Ignatius Bau

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.

The Kaiser Family Foundation has issued this analysis of the state-by-sate impact of the bill proposed by Senators Lindsey Graham and Bill Cassidy to repeal and replace the Affordable Care Act (ACA), concluding that 35 states and the District of Columbia would receive less federal funding for their Medicaid programs. Overall, there would be a reduction of $107 billion in federal funding to the states.

Because of their larger state populations and their expansions of Medicaid and health insurance marketplace coverage under the ACA, the states of California, New York, and Pennsylvania would lose the most federal funding under the Graham-Cassidy proposal. In contrast, because they declined to expand Medicaid and only have limited increases in health insurance coverage through the ACA, the states of Texas, Georgia, Tennessee, and Mississippi would gain the most federal funding under the proposal.

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The Congressional Budget Office (CBO) has released this preliminary analysis of the proposal by Senators Lindsey Graham and Bill Cassidy to repeal and replace the Affordable Care Act (ACA), concluding that millions of Americans would lose their health insurance coverage under the bill. The CBO explains:

Since the bill shifts significant responsibility to the states for designing their Medicaid programs through block grants, and for their health insurance marketplaces with much more flexibility to change the current national standards established by the ACA, the CBO has not had the time to analyze or estimate the impacts on these complex, potential state-level decisions. For example, the CBO could project that states that have expanded Medicaid under the ACA are more likely to try to use both their Medicaid programs and their health insurance marketplaces to maintain coverage for those currently insured, including establishing state-based subsidies for premiums and cost-sharing. However, states may be limited in what they can do because the amount of federal funding for Medicaid under the new block grants and for their health insurance marketplaces is capped and limited.

Considering the caps on federal Medicaid funding and the limited amount of federal assistance for the marketplaces, the CBO does preliminarily conclude that the number of uninsured will increase, that the average amount of health insurance premiums will increase, and that the scope of health insurance benefits will decreases (since states can waive the “essential health benefits” required by the ACA).

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Here is the text of the proposed bill analyzed by the CBO (at least two other versions of the bill have been circulated):

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Since this bill would use the federal budget reconciliation process to repeal and replace the ACA, it must be voted on before the end of this year’s federal fiscal year, or this Saturday September 30. Republican Senators Rand Paul, John McCain, and Susan Collins have announced their opposition to the proposal, which means that whether the Senate even votes on the bill this week remains uncertain.