By Rob Richardson, LCI Issues Team, April 23, 2017
As Trump’s 100th day in office looms, white house officials seem desperate to resurrect the Republican House’s healthcare bill (AHCA). The hopes are pegged to an amendment being offered by Rep. Tom MacArthur (R-N.J.) that aims to attract conservatives (Freedom Caucus) and moderates (so-called Tuesday group). To entice conservatives, the amendment allows states to obtain permission to write their own list of essential health benefits and allow insurers to charge people with preexisting conditions higher premiums, if they also make a high-risk pool available to those patients. As a concession to moderates the amendment would add back federal requirements for essential health benefits which the current version of the bill had instead left up to the states. https://www.washingtonpost.com/powerpost/gop-leaders-downplay-revisions-to-health-care-bill-offered-by-house-moderate/2017/04/20/3890a8f8-25d7-11e7-bb9d-8cd6118e1409_story.html?utm_term=.2528ed171690
Also, it appears outside conservative groups including two backed by the Koch brothers have told the Freedom Caucus that they want to see the tide turned after the debacle of the previous ACA repeal and replace effort. Heritage Foundations President Jim DeMint has told House members he is open to a compromise this time around if conservative ideas are maintained. Also, the club for Growth has been running ads attacking moderates who might oppose a white house deal.
More of the same:
It appears the new proposal would still decimate Medicaid. Also, it would offer the same inadequate subsidies — which were much lower than ObamaCare’s already underpowered subsidies — to help customers on the insurance exchanges afford their premiums. The two new twists to the Republican plan are discussed below.
Relaxing Commonly Criticized Essential Benefits Unlikely to Lower Premiums:
The Freedom Caucus has pushed for removing mandatory essential benefits because they believe that coverage drives up premium prices and that they will be judged solely on whether premiums come down. They especially point to mandatory maternity care and mental health and substance abuse treatment as the benefits which drive up consumer cost for people who don’t need those services (yet).
However, independent actuaries claim those aren’t the benefits which drive up premiums (they calculate that maternity care and mental health/substance abuse account for only 5% of premium cost). The three that really do are hospital care, doctor visits and prescription drugs. Take away those and you have crappy insurance.
Those who want to be rid of required benefits point to the fact that premiums jumped dramatically from 2013 to 2014 the first year the benefits were required. However, that time was the first time, sicker patients could buy coverage and the higher cost of insuring those more at risk were included in the higher premiums.
Also, as some point out, required benefits do double duty. On the one hand, they ensure that consumers have comprehensive coverage and on the other they provide a benchmark for risk adjustment. When all plans agree on a certain level of coverage, then based on that level, the government can adjust payments to insurers to help compensate plans that enroll sicker than average patients.
The essential benefits have long raised right-wing ire ostensibly because they believe people should not have to pay for services they don’t need. What they don’t talk about is that no one pays insurers for the care they use. They pay for the care everyone in the customer pool uses. It is inherent to the nature of insurance
High Risk Pools: Invisible Risk Sharing at Time of Enrollment:
Before recessing for Easter, the House passed an amendment to the AHCA which proposed an “Invisible Risk Sharing Program” funded with $15 billion over 9 years. Some have suggested $100 billion over 10 years. Purportedly, this would enable insurers to place people with pre-existing conditions in higher risk pools with the federal government helping to offset the cost. Prior to the ACA, high risk pools without adequate state or federal funding resulted in catastrophic costs. About 130 million Americans have pre-existing conditions and experts predict the high-risk polls would need $250 billion to $500 billion over 10 years not the $15 billion which is thought to only cover about 2% of premium cost.
Invisible Risk Sharing is a behind the scenes type of reinsurance program for higher risk patients. From 2014 to 2017 it existed in the ACA in a “retrospective” fashion. That is under the ACA, insurers were reimbursed for enrollees who turned out to be expensive (initially with claims >$45,000 per year). The amendment to the AHCA is “prospective.” That is, it requires insurers to identify at time of enrollment those consumers who they think will be especially expensive and prescribe them and their premiums to a high-risk pool, funded by both insurers and the government. The pool then pays all the medical costs for these people beyond a lower threshold ($10,000).
While both are “invisible” the AHCA plan risk sharing pays nothing for people who unpredictably incur large claims.
That said, proponents of the amendment point toward the State of Maine which adopted a prospective reinsurance program in 2011 and they claim the program cut premiums in half. Opponents point out that two other things happened in Maine insurance markets that year. First, covered benefits became much less generous under the new reinsurance plan. Policies required 30% coinsurance and at least double the out of pocket maximums, so of course, with consumers bearing more of their health care costs, premiums came down. Second, Maine expanded its age-rating bands from 1.5-to-1 to 3-to-1 for new policy holders not legacy policy holders. Older, sicker subscribers kept what they had because they continued to benefit from the 1.5 to 1 ratio. That is, they could only be charged 1.5 times what a younger, healthier person was charged. Younger, healthier consumers chose the new prospective reinsurance plans with the lower premiums resulting from reduced coverage and increased out of pocket expenses.
Also, Maine’s program depended on charging all insured Mainers $4 per month whether they were insured by their employers or through the individual market. This added about $22 million per year that went to insurance companies. The GOP plan does not include a similar crucial funding structure and includes no funding at all after the first nine years.
Finally, the ACA propped up Maine’s program by penalizing those who did not buy health insurance and offering tax credits to many who did. The GOP plan would eliminate the penalties and tax credits.
So, although the number of insured in Maine went up and premiums went down, the increase in the number insured correlated with younger, healthier people buying cheap insurance without much coverage (goaded on in part by the ACA) and older, sicker people’s premiums went down because of the $4 Maine levy.
Given what has not changed and the new changes being controversial, it appears unlikely that amended AHCA legislation will come before the House by Trump’s 100th day in office or soon thereafter. No legislative text appears to have been developed over recess and moderates appear opposed to the amendments offered so far.
Also, Trump is facing the bigger challenge of a government shutdown. Democrats are demanding that legislation to fund the government include funding for ACA subsidies for insurance companies which Trump has threatened to end. It is unlikely they are in a mood to help repeal and replace the ACA.
House Speaker Paul Ryan said Saturday there is no healthcare vote scheduled for this coming week and that there will be a vote only when they know they can pass a bill.