Ignatius Bau

The Congressional Budget Office (CBO) has published its analysis of the Bipartisan Health Care Stabilization Act, co-sponsored by Senators Patty Murray (D-WA) and Lamar Alexander (R-TN). Since the CBO had already done analysis of other legislation that either continued or discontinued the cost-sharing reduction payments to health insurance plans participating in the health insurance marketplaces, there is no new analysis of fiscal impacts from restoring those payments through 2019. However, the provisions in the bill that require states to certify financial benefit to the federal government and consumers from the payments would likely result in some rebates to consumers and lower payments to the health plans. In addition, the provision in the bill that expands the availability of “copper” plans with basic catastrophic coverage (at lower premiums) means lower costs for federal premium subsidies. Accordingly, the CBO also estimates that, over ten years, the bill would lower federal expenditures and reduce the federal deficit by $3.8 billion.

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Here is the text of the Bipartisan Health Care Stabilization Act, co-sponsored by Senators Patty Murray (D-WA) and Lamar Alexander (R-TN), that would appropriate funding for cost sharing reduction (CSR) reimbursement payments to health insurance plans participating in the health insurance exchanges established under the Affordable Care Act (ACA). A federal district court had agreed with House Republicans in May 2016 that the payments had to be appropriated each fiscal year and a federal appeals court has been waiting for the Trump administration to formally reverse its position in the litigation since the Obama administration had defended the legality of continuing to make the payments without annual appropriations. On October 12, the Trump administration finally announced that reversal in legal position and that it would no longer make those payments, effective immediately. California, 17 other states, and the District of Columbia have requested a federal court injunction to continue the payments.

The Murray-Alexander bill is also sponsored by Senators Tammy Baldwin (D-WI), Richard Burr (R-NC), Tom Carper (D-DE), Bill Cassidy (R-LA), Susan Collins (R-ME), Bob Corker (R-TN), Joe Donnelly (D-IN), Joni Ernst (R-IA), Al Franken (D-MN), Lindsey Graham (R-SC), Charles Grassley (R-IA), Maggie Hassan (D-NH), Heidi Heitkamp (D-ND), Johnny Isakson (R-GA), Angus King (I-ME), Amy Klobuchar (D-MN), Joe Manchin (D-WV), John McCain (R-AZ), Claire McCaskill (D-MO), Lisa Murkowski (R-AK), Mike Rounds (R-SD), and Jeanne Shaheen (D-NH).

The bill would provide funding for the CSR payments through 2019 , and states accessing the payments would be required to certify that both health care consumers and the federal government are financially benefiting from the payments of the CSRs that are made to health insurance plans participating in the ACA health insurance marketplaces, to avoid the criticism that the payments are “bailouts” to the health plans. Most health economists agree that the CSRs keep more Americans insured by making health insurance more affordable, which expands the overall risk pool of insured, which allows the health plans to keep premiums and cost-sharing lower. Conversely, without the CSRs, more Americans would become uninsured because they could not afford the premiums and cost-sharing, with shrinks the risk pool, which results in higher premiums and cost-sharing for the remaining insured, and more Americans needing the ACA tax credits to pay for those higher premiums (which results in a net increase in federal spending rather than any savings).

In a direct legislative override of President Donald Trump’s executive actions, the bill also would require that the Department of Health and Human Services (HHS) engage in outreach and education activities to support enrollment in the ACA’s health insurance marketplaces, and to report back to Congress about those activities. The Trump administration is reducing the amount spent on these outreach activities by 90% when the fifth, much shortened, open enrollment period (for health plan coverage year 2018) begins on November 1 (and ends on December 15), with the federal website unavailable for 12 hours every Sunday evening, when many applicants would ordinarily be using the website.

The bill also would make numerous amendments to section 1332 of the ACA, which allows “waivers” to states to implement alternate health insurance rules, as long as levels of coverage and affordability are maintained. The amendments would provide more flexibility than the original ACA (for example, to use a ten-year period to show cost neutrality rather than having to demonstrate cost neutrality every year) and would streamline and expedite the review, approval, renewal of such waivers.

The bill also would expand the availability of so-called “copper” level, or catastrophic coverage plans with lower premiums (since they provide only catastrophic coverage), and would instruct HHS to issue regulations about selling health insurance products “across state lines”, a favorite proposal of many Republicans (that ironically, almost all national, regional, and state health plans have never requested, or supported).

The bill does not reference any specific sources of federal revenues for the CSR payments; presumably since section 1332 waivers would still have to be cost-neutral, there would be no additional costs from expanding the number or types of those waivers.

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The Senate Health, Education, Labor, and Pensions Committee has prepared this section-by-section summary of the bill:

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A vote on the bill has yet to be scheduled in the Senate.

In a memorandum from Acting Secretary of Health and Human Services Eric Hargan (who was just named Acting Secretary three days ago) to Centers for Medicare and Medicaid Administrator Seema Verma, the Trump administration has abruptly ended payments for cost-sharing reductions that assist millions of  low-income Americans (with incomes below 250 percent of the Federal Poverty Level) afford health insurance coverage obtained through the health insurance marketplaces established under the Affordable Care Act.  The payments are made to health plans who offer health insurance through the exchanges, and were ordered ended immediately. Health plans were expecting up to $7 billion in such payments this fiscal year.

Since health plans have relied on these payments in calculating their premiums, this executive action will result in dramatically increased health insurance premiums in the future (premiums for 2018 health plans have already been established, and the shortened month-and-a-half open enrollment for the marketplaces begins in two and a half weeks, on November 1, 2017). This action also will likely result in health plans declining to participate in the marketplaces at all, resulting in less competition, and also pushing premiums higher.

The terse three-sentence HHS directive is accompanied by a legal opinion from the U.S. Department of Justice that agrees with the legal position taken by House of Represetnative Republicans who have sued HHS, claiming that the cost-sharing reductions were “authorized but not appropriated” under the ACA, and therefore cannot be paid without Congressional appropriations under each fiscal year’s budget. Since all parties agree that one solution would be for Congress to appropriate the necessary funds, the executive action now places additional pressure on Congress to include such funding in the federal government appropriations bill for FY2018, which has been deferred to mid-December. Disaster relief for Texas, Florida, and Puerto Rico, President Trump’s tax plan, and the President’s other priorities such as more resources for immigration enforcement, also will make demands on that FY2018  budget.

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As part of his continued opposition to the Affordable Care Act, President Donald Trump signed an executive order today to loosen federal regulations on association health plans, short-term health insurance, and health reimbursement arrangements, all of which will have the effect of further destabilizing the health insurance marketplaces, and result in fewer Americans having access to affordable, comprehensive health insurance. While issuing these directives through an executive order, each of these actions will need to be implemented through future regulatory actions by the Departments of Health and Human Services, Labor, and Treasury, which will take many months to complete, including requesting and responding to public comments of any proposed regulatory changes. These executive actions to undermine the ACA are being taken while Congress has been unable to pass legislation that would either repeal and/or replace the ACA.

Allowing more employers to purchase association health plans will allow more employers to avoid purchasing health plans regulated under the ACA, which require a uniform set of “essential health benefits”, have lifetime and annual limits, prohibit different rates and exclusions for pre-existing conditions, etc. This will mean that more health insurance – primarily for healthy, working adults – will be purchased outside of the health insurance marketplaces, leaving those marketplaces with increased percentages of sicker and poorer Americans, which will drive up premiums and costs in those marketplaces.

Short-term limited duration health insurance is a little-known type of health insurance that is really intended to be gap coverage and therefore provides primarily emergency and catastrophic care coverage; it does not have to meet all the ACA rules for essential health benefits, preventive services, etc. The Obama administration limited these plans to 3 months; this executive order would lift that limitation and potentially allow these  extremely limited plans to be used as an ongoing coverage option. Again, younger, healthy adults are likely to purchase such plans outside of the health insurance marketplaces, driving up premiums and costs in those marketplaces.

Finally, the expansion of health reimbursement arrangements (including health savings accounts and health reimbursement accounts), are employer-funded, tax-advantaged arrangements that set aside funds to be used to pay for out-of-pocket health care expenses. These are useful for high-income individuals who can afford to set aside significant sums as savings and can benefit from the favorable tax rules. They are not useful for low-income individuals who don’t earn enough for the “savings” to be meaningful, and cannot use the tax advantages because their incomes are not high enough.