We declare is has been quite a number of years since we have seen Congress work as hard as they have these first few weeks of the term. There were five (!) ACA related hearings on seven potential fixes to the law last week and more scheduled. Meanwhile the Trump administration is set to approve regulatory action to stabilize the individual marketplace.
Let’s call it #TrumPace.
The sheer volume of activity has the effect of shedding a good bit of light on at least some of Congressional Republicans’ intentions with respect to changes to the ACA. A few things are coming into focus:
- We now have a strategy known as Repeal, Repair and Replace
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Repeal, at least at this point, is still looking a lot like the December 2015 reconciliation bill ultimately vetoed by former president Barack Obama. Senate Majority Whip, John Cornyn estimates a reconciliation bill will be filed within 30 days. There are a couple of things in play, however:
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The Medicaid expansion may get excluded in deference to larger Medicaid reform co-developed with Governors
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The items for repeal may expand to include things like insurance market reforms (age bands, grace periods, etc.) particularly if Senate Democrats refuse to cooperate on bills addressing those issues via regular order.
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Repair provisions are being considered that are small in scope but significant in the long term relief they provide to insurers. These bills may get folded into reconciliation if cooperation with Senate Democrats does not materialize
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Medicaid reform and/or increased oversight is getting more attention – likely in response to meetings with Governors in January
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Replacement of the ACA with a “patient-centered” system is probably going to take the rest of the year. President Trump and Speaker Ryan estimate a replacement won't be ready until late 2017, early 2018
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The ACA gives enormous power to the HHS Secretary to radically change the law, something Democrats are sure to regret
For the time being – and let me remind you that the situation is so fluid that “for the time being” may just be today – the focus is on the repair part of the program. The two areas getting the most attention are stabilization of the individual market and increased oversight and possible reforms to the Medicaid program.
Individual Market Stabilization. Two hearings on both sides of The Hill focused on insurance market reforms in the ACA. The House Energy and Commerce’s Health Subcommittee centered their hearing on discussion drafts of three bills that would:
- Limit the use of special enrollment periods to enrollees whose claim for special enrollment can be verified
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Increase the age rating ratio from 3:1 to 5:1 or what a state may otherwise determine
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Reduce the grace period for non-payment of premium from 90 days to 30 days, or what a state may otherwise determine
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Assuming repeal of the ACA, continue prohibition on a pre-existing conditions exclusion for group and individual markets and a yet to be drafted provision regarding continuous coverage
The Senate HELP committee, led by Sen. Lamar Alexander (R-TN), also isolated the debate to the individual market, and specifically temporary solutions that would stabilize things while Congress worked on developing a long term replacement plan. Testimony from America’s Health Insurance Plans (AHIP), the president-elect of the National Association of Insurance Commissioners and the National Association of Insurance Underwriters suggested a number of industry positions:
- The individual market has always been a challenging one but the current instability is creating an existential crisis in some parts of the country
- Stability can be bought with changes in several key areas:
- A relaxation of the definition of Essential Health Benefits
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Constraining use of Special Enrollment Periods and grace periods
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Continuing cost sharing, tax subsidies and reinsurance programs
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Congress or the administration would need to act on these fixes within 30 to 45 days in order to bring the certainty necessary to price 2018 plans. (In the alternative, HHS could change the schedule which requires plan submissions and pricing much further in advance than has traditionally been the case in the individual market.)
Relaxing the definition of EHBs and constraining use of SEPs can probably be accomplished through regulatory action. Indeed, CMS sent to the White House for approval a proposed rule titled, “Patient Protection and Affordable Care Act: Market Stabilization.” This rule would almost certainly include changes to EHBs and SEPs. Politico is reporting today that the proposal may also include changes to the actuarial value of silver plans – a minimum of 66 percent of medical costs covered versus the current 68 percent –and deferring to states when determining network adequacy.
Changes to the age rating ratio and the grace period are a little more difficult as these are provisions in the law itself. However, as we understand it, the Trump administration is looking at permitting an age ratio of 3.49:1. The grace period of 90-days could be qualified as only applying to those with no medical debt or some other similar restriction. The Trump administration is also reportedly considering limiting 2018 open enrollment to six weeks – November 1, 2017 to December 15, 2017.
We suspect individual market stabilization will have to be accomplished through regulation and reconciliation. The tenor and tone of hearings and the marathon speeches to defeat President Trump's nominee for Education Secretary suggests Demcrats and Republicans have a long way to go before they find common ground on something as contentious as the Affordable Care Act. Hope, as they say, does spring eternal.
Medicaid Expansion/Reform. In December, Congressional leaders raised the issue of enrollment and per enrollee expense growth and its connection to eligibility oversight. Our review of the enrollment data, suggests their concerns, at a minimum deserve a closer look.
The Health and Oversight and Investigations Subcommittees of Energy and Commerce each held a hearing last week to more closely examine the oversight of the Medicaid program. The hearings covered a good bit of territory on eligibility, federal funding mechanisms and the impact the ACA Medicaid expansion was having on other eligible populations. The points made repeatedly in these hearings were:
- Because CMS has not used eligibility as a factor in its Payment Error Rate Measurement – a key Program Integrity tool – since 2013, the Government Accountability Office has no idea how accurately CMS and the states are determining Medicaid eligibility
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Data on payment and eligibility is sorely lacking
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The FMAP system of matching dollars means states primary motivation is increasing federal dollars
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The enhanced match for the ACA expansion population means that state budget cuts often disproportionately affect traditional Medicaid populations (disabled, aged and pregnant women)
- States need flexibility to design their programs
Not discussed in the health subcommittee hearings but of great importance to the ACA repeal, repair and replace drama, is the provision in each of the three bills that creates the “Medicaid Improvement Fund.” In the context of ACA repeal, there is an emerging strategy whereby savings from terminating the Medicaid expansion could be transferred to a fund that would be used to smoothly transition to a state-based block or per capita program.
The Senate side, for the time being anyway, has not taken up the issue of Medicaid reform with Senator Alexander only referencing it as a “separate conversation with Governors.”
Stabilizing the individual market and appeasing Governors, red and blue alike, are critical components to a Republican strategy for repealing, repairing and replacing the ACA.
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In the zero sum game that is health insurance, what is good for plans is bad for providers. Assuming the insurance industry is right and large numbers of people have been purchasing insurance for the purpose of gaining coverage for high cost services then dropping coverage, or not paying for it at all, the changes contemplated by Congress and potentially the Trump administration are likely to further exacerbate the slowing growth in health care spending discussed on the Health Care Team’s Macro Themes call.
We should acknowledge that it is possible that if plan costs do come down as a result of changes to the mandated benefit package, people will be more inclined to stay enrolled. Of course, a leaner benefit package will certainly not do much to reverse a slow growth trend either.
Similarly, a greater emphasis on Medicaid eligibility by CMS or the states, whose budgets are under pressure this year due to an increase in the state match for the Medicaid expansion population, means a likely reversal in enrollment trends. Medicaid beneficiaries found to be ineligible can shift to the individual market but the cost sharing is likely to limit health care services utilization in a way Medicaid does not.
Call with questions. We are always here.
Emily Evans
Managing Director
Health Policy
@HedgeyeEEvans
