Author: ITUP


The U.S. Senate is contemplating ACA repeal legislation that could lead to 6.7 million Californians losing coverage

The Number of Uninsured in California Could Reach 10 million by 2027

Under the latest Republican ACA “repeal and replace” bill, 6.7 million Californians could lose coverage and California could lose in one year an amount in federal funding equivalent to more than one-third of all General Fund spending in California’s budget, $57.5 billion, according to the U.C. Berkeley Labor Center (Labor Center) blog post.

Introduced by Senators Bill Cassidy and Lindsey Graham, with co-authors Heller and Johnson, as an amendment to the House-passed H.R. 1628, the Graham-Cassidy legislation is so far the worst of all the repeal and replace bills for California. See ITUP’s summary of the bill here. The impact for California is so devastating because the bill:

  • Replaces enhanced federal funding for the Medicaid adult expansion, ACA tax credits and cost-sharing reduction subsidies with “market-based,” lump-sum state grants, providing states with less funding than current law and total elimination of the additional federal funds starting in 2027. After 2026, Graham-Cassidy essentially repeals the ACA with no replacement.
  • California is hit especially hard by the new market-based grant program because the allocation formula redistributes funds from states that expanded Medicaid under the ACA to states that did not. California is among 20 states facing cuts in the range of 35-60 percent below the funding they receive under current law. (See Center on Budget and Policy Priorities overview.)
  • Includes the same dramatic shift in the federal responsibility for Medicaid as in House-passed and Senate proposed prior ACA repeal proposals. The new per capita cap for Medicaid implements formula-based, fixed funding for states, and significantly reduces federal funding to states over time, which will require drastic program cuts in the core Medi-Cal program or major new state revenues. In addition, by including funds for the ACA Medicaid expansion in the new block grant, with less federal funding, it will be difficult for California to maintain the Medi-Cal benefit and coverage expansions implemented under ACA.
  • Destablizes the individual health insurance market by eliminating federal ACA subsidies to help individuals purchase coverage and the penalties for individuals and employers not complying with ACA coverage mandates.
  • As part of the new market-based block grants consolidating ACA funding streams, requires CMS to approve state waiver requests of key consumer protections in the ACA, such as the requirement for insurers to cover essential health benefits, the prohibition on charging individuals more based on health status or pre-existing condition.

Graham-Cassidy Penalizes States Successful Under ACA

Although the Graham-Cassidy legislation has many familiar elements from the federal debate on repealing and rolling back the ACA this year, Cassidy-Graham goes further than most prior proposals and ends with full repeal of all ACA funding for expanded coverage after 2026. Moreover, the proposed allocation formula for the new market-based grant program (ACA block grant) appears to be cynically designed to fiscally penalize states like California that stepped up to expand coverage under the ACA, while rewarding states that refused to move forward in implementing the ACA.

The Senate must pass and return H.R.1628 to the House of Representatives by September 30 when authorization to pass a budget reconciliation bill with just 51 votes runs out. As of this writing, Graham-Cassidy is slated to have at least one hearing next week (potentially September 26 or 27) and could come up for a vote thereafter.

Given the magnitude of the cuts California could sustain, and the potential dramatic impact on the number of uninsured in the state, you may want to let your Congressional representatives know about these devastating consequences if they vote for H.R. 1628.

You can find contact information for your members of Congress here.

Fact Sheet September 2017 – Remaining Uninsured in California

California benefited more than most states from the Affordable Care Act (ACA) because California fully embraced the ACA opportunities to expand coverage and streamline enrollment and retention processes. This also means that California has the most at stake in federal efforts to repeal or rollback the ACA coverage expansions.

In the years preceding the ACA, the uninsured rate for nonelderly Californians persistently hovered around 20 percent. Although California’s implementation of the ACA dramatically reduced the number of uninsured, approximately three million uninsured Californians remain.

California still has a lot of work to do. This fact sheet provides an updated profile of California’s remaining uninsured.

Download the Fact Sheet here.

U.S. Senate Hearings Focus on Short-Term Market Stabilization Initiatives

The U.S. Senate Committee on Health, Education, Labor and Pensions held two hearings last week on stabilizing premiums and strengthening the individual insurance market for 2018. Several Governors and State Insurance Commissioners testified on market stabilization proposals they believed would strengthen the individual market in the short-term. The testimony exhibited broad bipartisan support for proposals to address the uncertainty related to cost-sharing reduction (CSR) subsidies and the establishment of a reinsurance mechanism. These proposals were identified as key, even critical, to stabilizing the individual market in the short-term. Additional state flexibility with §1332 waivers was another often mentioned proposal in the two days of testimony.

The committee hopes to develop bipartisan legislation on short-term, market stabilization by mid-September. Although most of the testimony and subsequent comments from governors, state insurance commissioners, as well as the Senators participating in the hearings, affirmed that CSR subsidies, reinsurance and §1332 waiver proposals should be part of a short-term, market stabilization response, the discussion reflected notable differences that will need to be addressed. If not reconciled or if compromise on discrepancies proves elusive, a bipartisan initiative to stabilize the individual market may meet the same fate as recent efforts to “repeal and replace” the Affordable Care Act (ACA).

This blog summarizes key testimony from last week’s hearings on CSR subsidies, reinsurance and §1332 waivers highlighting areas of general agreement and some of the areas of possible disagreement.

Cost Sharing Reduction Subsidies

CSR subsidies lower deductibles, co-pays and coinsurance for marketplace enrollees under 250 percent of the federal poverty level (FPL). Almost half of Covered California consumers benefit from CSR subsidies, which reduce out-of-pocket costs on average $1,000/year, according to Covered California. Payments for CSR subsidies go directly to insurers, who are obligated under the ACA to reduce the out-of-pocket costs for their eligible enrollees – whether they receive CSR payments or not. The Trump Administration has chosen to fund CSR payments to insurers month-by-month and repeatedly threatened to unilaterally stop this funding – creating significant uncertainty in the market.

Testimony at the U.S. Senate Hearings on Cost Sharing Reduction Subsidies

Virtually all witnesses testified on the importance of funding CSR subsidies, with some differences on the length of time payments should be guaranteed. In his testimony, Governor John Hickenlooper (Colorado) provided the recently released, bipartisan blueprint on market stabilization, developed with seven other Governors. The blueprint urges Congress to “put to rest any uncertainty about the future of CSR payments by explicitly appropriating federal funding for these payments at least through 2019. This guarantee would protect the assistance working Americans need to afford their insurance, give carriers the confidence they need to stay in the market, increase competition, and create more options for consumers.”

Utah Governor, Gary Herbert, testified that he did not believe CSR payments are “the most transparent and effective way to assist low income individuals. Nevertheless, in the near team, (Utah’s) individual insurance markets need predictability in order to price their products adequately. The sudden demise of CSR support would destabilize Utah’s individual insurance market.”

Insurance Commissioner Teresa Miller (Pennsylvania) testified, “When rates were initially filed (in Pennsylvania), (she) asked … insurers to provide information on what they would need to request if cost-sharing reduction payments were not made …. If cost-sharing reductions are not paid, [insurers] estimated that they would need to request a statewide average increase of 20.3 percent. …… Failing to make payments for cost-sharing reductions does not serve any goal aside from trying to make markets fail.”

Insurance Commissioner Miller continued to make the argument in favor of funding CSR subsidies by highlighting findings from the Congressional Budget Office. “According to the Congressional Budget Office’s analysis on the matter, (eliminating CSR payments) would result in higher premiums, more counties without individual market coverage options for 2018, and would increase the federal deficit by $194 billion through 2026 due to the payment of additional premium subsidies because of higher premiums. The Congressional Budget Office further estimates that premiums would rise an additional 20 percent in 2018. This will undoubtedly create more problems, especially for individual market consumers who are not eligible for financial assistance.”

Mike Kreidler, Washington State’s Insurance Commissioner, testified that, “Here and around the nation, states have been spending countless hours during the last several months trying to find an approach to rate setting in 2018 that does the least harm to consumers if cost-sharing reduction payments are suddenly curtailed. I can assure you there is no solution that doesn’t hurt consumers, especially those who do not receive advance premium tax credits.”

Reinsurance

The temporary ACA reinsurance program was in place from 2014 to 2016. The program transfered funds to individual market plans, subject to guaranteed issue, who enroll high-cost enrollees. Reinsurance is based on actual health care expenses rather than estimated risk or predicted costs. In this way, reinsurance accounts for low-risk individuals who have unexpected health care costs, as well as those with high risk and high costs. Under the ACA, all health insurers and self-funded group plans made contributions to a reinsurance pool in 2014 – 2016, but the reinsurance payments were made only to ACA-compliant individual market plans, inside and outside the exchange. Most states, including California, opted to participate in the federally-administered reinsurance program. Health plans received reinsurance payments if they had enrollees whose health care expenses reach a specified threshold (attachment point), which was $45,000 in 2014 and 2015 and $90,000 in 2016. Payments are subject to a dollar limit (reinsurance cap) of $250,000. The U.S. Department of Health and Human Services reimbursed health plans a percentage of the costs between the attachment point and the reinsurance cap (coinsurance).

Testimony at the U.S. Senate Hearings on Reinsurance

Alaska’s Director of the Division of Insurance, Lori Wing-Heier, testified that Alaska’s recently implemented reinsurance program (secured with a §1332 waiver) helped stabilize Alaska’s volatile individual market. She testified:

As anticipated, the (Alaska Reinsurance) (P)rogram (ARP) had an immediate impact on the rates in the individual market. Prior to the enactment of the ARP, indications were that the rate filing from the single insurer in Alaska’s individual market would include an increase of close to 40 percent. After the enactment of the ARP, however, the 2017 individual rates had a moderate average increase of just over seven percent….

Actuarial modeling indicates that the ARP will continue to help reduce the rates necessary for insurers in the Alaska individual market and thus the premium amounts charged to Alaskans. The slowing of the growth of rate increases (and potential for rate decreases) due to the ARP may also draw additional Alaskans into the market. Independent analysis estimates the ARP will increase enrollment in the individual market by nearly 1,650 individuals relative to what enrollment would be absent the program. Modeling also indicates that the ARP may attract healthier members to the individual market, further reducing premium rates.

Additionally, there is potential that the ARP will encourage competition in the state’s insurance market. … In 2016, the insurer covering approximately two‐thirds of those enrolled in the individual market … exited the market, leaving only one insurer to serve Alaska’s individual market in 2017. There is optimism that in subsequent years there may be interest from other insurers to provide health care plans if the market remains stabilized.

Governor Steve Bullock of Montana testified, “Although no longer in place, in 2014, the reinsurance program under the ACA reduced premiums in the individual marketplace by 10-15 percent. With several more years of experience now behind us, it is a mechanism that will add to the stability of the market. Certainly, some states have been taking steps to do the same. However, Congress should create a reinsurance program or a fund that states can use to create reinsurance programs or similar efforts that reduce premiums and limit losses for providing coverage. This safety net will allow insurers to manage their risk and bring down premiums. As recommended in the bipartisan Governors’ letter, it should be provided for at least two years and that a funding source be identified to offset the cost so it does not add to the deficit.”

Testimony supporting the development of a reinsurance mechanism highlighted several areas of potential conflict that will need to be resolved. If a reinsurance program is to be included in a final bipartisan proposal, committee members will need to agree on whether a reinsurance program should be run at the federal level or if funds should be available for state-run reinsurance programs, the amount of federal resources to allocate to a reinsurance program, the length of time the program should be in place, and whether a state contribution or match should be required for participation in a federally-funded reinsurance program.

Section 1332 Waivers

Section 1332 waivers allow states to waive specific requirements of the ACA with the stated goal of developing new and innovative models to improve and expand health coverage. A §1332 waiver can waive:

  1. The individual mandate to have health coverage,
  2. The employer mandate to offer coverage,
  3. The health benefit exchanges and the essential health benefits requirement, and
  4.  The premium and cost-sharing subsidies available through the exchanges.

The ACA requires that state §1332 waiver programs be comparable or exceed the ACA’s standard coverage framework in the following four ways:

  1. The number of people covered,
  2. The scope of health benefits,
  3. Consumer affordability, and
  4. Containing the cost to the federal government.

The limitations on §1332 waivers, often referred to as “guardrails,” are intended to ensure states do not waive critical ACA protections and compromise the ACA’s goal of providing comprehensive, affordable coverage.

The Congressional testimony highlighted what some consider unreasonable bureaucracy in securing a §1332 waiver. Most witnesses expressed support for expediting §1332 waiver review and allowing states to replicate approved waivers in other states, without having to secure approval for a duplicate or “copycat” waiver. Witnesses also testified on the need for greater flexibility and recommended loosening the current §1332 regulatory framework. Some felt the §1332 guardrails stifled innovation, while others testified on the continued importance of the guadrail protections. The value many participants placed on these protections foreshadows the opposition a proposal to weaken the guardrails will likely face as the committee seeks to develop its compromise legislation.

Testimony at the U.S. Senate Hearings on §1332 Waivers

Governor Charles Baker of Massachusetts emphasized the importance of increased flexibility for states seeking to innovate with §1332 waivers and provided various examples of improvements he would support. Governor Baker testified that, “Greater flexibility is … needed around benefit design. Value-Based Insurance Design (V-BID) approaches to benefit design seek to align patients’ out-of-pocket costs, such as copayments and deductibles, with the value of services. Certain technical parameters of (essential health benefits) EHB make important kinds of benefit design innovation difficult. For example, in many areas, bronze and silver plan deductibles are extremely close to the maximum out of pocket (MOOP) limits. States may want to experiment with designing plans in which there are lower MOOP levels for high-value care (like chronic illness care) in exchange for a slightly higher MOOP overall, perhaps exceeding the existing EHB MOOP limit for relatively lower-value services. This would help make sure people who opt to buy high deductible plans don’t put off care that will keep them healthy and also help make sure they don’t develop an even more costly medical condition.”

Governor Baker continued to provide examples of how the current structure of §1332 waivers stifle innovation. He added, “the current 1332 regulations require that proposals are examined on their own terms with regard to federal deficit neutrality impact. This can greatly limit creative proposals by not allowing commercial innovations to draw from savings enabled on the Medicaid program and vice versa. Opportunities for change could range from coupling savings from 1115 and 1332 waivers that are filed together or to determine savings over the course of several years. These types of common sense adjustments along with consumer protection guardrails could widen opportunities for meaningful innovation and allow for far more comprehensive waivers that integrate the ACA, Medicaid and CHIP programs into a coherent health care insurance program at the state level.”

While some witnesses emphasized the importance of the §1332 waiver requirements to protect ACA coverage standards, several witnesses discussed loosening the §1332 guardrails. For example, Tennessee Governor, Bill Haslam, testified that, “A third critical way to provide more stability is to offer flexibility to states to address their unique challenges and circumstances. The waiver approval process should be expedited, and the strict guardrails currently placed upon waiver requests should be loosened in a manner that will attract younger, healthier individuals to the marketplace. Examples of guardrail relief include more flexibility around rate bands and plan design. Simply put, without more flexibility, carriers will be left with two choices – leave the individual market or raise rates.”

The testimony and comments at the U.S. Senate hearings last week suggested potential areas for bipartisan collaboration to stabilize premiums and strengthen the individual market, but also raised significant issues that could derail a compromise. Proposals to potentially weaken ACA protections through state waivers could also be an obstacle to Congress reaching an acceptable short-term market fix. Whether the bipartisan effort begun last week will result in legislation that can garner enough support to pass out of Congress and secure the President’s signature remains unclear. What is clear is that this legislation needs to materialize quickly to impact the performance of the 2018 individual market. By the end of this month, insurers need to finalize rates and contracts with the marketplaces and many are currently proposing significant rate increases because of the uncertainty regarding CSR payments, in particular. A September compromise that guarantees insurers will receive CSR payments (to cover the costs of reducing out-of-pocket expenditures for lower income enrollees) will positively impact 2018 individual market rates. (See the ITUP blog on how Covered California is addressing the uncertainty regarding CSR payments.)

Fact Sheet August 2017 – Senate BCRA Incorporating the Graham-Cassidy-Heller Amendment

Near the end of July 2017, as the U.S. Senate began voting on various Republican­‐sponsored initiatives to rollback the Affordable Care Act (ACA), Senators Graham (R‐South Carolina) and Cassidy (R‐Louisiana) offered an amendment to the Better Care Reconciliation Act (BCRA), which Senator Heller (R­‐Nevada) later co-­sponsored.

The Graham­‐Cassidy‐Heller amendment retains many of the harmful provisions in the BCRA including dramatic restructuring of the Medicaid program. The primary distinctive provision is the proposal to establish a “Market‐Based State Grant Program” allocating to states federal funds intended to replace the ACA Medicaid adult expansion, ACA tax credits and cost sharing reduction (CSR) subsidies.

Download the Fact Sheet here.

California Assembly Speaker Creates New Select Committee to focus on Health Care Reform

On August 25, 2017, Speaker of the California Assembly, Anthony Rendon (D-Lakewood), announced the formation of the new Select Committee on Health Care Delivery Systems and Universal Coverage. The committee, co-chaired by assembly members, Joaquin Arambula, MD (D-Fresno) and Jim Wood, DDS (D-Healdsburg) will hold investigative hearings during the legislative interim this fall.

The Speaker’s statement:

“The fight to protect the Affordable Care Act helped galvanize the principle that health care is a basic right,” Rendon said. “There are several different approaches being proposed, including Medicare for all, single payer, hybrid systems and ACA expansion. I have called for these hearings to determine what approach best gets us there – what gets us to ‘yes’ when it comes to health care for all.”

Speaker Rendon stressed that the hearings would not simply go back over information covered in the past, but will provide a new opportunity to determine the best and quickest path forward toward universal health care. Overcoming potential federal and constitutional obstacles, ensuring delivery of care, and examining funding mechanisms will all be part of the committee’s purview.

“It’s not a question of debating whether we move toward health care for all – it’s a matter of choosing how best and how soon,” Rendon said. “The committee’s work will help fill the void of due diligence that should have been done on SB 562 or any universal health care bill that so profoundly affects so many Californians.”

“It is my direction that these hearings be focused and thorough, and produce real results,” Rendon said. “In addition to the oaths they took as legislators, Dr. Wood and Dr. Arambula have also taken oaths to protect and defend patients’ health, so I know they will take a vigorous approach to this challenge, and the committee will begin the heavy lifting needed to advance serious proposals for health care for all.”

ITUP is committed to working with state policymakers in both houses to further health care reform and will actively participate in the debate and exploration the Assembly is initiating. ITUP recently developed a framework for consideration of health care reform proposals that will hopefully assist the new committee and other state policymakers in shaping the agenda for this important conversation.

Select Committee Creation Timely

Appointment of the dedicated Selet Committee comes at a critical time for health care reform in California. California made substantial progress in implementing the Affordable Care Act (ACA), reducing the number of uninsured in the state from more than seven million to less than three million. As a result of ACA implementation, and other related California-specific policies, coverage is universally available for low- and moderate- income citizen adults and other residents, through Medi-Cal or Covered California, and for all low-income children regardless of immigration status through Medi-Cal.

However, California’s progress is under threat as Republican majorities in both houses of Congress and the President press for potentially sweeping changes to the ACA. The state must remain focused on fighting federal proposals that would roll back the state’s success. At the same time, California continues to have nearly three million remaining uninsured, as well as access and affordability challenges throughout the state’s health care system.

For these reasons, ITUP agrees that a statewide conversation on universal coverage in California is timely. It is important for state health care leaders to fully examine the status of coverage and care in the state, including a practical assessement of the implications from a reduced federal commitment to health care. California led the way in embracing the ACA and must continue its leadership by identifying a clear path and timeline for universal coverage (coverage for all) and the critical delivery system advances that will improve access, promote quality and reduce health care costs.

ITUP has been tracking and analyzing federal legislation through its ACA Watch publication series and will continue to do so. In addition, ITUP is currently in the field for regional workshops that bring local health care leaders together for analysis and discussion of health care challenges and solutions. Upcoming workshops will engage participants in identifying information, suggestions and options which ITUP will bring to the state-level conversation. The annual ITUP conference in Sacramento February 6-7, 2018 will also be timely for highlighting and refining the emerging reform options.

This is a critical juncture for health reform in California. ITUP believes California will continue to be up to the challenges it faces.

Fact Sheet August 2017 — Framework for Designing a Health Coverage Proposal

On August 25, 2017, Speaker of the California Assembly, Anthony Rendon (D-Lakewood), announced the formation of the new Select Committee on Health Care Delivery Systems and Universal Coverage. ITUP is committed to working with state policymakers in both houses to further health care reform to address the nearly three million remaining uninsured in California.

Download the Fact Sheet here.

2017 ITUP Regional Workgroups!

ITUP connected with health care leaders in San Diego on Wednesday, September 6 at the beautiful Alliance Healthcare Foundation offices. ITUP staff shared updates on the federal health reform and immigration policy, and heard from local stakeholders on emerging trends and challenges in the San Diego region. Workgroup findings inform ITUP’s policy work and future convenings, including the ITUP annual statewide conference held each February in Sacramento. (more…)

Covered California 2018 Rates Complicated By Federal Uncertainty and Rural Challenges

This week, Covered California, California’s Affordable Care Act (ACA) exchange, announced preliminary 2018 premium rates for exchange health plan offerings. Health plan proposed rates are still subject to regulatory review by the state Department of Managed Health Care (DMHC) and the California Department of Insurance (CDI).

  • Covered California announced an average rate increase of 12.5 percent, weighted for the number of enrollees in each plan and region. The weighted average rate increase varies significantly by rating region from a high of 33.2 percent in the rural north region to a low of 4.3 percent in the San Mateo region. The proposed 2018 average increase is lower than last year and, according to Covered California, includes a one-time increase of 2.8 percent because health plans must pay the ACA health insurance tax which Congress delayed until the 2018 plan year.
  • All 11 health insurance companies will return to the market in 2018, and 96 percent of consumers will be able to choose from two companies. Eighty-two percent will be able to choose from three companies or more. Approximately, four percent of consumers (about 60,000 of the 1.4 million consumers) will have only one company providing individual market coverage in their area caused, in part, by Anthem leaving some markets that comprise about half of its enrollment.
  • According to Covered California, the competition among health plans allows consumers to avoid a significant increase by switching to the lowest-cost plan in the same metal tier, and see rate increases of closer to 3.3 percent. However, consumers in the rural north, where fewer health plan choices exist, will still face an average rate increase of 29.5 percent even if they switch to a lower priced plan.

Pre-ACA Regional Challenges Still impact Insurance Premiums

Covered California pointed out that provider concentration and regional factors continue to drive regional variation in premiums. Rural residents, in particular, have historically faced barriers to accessing both providers and insurance coverage. According to the Office of Statewide Health Planning and Development, half of the counties in Covered California’s rural north rating region (Region 1) have only one hospital and Alpine County has no hospital. Historically, significant portions of these counties have been designated federal health professional shortage areas or medically underserved areas due to chronic provider shortages. These challenges, and the resulting higher insurance rates in this region (and other rural regions to a lesser extent), pre-date the ACA.

Despite the continued challenges, the ACA makes a difference in helping rural consumers secure individual market coverage. First, Covered California uses its leverage as an active purchaser to negotiate with insurers on behalf of its enrollees ensuring that the overwhelming majority of enrollees have at least two health plan choices and rates are as competitive as possible. Second, the ACA’s premium tax credits adjust based on geography. Regardless of the rating region, premium payments for all subsidized consumers are limited to a specific percentage of income with the remainder covered by the ACA tax credit, adjusted as premiums increase. This critical affordability protection is utilized by 91 percent of the enrollees in the rural north region and 87 percent of all Covered California enrollees. On average, ACA tax credits cover 71 percent of the monthly premium of household policies.

In the rural north region, Covered California enrollees not eligible for premium assistance (those over 400 percent of the federal poverty level (FPL)) will face rate increases of 3 to 54 percent.

Federal Threats Result in Cost-Sharing Reduction Surcharge

One complicating factor for 2018 Covered California rates is the uncertain status of payments to health insurers that support reductions in out-of-pocket costs for low-income consumers. In addition to premium assistance in the form of tax credits, the ACA also provides cost sharing reduction (CSR) subsidies that lower deductibles, co-pays and coinsurance. Almost half of Covered California consumers benefit from CSR subsidies, which reduce out-of-pocket costs on average $1,000/year, according to Covered California.

ACA CSRs Under Threat. The Trump Administration has chosen to fund CSR payments to insurers month-by-month and repeatedly threatened to unilaterally stop this funding – creating significant uncertainty in the market.  (See “How CSR Subsidies Work.”) The ACA requirement for insurers to reduce consumer cost sharing for those eligible applies, whether or not insurers are reimbursed by the federal government. According to Covered California, insurers participating in the state’s exchange annually receive $750 million in CSR payments from the federal government. Knowing whether the Trump Administration will fund CSRs is critical as Covered California finalizes rate negotiations and executes final contracts.

Response to Federal Uncertainty. While Covered California leadership, insurers and other stakeholders would prefer that federal CSR payments continue, for the 2018 rate year Covered California developed a contingency plan.

Covered California required insurers to submit two different premium rates: one rate calculation that includes federal CSR funding and one assuming the payments discontinue. Covered California also required insurers to create a “non-mirrored silver plan” outside the exchange. (Under California law, if a Covered California issuer participates outside the exchange, the health plan must offer “mirrored” exchange products outside the exchange – products with the same benefits, premiums and provider networks. The “non-mirrored silver plan” parallels the silver plan benefit design, but without the costs of providing CSRs included in rate calculations.)

How CSR Subsidies Work. Federal funding for CSR subsidies is paid directly to Covered California insurers for their silver plan enrollees between 138-250 percent of the federal poverty level. A silver plan is a standardized insurance plan within Covered California that is benchmarked at the actuarial value of 70 percent. Generally, the actuarial value represents the percent of health services covered by the plan. For a silver plan, the insurer covers 70 percent of the costs of services and the remaining 30 percent is covered by the enrollee as their out-of-pocket cost responsibility. Federal funding for CSR subsidies provide revenue so insurers can increase the actuarial value of coverage for eligible enrollees, which lowers the subsidized enrollee’s out-of-pocket costs. Subsidized enrollees are responsible for 10-20 percent of the out-of-pocket costs versus 30 percent.

Loading the costs of subsidies solely on silver plans increased premiums on average by 23.5 percent for standard silver plans inside Covered California and its mirrored plans outside the exchange. Subsidized consumers are insulated from this increase because tax credits adjust to ensure consumer spending on premiums is capped at a specific percent of their income. Consumers not eligible for premium assistance would be subject to higher premiums.

In an effort to ensure all consumers have the ability to remain in a silver plan without experiencing extreme premium increases even with the loss of federal CSR funding, Covered California proposed the creation of “non-mirrored silver plans” outside the exchange. If federal CSR funding is lost or if uncertainty remains when rates must be finalized, Covered California will inform current silver plan enrollees above 400 percent FPL about the new off-exchange, non-mirrored silver plan option, as well as other in-exchange options that may better suit their needs, such as gold plans.

Ironically, if the Administration chooses not to make the federal payments, federal costs will actually go up. According to Kaiser Family Foundation, in 2018, the federal government will incure a net increase in costs of $2.3 billion if CSR funding is halted because ACA tax credits will adjust to cover the increased premiums that result.

Choices Remain in Most Areas, Even as Anthem Pulls Out of Many Regions

Covered California negotiated to maintain all 11 carriers offering coverage in the exchange and ensured choice of at least two health plans for 96 percent of existing enrollees. Anthem is pulling out of 16 of 19 Covered California regions. This departure is partially responsible for 4 percent of enrollees having only one health plan option. Anthem’s stated reason for leaving some markets was the uncertainty surrounding federal health reform and federal funding for CSRs. However, it will be important for Covered California to monitor the communities impacted by the Anthem withdrawal, and the impact on health plans and consumers in those areas, to identify potential strategies to increase carrier participation going forward.

ACA Stands (for Now): Takeaways from the Repeal and Replace Roller Coaster

In recent days, multiple Republican bills to repeal or rollback the Affordable Care Act (ACA) failed to get enough votes on the U.S. Senate floor. It was a close vote. Senators came within one vote of sending a repeal bill to a two-house conference committee where all the most damaging proposals of recent months would presumably be considered. The repeal process unleashed one proposal after another estimated to result in millions of Americans losing coverage, including sweeping program changes and funding cuts for Medicaid, reduced premium assistance for low-income consumers to purchase coverage and changes to health insurance rules threatening many of the key consumer protections of the ACA and California law.

For now, the ACA remains. Credit goes to all the community voices, advocates, and experts who kept the pressure on elected officials and continued to call out the very real threats the proposals represented.

The threat is not entirely removed of course. Opportunities for federal officials to reverse, rollback or weaken the ACA and Medicaid through budget action, legislation or regulatory challenges will certainly present themselves over the coming months and years. To preserve California successes, and build on them, California health care leaders must continue to evaluate, educate and communicate the advances the state made and the opportunities for improvement that remain.

Here for consideration are some takeaways from the admittedly chaotic “repeal and replace” process.

ACA Successes Tell the Story

During Congressional debate on repealing the ACA, advocates, providers, and consumers focused on the transformations in the lives of real Americans because of the ACA. Whether in legislative hearings, town halls, media interviews or in contacts with federal representatives, the compelling stories of individuals and families securing health coverage, many for the first time, captured the attention of the media and the public. Every day in communities Americans learned about family members, friends, co-workers and neighbors with pre-existing conditions or access to medical care and treatments that were saving and improving lives. Hearing stories about real people made the ACA more concrete and made it less acceptable to roll back the gains of the ACA. California weighed in in the voices of state leaders, advocates and consumers with a compelling story to tell about developing a successful ACA marketplace, state investment in early implementation, state-specific market improvements and robust outreach and enrollment efforts around the state that cut the uninsured rate in half.

ACA Implementation (and the Effort to Repeal It) is Shifting Public Attitudes

Public support for the ACA shifted substantially over the past year so that a majority of Americans support continuation of ACA policies. Prior to passage of the ACA, a relatively small percentage of individuals navigated the process to secure individual coverage. Lots of consumers had no exposure to the standard pre-ACA insurer practices of coverage denials based on health status, soaring premiums for those in less than perfect health who had no alternative but to pay the premiums or go uninsured, and the low-value, low-benefit policies that characterized individual coverage. Similarly, until the repeal effort focused attention on the Medicaid program, and the substantial number of Americans who had gained coverage in states that expanded Medicaid under ACA, many Americans viewed the program as having little direct impact in most of their lives. The debate highlighted the broad reach of Medicaid into the lives of low-income individuals and families in both red and blue states and communities.

While there are still serious disagreements across the political spectrum about health care and the role of government in health care, more and more Americans believe that it is inherently unfair (potentially un-American) to exclude from coverage individuals with pre-existing health conditions or to charge these individuals or older individuals astronomically more for premiums. Growing numbers of consumers also believe that however it might be accomplished it is a worthy societal goal to get everyone covered. These views are evolving and increasing public expectation and support for strategies to accomplish the goal of universal or near-universal coverage. Although there is a long way to go before there is a societal wide consensus on these issues a lot of progress was made during this process.

Facts Matter – Education and Information are Key

Since passage of the ACA, and throughout the repeal debate, ACA opponents repeated slogans and talking point criticisms of imploding markets and the negative impact of the ACA on most American families. Some legislators supporting repeal also failed to acknowledge the potential real-world impacts or directly contradicted the expected consequences of ACA repeal and Medicaid cuts. Researchers, experts, philanthropy, and health care leaders consistently developed and disseminated timely analysis about the potential impacts of proposals under consideration to counteract misinformation. The Congressional Budget Office (CBO) analyses provided expert, independent information assessing the repeal proposals. While CBO was often criticized and dismissed by ACA opponents, the presentation of factual, analytical information helped to shape the public conversation and turn the tide of public opinion against the repeal proposals.

Improving ACA Will Protect It

While many of the criticisms and claims about the problems with the ACA were overstated, exaggerated, or manufactured, the American public and ACA proponents recognize there is work remaining to improve the ACA and the health care system. Individuals and families continue to experience high out-of-pocket costs and challenges in securing timely access to health care services. Health care costs and premiums continue to rise placing strains on families, and challenging health care providers and policymakers to meet the needs of communities. Before the repeal effort began in earnest, California was focused on taking ACA implementation to the next level through investment in access, quality, care management and community health improvement. We must stay the course in pressing for system-wide change even as we carefully monitor the shifting landscape threatening the progress to date. Ultimately, addressing access and quality issues, and the underlying causes of rising health care costs, will be essential to protecting the gains of the ACA. Failure to address these issues over time could erode the newly gained public support for the ACA.

 

The Common Theme of Pending Senate Health Reform Bills? Dramatic Increases in the Number of Uninsured

As of this writing, multiple discussion drafts of potential legislation to repeal or rollback the federal Affordable Care Act (ACA) are pending in the U.S. Senate. All the bills result in dramatic increases in the number of uninsured over the next ten years; ranging from 22 million to 32 million depending on the proposal, according to analyses by the nonpartisan Congressional Budget Office (CBO).

Better Care Reconciliation Act (BCRA)
The BCRA, first introduced in June, among other things, eliminates financial penalties for individuals and employers that do not purchase coverage, reduces premium tax credits and eliminates cost-sharing reductions that help low and moderate income individuals purchase and access coverage, phases out the enhanced federal funding for the ACA expansion of Medicaid for low-income adults, and fundamentally alters the federal financial commitment to Medicaid by imposing a fixed formula, “per capita cap” model of reimbursing states for the program.

The July 13 version of the BCRA also included a new section typically referred to as the “Cruz amendment” because it was originally put forward by Senator Ted Cruz. The new section allows insurers to offer products that do not meet ACA standards, potentially with much lower benefits and fewer protections for individuals with pre-existing conditions. (See ITUP blog for details on the Cruz amendment.) Most experts believe that the Cruz amendment would result in segmenting the individual insurance market between younger, healthier individuals and those who are older or have health conditions that cause insurers to deny them coverage. Premiums would drop for those able to enroll in skimpier benefit plans and rise for those who need to remain in more comprehensive ACA-compliant benefit plans. (See ITUP BCRA summary here.)

CBO has not released an analysis of the impacts of the Cruz amendment, but found that other elements of the BCRA would leave 22 million Americans uninsured by 2026. (See latest CBO analysis of BCRA here.)

Obamacare Repeal Reconciliation Act (ORRA) of 2017
In recent days, Republican leadership released a new ACA repeal draft that includes no replacement elements, similar to a 2015 measure passed by Congress and vetoed by President Obama. ORRA repeals significant portions of the ACA in 2020, including the Medicaid adult expansion, ACA premium and cost sharing subsidies, and the penalties necessary to enforce the individual mandate. The approach in ORRA is sometimes referred to as “repeal and delay.” ORRA is predicated on the notion that Republicans would develop a replacement plan before the 2020 repeal date.

On July 19, the Congressional Budget Office (CBO) released its analysis of ORRA and found that in 2018, about 17 million more people would be uninsured under ORRA, reducing the percent of insured Americans from 90 percent under the ACA to 84 percent. By 2026, ORRA will strip coverage from 32 million individuals, leaving a historic high of 59 million Americans uninsured. In 2026, under ORRA, 21 percent of adults under age 65 will be uninsured.

Under ORRA, funding for the Medicaid adult expansion would be eliminated. The loss of federal Medicaid funds threatens coverage for 3.9 million California adults. In addition, 1.2 million of Covered California’s 1.4 million enrollees (87 percent) rely on ACA tax credits to help defray approximately 71 percent of overall premium costs. By eliminating these subsidies, as well as the cost sharing reductions that reduce out-of-pocket costs for 50 percent of Covered California enrollees, ORRA makes it likely that most, if not all, Covered California enrollees will lose coverage as well.

If fully implemented, ORRA could lead once again to more than 7 million uninsured in California.

Analyzing Impacts on Individual Coverage
In its most recent analysis of the BCRA, CBO includes extensive analysis on the potential impacts of reducing premium tax credits and changing the benchmark plan for premium tax credits from the current silver 70 percent actuarial value plan to a 58 percent actuarial value plan. CBO finds that premiums would initially increase (20 percent in 2018 and 10 percent in 2019) but then decrease as the level of benefits covered also decreases. In one example, CBO estimates that in 2026 a 40-year-old with income at 175 percent of the federal poverty level (FPL) would face a lower premium of $1,450 for the new benchmark plan than for an ACA silver level plan at $1,700, but that individual would pay much more in the form of cost sharing; 41 percent of the benefit costs versus 13 percent in a silver plan with cost-sharing reductions. Many individuals would overall pay more for the combination of premiums and cost-sharing than under the ACA.

CBO estimates that the deductibles under a 58 percent actuarial value plan would have to be approximately $13,000. In plans that offered some coverage before the deductible was satisfied, such as primary care visits or generic drug purchases, the deductible would have to be higher. This would mean that in 2026 deductibles alone would exceed the existing ACA limit on out-of-pocket costs (adjusted forward according to the current formula). Given such a high deductible, low income individuals would likely not purchase coverage. A $13,000 deductible would exceed the entire income of someone at 75 percent FPL, be equivalent to half of the income of someone at 175 percent FPL and equal one-quarter of the income of a person at 350 percent FPL.

Analyzing Market Impacts
Despite one stated aim of Republican efforts to repeal the ACA – addressing collapsing markets under the ACA — CBO has consistently found that the non-group (individual) insurance markets in most parts of the country are stable under the ACA.

To illustrate this point, according to Kaiser Family Foundation at the time of this post, only 38 U.S. counties out of 3,143 are at risk of having no insurer on the marketplace in 2018. Twenty-four thousand estimated enrollees out of 12 million (0.2 percent) are at risk of having no exchange insurer in 2018 (Kaiser Family Foundation updates this information regularly). In California, all California counties have at least two insurers and some counties have up to seven offerings through Covered California. California expects to have similar insurer participation in 2018.

By contrast, CBO projects that the loss of subsidies and other market changes in ORRA will destabilize the markets so that half the nation’s population will have no insurer participating in the individual market by 2020 and three-quarters of the nation will have no individual market insurer by 2026. CBO projects that by 2026, fewer than 2 million Americans will participate in the individual market nationwide, the approximate number insured in California’s individual market pre-ACA.

The CBO also estimates that under ORRA, because of reduced enrollment, higher average health care costs among remaining enrollees, and less participation by insurers, the average premium for silver plans in the individual market will increase by 25 percent in 2018 and be 50 percent higher in 2020 under ORRA. According to the CBO, premiums will continue increasing relative to premiums under the ACA and be 100 percent higher in 2026. For comparison purposes, average rate increases in California’s ACA marketplace, Covered California, for the past three years, has been 7 percent. Covered California rates increased, based on a weighted average, 13.2 percent in 2017.

What Comes Next
It remains unclear whether and in exactly what form the Senate will vote on ACA repeal legislation, although the leadership has promised a vote the last week of July. The Senate Parliamentarian also released the anticipated ruling concluding that many of the provisions of the BCRA violate the so-called “Byrd rule” limiting provisions that can be included in reconciliation bills.

What is clear is that the known proposals being considered by the Senate would drastically increase the number of uninsured, effectively erasing many of the coverage gains in California and around the country.