Now that the GOP effort to dismantle the Patient Protection and Affordable Care Act (PPACA) is in limbo, are there ways to make it work better? “Yes,” says Kaiser Health News columnist Julie Rovner. She offers four possibilities.
Insurance companies have only a matter of weeks before they must tell the federal government and/or individual states whether they plan to offer coverage in 2018 on the PPACA’s online marketplaces, which serve customers who don’t have job-based or government insurance. As of now, Rovner says, the uncertainty of what the market will look like—or the rules under which they will operate—is making that decision difficult for many companies. At least one insurer, Humana, has already said it won’t offer coverage.
“Two key moves that insurers are looking for from the administration are a promise to continue providing certain subsidies for those with lower incomes and enforcing the requirement for most people to either have insurance or pay a tax penalty,” Rovner writes.
The subsidies—known as “cost-sharing reductions”—are different than the tax-credit subsidies that many marketplace customers receive to help pay their premiums. The cost-sharing subsidies help those with incomes between the poverty line ($20,420 for a family of three) and nearly 2½ times that ($50,400 for that same family) pay their deductibles and other out-of-pocket costs. The House of Representatives sued the Obama administration in 2014 for providing the subsidies without a formal congressional appropriation for the money, and a federal judge sided with the lawmakers.
The Obama administration appealed the decision, but if the Trump administration were to drop that appeal, the subsidies would disappear, Rovner notes. At a House hearing in March, Health and Human Services Secretary Tom Price would not say what the administration plans to do about the lawsuit or the subsidies.
The administration has also been quiet about how strictly it will enforce the “individual mandate” that requires most people to have health insurance or pay a fine. On his first day in office, President Donald Trump issued an executive order directing federal agencies to “minimize the unwarranted economic and regulatory burdens” of the PPACA. But other than the IRS backtracking on a plan to enforce the mandate more strongly, little has happened on that front.
And yet those two provisions together—the cost-sharing subsidies and the individual mandate—could result in 25% to 30% increases in insurance premiums if they were to disappear, according to Andy Slavitt, who oversaw the PPACA during the final years of the Obama administration.
Some GOP health analysts have proposed replacing the individual mandate with penalties for signing up for insurance late, which is what Medicare does. Republicans did that in their proposed replacement bill by adding a 30% premium surcharge to those with a break in coverage longer than two months. But insurance actuaries and the Congressional Budget Office said that might eventually prompt fewer people to enroll because it would encourage healthy people to remain uncovered.
Getting young and healthy people to sign up for coverage is not just a benefit for them, Rovner says. If there are not enough healthy people in the insurance pool, then premiums rise for everyone, because risk is being spread across a mostly sicker population. And some day even the healthy people will need medical care.
But it takes more than just the requirement for coverage to get people to enroll. Slavitt said it requires a real effort by both federal and state officials to reach people and help them understand that having health insurance is a good thing, even if they are healthy. “What they should be doing is increasing marketing and the outreach budget,” he said. “You’re trying to reach people who are uninsured and are unsure how it all works, and it does take a lot of hand-holding.”
So far, however, the Trump administration’s only move on that front was to cancel ads that encouraged people to sign up at the end of the enrollment period, which overlapped with Trump’s first days in office. The Department of Health and Human Services (HHS) Inspector General is now investigating the results of that action. Some analysts have estimated that canceling the last-minute push lowered enrollment in the exchanges by as much as 500,000 people.
Democratic lawmakers who wrote the PPACA knew that the market might be hard for insurers to navigate for the first few years, and they built in several programs to help reimburse those who lost money, Rovner notes.
Republicans, however, blocked funding for one of the major programs, which was intended to reimburse insurance plans that enrolled sicker-than-average populations for the first three years of the marketplace operations. The loss of that money was a major reason for the collapse of many of the nonprofit insurance co-ops created under the PPACA, Rovner contends, and some other insurance companies said it contributed to their decisions to leave the marketplaces.
Now, however, there are indications that Republicans might support some efforts to provide more funding for insurers.
On March 13, Price sent a letter to governors encouraging them to apply for waivers of the PPACA rules in order to make insurance more affordable and available in their states. Among the state innovations singled out in the letter is a “reinsurance” program in Alaska that helps insurers pay for extremely high-cost patients. That plan, Price wrote, “significantly” offset what was a projected 40% premium increase in the state, and might be an option elsewhere under the waivers, which could allow states to obtain federal funding for such a program.
Moreover, the GOP’s health bill––called the American Health Care Act––included $100 billion for a “Patient and State Stability Fund” that states with limited insurer competition could use to lower costs and to help encourage insurers to stay in the market.
Democrats and Republicans agree that people who buy their own insurance are paying too much out-of-pocket, according to Rovner. Democrats mostly want to increase federal subsidies to help with affordability—something Republicans are not likely to embrace. But there are other ways to lower consumer spending, Rovner says.
For example, Sabrina Corlette of Georgetown University’s Center on Health Insurance Reforms has called for “smarter, not skimpier, benefit design.” One way to do that is to set federal rules to push insurers that offer coverage with high deductibles to add more benefits that would be available without paying thousands of dollars first, such as a few trips to the doctor or urgent care center, or a few prescriptions. She writes that that could keep people from dropping coverage because they feel they are not getting any value for their premiums. And if those mostly healthy people feel they are getting benefits they might use, they are more likely to continue to purchase coverage, thus reducing premiums for everyone.
Another potential way to lower insurance costs is to lower health care costs. Even if there are multiple competing insurers in an area, if there is one dominant hospital system, it can pretty much charge whatever it wants, Rovner writes.
“There’s no other price in the U.S. economy that’s growing as fast as a hospital price,” said Bob Kocher, a former Obama administration health official now at the venture capital firm Venrock. And in areas without much hospital competition, “prices are 30 to 50% higher for everything.”
But how to get hospital prices down is almost as hard as regulating insurance, Rovner observes. Kocher said one way would be for federal regulators to be more discriminating about approving hospital mergers, which tend to give hospitals more negotiating power over insurers.
More controversial would be to require hospitals that dominate their markets “to just accept Medicare prices” from marketplace insurers, Kocher suggested. While that would tend to bring prices down, it’s not likely to fly with free-market Republicans.
Source: Kaiser Health News; April 4, 2017.