OVERVIEW. In what has to be one of the most eventful days in health policy since the November election, President Trump issued an executive order on Thursday designed to provide more affordable and flexible health insurance options than what is currently permitted under the ACA. At the same time, word leaked that the administration would be notifying the D.C. Court of Appeals of its decision to end reimbursement to insurers for cost-sharing reduction payments made to silver plan enrollees on the ACA exchanges.
So, if there was any optimism that President Trump would move on from failed attempts to repeal and/or replace the ACA, it is surely defeated now. President Trump's read of the electorate (and one, as a resident of a non-coastal red state, I tend to think is accurate) is that they want "something" done. If Congress cannot deliver, he will. We might even be inclined to conclude this outcome is the one President Donald Trump prefers.
Be sure and tune into our Q4 Themes call on Monday morning when we will be covering recent events in more detail.
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EXECUTIVE ORDER. The Executive Order signed yesterday addresses three main areas; short term health insurance, association health plans and health reimbursement accounts.
Short Term Health Insurance – The Obama Administration, likely at the behest of the insurance industry ahead of the 2017 ACA marketplace enrollment period, issued a rule that redefined short-term health insurance from having a duration of less than 12 months to having a duration of less than three months. The rule also required that issuers of short term insurance include in their contracts bold-face, all cap warnings that the policy does not comply with the ACA’s minimum essential coverage requirement.
Short term plans like those sold by QIIH and UNH, are exempt from the rather onerous requirements of the ACA like Essential Health Benefits and guaranteed issue. They are also more affordable and have become more popular in response to the rising costs to the consumers for qualified plans on the ACA marketplaces. People that purchase these short plans - often relatively healthy individuals who do not need a lot of health services - do not enter the ACA risk pool, thus driving up costs for everyone else.
The Executive Order appears to suggest HHS roll-back the Obama-era rule. At the time the rule was released in June 2016, we expressed doubt that it would matter much. As long as premiums on the exchanges remain high and the benefit design of the plans offered there included services many people do not want to buy, we were skeptical that the rule would produce the intended results. HIIQ’s 50 percent 2Q 2017 YoY increase in policies in force suggested we were right.
So, the executive order is not likely to alter the current course because the ACA requirements and Obama rules on short term insurance were being ignored anyway.
Health Reimbursement Accounts – The Executive Order asks agencies to consider “proposing regulations or revising guidance, to the extent permitted by law and supported by sound policy, to increase the usability of HRAs, to expand employers' ability to offer HRAs to their employees, and to allow HRAs to be used in conjunction with non-group coverage.”
Rules issued by the IRS and the Department of Labor interpreted the ACA to prohibit employers from contributing to their employee’s purchase of health insurance in the individual market. The 21st Century Cures bill that passed in late 2016, relaxed this prohibition somewhat. Current law permits small employers, defined as having fewer than 50 employees, to contribute to an HRA. The employee can use an HRA to pay medical expenses including health insurance premiums and deductibles in the individual market. The employer’s payment to the HRA are tax preferred.
Since the ACA-era prohibition on use of HRAs to purchase individual insurance was done through rulemaking and not via an express provision of the Affordable Care Act, the Trump administration is likely to extend the use of HRAs to employers with more than 50 employees.
The question is: to how large a firm would the executive order apply?
There have been some efforts to expand the 50 employee limit set forth in the 21st Century Cures Act to 150, so that seems like a possible target for HHS, DOL and the IRS to consider when complying with this Executive Order. However, somehow the administration will have to get around the employer mandate that requires businesses with over 50 employees to provide health insurance through the small or large group market (and not the individual market as contemplated by the 21st Century Cures Act and, presumably, the Executive Order.) The Trump administration is helped considerably by the Obama Administration precedent that waived enforcement of the employer mandate for several years.
Expanded Access to Association Plans - The Executive Order also suggests expanded access to health plans sponsored by associations and sold across state lines. Both items are long standing goals of conservatives and especially Senator Rand Paul who has, as of recently, acquired some influence with the President.
The very best example of an association health plan is the Tennessee Farm Bureau's Rural Health Plan. Anyone who joins the Tennessee Farm Bureau and pays an annual membership fee can apply for their Blue Cross/Blue Shield PPO. However, the plan is not a Qualified Health Plan under the ACA because it is medically underwritten and maternity coverage is only available as a rider.
There are 56,000 people enrolled in the Farm Bureau’s individual plan – 28 percent of the individual market in Tennessee. Only Blue Cross/Blue Shield’s individual QHPs enroll more Tennesseans - 81,000 in 2017.
While Tennesseans seem happy with the arrangement (full disclosure; I was a policy holder for about ten years) policy makers have credited the Farm Bureau policies with a deterioration of the individual market. For much of 2017, it appeared that 16 counties in east Tennessee would be without an insurer on the ACA exchange. Blue Cross/Blue Shield eventually stepped in.
The ACA plans in Tennessee have become, in effect, high risk pools for the individual market as healthy people gravitated toward the less expensive Farm Bureau policies.
Trump is proposing to encourage proliferation of plans similar to the Farm Bureau's. However, Trump’s path for doing so will be through changes to the interpretation of ERISA. Specifically, the Executive Order calls for the Department of Labor to consider expanding the conditions that satisfy the commonality of-interest requirements under current Department of Labor advisory opinions interpreting the definition of an "employer" ERISA.
The imapct of selling policies across state lines will depend on which insurers are selected by the associations. If the Tennessee Farm Bureau were to use a UNH plan instead of a BC/BS PPO, they would be able to exploit UNH's networks in other states while remaining subject to the more relaxed oversight of the Tennessee Insurance Commissioner. If they remained with BC/BS of Tennessee, the reach of their plan would be limited by the established networks.
COURT OF APPEALS NOTICE. The notice to the DC Court of Appeals filed today advises the court that the Trump administration is ending cost-sharing reduction payments effective with the payment due October 18th.
Terminating Cost-Sharing Reduction Payments - Recall that insurers must still make cost sharing payments to policy holders even in the absence of a reimbursement from the US Treasury. Cost sharing payments made on behalf of enrollees in the ACA marketplace silver plans only earning between 100 and 250 percent of the FPL.
According to a decision in federal court, money to fund the CSR payments must be appropriated by Congress. To date, Congress has not funded the payments and the House of Representatives sued to stop the Obama administration from reimbursing insurance companies. The trial court agreed with the House and the decision was appealed by the Obama Administration. Since January, the Trump administration has been making the payments while ACA legislation, which included the necessary appropriations, moved through Congress.
Plan sponsors have, for the most part, accepted the possibility that the CSR payments would stop and priced their plans appropriately. In a number of states, plans were asked to submit two rates – one that assumed payments of the CSRs and one that did not. With this move by the Trump administration, silver plans are likely to be priced at a rate higher than the more robust actuarial value gold plans.
Recall too that in August, the Court agreed to let the Attorney Generals in about a dozen states intervene in the lawsuit. We expect that these same AGs will seek relief from the Court of Appeals to force payment while the appeal proceeds. We also expect that the Court will grant it. Of course, that result does little to calm the jittery nerves of insurers for whom undercertainty is the biggest threat.
Of course, Congress could always appropriate the CSR payments. There are a few vehicles for doine so - disaster relief, CHIP re-authorization, omnibus spending package, or as a standalone bill. We are not optimistic that Congress will be able to come to any agreement. Republicans esepcially those of a more conservative ilk will want changes to the ACA that are not likely to be accepted by Democrats.
Call with questions. We are pretty certain Trump won't stop here and there is lots to discuss.
Emily Evans
Managing Director
Health Policy
@HedgeyeEEvans
