Upcoming GOP Reform Package is Just the Start

Up until now, the debate over the repeal and replace of the Affordable Care Act has been limited to the reading of tea leaves and, at best, educated guesses. We’re about to get some meaningful data. Earlier this month, House Speaker Paul Ryan promised that Republicans in the House would unveil their health care reform legislation after the mid-February Congressional break. And, in fact, details of the GOP leadership’s Obamacare replacement plan leaked today. (More on that, below).

The introduction of this GOP health care reform proposal is significant, but hardly as earth shattering as you might think based on the news coverage over the leak, let alone the attention the official unveiling will generate. Nor is this proposal necessarily indicative reflective of whats going to emerge from Congress at the end of this process. Think of it as allowing educated guesses to be a bit more educated. That’s important, but it determines nothing.

If you’re interested in what the 106-page document leaked today shows, Sarah Kliff of Vox.com has an excellent analysis. She writes that “In broad strokes, the draft bill hews closely to ideas outlined by House Speaker Paul Ryan and Health and Human Services Secretary Tom Price.” However, she does identify one “important shift” from earlier GOP proposals: “This bill … has more generous financial support for those who buy their own plans … and lower penalties for Americans who do not maintain continuous insurance coverage.”

Of course, the first question to ask is whether the leaked document is legitimate. The answer appears to be yes. There’s no bombshell that would suggest it’s only a trial balloon. It hews closely to the long-espoused reforms put forward by Republicans supporting high-risk pools, promoting HSAs and permitting health insurers to sell across state lines. Let’s assume, then, what we’re seeing today is exactly what Speaker Ryan will unveil next week. Does it matter?

Yes, but not much.

Changing America’s health care system will take time, regardless of how many politicians tell you otherwise. There are a lot of reasons why. Here’s just three:

  1. Republicans can’t agree on what they want to do. Just in the House of Representatives there a numerous factions each looking for a different outcome. The (very) conservative Freedom Caucus wants to repeal the entire ACA now and deal with a replacement later (if ever). Establishment members want to work out the replacement plan first and then simultaneously repeal and replace the ACA after a long transition period. Some of the two dozen members who represent districts that went for Hillary Clinton in the recent presidential election (and, I suspect, a percentage of those who endured raucous town hall meetings this week) seem more intent on repairing the ACA as opposed to blowing it up. Meanwhile, Republicans in the Senate can’t agree on what should follow the Affordable Care Act either. Many Senators, however, seem certain they don’t like the direction the House is taking. In short, consensus among Republicans is a long way off.
  2. Republicans need Democrats to replace the ACA. Even if Republicans reach a consensus on health care reform, they still need to bring along some Democrats to get the job done. Yes, heavy damage can be inflicted on the ACA through changes to the federal budget that require a simple majority of lawmakers in each chamber to pass. Regulations and executive orders can tear down more of it. Replacing the Affordable Care Act, however, will require at least 60 votes in the Senate (unless Republicans take the highly unlikely step of ending filibusters). With only 52 Republican Senators that means at least eight Democrats have to vote for the replacement legislation. And if Republicans factions in the House get too entrenched, the House Leadership may need some Democratic votes in that chamber to get anything passed. All of which means a lot of negotiating before there’s any hope of getting a new health care reform bill on President Donald Trump’s desk..
  3. The stakes are high–really, really high. As I’ve written previously, if Republicans get health care reform wrong they could destroy the individual health insurance marketplace. And I mean destroy. In fact, it may be too late to save the individual market (a possibility I’ll have another post on soon). Yet the GOP has been promising their base to nuke the Affordable Care Act and replace it with something better since before it was passed. Republicans need to act, but in a way that doesn’t leave their party explaining to voters why the demise of individual coverage is not Republicans’ fault.

Don’t get me wrong. That the GOP House leadership is introducing health care reform legislation is a meaningful milestone along the path to a post-Obama American health care system. If Secretary Price and President Trump sign-on to the bill, it will be a “big league” milestone. At the end of the day, however, it’s a milestone, not the finish line; just the first steps in what will be a long slog through numerous committees, endless public posturing, lobbying by interest groups, tumultuous public demonstrations, and intense negotiation. What Republicans are putting forward now may bear only a passing resemblance to what we get at slog’s end.

Please check out my health care reform magazine on Flipboard for constantly updated, curated articles.

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.

America’s Disappearing Common Ground

Everyone knows the reason so little gets done in Washington is that the two political parties have become ever more divided and uncooperative. We can see it on cable news programs. We can hear it on talk radio. And we experience it as the federal government generates more crises than solutions. We also experience it every Thanksgiving dinner when our crazy uncle starts spouting eye-roll inducing political nonsense.

For those of us engaged with health care reform, we witness this dynamic every time politicians on both sides of the aisle identify the same problem, but refuse to work together to resolve it.

Subjectively, we all know common ground is shrinking in this country. Turns out there’s objective evidence, too. The Pew Research Center tracked the distribution of political values held by Democrats and republicans between 1994 and 2014. As the graph below shows, the gap is widening.Pew Ideological Divide Graphic

There’s a couple of things to note in the graph. First, the gap between the center of each party is further apart now than 20 years ago. The second is the bulking up of the extremes. “92% of Republicans are to the right of the median Democrat, and 94% of Democrats are to the left of the median Republican”. This shows what we’ve all felt: the parties have moved apart and common ground is increasingly rare.

The Pew study was issued more than a year ago. However, anyone watching this year’s presidential debates will attest that ideological differences between the parties is definitely not diminishing.

America moves forward when reasonable people can disagree, find common ground, and compromise. Over the past 20 years, however, fewer partisans see the other side as reasonable; fewer are willing to compromise. Common ground is disappearing.

The Pew Study is pretty depressing for those of us who want less fighting between the parties and more problem solving. However, there is some good news in the report. While there’s movement towards the extremes, the majority of Americans remain neither uniformly liberal nor conservative. As the Pew Research Center notes, “more [Americans] believe their representatives in government should meet halfway to resolve contentious disputes rather than hold out for more of what they want.”

Politicians often claim to speak for the “silent majority.” This is usually not the case as it’s their next statement is often a pander to the most extreme elements of their party. The real silent majority are those who want their representatives to “meet halfway.”

The problem is, however, the silent majority is, well, silent. No one hears them. In a political context, silence equates to voting. If it’s the extremists who vote, then politicians listen to the extremists. When a majority of Americans stand up and insist that their representatives work together, politicians will find a way to work together. Maybe not right away, but eventually they’ll get the message.

Until the majority speaks up (votes), however, it’s the crazy uncles that are listened to–and not just on Thanksgiving. In fact, it seems the crazy uncles are part of the presidential debates now, too.

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.

 

No on Proposition 45

As you know, this blog has been—and remains—on hiatus. I’m playing around with reviving it down the road, but before I could even think that idea through, a California issue has arisen that compels me to write something now. That issue is Proposition 45. There’s a long and storied history in California of great sounding initiatives that harbor devastating impacts. Proposition 45 is one of those and that’s why it needs to be defeated on November 4th.

Proposition 45 is Unnecessary

Proposition 45 supporters claim it will lower costs by simply requiring the California Department of Insurance Commissioner to approve rate and benefit changes to individual and small group medical plans before they take effect. (Large group coverage is exempt and untouched by Proposition 45). Whether this would actually lower rates or not is an open issue. After all, insurance rates are driven by a host of issues—the cost of medical care, new technologies and drugs, an aging population and changing demographics, increasing rates of chronic conditions—none of which are addressed by Proposition 45.

Regardless of its intent, Proposition 45 is late to the lower-premiums party. The Patient Protection and Affordable Care Act (the “ACA”), often referred to as ObamaCare, already requires carriers to spend a specified percentage of the premium they take in on medical services and related expenses. This mechanism acts to prevent the price gouging Proposition 45 proponents claim is rampant in the industry.

That Proposition 45 is unnecessary is reason enough to vote no on the initiative. But it’s far worse.

Proposition 45 Gives too Much Power to One Politician

Proposition 45 doesn’t create a single payer system; it creates a single overseer system. By explicitly giving the Insurance Commissioner authority over rates and benefits, Proposition 45 gives this elected official implicit power over everything relating to health plans in California. This includes what treatments carriers cover—or don’t cover, what doctors and hospitals are in—or out—of a carrier’s network, what insurers spend on marketing and distribution, and virtually everything else but what colors are in the carrier’s logo. And a creative Commissioner could probably find a way to control that as well.

The ability to leverage explicit powers to expand control over other items isn’t idle conjecture. I’ve seen it done in other contexts. In fact, I did this kind of thing in another context. When I served on the Santa Monica City Council we used our authority over zoning to extract all sorts of concessions from developers. For example, while we didn’t have explicit authority to require a developer to set up a job training program in the city, leveraging our power over zoning exceptions we got it anyway.

The power given the Insurance Commissioner by Proposition 45 is unprecedented—and dangerous. For example, while the Commissioner oversees insurance companies, HMOs are regulated by the Department of Managed Health Care. Proposition 45, however, allows the Commissioner to overrule a DMHC decision concerning an HMO’s rates. Or benefits. Or network. Or anything else.

Covered California is the state agency running the medical exchange in the state setup pursuant to the ACA. In that role Covered California negotiates with participating carriers over rates and benefits. Under Proposition 45, however, the Commissioner (or, as we’ll see, virtually anyone else) can object to the deals reached by Covered California. The result, discussed below, could be catastrophic for California’s health insurance exchange.

So long as we continue to elect human beings to public office no politician should be given such unbridled power. The temptation to misuse it (even in the name of all that’s good and just) would overpower a saint. And to my knowledge, there are few politicians who have been up for sainthood.

Here’s an interesting fact: every elected California Insurance Commissioner but two have run for higher office. One of the exceptions, Chuck Quackenbush was indicted and resigned the office. The second, the incumbent Dave Jones, simply hasn’t had the time yet. Commissioner Jones will be reelected this Tuesday and is widely assumed to be eyeing a run for Governor, Senator or Attorney General at the next opportunity. The post of Insurance Commissioner is a stepping stone, not a destination.

There’s nothing wrong with political ambition. But it does mean almost every decision made by an office holder is at least partially a political one. The calculus facing an Insurance Commissioner when reviewing a carrier’s rate submission is pretty straightforward. At the next election does the Commissioner want to run ads bragging about the hundreds of millions of dollars they saved voters or does she want to give her opponent ammunition to call her a tool of the evil insurance companies? In the political world, regardless of party affiliation, this choice is as close to a no brainer as politicians are legally allowed to stand. The market isn’t always a perfect pricing mechanism, but it’s far preferable to a political one.

Proposition 45 Will Create Chaos and Confusion

Some 35 other states require state regulators to approve rate changes. None of them, however, have an “intervener” system like that contained in Proposition 45 (or gives such extensive power to a single politician). Proposition 45 enables “consumer advocates,” lawyers and others to object to carriers’ rate actions. Once their intervention is accepted by the Commissioner, these interveners can earn $675 per hour for their efforts. A similar provision in Proposition 103, which dealt with auto and home insurance, has earned the authors of that initiative millions of dollars since its passage. No wonder they included a role for interveners when they drafted Proposition 45.

The extremely lucrative intervener provisions in Proposition 45 are virtually guaranteed to result in costly and frequent objections. Which means rate and benefit changes could be delayed months. Under Proposition 103, the average rate filing subject to intervention takes 343 days … over 11 months. Given that health insurance is not the same as property & casualty coverage this is extremely troubling. Timely decision-making is even more important with medical coverage than homeowner and auto policies.

If anything remotely close to these delays were to result from Proposition 45 the result would be chaos and confusion. Here’s a nightmare to consider: the premium subsidies available individuals in Covered California’s individual exchange is based on the cost of a specific plan (the second lowest cost Silver plan for those interested). What happens if, after this linchpin-product is identified, priced and in place, an intervener objects to its rates? What would the premium subsidy be based on then? What plans would be available in the exchange?  It could, and I believe probably would, take months to decide.  And by then open enrollment in the exchange could be over.

Think of the opportunities for mischief. Want to undermine the ACA? Wait until the last-minute and then object to the plans and rates negotiated by Covered California. No wonder the Board of Covered California have expressed their dismay about the damage Proposition 45 could do to their program.

Broad Opposition to Proposition 45

And the Board of Covered California (who took no formal position in opposition to Proposition 45) are not the only ones concerned about Proposition 45. The roster of Proposition 45 opponents is broad and impressive.

Earlier this week House Minority Leader Nancy Pelosi voiced her opposition to Proposition 45.telling the editorial board of the San Francisco Chronicle, “If I wanted to kill the Affordable Care Act, I would do this.”

Minority Leader Pelosi joins the California Medical Association, the California Hospital Association, the Service Employee International Union of California, the California State Conference of the NAACP, the Small Business Majority, the California Association of Health Plans and a host of others in opposing Proposition 45. Significantly, the vast majority of newspapers in the state are opposing the initiative as well, including the Los Angeles Times, Sacramento Bee, U-T San Diego and the San Francisco Chronicle.

As are the major agent and broker organizations: CAHU, NAIFA-California, IIAB-Cal and WIAA have come together to form Agents of Action. This is a grassroots effort to generate 100,000 No votes on Proposition 45. The strategy is by harnessing the efforts of brokers throughout the state to educate and motivate their clients, colleagues, friends and family on why it’s important to defeat Proposition 45. (Full disclosure, I’ve played a leadership role in Agents of Action).

If you’re a broker in California, please check out the web site at www.AgentsOfAction.org, download the tools available to you there and get your network out to the polls on November 4th to vote No on Proposition 45. As Agents of Action emphasizes, Proposition 45 is bad for you and worse for your clients.

Of course, the important thing to do is vote. Too many have given too much for us not to live up to our responsibilities.

And, hey, when you do vote, please vote No on Proposition 45.

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.

Catching Up on Health Care Reform

Hello. It’s been awhile. Hope you’re all well. To all who have inquired, my thanks for your concern, but all’s good. Hectic, but good. Lot’s going on (more on that later) and an awful lot of travel. I’ve had a chance to meet and talk with brokers in various parts of the country, including a few places I’ve never been before or haven’t been to for years: Boise, Omaha, Denver, Nashville. It’s been a great time to learn, recharge and stay a bit too busy to write any meaningful posts. While staying busy appears to be the new constant, I’ll try to find something worthy to share on a more regular basis. For now, however, let’s play some catch-up:

We’ll start with some (relatively) good news. One of the more popular elements of the Patient Protection and Affordable Care Act is the ability for children up to age 26 to remain on their parents’ medical insurance. The Department of Health and Human Services estimated 1.2 million young adults would take advantage of this opportunity. A story at Kaiser Health News indicates the actual number may be much higher: at least 600,000 young adults have already obtained coverage under their parents’ health plans. While most of the growth has apparently been in self-insured groups, fully insured plans are experiencing the same upsurge in membership. WellPoint, for example, reports adding 280,000 young adult dependents nationwide and the federal government added a similar number (although the article didn’t state what percentage of these were in fully-insured plans).

Of course, when it comes to health care reform every silver cloud has a gray lining. The Kaiser Health News article quotes Helen Darling, CEO of the National Business Group on Health, as noting “I don’t think anyone is eager to spend more money. This is not something employers would have done on their own.” She further cites the unfairness of asking employers to cover adult children who may be employed elsewhere. And businesses (and their employees) will pay a bit more due to this expansion of coverage to young adults – about one percent more according to estimates. And while its unclear how many of these individuals would not be able to obtain coverage elsewhere, but the general thinking is that a large majority of these young adults would be uninsured or underinsured, but for this provision of the PPACA.

Next let’s pause to note how rate regulation can be big business for consumer groups. In some states, regulators must approve health plan rate increases before they take effect. In others carriers may need to file their rate changes with regulators, but so long as the rate increases are actuarially sound they move forward. California, where rate increases tend to generate national news, is in the latter camp. The state’s Insurance Commissioner, Dave Jones would like to change that. (Actually he’d like to put health insurance companies out-of-business by implementing a single-payer system, but that’s another matter). However, he and others are pushing to change that. Assembly Bill 52, authored by Assemblymen Mike Feuer and Jared Huffman. This legislation would give the Department of Insurance (which regulates insurers in the state) and the Department of Managed Care (which regulates HMOs) to reject rate or benefit changes the agencies determine to be “excessive, inadequate, or unfairly discriminatory.”

In the findings section of the bill (which are the “whereas” clauses justifying the bill), the legislation cites rising premiums and the need for the state to “have the authority to minimize families’ loss of health insurance coverage as a result of steeply rising premiums costs” are among the problems the bill is intended to address. The solution: give politicians and bureaucrats the power to reject rate increases. No need, apparently, to address the underlying cost of medical care. The assumption seems to be that the way to reduce health care spending is to clamp down on premiums. This, of course, is like saying that the way to attack rising gas prices is to limit what gas stations can charge at the pump. One might conclude that, to be charitable, the legislation is addressing only a part of the problem.

Not only does AB 52 give medical care providers a free pass, it is likely to result in a windfall for the consumers groups supporting its passage. Politico Pulse notes that AB 52 requires insurance companies to pay for costs incurred by groups representing consumers at rate hearings. For groups like Consumer Watchdog this can represent a substantial amount of income. The Politico Pulse post reports that “Under a similar California provision for property and auto insurance, Consumer Watchdog has recouped approximately $7 million in legal fees since 2003”

Then there’s the 4th Circuit Court of Appeals hearing on two Virginia law suits seeking to have the Patient Protection and Affordable Care Act declared unconstitutional. A ruling from the three judge panel is expected in July. Much has been made of the fact that two of these three Appeals Court Judges were appointed by President Barack Obama – and the third by President Bill Clinton. While those so inclined are likely to consider this a conspiracy of cable news worthy dissection ad nauseum, it’s important not to make too big a deal about this.

First, courtrooms are not like the floor of Congress: partisan leanings have far less influence there. Second, as the Associated Press article points out, there are 14 judges on the court. Which of them hear a particular appeal is randomly determined by a computer program. There’s nothing sinister about the three judges selected for these appeals being appointed by Democrats, it’s just the way things turned out. No black helicopters are involved. Third, whatever this panel decides will be appealed by whichever side loses. The appeal could go to a hearing before all 14 Appeals Judges in the 4th Circuit or it could go straight to the Supreme Court. Finally, even if the appeals remain at the circuit level for another round, the final decision will be made by the Supreme Court. Everything going on in the lower courts (and there’s a lot of other suits out there needing to go through their appropriate Circuit Courts), is simply prelude. Yes, what the appeals court decide influences the Supreme Court Justices, but in a matter of this magnitude, far less than one might imagine. What happens at the District and Circuit levels is not unimportant, but it’s far from definitive.

While we’re playing catch-up: my previous post noted that Congress was likely to repeal the 1099 provision in the health care reform law. They did and the President Obama signed the law removing the tax reporting requirement from the PPACA. The PPACA no longer impacts 1099 reporting. I know you already knew that, but I wanted to close the loop on this issue. It’s now closed – and repealed.

Finally, a note about broker commissions and the medical loss ratio calculations required by the health care reform law. Where we last left our heroes, the National Association of Insurance Commissioners was debating whether to endorse bi-partisan legislation (HR 1206) that would remove broker compensation from the MLR formula used to determine a health plan’s spending on claims and health quality initiatives. The NAIC task force dealing with this issue wants time to review data being pulled together by the National Association of Health Underwriters, carrier filings and elsewhere.  Pulling together all this information, much of which has never been gathered before and is not maintained in a centralized data base, took a bit longer than initially anticipated. According to Politico Pulse, however,  the task force no”now believes it has all the data it will be able to get.” Which means the task force’s final report on broker commissions and the MLR calculation is now expected by May 27th.

Stay tuned.

And thanks again for staying tuned to this blog.  I look forward to continuing the dialogue with all of you.

Repealing PPACA’s 1099 Provisions Could Happen Soon — Maybe

Getting anything done in today’s Washington is never easy. Even when there’s widespread agreement. .

Congress has been trying to eliminate the 1099 requirements since last year. Everyone agrees that the provision is an unaffordable burden on American business. President Barack Obama supports removing it from the health care reform law. So do a majority of Democrats and Republicans in Congress. It’s not hard to see why. Today businesses file a 1099 with the Internal Revenue Service only when they pay contract workers $600 or more. The Patient Protection and Affordable Care Act expands this to all vendors and contractors providing $600 or more in goods or services. Meaning a business (non-profit or government agency) buying $600 in paper and staples per year from, say Staples, would be required to file a 1099 form. Same with paying the guy who waters the plants. Or UPS for delivering products. Or the printer, the security service, the landlord, the … well, you get the idea.

Even with what passes in the Capitol these days for near universal support, Congress has tried and failed to repeal the provision. The problem is that more thorough reporting of payments for goods and services is expected to bring roughly $20 billion into federal coffers over the next 10 years. Repeal the enhanced reporting and the money goes away.

Democrats and Republicans have differed on how to make up for these lost funds. The House approach is to increase the amount consumers will need to repay if they receive premium subsidy overpayments. (The PPACA will assist consumers purchasing coverage through exchanges set up by the health care reform law. The premium subsidies vary based on consumers’ income as reported in previous years. If their income turns out to be higher than anticipated consumers will need to repay a portion of the subsidy).

Here’s an example used by Representative Joseph Crowley as reported in the New York Times: “A family of four with an annual income of $88,000 buys a typical family insurance policy costing $13,000. The family would have to pay $8,360 in premiums and could qualify for a federal tax credit of $4,640, which the Treasury would pay directly to the insurance company. If the breadwinner receives a $250 bonus at work, the family would become ineligible for the tax credit and would have to repay the full amount, $4,640, with its income taxes.”

Democrats oppose this outcome because the overpayment of the subsidy was no fault of the consumer. As reported in the The New York Times article, they see this as a “tax increase on the middle class” claiming “honest taxpayers might find themselves owing large sums to the I.R.S.” This they consider a tax trap. Republicans in the House deny repaying money to which one is not entitled can be described as a tax increase. They also claim it’s the same offset Democrats proposed to pay for adjusting Medicare payments to doctors, according to The Hill’s On the Money blog.

The Senate has taken a different approach to paying for repeal of the 1099 provision. They want the Office of Management and Budget to recapture unused federal dollars from various governmental agencies. But it appears there may now be sufficient votes in the Senate to go along with the GOP approach. So things will happen quickly now, right? Perhaps, but maybe not.

Senator Robert Menendez wants the Senate to consider an amendment requiring Health and Human Services to determine the impact the subsidy claw-back provision in the House bill will have on the overall cost of coverage purchased in the exchange. If this amendment were to pass, the Senate version of the legislation would differ from that passed by the House. This, in turn, would require the bill to go back to the lower House delaying passage of the repeal.

Republicans, however, are expected to stand united in opposition to this amendment, effectively blocking its passage. Assuming this is the way things play out next Tuesday, the bill could wind up on President Obama’s desk sooner rather than later. The Administration, in the past, has expressed “serious concerns” about the way the House bill retrieves subsidy overpayments. A statement from the Office of Management and Budget notes “H.R. 4 could result in tax increases on certain middle-class families that incur unexpected tax liabilities, in many cases totaling thousands of dollars, notwithstanding that they followed the rules.” The statement goes on to support the Senate approach to paying for repeal of the 1099 reporting provisions in the health care reform law.

Whether President Obama signs the legislation in an act of bi-partisan compromise or vetoes it in the cause of avoiding a middle class tax cut won’t be known for sure until the bill is before him. It remains highly likely the tax reporting element of the PPACA will eventually be repealed. Whether this will happen soon remains an open question.