Is the GOP ACA Repeal Strategy Taking Shape?

GOPThere’s politics then there’s governing. As former New York Governor Mario Cuomo put it, “You campaign in poetry. You govern in prose.” Republicans have been campaigning against the Affordable Care Act since its enactment with rhetorical flourishes along the lines of “repeal and replace” and “end Obamacare on Day One.” That is poetry (or at least what passes for poetry in politics). Come January, Republicans will need to prove they can handle the prose part. As discussed in my previous post, that won’t be easy.

Repealing the law outright would cause chaos in the health insurance marketplace and take medical coverage away from millions of consumers. However, doing nothing would break a promise central to the GOP’s electoral successes in the past four Congressional elections, not to mention the most recent presidential campaign. Either path could lead to voter retribution that would be devastating to the short- and long-term interests of the Republican party.

A GOP strategy may be emerging that aims to avoid this rock and that hard place. The idea involves passing repeal legislation as close to President Trump’s first day in office that is legislatively possible, but delaying the effective date of that legislation by a year or two. This enables Republicans to keep their promise to repeal Obamacare “on day one,” yet gives them time for the more difficult task of working out a replacement to the ACA. It’s a political two-step Joanne Kenen has dubbed “TBDCare.”

Yes, this would cast a dark cloud over the health insurance market for some considerable time and raises a host of questions: Is Congress capable of passing workable and meaningful health care reform? What happens if they don’t? What would those reforms look like? Who would the winners and losers be under Republican-style reform?  Not knowing the answers to these questions is terrifying. For GOP leaders trying to avoid the wrath of voters, however, living under a frightening dark cloud for a couple of years might look better than ushering in the health care reform apocalypse.

The repeal part of this two-step strategy is simple: Republicans in Congress eviscerate the financial mechanisms critical to the ACA through the budget reconciliation process. This type of bill requires only 51 votes, which means no Democratic support is needed. Meanwhile, President Trump dismantles other elements of the law by either revoking President Barack Obama’s executive orders or issuing new ones. Both the legislation and executive orders become effective at the end of either 2017 or 2018 to allow for a “smooth transition.”

Then the replace portion of the program would begin. Much of any new health care reform legislation would need to go through the normal legislative process and be completed before the effective date of the repeal. Given the Senate’s filibuster rules this means securing at least eight Democratic votes in the upper chamber. (Here’s a list of the Democratic Senators most likely to be recruited by Republicans).

Both Jennifer Haberkorn on Politico.com and Albert Hunt on Bloomberg.com do a great job in reporting on this evolving strategy.  Meanwhile, opposition to TBDCare is already building as evidenced by this editorial in the Denver Post.

What should not be overlooked in all this pain aversion is that the Affordable Care Act was neither the cause nor the solution to America’s deep-seated health care problems. Long before Senator Obama became President Obama everyone knew the key to successful health care reform was reducing medical costs. A few provisions in the Affordable Care Act address costs, but the legislation focused primarily on health insurance reforms because, well, reforming the health insurance market is a lot easier than reducing health care costs. If you were a politician, who would you rather take on, insurance companies or doctors, hospitals and pharmacy companies?

Whether using poetry or prose then, it would be nice if, once they get past the politics of health care reform, Congress and the new Administration addressed the substance of health care reform. Let’s hope that’s not asking too much.

Please check out my magazine on Flipboard for a curated collection of news and opinion concerning health care reform.

 

Republican Health Care Reform: Destruction or Refinement?

capitol-at-dusk

With the (surprising) election of Donald Trump as America’s next president I’ve been asked by quite a few folks what this might mean for the Patient Protection and Affordable Care Act, especially as it relates to individual health insurance. It’s been over seven months since I posted anything in this blog (been busy launching a couple of companies), but I thought I’d use this space to provide my perspective on the answer.

For the impatient among you, that answer is: either a complete disaster or some modest fixes that actually improve the ACA. Dramatic, but non-lethal changes, are unlikely.

As for the details: Mr. Trump’s call to repeal and replace the ACA was core to his campaign. His official health care reform platform promised to:

  1. Repeal Obamacare in its entirety.
  2. Permit the sale of health insurance across state lines.
  3. Allow individuals to fully deduct their health insurance premiums.
  4. Promote Health Savings Accounts.
  5. Require all health care providers to publish their pricing.
  6. Provide block-grants to states for Medicaid expenses.
  7. Remove barriers that delay the introduction of new drugs.

Some of these ideas, such as promoting HSAs and increasing pricing transparency, have merit. Some, like enabling carriers to sell across state lines, are nonsensical for several reasons I described in a February LinkedIn post. None, however, offer much solace to the 20+ million consumers in danger of losing their individual coverage if the ACA is repealed. Mr. Trump and his Republican allies in Congress will need to do more.

I hesitate to predict how Mr. Trump will lead as president. He seems to be  a “big picture guy” who leaves details to others. So let’s assume he lets Congress take the lead on repeal and replace. In December 2015, Republicans in Congress passed legislation aimed at gutting the ACA. President Barack Obama vetoed the bill, but its major provisions are instructive:

  1. Repeal the federal government’s authority to run health care exchanges.
  2. Eliminate premium subsidies available to individuals purchasing through the exchange.
  3. Eliminate penalties on individuals for not buying coverage and employers who failed to offer their worker’s health insurance.

Combined with Mr. Trump’s campaign promises, these elements of the Republicans’ repeal and replace legislation, give a glimpse to the starting point of GOP-style health care reform. Add House Speaker Paul Ryan’s call earlier this year for high-risk pools and the hazy outlines of a possible reform package begins to emerge.

Given Mr. Trump’s commitment to start the repeal and replace process on the first day of his administration and Senate Majority Leader Mitch McConnell’s statement yesterday that getting rid of the ACA was “pretty high on our agenda,” health care reform is coming — and soon.

Whether the result will be an outright, actual repeal of President Obama’s signature legislative accomplishment is no sure thing. Supporters of the ACA are already vowing to defend the law. And while Republicans will hold majorities in both chambers of the new Congress, they are a long way from having 60 votes in the Senate. And that’s problematic.

Senate filibuster rules require 60 votes to cut-off debate and allow legislation to come to a vote. This means the most powerful person in Washington on health care reform may not be President Trump, Speaker Ryan, or Senator McConnell, but the Senator needed for that all important 60th vote. Yes, the first through 59th supporters are important, but their support means little if a 60th vote is not found. As a result, the 60th Senator can have a tremendous impact on the final language in the bill simply by offering (implicitly or explicitly) a favorable vote in exchange for whatever is important to that Senator.

In 2017, the 60th Senator for repeal and replace will be a Democrat. A Republican is expected to win Louisiana’s run-off election giving the GOP a 52 seat majority in the upper chamber. Assuming Republicans vote as a block — something they’ve become quite adept at in the past eight years — eight Democratic votes will be needed to end a filibuster. The requests of each of the first seven will need to be considered and addressed, but it’s the demands of the eighth Senator, that 60th vote, that ultimately matters. Unless …

The Senate can temporarily eliminate the possibility of a filibuster against a bill under the rules of budget reconciliation. However, reconciliation bills must address the federal budget; a vague definition that Congress has interpreted with varying strictness throughout the years. Clearly, eliminating funding for exchanges, taxes, and monetary penalties impact the budget. Much of the ACA, however, doesn’t. For example, requiring carriers to issue individual policies to all applicants regardless of their health conditions (what’s called “guarantee issue”) has no impact on the budget.

This creates a dangerous, even apocryphal, situation. Just one example: Republicans use the reconciliation process to eliminate penalties paid by consumers who fail to purchase health insurance, but not the guarantee issue requirement. Under this situation, few consumers — especially young, healthy consumers — will likely obtain coverage until they get sick or injured. This adverse selection would be cataclysmic and few, if any carriers, would want to participate in such a market. After all, insurers are in the business of spreading risk across a broad population. Guarantee issue without an obligation to buy coverage guarantees a concentration of risk across a narrow population.

President Trump can significantly impact the Affordable Care Act through Executive Orders, but the risk is the same as a partial repeal through legislation. The ACA is a multi-faceted construct with interlocking pieces. The wrong changes can cause devastating unintended consequences.

Republicans in Congress and President Trump may not care. The ACA has taken on nearly mythic proportions as the symbol of all that is evil with the liberal, big government side of politics. However, doing so would not only be irresponsible, it would risk the wrath of millions of voters tossed out of the individual market. Those votes matter. Keep in mind, Donald Trump’s election was close. He lost the popular vote. His leads in Wisconsin and Michigan add up to a combined total of less than 40,000 (as of today).

Yet failing to repeal Obamacare after making it so central to their 2016 campaigns could be a political disaster as well. Republicans jumped on replace and repeal in 2010 and over the past six years this position helped deliver durable GOP majorities in both houses of Congress. Many in their ranks may not care about the consequences of dismantling the law.

Assuming a desire to address health care reform in a responsible way will require the help of at least eight Senate Democrats. Fortunately for Republicans, ten Democrats have an incentive to responsibly neutralize the ACA issue in 2017. All are up for election in 2018 and hail from red or nearly red states.

  • Senator Tammy Baldwin of Wisconsin
  • Senator Bob Casey, Jr. of  Pennsylvania
  • Senator Joe Donnelly of Indiana
  • Senator Heidi Heitkamp of North Dakota
  • Senator Tim Kaine of Virginia
  • Senator Angus King of Maine (officially an Independent, but he caucuses with Democrats)
  • Senator Joe Manchin of West Virginia (and arguably the most conservative Democrat in the Senate)
  • Senator Claire McCaskill of Missouri.
  • Senator Debbie Stabenow of Michigan
  • Senator Jon Tester of Montana

The important question, then, is not what Republicans want to replace the ACA with, but what will it take to get enough of these Senators to come along? A task that could be extremely difficult if new Senate Minority Leader, Charles Schumer, doesn’t make it politically impossible for many of these Senators to break ranks.

Republican then have two choices:1) go nuclear and gut the ACA through the reconciliation process, but keep in place market reforms like guarantee issue; or 2) pass something palatable to eight Democrats, but which they sell as “repeal” to their base. Clearly the first option is irresponsible, but these are not necessarily responsible times. Nuking the ACA will appeal to many in the party, both in Congress and in their districts.

The more responsible choice, repealing the ACA in name only, makes the law more palatable and workable. This last point is critical: once they repeal and replace the ACA, the GOP will own health care reform. It darn well better be clear by say, October 2018, that the new system is working.

Which result — destruction or refinement — is most likely? We’re in a new and wacky world. We’ll find out soon enough.

The Endangered Individual Health Insurance Market

And then there were none? The individual health insurance marketplace is endangered and policymakers need to start thinking about a fix now, before we pass the point of no return.

Health plans aren’t officially withdrawing from the individual and family market segment, but actual formal withdrawals are rare. What we are witnessing, however, may be the start of a stampede of virtual exits.

From a carrier perspective, the individual and family health insurance market has never been easy. This market is far more susceptible to adverse selection than is group coverage. The Affordable Care Act’s requirement guaranee issue coverage only makes adverse selection more likely, although, to be fair, the individual mandate mitigates this risk to some extent. Then again, the penalty enforcing the individual mandate is simply inadequate to have the desired effect.

Add to this higher costs to administer individual policies relative to group coverage and the greater volatility of the insured pool. Stability is a challenge as people move in-and-out of the individual market as they find or lose jobs with employer provided coverage. In short, competing in the individual market is not for the faint of heart, which is why many more carriers offer group coverage than individual policies. Those carriers in the individual market tend to be very good at it. They have to be to survive.

Come 2014, when most of the ACA’s provisions took effect, these carriers suddenly found their expertise less helpful. The changes were so substantial historical experience could give limited guidance. There were simply too many unanswered questions. How would guarantee issue impact the risk profile of consumers buying their own coverage? Would the individual mandate be effective? How would competitors price their products? Would physicians and providers raise prices in light of increased demand for services? The list goes on.

Actuaries are great at forecasting results when given large amounts of data concerning long-term trends. Enter a horde of unknowns, however, and their science rapidly veers towards mere educated guesses. The drafters of the ACA anticipated this situation and established three critical mechanisms to help carriers get through the transition to a new world: the risk adjustment, reinsurance and risk corridor programs.

Risk corridors are especially important in this context as they limit carriers’ losses—and gains. Carriers experiencing claims less than 97% of a specified target pay into a fund administered by Health and Human Services; health plans with claims greater than 103% of this target receive funds. You can think of risk corridors as market-wide shock absorbers helping carriers make it down an unknown, bumpy road without shaking themselves apart.

You can think of them as shock absorbers. Senator Marco Rubio apparently cannot. Instead, Senator Rubio views risk corridors as “taxpayer-funded bailouts of insurance companies.”

In 2014 Senator Rubio led a successful effort to insert a rider into the budget bill preventing HHS from transferring money from other accounts to bolster the risk corridors program if the dollars paid in by profitable carriers were insufficient to meet the needs of unprofitable carriers. This provision was retained in the budget agreement Congress reached with the Obama Administration late last year. Senator Rubio in effect removed the springs from the shock absorber. The result is that HHS could only reimburse carriers seeking reimbursement under the risk corridors program just 12.6% of what they were due based on their 2014 experience. This was a significant factor in the half the health co-operatives set up under the ACA shuttering.

Meanwhile individual health insurers have taken a financial beating. In 2015 United Healthcare lost $475 million on its individual policies. Anthem, Aetna, Humana and others have all reported substantial losses in this market segment. The carriers point to the Affordable Care Act as a direct cause of these financial set-backs. Supporters of the health care reform law push back on that assertion, however. For example, Peter Lee, executive director of California’s state-run exchange, argues carriers’ faulty pricing and weak networks are to blame. Whatever the cause, the losses are real and substantial. The health plans are taking steps to staunch the bleeding.

One step several carriers are considering is to leave the health insurance exchanges. Another is to exit the individual market altogether; not formally, but for virtually. Formal market withdrawals by health plans are rare. The regulatory burden is heavy and insurers are usually barred from reentering the market for a number of years (five years in California, for example).

There’s more than one way to leave a market, however. A method carriers sometimes employ is to continue offering policies, but make it very hard to buy them. Since so many consumers rely on the expertise of professional agents to find the right health plans, a carrier can prevent sales by making it difficult or unprofitable for agents to do their job. Slash commissions to zero and agents lose money on each sale.

While I haven’t seen documentation yet, I’m hearing of an increasing number of carriers eliminating agent commissions and others removing agent support staff from the field. (Several carriers have eliminated field support in California. If you know of other insurers making a similar move or ending commissions please provide documentation in the comments section).

So what can be done? In a presidential election year not much legislatively. Republicans will want to use an imploding individual market to justify their calls repealing the ACA altogether. Senator Bernie Sanders will cite this situation as yet another reason we need “Medicare for all.” Former Secretary of State Hillary Clinton, however, has an incentive to raise the alarm. She wants to build on the ACA. Having it implode just before the November presidential election won’t help her campaign. She needs to get in front of this issue now to demonstrate she understands the issue and concerns, begin mapping out the solution and inoculate herself from whatever happens later this year.

Congress should get in front of the situation now, too. Hearings on the implosion of the individual market and discussions on how to deal with it would lay the groundwork for meaningful legislative action in 2017. State regulators must take notice of the endangered individual market as well. They have a responsibility to assure competitive markets. They need to examine the levers at their disposal to find creative approaches to keep existing and attract new carriers into the individual market.

If the individual market is reduced to one or two carriers in a region, no one wins. Competition and choice are consumers’ friends. Monopolies are not. And when consumers (also known as voters) lose, so do politicians. Which means smart lawmakers will start addressing this issue now.

The individual health insurance market may be an endangered species, but it’s not extinct … yet. There’s still time to act. Just not a lot of time.

Will Rubio’s Measure Undermining ACA Survive?

Republicans stated goal is to “repeal and replace” the Patient Protection and Affordable Care Act. That hasn’t happened and won’t at least through the remainder of President Barack Obama’s term. So a secondary line of attack is to undermine the ACA. And Senator Marco Rubio has had success in that regard.

As reported by The Hill, Senator Rubio accomplished this feat by weakening the ACA’s risk corridors program. Whether this is a long- or short-term victory is being determined in Washington now. We’ll know the answer by December 11th

President Obama and Congress recognized that, given the massive changes to the market imposed by the ACA, health plans would have difficulty accurately setting premiums. Without some protection against under-pricing risk, carriers’ inclinations would be to price conservatively. The result would be higher than necessary premiums.

To ease the transition to the new world of health care reform, they included three major market stabilization programs in the Affordable Care Act. One of them, the risk corridors program, as described by the Kaiser Family Foundation, “limits losses and gains beyond an allowable range.” Carriers experiencing claims less than 97% of a targeted amount pay into a fund; health plans with claims greater than 103% of that target receive funds.

The risk corridor began in 2014 and expires in 2016. As drafted, if payments into the fund by profitable insurers were insufficient to cover what was owed unprofitable carriers the Department of Health and Human Services could draw from other accounts to make up the difference.

Senator Rubio doesn’t like risk corridors. He considers them “taxpayer-funded bailouts of insurance companies at the Obama Administration’s sole discretion.” In 2014 he managed to insert a policy rider into a critical budget bill preventing HHS from transferring money from other accounts into the risk corridors program.

The impact of this rider has been profound.

In October HHS announced a major problem with the risk corridors program: insurers had submitted $2.87 billion in risk corridor claims for 2014, but the fund had taken in only $362 million. Subsequently, payments for 2014 losses would amount to just 12.6 cents on the dollar.

This risk corridor shortfall is a major reason so many of the health co-ops established under the ACA have failed and may be a factor in United Health Group to consider withdrawing from the law’s health insurance exchanges. (United Health was not owed any reimbursement from the fund, but likely would feel more confident if the subsidies were available).

The Obama Administration certainly sees this situation as undermining the Affordable Care Act. In announcing the shortfall, HHS promised to make carriers whole by, if possible, paying 2014 subsidies out of payments received in 2015 and 2016. However, their ability to do so is “subject to the availability of appropriations.” Which means Congress must cooperate.

Which brings us back to Senator Rubio’s policy rider. It needs to be part of the budget measure Congress must pass by December 11 to avoid a government shutdown. If the policy rider is not included in that legislation, HHS is free to transfer money into the risk corridor program fund from other sources.

Senator Rubio and other Republicans are pushing hard to assure HHS can’t rescue the risk corridors program claiming to have already saved the public $2.5 billion from a ‘crony capitalist bailout program.” Democrats and some insurers, seeing what’s occurred as promises broken, are working just as hard to have it removed.

By December 11th we’ll know whether the ACA is further undermined or bolstered.

 

Health Care Reform Absent from Democratic Debate

Two hours of policy-heavy dialogue and, unless I missed it, not one of the five Democratic candidates for President uttered the words “Obamacare,” “Affordable Care Act” or “health care reform.” True, Senator Bernie Sanders brought up “Medicare for all” and declared that health care coverage is a right of citizenship. However, there was no mention of his remarks by the other candidates, former Senator Lincoln Chafee, former Secretary of State Hillary Clinton, former Governor Martin O’Malley, and former Senator Jim Webb.

Update: October 14, 2015: Oops. There was a brief discussion of allowing undocumented immigrants eligible for coverage under the ACA. The focus of this segment was immigration and the candidates mention of health care was incidental. I don’t think this undermines the point of this post, but they did mention it. My bad.

Ignoring health care reform is a s pretty amazing development when you think about it. Health care reform was a big part of the Democratic presidential primary campaign in 2008. The passage of the Patient Protection and Affordable Care Act in 2010 turned American politics upside down adding copious amounts of fuel to the Tea Party movement. Yet, in the CNN/Facebook debate from Las Vegas … not a word.

I’m not saying CNN should have made health care reform the primary topic of Tuesday night’s Democratic debate. However, a short simple question soliciting short simple answers would have, I believe, highlighted some differences among the candidates. At the very least it would have contrasted the Democrats running for president from the Republicans seeking the office.

My hoped for question: “What changes to the Affordable Care Act, if any, would you seek if elected President?”

We know Senator Sanders’ response: he’d scrap the Affordable Care Act for a single payer system. Would any of the others join him? Maybe. Would any of them defend the health care reform law as is? Possibly. Quizzing the candidates on legalizing marijuana was of interest to some, no doubt, but, in my mind at least, finding out what they’d change in the ACA is both a more important and fascinating topic.Of course, given the topic of this blog, I am a bit biased.

Jeb Bush Reveals Health Care Reform Plan

Ironically, this is the day former Republican presidential candidate, Governor Jeb Bush, detailed his health care reform proposal. Calling the ACA a “monstrosity,” Governor Bush said the government should help Americans obtain catastrophic coverage (albeit with a preventive care component) to protect them from financial ruin, but not force individuals to buy and businesses to offer comprehensive coverage.He would require carriers to cover insured’s pre-existing conditions for individuals who maintain continuous coverage.

Under Governor Bush’s proposal, individuals without employer coverage would receive tax credits allowing them to buy coverage against “high cost medical events.” Governor Bush also called for raising the contributions limits allowed on health savings accounts.

Significantly, Governor Bush recognizes that the ACA can’t simply be repealed without serious adverse impacts on what he calls “the 17 million Americans entangled in Obamacare.” He calls for a transition plan to help them move from the ACA to the Governor’s system.

Governor Bush’s health care reform plan also calls for restoring state regulation of insurance markets, promotion of health information technology adoption, wellness rewards and innovation in care delivery models. An interesting, and maybe wishful, provision of his proposal is “an app on your smart phone that calls your doctor to your front door, just as it does for a car to come pick you up.”

Maybe Next Time

Health care reform in general and the Affordable Care Act will no doubt be a big part of the general election. Governor Bush has laid out one approach for Republicans. It would be nice to learn a bit more about what Democrats would do. CBS hosts the next one on November 14th. Maybe the issue will come up then.

Is requesting one straightforward health care reform question asking for too much?

 

Ease Up on ACA Reporting

No one goes into business because they love paperwork. Well, OK, someone in the stationery business must be into it, but most people abhor it. Which is why it would be nice if Congress and President Barack Obama could come together to pass a bi-partisan proposal to amend the Patient Protection and Affordable Care Act with the Commensense and Verification Reporting Act of 2015.

The legislation was introduced in the House of Representatives as HR 2712 by Representatives Diane Black, a Republican from Tennessee, and Mike Thompson, a California Democrat. In the Senate the legislation, S 1996, is being put forward by Democratic Senator Mark Warner and Republican Rob Portman. Their goal, supported by over 175 businesses and associations, is to simplify the reporting employers need to support enforcement of the Affordable Care Act’s individual and employer mandates. Those regulations, promulgated by the Internal Revenue Service 2014, are quite burdensome and confusing–more than is required to achieve the purpose of the ACA.

The ACA tweak doesn’t do away with the reporting of information necessary to administer the health care reform law. The proposals simply streamline the process and reduce the burden. The proposal doesn’t undermine the individual mandate nor does it relieve employers from their responsibility to provide coverage or pay a fee to help offset their employees moving into the individual market. What it does do is make it easier for employers to comply with the ACA while still providing regulators the information they need to police the system.

This isn’t the first run at simplifying reporting under the ACA. Legislation similar to HR 2712 and S 1996 was introduced in the last Congress. That bill, S 2176, went nowhere. So is there any reason to believe this year’s attempt will fare any better?

Well, maybe. Yes, it’s true that any legislation aimed at improving the ACA has a rough road. Republicans want to kill the Affordable Care Act, not fix it. The House has tried to repeal or undermine the ACA so often pundits and the press have a hard time keeping a tally. No one in the GOP wants to face a primary challenge accusing them of being soft on Obamacare.

But, Congress has proven they can come together on simple fixes to the Affordable Care Act, especially if they help businesses. In 2011 Congress and the White House came together to remove expansion of the 1099 reporting requirement from the ACA. And this month they worked together in a bi-partisan fashion to allow states flexibility in defining what is, and is not, a small group.

It’s this last accomplishment — passage of the Protecting Affordable Coverage for Employees Act — that provides a glimmer of hope that maybe the Commensense Reporting and Validation Act of 2015 has a snowball’s chance of passage. Maybe.

It won’t be easy, however, and if it happens at all it will be next year. Congress’ s dysfunction has reached epic proportions as represented by the fiasco over electing a Speaker. Over the next several weeks Republicans will be consumed with getting their house in order (you’ll pardon the pun). Little time will be left for a full agenda of major issues touching on keeping the country out of default, avoiding a government shutdown, determining the fate of the Export-Import Bank, and more.

Getting any legislation through Congress during 2016 is problematic because it’s an election year. Elections distract lawmakers. They tend to focus more on scoring political points than addressing real problems. It’s a problem.

All of this means that proponents of HR 2712 and S 1996 will need to position their paperwork fix as a political win for enough candidates — I mean, members of Congress–to get them to pay any attention to it at all. If they are successful in this, however, the small amount of momentum generated by the recent passage of The Protecting Affordable Coverage for Employees Act may be enough.

Assuming members of Congress hate paperwork as much as the rest of us.

 

An ACA Tweak: Miracles Happen

Just when you thought Congress and the White House were officially incapable of agreeing that the days of the week actually end with the letter “y” they come up with a surprise — a tiny sliver of light that penetrates the cynical gloom in which most Americans shroud Congress. Lawmakers today passed legislation that amends the Patient Protection and Affordable Care Act.

Yes, that’s not a misprint. Congress amended the ACA.

It wasn’t a major change, more of a tweak, but a change nonetheless. Specifically, both chambers of Congress passed the Protecting Affordable Coverage for Employees Act (H.R. 1624). The legislation allows states to set the definition of “small group” as opposed to being required to adopt the definition set in the ACA. HR 1624 is on its way to President Barack Obama’s desk for his signature. Given the strong support in Congress (it was passed by unanimous consent in the Senate) I’m optimistic the President will sign HR 1624 into law. And the President did sign HR 1624 on October 7th.  <I’ll update this post when the President acts.

What’s going on here? As far as the substance of the bill is concerned: currently, the small group market covers companies up to 50 full-time equivalents (“FTEs”). Small groups are subject to a host of requirements under the ACA concerning plan design, pricing, medical loss ratio, and more. Large groups (currently defined as companies with 51-or-more FTEs are subject to different regulations. (Full time equivalents is a measure that takes into account part-time employees when calculating a company’s size under the ACA).

On January 1, 2016 the definition of “small group” is changing to include companies with 100-or-fewer FTEs. This is going to result in substantial changes for these companies — more than a few of those changes of the unpleasant variety. Some carriers are averaging 35%-to-40% rate increases in this market segment. A company of 51-to-100 FTEs will find fewer plan options and other limitations at which they are likely to chafe.With the enactment of HR 1624, many companies will now be able to remain in the large group market. (To be fair, there’s some benefits to being considered a small group that these companies may regret missing out on, but overall most brokers I talk to report that their impacted clients would like to avoid entering the small group market).

In practice, HR 1624 doesn’t change the definition of small group under the ACA. It simply allows states to set their own definition: think of it as permitting state preemption of the federal definition.

Consequently, HR 1624 may or may not matter. States may decide to move forward with the redefinition of small group to companies with up to 100 FTEs (California is a state likely to take this position). Your state Association of Health Underwriters chapter will be a good source for learning what your state is doing.

What’s going on here politically is even more interesting. Allowing states to set their own definition of what is a small group is the kind of tweak that’s supposed to happen when Congress passes complex legislation. In the old days after passing something like the ACA, Congress and the Administration would work together to refine the law into something less burdensome and more effective. That’s what HR 1624 does, but getting it this far was no easy task. It took a bipartisan group of lawmakers in Washington (that’s a phrase becoming increasingly rare) and the urging of many business and industry groups like the National Association of Health Underwriters to push the bill over the line.

Which is why, while the substance of the law is significant, what’s most significant is that the law passed Congress at all. The current Congress is not known as a “can-do” group of folks. Getting them to agree on anything meaningful is a Herculean task. That they came together on the Affordable Care Act is newsworthy — they usually prefer to use health care reform to bludgeon one another about the head. For this Congress at this time to make any change to the ACA is remarkable.

The passage of HR 1624 is remarkable, but not unprecedented. Congress, for example, previously removed an onerous provision of the ACA that would have required businesses to issue 1099s to any vendor they spent $600 with in a year. Everyone realized that was silly and they repealed the provision. So enactment of HR 1624 is not unprecedented.

It is, however, welcome and remarkable.

 

Initial Response

It’s going to take some time to dive into the Supreme Court’s 5-4 decision on the constitutionality of provisions of the Patient Protection and Affordable Care Act. The opinion is now online for those who wish to wade through it. Here’s my initial take:

1. As noted in my first post today, the individual mandate isn’t much of a mandate, but the principle of a mandate could have brought down the entire health care reform package. It didn’t, but that doesn’t mean the individual mandate, as written, will have the impact supporters of the PPACA intend. The only thing that’s new today is that this provision of the law can now be described as a “tax.”

2. Chief Justice John Roberts makes clear that he believes an individual mandate would violate the Commerce Clause. However, because he interprets it as a tax, that observation is important, but doesn’t effect the outcome. The other four Justices in the majority (Ruth Bader Ginsburg, Stephen Breyer, Sonia Sotomayor and Elena Kagan), in a separate opinion, stated their belief an individual mandate is constitutional. However, in order to form a majority they’ve signed off on Chief Justice’s Robert’s interpretation. So while having four members of the Court interpret the Commerce Clause this way is significant to legal scholars and could impact the future, for now it’s immaterial.

3. The four Justices dissenting from the majority opinion (Antonin Scalia, Anthony Kennedy, Clarence Thomas, and Samuel Alito) would have found the entire PPACA unconstitutional. Chief Justice Roberts often sides with this group of colleagues. He made history by parting ways with his more conservative colleagues. Justices might have lifetime tenure on the Court, but it still took courage for the Chief Justice to make this decision.

4. Politically, this decision is a two-edged sword for both presidential candidates. The Administration’s key domestic accomplishment has been upheld. The Administration can now move forward to implement the health care reform package without the cloud of court decisions making their work meaningless. But the President’s key domestic accomplishment is also one of his greatest liabilities in the upcoming election. The PPACA remains unpopular. Many Americans (including four Supreme Court Justices) believes it’s an unwarranted expansion of federal power at the expense of personal liberty. This decision will only flame the passions of those who take this view, meaning they’ll be going to the polls in November with one goal in mind: elect a President and Congress that will repeal the PPACA. Will supporters of the bill be as motivated and engaged? Not likely.

5. Just because the PPACA is constitutional does not mean we’ve seen the final version of the law. Congress will amend health care reform. Agencies (both federal and state) will interpret it. The PPACA is complicated and open to significant interpretation. The upcoming election will determine how much the law will change, not that it will be changing.

6. The PPACA accomplishes a lot of good things: increases access to coverage, provides some useful and meaningful consumer protections, takes the first steps needed to begin constraining health care costs, and more. The PPACA also botches a lot of important things: it will not make coverage more affordable, it doesn’t go far enough to constrain escalating health care costs, and more. Lawmakers owe it to their constituents to revisit the law and make some substantial changes. This doesn’t mean Democrats have to follow the GOP’s demand to repeal the law nor does it mean Republicans have to cave to the administration. But both sides need to recognize that the PPACA is the law of the land. Barring a GOP super-majority in the Senate come 2013, the PPACA is not going away. So responsible leaders will try to make it the best law possible.

7. The Court majority made clear an individual mandate is not justified by the Commerce Clause or the Necessary and Proper Clauses of the Constitution. This will have an impact on other social welfare efforts Congress might consider. Needing to fund expansion of the safety net through taxes is a tough political and practical challenge.

8. However, there were four votes to uphold the PPACA under the Commerce Clause. Which underscores the importance of this November election. Presidents appoint Supreme Court Justices. All of the Justices four of the Justices upholding the law under the Commerce Clause were appointed by Democrats. All four of the Justices voting seeking to overturn the law were appointed by Republicans. The Chief Justice shows that not every appointment votes in the way one would expect based on the party of their appointing President. And two of the liberal Justices joined with conservatives and agreed that the Medicaid expansion included in the PPACA was unconstitutional. But the fact is, the appointments of Republican Presidents tend to be more conservative; those appointed by Democrats tend to be more liberal. At least one, and maybe more, vacancies will open on the Supreme Court in the next four years. Who is President matters.

9. The Supreme’s decision on the Medicaid provision of the health care reform law will be interesting. In essence, a 7-2 majority said the law went too far in threatening to withhold Medicaid funding to states who refuse to expand Medicaid eligibility to those at up to 133% of the federal poverty level. They ruled the federal government can withhold the additional funding promised in the PPACA to pay for this expansion, but they can’t take all Medicaid funding away from non-participating states. Put another way: states have the ability to opt out of the Medicaid expansion. Given the importance of this expansion to reduce the uninsured, this is an issue President Obama and his allies in Congress will need to address. As noted above, the health care reform debate is far from over.

10. While watching the news about the decision, an ad by Concerned Women for America with a vicious (and somewhat inaccurate) attack on the PPACA aired on CNN. The upcoming election will be about the economy, but health care reform will be a major factor as well.

7. People who predict what the Supreme Court is going to do and how they are going to do it are making wild guesses. Pundits take another blow.

So, I don’t pretend to have any special insight on the meaning of the Court’s decision today. But my mother misses these posts so I thought I’d return to the keyboard again. I’ll try to write a more thoughtful piece later today or in the next few days. In the meantime, please let me know your thoughts on all this.

And the Winners Are … Maybe

According to SCOTUSblog, the winners are the Patient Protection and Affordable Care Act, the administration of President Barack Obama and the individual mandate … as a tax. But as Amy Howe of that blog notes “It’s very complicated, so we’re still figuring it out.” Chief Justice Roberts joined with the more liberal members of the Court to find the individual mandate (such as it is) constitutional.

So, bottom line: the PPACA is upheld. Yes, the Medicaid provision that allows the federal government to terminate state’s Medicaid funds if they fail to expand coverage to 133% of the federal poverty level is limited a bit through a strict reading of the provision, but the bottom line is the bottom line: the PPACA

The sky is not falling as of yet. The Republic survives. And the Chief Justice, appointed by President George W. Bush (not Justice Anthony Kennedy) is the swing vote. Few predicted that one.

The critical quote, again as reported by SCOTUSblog (which, really, anyone reading this as it’s written should just move over to that site) is “Our precedent demonstrates that Congress had the power to impose the exaction in Section 5000A under the taxing power, and that Section 5000A need not be read to do more than impose a tax. This is sufficient to sustain it.” Section 5000A being the individual mandate.

I’m Just Sitting on a Fence

Hello. As you may have noticed, this blog has been dark a lot longer than the month or two I thought it would be. But what’s 10 months among friends? I haven’t made it back to regular blogging because things at SeeChange Health have simply been too busy. We’ve launched statewide in California back in September, have grown very consistently since then (thanks to all of you supporting our approach to health insurance) and we’re waiting on regulators in Colorado to begin selling there. All of which has kept me away from this blog.

But how can I ignore what’s happening in Washington today? With the U.S. Supreme Court ready to announce their decision in just a few minutes, I thought I’d return for one more day of comment. So like much of the industry, I’ll be tuning in to SCOTUSblog for their live coverage and I’ll be back to provide whatever insight I can add as soon as the Supremes do their thing. Later tonight I’ll try to offer a more considered evaluation.

One quick observation first: what’s amazing about all this is that the Supreme Court’s decision concerning the Patient Protection and Affordable Care Act will be based on the constitutionality of the individual mandate. A provision that, in practical terms, is hardly a mandate at all. The fine/tax/penalty/whatever-you-want-to-call-it in the PPACA is so modest as to be all but meaningless. Yet whether a mandate in concept (if not fact) is constitutional will have tremendous impact.

As far as predictions go? I’m with the Rolling Stones on this one: “I’m just sittin’ on a fence You can say I got no sense Trying to make up my mind Really is too horrifying So I’m sittin on a fence.”

Be back soon.