledged that the American Healthcare Act, the Republican proposal was never primarily about the individual market. Its primary focus has been on massive tax cuts for wealthy Americans, insurers and drug companies and cuts in the medicaid entitlement. Yet it did contain some elements that could have helped the individual market. $100 billion in money for the states for reinsurance and other premium stabilization programs, tax credits to help middle-income consumers afford health insurance and lower premiums for young consumers. It also contained provisions that would have undermined the market. Most notably the end of the individual mandate penalty in which the CBO predicted would have caused 14 million Americans to lose coverage by 2018 and premiums to increase in the short run by 15 to 20% above increases otherwise anticipated.
President Trump greeted the AHCA stumble with characteristic petulance asserting that the markets were exploding and that the Republicans in his administration should simply let them explode and blame it on the Democrats. In its own assessment of the AHCA, however, the CBO stated and I quote “the non-group market would probably be stable in most areas under either current law or the new legislation. The ACA’s tax credits which rise to meet insurance premium increases ensure the affordability of coverage for most marketplace participants while the continued enforcement of the individual mandate could drive healthy people into the market.
This judgement is confirmed by assessments late last year by S&P Global and by the _____ [00:19:04] HHS which also saw the markets as stabilizing. But the individual market is delicate and could easily be pushed over the edge. President Trump’s withdrawal of advertising in the last week of the 2017 enrollment period, a move now being investigated by the HHS Office of Inspector General, contributed to marketplace enrollment flat lining just at the time when young, healthy people are most likely to enroll. While the inauguration day executive order and subsequent moves by the IRS has caused confusion as to whether the individual mandate is still being enforced. Insurers are deciding right now whether to come back to the individual market for 2018.
The entire individual market, covering millions of farmers, ranchers and self-employed people, is at risk. They will along with the lower income consumers covered through the marketplaces suffer financial instability and loss of health and indeed life if the market is destroyed. The Trump administration has given insurers until June 21 to decide whether to come back but insurers must decide well ahead of that filing date whether to develop rates and forms for 2018. The administration has proposed what it refers to as a market stabilization regulation in an effort to lure them back which may be finalized this week or next.
The rule basically signs off on a wish list presented by the insurers by measures that they believe will contribute to market stability. The rule would make it harder for consumers to sign up for coverage outside the annual open enrollment period through special enrollment periods which are available for example to people who move or lose coverage or have a baby. Insurers believe that special enrollment periods are being gamed by people who don’t sign up when they should but try to get coverage when they get sick. HHS tightened up enrollment requirements last year and found that enrollment dropped but dropped more among younger than among older people. HHS had proposed a pilot test to see if enhanced verification would improve or worsen the risk pool but the Trump administration is moving ahead confident that it already knows the answer.
Other moves include allowing insurers to refuse coverage to consumers who owe them money for the prior year, cutting in half the length of the open enrollment period for 2018, removing federal oversight of provider networks and allowing insurers to sell plans with higher deductibles and co-insurance. I haven’t heard a lot of consumers clamoring for higher deductibles and complaining that their provider networks are too broad but if these measures convince insurers that the Trump administration is going to do what they want, they may have the effect of bringing insurers back to the market.
What the insurers really need right now is money. The ACA promised the insurers that if they would sell guaranteed issue, non-health status unwritten insurance that covered pre-existing conditions, the federal government would share the risk with them and Joel’s already introduced this topic. The risk sharing program it offered was modeled after the programs created by the Republicans in 2003 for the Medicare Part D drug program.
First the ACA offered insurers reinsurance for high cost claims for the first three years. This program was very successful in reducing premiums initially by 10 to 14% in the first year but it phased down and then out far too quickly.
Another program, however, the risk corridor program has not been allowed to work. The risk corridor program responded to the program that insurers would have a difficult time setting premiums for the first few years in a new market. So the government would share losses with them if their losses exceeded certain thresholds while sharing profits with those and then all profits. After insurers had set their rates for 2014 based on this understanding, however, congress adopted a pro sheet appropriations riders limiting payouts under the program to collections. In fact, losers outnumbered winners and insurers are now out at least $8 billion just for 2014 and 2015. 23 insurers have now sued and the lower courts have split as to whether they are due the money or not. It would be a significant showing of good faith if the administration would settle these cases and pay the insurers what they rightly expected.
More important is the House v Price lawsuit currently pending concerning the ACA’s cost sharing reduction payments. Joel’s already described this case so I won’t go into it in any length. The Obama administration believed that there was an appropriation to cover the cost sharing reduction payments. The House asserted that there wasn’t. A lower court ruled for the House and that question is now on appeal. The Trump administration stated yesterday that it will continue to pay while the case is pending. But if the payments cease, it is very likely that no insurers would come back to the marketplaces for 2018 assuming a $9 billion loss. Some would probably terminate their participation for this year. If congress and the administration are serious about saving the individual insurance market, they need to immediately take action to appropriate money for this year and next year for the cost sharing reduction payments. Congress has never objected to appropriating the money. It has just disagreed with the administration as to whether there was already an appropriation.
The ACA was based on the premise that the individual mandate could drive and the premium tax credits could lure healthy consumers into the individual market in sufficient numbers that would offset the costs of people with pre-existing conditions. But the premium stabilization programs were temporary unlike those under Republic Part D program where they are still in place a decade after the program was launched and frankly more generous than under the ACA. These programs need to be extended and fully funded. A fact which the American Health Care Act recognized although it extended the reinsurance programs through the states.
The United States has long subsidized healthcare coverage for people who get insurance through their employers to the tune of $3.6 trillion over the next decade. Of course, it heavily subsidizes healthcare for the elderly, disabled and some categories of poor people through medicare and medicaid. Until 2014 the only Americans who did not benefit from federal subsidies were the uninsured and participants in the individual market. Healthcare has become simply too expensive for lower and moderate income Americans to afford on their own. It’s only fair that consumers in the individual markets should enjoy the same support that others do.
The Republican’s response to the individual market has been to claim that the ACA’s insurance regulations need to be abolished or eased to make coverage more affordable. The primary ways in which the American Health Care Act would have done this would be by raising deductibles and co-insurance and increasing premiums for older people while cutting them for younger people. Raising cost sharing for lower income people, however, simply makes healthcare less affordable as it makes coverage more affordable. Your premiums go down, your deductibles go up. And increasing premiums for older people would drive those out of the market who are most in need of healthcare.
There is also speculation that Secretary Price may roll back the essential health benefits and there are rumors this afternoon that the HCA would be amended to allow states to do that. There are strict limits under the ACA currently as to what the administration can do. Individual and small group coverage must coverage 10 categories of benefits to the same extent as the typical employer policy as certified by the independent CMS actuary. But a rollback of the essential health benefits would also be controversial. Is this the time when we want to insurers to abandon mental health or substance abuse coverage? Should maternity really be only self pay at a time when a complicated delivery can cost $50,000.
HHS does have the power to grant immunization waivers to the states and Secretary Price recently wrote a letter to state governors encouraging these waivers. These could play a positive role. The letter praises Alaska’s reinsurance program which dramatically cut premium increases for this year. But the guardrails currently under 1332 the state immunization waiver provision are high and any effort to use this program to simply cut benefits or coverage would be illegal and would be met with lawsuits unless the statute is further amended. As I said, revision of this provision is now under discussion and could seriously undermine consumer protections.
In conclusion, the administration needs now to move quickly to preserve the individual market unless it is willing to live with the political consequences of allowing the markets to collapse. What it needs to do now is clear. It simply needs to rise to its responsibilities. Thank you.
Karl Eisenhower: Thank you, Tim. Our next presenter is Julie Rovner. But before Julie starts, I just want to reiterate if you’re looking for these presentations, we had a limited number of slots in the handout section in this webinar tool. All of the presentations are on our website which is allhealth.org. If you go to the allhealth.org home page and click on the link for this webinar, you will have access to all the presentations.
Julie Rovner: Thank you very much. Thank you for having me and thank you everyone who is here. I think my role in this is to think about what’s going to happen going forward as a journalist. I confess at the beginning I’m kind of confused as everybody else. Is the AHCA dead? Is it partly alive? Is it almost alive? Is it about to come back to life? No matter what was happening this week, I would have begun by saying this debate is far from over.
I think the first thing we need to keep in mind is doing nothing is actually doing something when it comes to the individual market and what’s about to happen with the individual market and that’s largely because dates are getting short. There are two main things that are sort of pushing on congress to do something sooner rather than later. One of them is of course we keep hearing that they want to get the tax reform and the only way they can get the tax reform is to do a new budget resolution. But as soon as they do a new budget resolution, that makes the current budget resolution that they’re operating under to try to do health reform with only 50 votes in the Senate, that makes it go away. So as soon as they do that new budget resolution for tax reform, they lose these reconciliation instructions for healthcare reform and therefore anything that they would want to do with healthcare reform would require 60 votes in the Senate.
The second thing if we could have the next slide is that as I think some of the previous speakers have mentioned, things are happening right now with insurance companies. They have to decide as I think Tim mentioned by the end of June whether they’re going to participate in the federal healthcare.gov. Some of the state requirements are even earlier. Many of them are in May. So if you’re in a state that has its own exchange, you might want to check and see when insurers have to submit basically their preliminary rates for 2018. Right now, what we’re seeing pretty much every day is insurance companies saying they have no idea what to do because the uncertainty is making it impossible for them to decide if they want to stay in this market and if they want to stay in this market, how much they want to charge. There are opportunities to tinker with rates as sort of the summer goes on but really right now is when the insurance industry is deciding whether it’s going to be part of this going forward.
As I think we’ve heard, the administration has enormous power to either make this work better or make it not work at all. If the administration actually wanted to stabilize the program, they could as both previous speakers had mention, continue the cost sharing reduction payments. That’s the first, second, third, fourth and fifth things that the insurance companies are looking for.
The sixth thing that plays a slightly less important but also important role is enforcing the individual mandate. Again, it’s not clear how strongly the administration plays to enforce the individual mandate. The president on his first day in office issued an executive order saying basically inviting the administration to do as much as it could to reduce the burden of the law. The IRS basically pulled back on a proposal that it was going to start rejecting returns that did not check the box about did you have health insurance. I should point out that was not something they had done before so it was something they were going to do this year and they are not going to do it. So those are big question marks about the individual mandate and how strongly it will be enforced.
The administration could encourage enrollment and outreach. But as you heard, one of the things they did early on was cancel some of the advertising which some experts said caused perhaps a half a million people mostly healthy people there at the end not to sign up. So if they wanted to go back to actually encouraging people to sign up, that would go a long way in stabilizing the market.
And finally help with reinsurance as both earlier speakers had mentioned. The insurance companies are still very concerned that they have too many sick people, not enough healthy people. In some cases, way too many sick people and they really want the federal government to step up and help them. We’re already seeing a couple of states do this. Most notably Alaska and just this week Minnesota to sort of help insurers with their highest cost patients. The administration has in fact already encouraged that. Secretary Price has sent out a letter highlighting Alaska and what it did and suggesting that other states might want to follow suite.
Those are things the administration could do if it didn’t want the program to fall apart.
There are things the administration can do to basically make it all blow up. Of course, those are mostly exactly the opposite of the things that would stabilize it. Dropping the lawsuit about the cost sharing reductions which would let the lower court decision stand and would basically end the cost sharing reductions unless congress were to actually appropriate money. More publically and emphatically …
Karl Eisenhower: Julie, I’m just going to jump in to clarify for our audience. When you say dropping the suit, it’s dropping the opposition to the suit or dropping the government …
Julie Rovner: It’s dropping the appeal to the suit which would let the lower court ruling stand. Again, the cost sharing reductions would go away unless the House were to actually appropriate the money which has been discussed but it’s not entirely clear that there are enough votes for that to happen. As I said, more publically stopping the enforcement of the individual mandate sort of more than they’ve already done. And I mentioned at the top, not doing anything is creating an uncertain atmosphere where insurance companies really don’t know what to do. Finally, there’s the infrastructure of heathcare.gov which has been pointed out is not always the easiest interface in which to buy insurance. If it were allowed to deteriorate, then even people who wanted to buy insurance, might not be able to.
Meanwhile though even if the American Health Care Act goes away and congress moves on to tax reform, that doesn’t mean that all talk about healthcare is done for the year. There are a number of laws that congress has to address in this next calendar year and there are opportunities for them to do things to the Affordable Care Act.
One of them is the CHIP Program, the Children’s Health Insurance Program which is a law that dates back to 1997 but it’s up for renewal again this year. There was some thought two years ago that maybe we wouldn’t need the CHIP program now that we have the Affordable Care Act. There was concern among mostly Democrats that CHIP provides in some cases richer benefits than some of the lesser plans on the AC exchanges. Maybe we should keep it. They wanted to have four years. Republicans negotiated that down to two years which is why we’re back to addressing CHIP this year.
The second one is PDUFA which is the Prescription Drug User Fee Act. Again, it comes up for renewal every five years. It’s up this year. That could be a place where congress if it wanted to and the president who said he wants to do something about drug prices, might be able to do something about drug prices. Where they want to, whether they’ll be able to find the votes, whether the drug industry who obviously needs this law to continue so that they’ll be able to get their products approved will be able to lobby strongly enough to keep it “clean” is yet to be determined. We’re seeing the early hearings in both the House and the Senate on the renewal of this law.
Then there are the appropriation bills. We are getting to the end at the end of April. Once again, funding will run out under the appropriations. We keep hearing about the negotiations that are going on to keep the government open. This includes all of the Department of Health and Human Services. Not clear where they’re going to come up with the votes to keep things running. Whether if they put poison pills in like defunding Planned Parenthood that would lose almost all the Democratic votes, that there might be some Republicans that don’t want to continue funding at current levels. That’s something to watch. When the continuing resolution is done, assuming it goes through the end of the fiscal year, they’ll start work on the fiscal 2018 appropriation bills. Again, Department of Health and Human Services will be up for discussion about what kinds of programs that members want to fund and not fund. That’s another place where you can see some of this debate going forward.
Finally, the trigger for the IPAB which is the Independent Payment Advisory Board which is a very controversial piece of the Affordable Care Act that has never been triggered because it only happens if medicare spending goes above a certain threshold and last year the trustees of the medicare said that they anticipated that this year it would be triggered. This, of course, if the board that opponents call Death Panels. That their job would basically be to bring down medicare spending. Although their job, it says in the law that they’re not allowed to ration care. The board has never been appointed and in the absence of a board, the authority goes to the Secretary of Health and Human Services. So if the IPAB is indeed triggered, it would basically be up to Secretary Price to decide what to do about medicare. Again, that would spark quite a lively debate.
I think the fact that the Republican initial effort to repeal and replace so far at least is not bearing fruit doesn’t mean that there’s not going to be a whole lot for health reporters to do going forward this year. Thank you.
Karl Eisenhower: Julie, thank you. I’m opening the microphones for our other panels so that we can take your questions. I also want to remind you that if you would like to access these presentations that you’ve just seen, they’re on the allhealth.org website.
This first question is going to sound like we’re playing a game of stump the panel which is not my intention but this is a good question. I’m going to direct this question to Julie. You were just talking about some of the other things that congress is doing that could be a vehicle for changes to the provisions of the health law. The question is there are rumblings that MACRA reauthorization might be another avenue for repeal and replacement. With funding reauthorization hanging in the balance for CHIP, what can be done using MACRA to fix or impair the ACA? If you could just start with a quick description of what MACRA is for those not familiar with it and whether you have any thoughts on whether or not that could be a vehicle for this.
Julie Rovner: MACRA is actually the vehicle by which they did the CHIP bill two years ago. MACRA basically is a way to change how medicare pays doctors. It was the product while all this partisanship was going on, this was something that was done on an extremely bipartisan basis. It passed most of its relevant committees unanimously. It is not completely uncontroversial because basically the idea is to pay doctors according to how well they do things rather than how many things they do. But it is like most things in health policy, extremely complicated. I am not aware that MACRA actually has to be revisited the way some of these other things that actually expire and must be revisited. But yes, I have heard rumblings about using MACRA. MACRA is mostly about quality. It is one of the things that the Affordable Care Act did address but hasn’t been among the controversial things that it addressed. There have been some controversies within that but the other panelists might have more insight into how MACRA could be used to adjust the ACA.
Timothy Jost: This is Tim. I wonder if the question isn’t aimed at the CHIP reauthorization actually which is what you just talked about. I mean CHIP is something that is a well-beloved program that has bipartisan support but I think would be particularly important to the Democrats and I could see that it would be possible for Republicans who wanted to get more amendments than they can get through budget reconciliation to try to use the CHIP reauthorization as a bargaining tool with Democrats to try to get other provisions though.
Karl Eisenhower: Joel, do you want to jump in on this one?
Joel Zinberg: No, other than what Tim just said, I’m not exactly sure what the questioner was aiming at.
Karl Eisenhower: Well there is a followup question that one of you may know the answer to. Julie pointed out that MACRA law was very bipartisan when it was put together in part because everybody hated its predecessor the Sustainable Growth Rate. But the question is did Secretary Price support MACRA when he was in congress? Does anybody know the answer to that question?
Joel Zinberg: I think he must have because he was on the Ways and Means Committee and the Ways and Means Committee was unanimous so I’m pretty sure he did. But I would have to go check that for absolute sure.
Timothy Jost: I would bet he would for another reason. The Sustainable Growth Rate formula was uniquely unpopular among physicians. And in as much as Secretary Price was an orthopaedic surgeon, I bet he would have done anything to get rid of it.
Joel Zinberg: It does raise another issue though which is that I think the demand for absolute and total ACA repeal has kind of been going away. It was prior to the election it was something one heard a lot about. But I think a lot of the public doesn’t focus on the fact that probably most journalists are aware of that the ACA included 10 titles, was 1,000 pages long and all of the debate that we’ve talked about has concerned really one title, title one of private insurance reforms and affordability provisions and a little of title two which was the medicaid expansion and of course the bill the American Health Care Act also includes title nine which were the insurance provisions. But vast stretches of the ACA were really pretty uncontroversial. In fact, my understanding is that Republicans wrote some parts of it. Senator Grassley, I think played a very major role in the drafting of the fraud of use parts of the Act. And the parts of the Act dealing with a medicare cost control and quality improvement received pretty much bipartisan support and MACRA was really an extension and elaboration of those. There has been some debate as to how exactly the Obama administration carried out some of those provisions but there is I think much more bipartisan consensus as to some parts of healthcare than I think most Americans would realize, healthcare law.
Timothy Jost: As I mentioned during my presentation, there are big parts of the ACA that I think there are no question are going to survive. The pre-existing conditions, the insurance up to age 26 for dependant children, those sort of noncontroversial. I do think Secretary Price has indicated he is not so enthralled with some of the medicare value experiments that were planned and he is thinking of pulling back on those but basically as you suggest large parts of the ACA that are going to survive. That’s why it is so disappointing that you have a cabal of people who insist that everything must be repealed because there really isn’t consensus in the country for repeal of the entire Act.
Julie Rovner: It is also important to remember that all these members of congress who are running about talking about full repeal conveniently don’t say that full repeal would require 60 votes in the Senate which they don’t have and unlikely that they would get eight Democrats to go along with them for full repeal.
Karl Eisenhower: Joel, you just described the ban on blocking people from getting insurance over pre-existing condition as something that sort of not going to go away. But according to the story in The Washington Post and The New York Times this morning discussions between the vice president and the Freedom Caucus included taking away community rating and replacing it most likely with high-risk pools instead. Does that solve the same problem enough for that to be a viable proposal?
Joel Zinberg: My understanding of what they’ve been talking about is that states would have the option of waiving pre-existing coverage. It remains unclear as to how many states would actually waive that. But the whole question of high-risk pools versus community rating is sort of a little bit cloudy simply because no one can quite agree on how many people were actually denied coverage prior to the ACA because of pre-existing conditions. Some of my colleagues they have come up with a 2 to 4 million number. Other people have come up with substantially higher numbers. I think largely because they include everyone who has a chronic disease and not that they were denied coverage but that they could potentially be denied coverage. If you take the smaller number and you say look those are folks who need some sort of special rating and a special high-risk pool, then it becomes perhaps a reasonable alternative and you could end up lowering the premiums for everyone else. The Republican proposal had included $100 million, excuse me $100 billion. Million doesn’t go very far nowadays. $100 billion that states would have to set up high-risk pools if they chose. I think it is potentially a solution but one that we have to see what comes out of all these meetings and machinations.
Timothy Jost: We had high-risk pools in 35 states prior to the Affordable Care Act and they insured a tiny proportion of the population and they had pre-existing condition exclusions and the premiums tended to be very high and they had annual limits and high deductibles and except in a couple of states people were really unhappy with them. It’s not like nobody has every tried this or thought of it before. They insurers, and also I’m eagerly waiting to see the proposal but high-risk pools would have to be set up by the states. That couldn’t happen overnight. It takes some period of time for states to set those up and for the federal government to set up a funding mechanism for them.
It seems to me and frankly it seems the insurers are also I think would say a much better solution is reinsurance rather than high-risk pools. With reinsurance, you leave everybody in the same risk pool and you just pick up the cost or share the cost of the really high cost enrollees. Frankly it worked well for the first couple of years of the Affordable Care Act. When insurers talk about high-risk pools when I’ve talked to them about it, what they say is what we really mean is virtual high-risk pools which is the more politically acceptable way of describing reinsurance. And the American Health Care Act to its credit the first time around did identify reinsurance as the default. It would have allowed funding from the 100 billion to go for high-risk pools but if states did nothing, it would have gone to reinsurance and frankly I think that’s where most of the money would have ended up. I think high-risk pools are problematic in that they isolate people who are less healthy in a particular market that problems getting into, problems getting out of and that leaving everybody in the same market but offering reinsurance to reduce the cost for healthy people and sick people is a much better approach.
Karl Eisenhower: Julie, I’ve heard one other concern about the high-risk pools and that is around continuity of care. That if your policy expires when you’re very sick and you end up in the high-risk pool right at the time when you need to be able to see the same specialists and stick with the same family doctor all of a sudden potentially you’re in another network.
Julie Rovner: That’s right. I mean there have been all kinds of problems but as Tim was saying, if you end up with what they call the virtual high-risk pools or the invisible high-risk pools where the money just flows on the backend, then you don’t have that kind of continuity of care problem because you’re not actually changing your insurance, you’re just getting someone to come in from behind and help the insurer not go broke paying for your care.
Timothy Jost: And you should also note that that problem goes away if you require continuous coverage where there is some guaranteed renewal which is something the Republicans borrowed out of the HIPAA statute. If you were insured, became ill and then your insurance expired or you changed jobs, you would still be able to access the regular market. You wouldn’t automatically jump into a high-risk pool.
Karl Eisenhower: Okay. Tim, I’m going to address this question to you. This question is can you talk a bit more about high-risk enforcement of the individual mandate. If they withdrawn the proposed rule to process tax forms without indication of health coverage, can they still deprioritize the collection of the penalty?
Timothy Jost: Well I personally think the individual mandate was a good idea. But one could argue it was never really tried. It was supposed to phase in over three years. So the first year was 95, second year 325, third year it was supposed to go up to 695. We’re now in the filing season for 695 and I would bet that many people hardly noticed that the $95 disappeared from their tax refund the first year. Maybe noticed it a bit more the next year. This figure is thrown around about all the people who got exemptions. The two largest categories of exemptions were number one, people in states that didn’t expand medicaid who would have been eligible for medicaid had medicaid been expanded which is to say very poor people. The second biggest category was expatriates. You can hardly expect Americans living in other countries to have to buy American health insurance. They’re probably covered where they are. Then the other big one would be affordability. In fact, the number of people who got exemptions on other than those categories were reasonably small. There are quite a few people who paid the penalty. But again, the first two years the penalties were very small.
Also, the statute was written in such a way that really the only way the IRS can enforce the law is through grabbing people’s refunds. It cannot, there’s no criminal penalties. It cannot impose liens and levies on people. I think because congress was so nervous about imposing the individual mandate, they did it in such a way that it really isn’t very effective. This was going to be the first year that the IRS was actually going to refuse to accept returns unless people checked the box or claimed an exemption or paid the penalty and they decided not to do that. The reason they gave for deciding not to do it was President Trump’s executive order. That sent, I think, a very bad message to tax preparers that hey we’re not serious about this. It also means that they’re just going to send people their refunds and not hold onto the refunds for paying the penalty. It completely undermines the enforcement of what was a pretty weak requirement to begin with.
I think it’s unfortunate that we didn’t really try to do it because I think it could well have worked. But I think it is very, very unlikely at this point that politically it’s going to be enhanced or enforced more strongly than has been true in the past.
Karl Eisenhower: Joel and Julie, do you want to jump in on that one?
Julie Rovner: No, I think Tim pretty much covered it.
Joel Zinberg: I think the CMS rule should go a long way to strengthening the individual mandates so we’ll see where it goes. Still I think as Tim pointed out, it’s structurally and because of the lack of sufficient penalties, probably not strong enough. But at least you’ll have eliminated some of these other outs that have allowed people to get out.
Karl Eisenhower: I’m going to pull up some of the charts from Joel’s presentation for this next question. Starting from this chart, we’ve only got about 7% of the people buying individual insurance policies but this question raises the very important point that we’re moving more and more to an economy where people are not in jobs that offer insurance through the employer. People who are driving Uber cars don’t have insurance from their employer. A lot of people in the retail and service industries in general can’t get insurance from their employers. Then I’m going to flip to this slide here that shows that people not eligible for subsidies haven’t found the marketplace policies to be a good value and they’re not signing up for them. As more and more people shift into self-employment or the gig-economy as it’s being called, do we have to do more than just sort of stabilize the insurance markets? Do we need to refocus on these people who haven’t been helped by the Affordable Care Act and are still sitting on the sidelines? Maybe Julie, you want to start on that one?
Julie Rovner: Yeah, this is a huge problem. There are a lot of people in the individual market as the previous slide showed who don’t but on the exchange. Mostly they don’t buy on the exchange because they’re not eligible for subsidies and they are bearing the brunt of these large premium increases. One of the things that the congressional budget office got wrong, and this was a surprise to a lot of people, is the main reason enrollment has been low is not because people haven’t’ found to be a good value and not signed up which is part of the problem. But the bigger problem is that people assume that the Congressional Budget Office assumed that employers would stop offering coverage because now their workers could go buy what was supposed to be good comprehensive coverage on their own and the ones under 400% could get a subsidy for it. So, if they were not covered by the employer mandate, particularly smaller employers, the idea was their workers would still be okay. Well that turned out I think with some of the problems with launching the exchanges in 2013 that employers and also the improving economy, employers didn’t really stop offering coverage. The employers that could have, didn’t. And therefore, all of those people who had jobs and were supposed to go into the exchanges, make the exchanges sort of a better, healthier risk pool which would have kept premiums down, didn’t happen. So, we’re sort of back in the fairly dysfunctional place the individual market was before the ACA except that now the people who had been shut out of the individual market because they couldn’t get insurance at all or because they were paying ridiculous premiums can get covered so there’s sort of a different problem. But that’s no less of a problem of people who work for themselves who don’t have employer coverage who want to get coverage and who can’t afford if they’re not subsidized the cost of the coverage.
That’s one of the things that people aren’t really talking about. The Freedom Caucus keeps talking about we have to get premiums down and we have to get premiums down and we have to get premiums down but most of the things that they’re proposing that would get premiums down would dramatically increase other costs like deductible and co-insurance because that money has to come from somewhere.
Timothy Jost: I think this question speaks to one of the fundamental problems with the American healthcare system and the way it’s evolved. You have a system of tax preferences for employer provided coverage that leaves about half the population, well not half because you have the significant part government but people who don’t get government insurance and don’t get employer insurance are completely disadvantaged compared to employer insurance people. The ACA I think was sort of a half-baked attempt to remedy that because the subsidies are really only available on the exchanges. If you’re not on the exchange, you don’t get a subsidy.
Every Republican proposal I think has been a lot better in the sense that they created tax credits instead of subsidies but they allowed them to be used for insurance purchased anywhere not just on the exchanges. I think that’s something going forward that we’re going to have to look very carefully at, whether it’s in the form of direct subsidy or whether it’s in the form of a tax credit the way the American Health Care Act had it. These things have to be made available to everyone. In addition, the health savings accounts are kind of another way of doing tax-free savings.
At the moment, they’re really most valuable for middle and high income people. They don’t do much for low income people who can’t put aside the money in the ACA. But if you were in some way able to meld a subsidy system along with HSAs so that people would be incentivized to shop around, get the cheapest price and if their premium was less than the subsidy amount, put that money aside into a savings account, you might actually go a long way towards getting people to sign on and equalizing the tax treatment.
Joel Zinberg: One of the reasons why I think the pre-existing condition exclusion ban has been so popular is because of the effect that it has on job lock. The fact that prior to the ACA millions of people were locked into jobs that were not the job that they would have preferred simply because it provided health insurance. Having an individual market where subsidies are available and a ban on pre-existing condition exclusions has allowed many people to leave their jobs and get jobs in the gig-economy or stay home with elderly parents or children or pursue their dreams in other ways.
In fact, because the subsidies phase out so quickly, the premium tax credits, their income base, you do have few people with incomes over 400% of poverty participating in the marketplaces. But many of those people are in the individual market. They’re getting coverage through brokers and agents they may have pre-existing relationships or they’re getting it though private web brokers. There’s actually a study that was done that found that premiums were higher off the exchange than they were on the exchange but for whatever reason people find it a friendly place to be for higher incomes where they don’t have premium tax credits available.
It’s important to recognize that the entire individual market for any one insurer is a single risk pool. There is no advantage in terms of risk in terms of health status being one place or another. I suppose if insurers are only participating off the exchange, they may be able to attract a healthier population. But insurers who are in both places, the premiums are the same either place.
I thought that an important contribution of the American Health Care Act was that it did offer tax credits to people had higher incomes. I think that’s important. But I think it’s also very important that means tested tax credits continue to be available to people with lower income. Tax credits were offered through the American Health Care Act which were fixed dollar and adjusted for age would have been almost worthless to the really low income people who are helped through the marketplace. They simply wouldn’t have been able to afford coverage, and if they could, it would have been with such high cost sharing that care would have been unaffordable. Also, premiums just vary so dramatically from place to place. The kinds of tax credits that were offered may have been sufficient for younger people in some states but would have been pretty much worthless to everybody in Alaska. And then also for older people.
Just one final comment on that is a study I saw recently. I wish I could remember the exact numbers. But a very high proportion of people, of entrepreneurs who are launching out on their own are people over 55. If you change the age ratios under the Affordable Care Act, they’re going to find health insurance completely unaffordable and they’re not going to be able to launch out on their own. I think a combination of solutions here may be the way to go.
Timothy Jost: I think part of the rationale behind going to the flat not income based credits was so the experience with the ACA has been that you try to guesstimate the year before what your income is going to be and then apply for the premium tax credit and then you’re supposed to reconcile it at the end of the year was a system that wasn’t quite working. The IRS year after year keeps issuing reports saying that they’re not sure that is working out. People aren’t filling out, they’re not doing the reconciliation at the end of they year. They’re understandably inaccurate when they make those guesstimates. As an administrative matter, I think it was not working out terribly well. So having an age based system, while it doesn’t get into the actual needs, in many ways is much simpler to administer. I think there was no question they should have increased the amounts of the credit. Perhaps they could have kept the upper, to make it budget neutral, brought the age down. They had it cutting out, it was starting to roll off at $75,000. Had you brought that down to say 60 or 50, you could have afforded to increase the credits which would have made the premiums affordable at the lower incomes.
Karl Eisenhower: Julie, here’s a question for you. You mentioned that reporters should look at state filing deadlines. You and I talked yesterday about those state filing deadlines and let me pull that slide up. It’s the beginning of a longer process. The beginning of the road, not the end of the road that in many states there is rate review. Now under the ACA if I think premiums are going to go up more than 10%, there’s a federal level of rate review. Can you sort of walk through what happens next? And the second part of the question is are you aware of any states that have begun to take action on the 1332 innovation waivers to try and experiment with other ways to meet the same goals of the ACA?
Julie Rovner: On the first question if you go on a HHS website, there is actually an updated timeline. I had that but I don’t actually have it in the room with me. About when things are due. There’s a lot of back and forth and this whole rate review process. But basically, it is important to know that the beginning of it happens fairly soon. There can be sort of no back and forth if insurers decide that they just don’t want to play anymore. It’s worth it to find out when the deadline is in your state as I mentioned. It’s been extended because congress was taking awhile. It was originally May 3rd, now it’s June 21st in the federal states. But there are other deadlines for other parts of the market. If I go much further, I’m going to step outside my area of expertise.
As to 1332 waivers, these are the waivers that were put into the Affordable Care Act that basically said state if you want to do something completely different, go for it, but you have to cover as many people and you can’t spend any more federal money. A lot of conservatives and some liberals have even said that those requirements are so constraining that it would be hard for a state to figure out what to do. Notwithstanding that there are states that are starting to talk about maybe tinkering, some of it around the edges, some of it a little bit more, with 1332 waivers. I don’t have the list in front of me. I think Hawaii was one of them.
Joel Zinberg: Hawaii and Alaska so far.
Julie Rovner: Yeah, places that have their own sort of unique situations. They only just became available in January of this year. Vermont was thinking about using one and they wanted to do a singer payer plan. In the end, they couldn’t basically figure out how to do it. I mean it was not that they did not, sort of like the Republicans with the repealing the Affordable Care Act, it wasn’t that they didn’t want to. They couldn’t figure out how. That was what happened at the opposite end. There is some thought about does the administration want to make 1332 waivers somewhat more available? Do they want to let states use 1115 waivers, existing waiver authority to do different kinds of things? That’s one of the open questions about how states could be given more flexibility to do different things.
Karl Eisenhower: Tim or Joel, do you want to jump in on that?
Timothy Jost: Just that 1332 waiver is a program that’s out there for states and Alaska has come up with a reinsurance program that it is trying to fund partially through the 1332 waiver. Hawaii, I think is the only state that has been granted a waiver because of its historical employer payor pay system that it needed to make some modifications in the Affordable Care Act to make work. But the guardrails are pretty high. It has to cover basically the same number of people, with benefits that are just as comprehensive, with coverage that is just as affordable, without increasing the federal budget deficit. That’s a pretty tall order unless the administration is willing to bend the guard rules pretty significantly and frankly if it does that, it’s going to get sued. That’s kind of where they are on that. They have though invited states to make more ambitious proposals.
Karl Eisenhower: Alright. We are running out of time. So let me just ask one more question. This is a topic that hasn’t come up but is important and something where the Affordable Care Act didn’t make as much progress as people had hoped. The question here is mental health issues are the biggest pre-existing condition and one that is the most problematic to treat for a variety of reasons. Mental health care is included in the essential benefits but having that coverage doesn’t necessarily mean it is easy to make use of it. Joel, why don’t you start us off. What are the issues that make mental health coverage difficult and does that belong in the essential benefits?
Joel Zinberg: Well clearly it belongs in the essential benefits. But it’s an issue because mental health covers a lot of ground and in this day and age it also would cover treatment of an addiction related problems which we know the opioid epidemic is taking over. So it’s a really multi-faceted problem. I don’t know that’s particular movement in really either party except for some fringe elements to dispense of mental health benefits.
Timothy Jost: Mental health and substance use disorder benefits were benefits that I think were least commonly covered under individual health insurance coverage after maternity care of the 10 essential health benefits prior to 2014. I think there really is concern in the consumer community that mental health benefits might be among the first to go if insurers were simply told you can offer whatever coverage you want. It is costly if done right. And it is a benefit that not everybody thinks they need. Therefore, that could become expendable if the essential health benefits were repealed. There are, of course, also mental health parity laws that predated the Affordable Care Act. And quite a number of states have mental health parity laws. They’re benefits that probably would stick around but it is something that I think makes consumer advocates quite nervous when people start talking about getting rid of the essential health benefits.
Karl Eisenhower: Julie, do you want to add anything to that?
Julie Rovner: Yeah, I think mental health particularly right now when the opioid epidemic is so enormous the idea of insurers not covering mental health and substance abuse makes a lot of people I think including a lot of Republicans uncomfortable.
Karl Eisenhower: Okay. Well thank you very much to our panelists. I want to let you know those of you who have been watching today, you’re going to get an e-mail later this afternoon to fill out an evaluation for us. We want these webinars to be useful to you so it helps a lot for you to let us know to what extent this is useful and let us know your suggestions for our next webinars through the rest of the year. Thank you again to all of our panelists. Thank you for the support from the NIHCM Foundation and the Association for Health Care Journalists. We will see you next time.