Trump ending cost-sharing reductions and his executive order, explained

President Trump and his administration's singular effort to undermine the Affordable Care Act escalated quickly last Thursday with the announcement of an Executive Order regarding regulations affecting the health law and the announcement that he will end funding for cost-sharing reductions. Here's what you need to know:

Cost-sharing reductions

President Trump announced plans to end payments to insurers to reimburse them for cost-sharing reductions (CSRs), which total around $7-8 billion annually. This is a unilateral move to sabotage the Affordable Care Act. TJC wrote in August about the potential effects ending cost-sharing reductions could have. It will raise premiums for consumers, could cause people to lose coverage, and will raise the deficit by nearly $200 billion (source: Congressional Budget Office). Tennessee already accounted for the administration pulling funding for cost-sharing reductions so premium increases have already been factored in to 2018 individual plans.

Statement from Tennessee Department of Commerce & Insurance Commissioner & NAIC President Elect Julie Mix McPeak:

“In Tennessee, our carriers filed rates assuming CSR payments would not be paid in 2018.  The President’s decision will not impact those approved rates, and Tennessee consumers will continue to have marketplace options available for next year.  Tennessee insurance consumers will continue to see the CSR benefit in 2018; however, the carriers will not be reimbursed for the benefit that federal law requires them to provide.”   

BlueCross BlueShield of Tennessee Statement:

"BlueCross rates for Marketplace plans anticipated that CSR payments would not be made in 2018, so our members will still receive this benefit. We’ll continue to offer coverage options for Tennesseans in six of eight Marketplace regions as planned, including the Knoxville region, when the enrollment period begins on Nov. 1."

Oscar Health Statement:

"There will be no change to Oscar's plans in Tennessee and we are looking forward to delivering easy, guided health insurance to Nashville residents in 2018."

As Insurance Commissioner Julie Mix McPeak stated, Trump's announcement does not change the legal obligation of insurance to offer silver plans with cost-sharing subsidies. There are also no changes to eligibility for premium assistance.

The Executive Order

President Trump issued an executive order that would destabilize health insurance markets and undermine protections for people with pre-existing conditions. The executive order allows the sale of junk insurance that doesn't have to cover essential health benefits and can charge higher premiums to people with pre-existing conditions. Tennessee is the only state with insurance rules like the ones President Trump proposed, and the TN experience shows how harmful these insurance rules are.

The components of this executive order include:

  • Expanding access to Associated Health Plans (AHPs)
    • It essentially would treat small-group coverage like large-group coverage, exempting it from most ACA regulations.
    • What does this mean?
      • A return to pre-ACA medical underwriting and segmentation of the risk pool that would cause the cost of ACA plans to rise.
      • These low-cost plans will be more attractive to healthier people, meaning sicker people could be stuck with higher cost, ACA-compliant plans.
      • AHPs have a long history of fraud and insolvency.
  • Expand time limits on short-term limited duration insurance
    • Not considered minimum essential coverage (MEC) under the ACA since they can underwrite and exclude essential health benefits.
    • Possibly exempting participants in these plans from the individual mandate and/or redefining what minimum essential coverage is.
    • What does this mean?
      • A return to the individual market before the ACA.
      • They will pull even more healthy individuals away from the individual marketplace.
      • More about short-term coverage
  • Expand health reimbursement arrangements (HRAs) to be used in the individual market
    • HRAs are employer-funded tax-advantaged health benefits for out-of-pocket costs.
    • Currently, HRAs must be used with a group plan and must comply with ACA rules.
    • There are currently exceptions for some small businesses to use these on non-group plans but there are boundaries.
    • What does this mean?
      • If large employers could use HRAs for their employees to get coverage in the individual market, they could shed sicker workers from their group plan and send them to the individual market.

For a more in-depth analysis of all aspects of the executive order, read this Health Affairs article by Tim Jost.

What will happen next?

On the cost-sharing reductions:

As you read above, Tennessee already accounted for the changes and business should continue as expected.

Seema Verma, CMS Administrator, stated Thursday “we will discontinue these payments immediately.”  However, federal law still requires insurers in the federal marketplace to provide the subsidies to consumers regardless of whether the insurers receive the expected payments from CMS. It's unclear how the insurance companies will respond in 2018.

On the executive order:

An executive order is a direction to draft rules, not a change of law. They are well into the drafting process for the actual regulations and the regulations will most likely be subject to notice and comment rulemaking, which will happen within 30 days of the release of the regulation. Once the comments have been considered, the regulation can take effect within 30 days of release. The process won't be done soon enough to affect plans by Jan. 1, but we could see some changes mid-year 2018. Health reimbursement arrangement (HRA) changes could take effect sooner.

Where does White House action leave Americans’ health coverage?

The President has made clear since his election that he is determined to end “Obamacare.” In recent months, his administration has taken a series of actions, such as cutting funding for outreach and enrollment assistance, to discourage enrollment and deter insurers from offering ACA-compliant health plans.  Since the recent failure of congressional efforts to repeal and replace the ACA, he has indicated he would proceed unilaterally to undermine the law and cause it to “implode.” The President’s actions this week have that purpose. But will they have that effect?

The President’s actions can have several possible types of effects, by:

  • Altering the scope, availability and affordability of health coverage for people in the individual insurance market;
  • Politically disrupting individual markets and the larger health insurance/health policy environment; and
  • Moving public perceptions of the ACA and the political parties’ handling of health policy.

First, the President’s actions will not immediately affect most consumers in Tennessee, but some higher-income consumers will see a sharp increase in premiums. Insurers must still provide cost sharing reductions to consumers who qualify for them by law. As the Tennessee Department of Commerce and Insurance announced, the state had already approved insurance rate increases based on an assumption that federal reimbursement of CSRs would not continue.  By making this assumption, Insurance Commissioner Julie Mix McPeak had the foresight to avoid the serious disruption that this announcement could have caused and helped mitigate the negative consequences of ending cost-sharing reductions. In effect, insurers will be reimbursed for CSRs through higher premiums. The 80% of consumers who get coverage through the marketplace and who qualify for premium tax credits will not feel the premium increase, because their tax credits will rise to cover it.

Insurers had already factored in the potential for disruption by the President before they decided to offer plans during the open enrollment period opening November 1. On October 13, both Blue Cross and Oscar announced affirmed that they would remain in the market in 2018.

The consumers who will be immediately harmed by the President’s actions are the 20% of households who get coverage on the marketplace and whose incomes are too high to receive premium tax credits. They will see sharp increases in premiums, and they will have to bear those increases without help from the federal government. The President’s apparent goal was to drive these higher income individuals out of the marketplace, leaving only those who have pre-existing conditions that are so serious that they will pay for coverage, regardless of the cost. Depending upon the new rules that will be issued under the executive order, insurers are likely to be encouraged to sell cheaper, less comprehensive plans off of the marketplace, with the goal of attracting healthy consumers who are more sensitive to price than to the value of the coverage. Departure of healthy consumers, and the concentration of sicker consumers in the marketplace are designed to make ACA plans non-viable and destabilize the individual insurance market.  These effects, if they do occur, are unlikely to occur in 2018, however.

In addition, the premiums of off-exchange products will also increase if the insurer offers individual coverage on both the federal marketplace and in the parallel market. This is because an insurer must use the same underlying risk pool to generate their premium rates.

Second, the President’s determination to disrupt insurance markets and cause the “implosion” of the ACA will have unforeseeable effects on the health insurance system affecting all Americans.

Although his target is the individual insurance market, which covers only 7% of Americans, damage to that market will have ripple effects on the larger insurance system and on health care providers. Blowing up the present system – even one part of it – will have effects that no one can predict, but are certain to be harmful to many Americans. Those most likely to be hurt are those who need coverage the most: people with pre-existing conditions.

Third, the President’s actions are out of sync with the views of 71% of Americans, who want the President and Congress to repair rather than destroy the ACA. Senator Alexander reflects the views of the great majority of Americans when he calls for Congress to find bipartisan solutions that will improve health care and lower costs for everyone.

What can you do?

  1. Keep spreading the word about Open Enrollment (Nov 1 - Dec 15). The Affordable Care Act has not been repealed. Also, in Tennessee, our insurance carriers assumed that the administration would end the CSR payments. This means that TN consumers will continue to have marketplace options available for next year, and they will continue to see the CSR benefit in 2018. It's vital for both Tennesseans' health and for the stability of our market that people still enroll in health coverage during Open Enrollment! But the administration has shortened Open Enrollment and cut funding for advertising. This means it’s vital that we all help spread the word! Share our graphic below and/or our Facebook post!

  1. Congress has the power to fix this. Call Senator Alexander on Monday, and tell him to continue bipartisan action to permanently fund the cost-sharing reduction payments.
  2. Call Governor Haslam and Insurance Commissioner Julie Mix McPeak and tell them to tell our congressional delegation how important cost-sharing reductions are for Tennesseans.

Hometown Healthcare Heroes

What a time to be alive!

Following the defeat of ACA repeal efforts in July, the Tennessee Justice Center asked Tennesseans across the state to nominate their friends, family, and neighbors who fought tooth and nail to preserve healthcare coverage.

We received so many inspiring submissions, I can’t help but feel so grateful to be surrounded by such passionate and dedicated Tennesseans who called, petitioned, marched, and prayed to protect health care for themselves, their families and their communities.

I heard from patients who nominated Dr. Terri Lewis, an advocate for those with chronic pain generating conditions, who has relentlessly advocated for access to care from her home in Putnam County to the national stage.

I heard from advocates in Knoxville about Molly Bryson, who publicly shared her story highlighting the importance of Medicaid in her daughter’s life to countless reporters and legislators. One of the nominators, Max Carwile, stated, “She's an incredible mom, advocate, and human being and I really believe she deserves to be honored for her work.”

I heard about Jessi Bohon, who made national news when she stood up in a town hall and defended the Affordable Care Act in front of hundreds, including Rep. Diane Black. A Slate reporter who covered the story said, “Bohon’s comments amounted to the kind of forceful, moral argument for universal health care we need to hear more often.”

I heard about the righteous Bedford County ladies who made countless trips while braving downpours, traffic and unwavering heat to stand outside Rep. Desjarlais’ and Senators Alexander and Corker’s offices demanding they vote no on any ACA repeal.

2017 has been a year for the books, but I have never been more hopeful knowing that we have these healthcare heroes who rose to the challenge and made history themselves. They wrote, called, prayed, told their stories, made signs, read policy blogs, became health policy experts, and told their terrified neighbors they weren't alone. TJC is so privileged to stand alongside each one of these hometown healthcare heroes.

Award winners will be announced on Monday, October 16th at the NALS Association for Legal Professionals Silent Auction benefiting the Tennessee Justice Center.

Our Statement on the Failure of the Graham-Cassidy Bill

In response to the announcement that the Senate lacks the votes to pass the Graham-Cassidy bill, Michele Johnson, executive director of the Tennessee Justice Center, made the following statement:

Withdrawal of the Graham-Cassidy bill allows over a million Tennesseans with pre-existing conditions to breathe a collective sigh of relief. It was a hugely unpopular bill that had the support of only 20% of the public, and it just kept getting worse the more the sponsors tinkered with it. Every major health organization in the country opposed it. The nonpartisan Congressional Budget Office pointed out that it would have left millions of Americans with pre-existing medical conditions without health coverage. Standard & Poors warned that it would cost the economy nearly 600,000 jobs. And even the sponsors did not know all of the effects, because they were trying to rush the bill through without full hearings and analysis. Now is the time to put aside partisanship and resume the process that Senator Lamar Alexander had started, so that Congress can find pragmatic solutions that work for everyone.


SNAP, ABAWDs, and Governor Haslam’s New Work Requirements

What’s an ABAWD?

Governor Haslam’s recent decision to voluntarily end waivers of time limits for childless unemployed workers will have significant consequences for our state if not done carefully.  There seems to be a lot of misunderstanding about what this policy is and how it works, and we’d like to help clear that up.

First, here’s a little history.  In 1996, Congress implemented a policy that limited the amount of time able-bodied adults without dependents (ABAWDs) could receive help through the Supplemental Nutrition Assistance Program (SNAP), formerly Food Stamps.  ABAWDs would only be allowed to receive assistance for three months in a three-year period unless they were working or engaged in work training at least 20 hours per week or participating in workfare or compulsory community service.  The time limit requirement makes no exception for women fleeing domestic abuse, people who are working 18 hours a week and would like to work more, or the recently unemployed who need help for more than three months as they look for a job.

At the same time, Congress recognized that there would be times and places where these policies would pose an undue hardship on people struggling to find work and the communities they live in.  That is why they included a provision that would allow states to waive the three-month time limit in counties with labor surpluses (i.e. not enough jobs to go around).  A county must have high unemployment or be very bad off in relation to the rest of the nation to qualify.

Because of the economic realities of the recession, every Tennessee county qualified for the time limit waiver until 2016.  As the economy has experienced an uneven recovery, some counties, primarily in metropolitan areas, no longer qualify for the waiver.  Despite that, 80 of Tennessee’s 95 counties have not fully recovered and will still meet the criteria for waivers in 2018.  The Governor’s administration chose to use more stringent requirements than required by federal law, however, and so only sought waivers for 16 counties.  That means 64 counties could continue to receive this relief next year but will not.

So what does the new state policy mean for your community and neighbors?

Obviously, everyone who can work should have the opportunity to contribute meaningfully to the economy and to be compensated for that work.  We applaud the Governor’s efforts to bring in high quality jobs to Tennessee and get our residents ready for those jobs.  The reality is that too many Tennesseans, and especially those impacted by this decision, have yet to benefit from these gains.  The map above shows how the new state policy will disproportionately impact rural communities across Tennessee, places that have not shared in the economic recovery to the same degree as their urban neighbors.

According to the Tennessee Department of Human Services (DHS), there are about 93,000 people statewide who would be subject to time limits.   Many of these individuals are already working while on the program, and some will find employment within the time limit, but still others are facing any of a number of challenges that prevent them from maintaining employment (i.e. domestic violence, temporary disability, homelessness, etc.).

The fact is that while there’s a lot of attention being paid to the record low unemployment rate in our state, that ignores much of the data that points to the very real struggles faced by so many Tennesseans.  Even in this improving economy, nearly half a million Tennessee workers lose their jobs due to private business closures and workforce reductions annually.  While many will soon find a new job, it all too often takes more than three months especially in communities with sparse employment opportunities.  Despite low unemployment numbers, according to data from the Tennessee Department of Labor and Workforce Development, there are more unemployed workers than available jobs in counties where the time limits will soon take effect.  In half of these affected counties, there are two unemployed workers for every available job. Put simply, even low unemployment means that there is unemployment, and it doesn’t make the challenges faced by those experiencing joblessness any easier.

Additionally, for many who will be impacted by this policy change, there truly is no work to be had for their qualifications.  While we strongly support the Governor’s Tennessee Reconnect initiative that provides last-dollar scholarships for post-secondary tuition, the people impacted by this policy are often very poor to begin with and don’t even have the transportation resources to get to classes, let alone all the other costs of pursuing an education.  Similarly, the workfare/community service option might sound reasonable on its face but what gets missed is that a SNAP participant may lack even the transportation resources to be able to meet this requirement.

Further, this is an extremely complicated policy that DHS has already demonstrated difficulty in implementing on a more limited scale.  Many individuals who comply or make a good faith effort to comply with ABAWD policies are being subjected to additional burdens on their participation, some are even being erroneously terminated from the program.  It’s hard to work or find work when you’re malnourished.  Even minor snags in implementing this policy could punish many who are truly just trying to get back on their own two feet and need a little help along the way.

This policy also adds to the administrative burdens of an agency, DHS, that is already extremely under-resourced.  DHS’s administration of SNAP is reliant on a 30-year old computer system that is inadequate to the tasks it must already perform. This will almost certainly result in other SNAP households – families with children, older adults, and adults with disabilities – receiving reduced service.  It will certainly do little to support DHS’s bold, new two-generation approach of moving families from welfare to self-sufficiency.

Finally, this has implications for all Tennesseans.  Those 93,000 ABAWDs receive an estimated $183 million in benefits.  While for any one person that may not be much (about $1.80/meal), it has a big impact on our retail grocery industry and supports nearly 1,800 jobs in some of the state’s most impoverished communities.  It won’t just have economic consequences, it will place a significant burden on Tennessee’s charitable food response.  That $183 million in potentially lost

Where do we go from here?

The decision to end time limit waivers will not go into effect until 2018.  There are a number of opportunities that the Governor and DHS have between now and then to ensure that this policy is implemented with the care needed to ensure that it will achieve its intended results.  First and foremost, the 64 counties being voluntarily removed from the waiver deserve to be re-examined for inclusion.  These are truly struggling communities, many are among the worst off in the nation.

At the same time, the economy is improving, and there will be even more counties where the federal government will require time limits to be enforced regardless of the Governor’s decision as long as the economy stays strong.  These are very complex policies, and it is important that they are implemented with great care.  Otherwise, eligible people, including older people and those with disabilities, may be mistakenly cut off of the program, an issue seen in other states.  To avoid cutting eligible poor Tennesseans off critical food assistance, DHS needs policies and processes in place that assess each individual’s case to determine whether they are subject to time limits, educate them about their responsibilities, and provide them with realistic opportunities to meet the work and training requirements.  Our state is not stronger and our economy is not better when our neighbors go hungry no matter the circumstances.  Let’s move people toward opportunity and self-sufficiency, but ensure that we do it in a manner that does not result in families going hungry.