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:
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?
- 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!
- 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.
- 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.