Author: ITUP


Revised Senate Health Reform Continues to Threaten Coverage for Millions

On July 13, 2017 Senate Republican leaders released a revised discussion draft of the Better Care Reconciliation Act (BCRA). The changes made in this version of the Senate proposal do not substantively change the basic features of the original BCRA proposal. The Congressional Budget Office (CBO) concluded the original BCRA ultimately strips coverage from more than 22 million Americans. An updated CBO score is expected early next week.

The discussion draft leaves in place the dramatic restructuring of the federal Medicaid program. The reduced federal commitment to Medicaid accounted for a significant portion of the CBO’s estimate of newly uninsured under BCRA.

In addition, the new discussion draft also includes language that could destabilize the individual insurance market. The new Title III in the draft allows insurers that offer specific products inside of the exchange marketplaces to offer products outside of the exchange that are not subject to Affordable Care Act (ACA) standards and consumer protections. This provision will allow for low-benefit plans that appeal to and can selectively enroll younger and healthier individuals, while leaving older individuals and those with pre-existing health conditions who need comprehensive coverage siloed in products that will become increasingly costly as the risk pool deteriorates. This proposal threatens to return the market to the pre-ACA discriminatory practices that left out those with less than perfect health status.

Here are preliminary highlights of the changes in the new discussion draft.

Preliminary Overview of the July 13 Revisions to the BCRA

Medicaid

  • Medicaid Per Capita Cap. Maintains the proposed per capita cap restructuring of federal Medicaid funding, shifting to a formula-based, fixed funding allocation for states. The revised BCRA discussion draft specifies that if a public health emergency is declared, Medicaid expenditures will not count toward the per capita cap or block grant allocations for the declared period of the emergency.
  • Medicaid Block Grants. Allows the Medicaid adult expansion population to be included under a block grant if states choose a block grant for adult enrollees over the per capita cap. In the prior version, block grants could only cover other Medicaid nonelderly, nondisabled, adult populations.
  • Medicaid Waivers. Establishes an $8 billion, four-year demonstration of state incentive payments for home and community-based services for the aged, blind, and disabled. States compete to secure funding and the 15 lowest population density states receive priority consideration. The revised BCRA maintains the elimination of the ACA enhanced Medicaid match for Home and Community-Based Attendant Services and Supports (a $19 billion cut over ten years), which California currently uses to partially finance the In-Home Supportive Services Program.
  • Retroactive Eligibility. Reinstates 90-day retroactive eligibility for seniors and persons with disabilities only. The BCRA otherwise limits eligibility to the month in which the applicant applied.
  • Enhanced Medicaid Funding for Native Americans. Extends eligibility for enhanced federal Medicaid matching funds for any provider that serves Medicaid-eligible Native Americans.
  • DSH Funding Calculation. Changes the DSH calculation for states that, unlike California, did not expand Medicaid coverage to childless adults.

Insurance Market

  • Non-ACA Compliant Offerings. After 2019, allows an insurer that offers specified products in the exchange to also offer products outside of the exchange that do not meet ACA standards. Specifically, insurers must offer in the exchange:
  1. At least one gold level and one silver level ACA compliant plan (as the ACA is amended by the BCRA), and
  2. One premium tax credit benchmark plan. Under the BCRA the benchmark plan for premium tax credits is a plan with actuarial value of 58 percent. Generally, the actuarial value represents the percent of health services covered by the policy and the consumer pays the remaining costs (e.g., 42 percent).

For the years an insurer meets these two requirements, BCRA allows the insurer to offer products outside the exchange that do not meet ACA market rules (non-compliant plans).

Non-compliant plans could avoid complying with any of the following ACA requirements:

✔️ essential health benefit requirements (with some exceptions)
✔️ rating restrictions including limitations on age rating
✔️ guaranteed issue requirements
✔️ open and special enrollment period
✔️ prohibition on pre-existing condition exclusions or other discrimination based on health status, medical condition, disability
✔️ prohibition on excessive waiting periods to secure coverage
✔️ requirements on coverage of preventive health services
✔️ requirements to ensure that consumers receive value for their premium payments (medical loss ratio standards)

The revised draft also states that insurers must comply with state requirements applicable to health insurance offered in the state.

The non-compliant plans are not eligible for premium tax credits and State 1332 Waivers cannot be used to redirect premium tax credits to non-compliant plans. Non-compliant plans are also ineligible for the ACA risk adjustment program. Health Savings Accounts (HSA) can be used to support premium payments if the non-compliant plan is otherwise HSA-eligible.

Non-compliant plans are not considered “credible coverage.” The BCRA imposes a six-month waiting period for individuals seeking coverage who failed to maintain continuous credible coverage, meaning they experienced a gap in coverage of more than 63 days in the preceding 12 months.

The draft appropriates an additional $2 billion in funding for states to offset the additional costs states may incur in regulating non-compliant plans.

  • Tax Credits. For the first time, allows premium tax credits to be used to purchase catastrophic plans, provided the individual meets other eligibility requirements for the tax credits. Catastrophic plans are high deductible health plans that cover at least three primary care visits per year before the deductible is met. Catastrophic plans are subject to the federal limit on out-of-pocket costs.
  • Catastrophic Plans. In 2019, allows any individual participating in the individual market to enroll in a catastrophic plan. Currently, enrollment in catastrophic plans is limited to individuals under 30 years of age and those with a hardship exemption from the requirement to maintain minimum essential coverage. (Hardships exemptions apply when financial situations and other circumstances keep an individual from securing comprehensive insurance coverage.)
  • Late Enrollment Penalty. Revises the BCRA “look back” period when an individual applies for special enrollment. Eligibility for special enrollment is triggered by certain life events, such as marriage, divorce, or loss of job-based coverage. To avoid the penalty of a six-month waiting period, an individual applying for special enrollment must have at least one day of credible coverage during a 60-day “look back” period immediately preceding the date of application. Applicants using open enrollment must demonstrate 12 months of credible coverage without a significant break immediately preceding the submission of their application.
  • Health Savings Accounts. Allows Health Savings Accounts to be used for health insurance premiums.
  • Adjusting the Benchmark. Authorizes the Secretary of the Treasury to increase the value of the BCRA benchmark plan (58 percent actuarial value) in any rating area where no plan at 58 percent actuarial value is offered.
  • Market Stabilization State Grants. Adds $70 billion to the BCRA’s $112 billion State Stability and Innovation Fund, which provides grants to states to address the health care needs of high-risk individuals, help stabilize premiums and reduce out-of-pocket costs in the individual market. Reserves one percent of funds annually for insurers in states where the cost of insurance premiums is at least 75 percent higher than the national average.

Other Provisions

  • Opioid Crisis. Provides $45 billion over the next decade to help states combat abuse of drugs, including opioids. The BCRA originally allocated $2 billion for state grants to support substance use disorder treatment and recovery support services for 2018.
  • ACA Taxes. Reinstates the 3.8 percent levy on investment income for high income earners, individuals with investment incomes over $200,000 and couples with investment incomes over $250,000. Reinstates the ACA 0.9 percent Hospital Insurance payroll tax on these high income earners.

Fact Sheet June 2017 — Year-by-Year Impacts of the Senate Better Care Reconciliation Act

According to the Congressional Budget Office (CBO), the Senate Better Care Reconciliation Act (BCRA) of 2017 strips insurance coverage from 22 million Americans by 2026, a similar result as the House-passed American Health Care Act (AHCA). This ITUP Fact Sheet shows the year-by-year policy changes that eventually lead to dramatic waive of uninsured Americans.

Download the Fact Sheet here.

State Medicaid Agency Finds Staggering Losses for California Under U.S. Senate Bill

On June 28, 2017, the California Department of Health Care Services (DHCS) released its analysis of the impacts for California’s Medicaid program, Medi-Cal, from the Senate Better Care Reconciliation Act (BCRA) now pending in the U.S. Senate. (See ITUP summary of the BCRA here.)

DHCS concludes that over the seven-year period 2020-2027, BCRA shifts $92.4 billion in costs from the federal government to California. To emphasize the gravity of this shift, the entire 2017-2018 state budget includes a total of $35 billion state general fund for all Health and Human Services Agency programs, including Medi-Cal.

This level of additional state costs will necessitate significant cuts in Medi-Cal, even if the state could identify additional revenues and savings to offset some portion of the federal reductions. The Republican proposed Medicaid cuts will require California to analyze and re-evaluate every element of Medi-Cal expenditures, not just the enrollment expansions made possible by the ACA. There is no doubt that California will be faced with potentially significant increases in the number of uninsured in the state.

The loss of federal funds for the state results from the BCRA phase-out of enhanced federal funding for the Medicaid adult expansion and the transition to a per capita cap funding model for Medicaid. The proposed per capita cap replaces the current federal Medicaid match of state expenditures (generally 50 percent for California) with a fixed, per person allocation formula and an annual adjustment factor.

DHCS projects a significant funding gap from the transition to the per capita cap and the switch from the Medical Consumer Price Index (CPI) to the general CPI starting in 2025, an indicator that will not keep pace with medical cost increases. DHCS estimates that, in 2027, the funding gap will be $11.3 billion because of the different adjustor. Cumulatively from 2020 – 2027, California will need to address a Medi-Cal funding gap of $37.3 billion created by implementation of the per capita.

According to CBO’s  long-term analysis released June 29, 2017, the funding gap from the per capita cap will eventually result in states receiving 26 percent less in federal Medicaid support when compared to the current law. CBO estimates that this funding gap grows to 35 percent by 2036.

California currently covers 3.8 million childless adults through the ACA Medicaid adult expansion. The BCRA elimination of enhanced federal funding for these recipients means that to maintain their coverage California would need to spend five times as much as under current law. In 2027, California would need to identify $12.6 billion additional state general fund to maintain coverage for these adults. Cumulatively from 2020 – 2027, DHCS found that the funding gap will be $51.9 billion general fund.

The magnitude of the state funding gap created by the BCRA threatens every part of the Medi-Cal program – provider payments, eligibility and benefits. Moreover, the Senate bill, and the House bill that preceded it, threaten California’s hard-fought progress in reducing the ranks of the uninsured and improving the health of Californians. See just released ITUP Fact Sheet on year-to-year BCRA impacts on the number of uninsured here.

U.S. Senate Discussion Draft Continues Path to Increasing the Uninsured

Cuts Medicaid Even Deeper than House-passed Bill

On June 22, 2017, Senate Republicans released a discussion draft of legislation they are considering that would undo key provisions of the federal Affordable Care Act (ACA) and make sweeping changes to the federal Medicaid program. The Senate proposed Better Care Reconciliation Act (BCRA) differs in several respects from the House-passed American Health Care Act (AHCA), including slowing the timeline for some changes to ACA, but also includes deeper cuts to Medicaid. (See ITUP analyses of the AHCA and the BCRA.)

The Congressional Budget Office (CBO) has yet to score the emerging Senate bill, but like the House bill, the Senate draft severely weakens the federal financial commitment to Medicaid and undermines key ACA insurance market rules and premium subsidies. It therefore seems very likely that the BCRA will also result in millions of Americans losing health coverage over time. CBO estimates that 23 million Americans would be uninsured under the version of AHCA passed by the House. The CBO score of the BCRA is expected early next week.

Deep Medicaid Cuts Should Trigger Greater Scrutiny

To date, the limited debate and truncated Congressional review of the full details of Republican ACA “repeal and replace” proposals has generally concealed from public view the historic and dramatic magnitude of the proposed changes to Medicaid. Both the AHCA and the BCRA cut federal Medicaid funding by nearly $1 trillion, shifting the costs to the states, and threatening to impact all Medicaid recipients, including children, seniors, persons with disabilities and the working poor.

Both AHCA and BCRA (Republican proposals) fundamentally alter the state-federal partnership in Medicaid from its inception fifty years ago. Instead of providing federal matching funds for state Medicaid expenditures consistent with federal program rules, the Republican proposals would set a capped, per beneficiary federal payment to states, based on each state’s “base year expenditures,” adjusted annually thereafter by an inflation adjuster.

To absorb the steep cuts in Medicaid, states will be forced to raise significant new revenues or reduce eligibility, benefits and/or provider payments. At the same time, the Republican proposals reduce federal funding for the ACA Medicaid expansion to low-income childless adults. The BCRA gradually reduces the higher federal matching rate under ACA for this population (95 percent in 2017 under ACA dropping to 90 percent permanently in 2020) so that by 2023, states will receive the traditional federal match, which in California is 50 percent.

As an illustration of the potential impact for California, the California Department of Health Care Services (DHCS) estimates that the shift in Medicaid costs from the federal government to the states under the House bill results in nearly $6 billion in additional costs to California starting in 2020 growing to $24.3 billion by 2027. Given the lower inflation adjuster in the BCRA, the cuts to Medi-Cal will be larger by 2027 under the Senate proposal. The level of additional state costs would likely necessitate significant cuts in Medi-Cal, even if the state could identify additional revenues to offset some portion of the federal reductions. The Republican proposed Medicaid cuts will require California to analyze and re-evaluate every element of Medi-Cal expenditures, not just the enrollment expansions made possible by the ACA. (See ITUP analysis of the ACA and Medi-Cal here.)

Key Differences: House and Senate Bills

  • Medicaid Per-Capita Cap. Senate includes the same per capita cap approach starting in 2020 as the House bill but excludes children with disabilities. Starting in 2025, the Senate adjusts the cap annually by the consumer-price index (CPI), and not the Medical CPI, which will slow the rate of increase in the program and result in deeper Medicaid cuts.
  • Medicaid Adult Expansion. The House bill ends the enhanced federal match for childless adults starting in 2020 (currently 95 percent) as individuals cycle out of the program. Senate gradually reduces the percentage match over time until 2023, when it reaches the level of traditional Medicaid match, 50 percent in California.
  • Premiums Subsidies for Low-Income Exchange Enrollees. Senate limits eligibility for premium tax credits to those under 350 percent of the Federal Poverty Level (FPL) instead of up to 400% FPL in the ACA. House adjusts premium subsidies by age only, making the tax credits more generous for younger enrollees than ACA, and premiums more expensive for those in high-cost areas. Senate allows for geographical and income adjustments to subsidy levels. In addition, like the House bill, the sliding scale capping the percent of income individuals must pay for premiums is less generous for those age 50 and older. Senate benchmarks subsidy levels to a lower benefit plan than ACA with an actuarial value of 58 percent.
  • State Waivers of ACA. House allows for state waivers of essential health benefits, as well as ACA community rating for those who do not maintain continuous coverage. Waiving community rating requirements allows insurers to charge sick people and those with pre-existing conditions higher premiums. Senate allows for state waivers for many significant ACA provisions but not for guaranteed issue or higher rates for applicants with health issues.
  • Individual mandate. House deletes penalties for not having coverage but imposes penalties of up to 30 percent when someone applies for coverage, if they have not maintained continuous coverage. Senate deletes individual and employer mandate penalty without any offsetting provisions.
  • Taxes. House repeals all ACA taxes but not all immediately. Senate repeals taxes, some retroactively, and some in 2018 and 2023. Senate further delays “Cadillac tax” on high-cost employer benefit plans until 2026.

See ITUP’s detailed summary of the Senate discussion draft here.

Covered California May 2017 Board Meeting

On May 18, 2017, the Covered California board convened its monthly meeting. The board agenda included the Executive Director Report, Covered California policy items, and regulations background materials.

Click here for the Covered California board agenda for May 18, 2017.

Click here for the meeting materials for May 18, 2017.

Click here to watch the board meeting for May 18, 2017.

Executive Director Report

Peter V. Lee, Executive Director of Covered California, delivered the Executive Director Report, which included a federal update, overview of the federal market stabilization regulations, and American Health Care Act (AHCA) updates.

Executive Director Lee introduced “Real Stories of California.” The project looks beyond the analytical data for exchange enrollees to reveal the real-life impact of Covered California coverage. Click here to see the eye-opening project.

Click here (slides 10,11) for Covered California’s briefs informing the national debate on health reform.

On April 18, 2017, the federal Department of Health and Human Services (DHHS) finalized market stabilization regulations. Covered California commented on the final provisions. DHHS will reduce the open enrollment period to 45 days (Nov 1 – Dec 15) in 2018. Director Lee made clear that for 2018, California will maintain its current extended open enrollment period, as outlined in state law. He commented that under existing regulatory authority, state-based marketplaces (SBMs), such as Covered California, may supplement the open enrollment period with a special enrollment period (SEP) to help address operational complications caused by a shorter open enrollment period. Director Lee shared Covered California’s plan to engage policymakers and other stakeholders to consider appropriate adjustments for open enrollment for the 2019 coverage year. He stated that there are good reasons for consumers and for risk mix purposes to have enrollees covered for an entire year. Currently under Covered California’s extended open enrollment period, individuals enrolling in January are not covered for the entire year.

The federal rules altered the special enrollment process by adding pre-enrollment verification. Covered California informed DHHS of existing SEP pre-enrollment verification efforts to leverage electronic verifications. While final regulations do not require SBMs to create pre-enrollment verification, SBMs are encouraged to adopt the federally facilitated marketplace (FFM) process, as outlined in the regulations.

Under the federal regulations, DHHS will allow health plans to have -4/+2 percent variation in actuarial value of metal tier plans, instead of the current -/+2 percent variation in federal rules. In addition, certain Bronze level plans will be permitted to have a variation of -4/+5. SBMs are not required to make this change.

Executive Director Lee reviewed the past, present, and future state of the AHCA. On May 4, 2017, the House of Representatives passed the AHCA (HR 1628) without a Congressional Budget Office (CBO) report. At the Board Meeting, Director Lee informed the Board that on May 24, CBO will publish a score for the House-passed version of the AHCA. The Senate will probably draft their own version of an Affordable Care Act (ACA) repeal bill. If the Senate bill varies from the House bill, a conference committee will iron out the differences between both versions of the bill. The reconciled bill would be reintroduced to both chambers for a final vote. If approved by both chambers, the bill would be sent to the President for approval.

Covered California Policy and Action Items

Fiscal Year (FY) 2017-18 Proposed Budget and Quality Health Plan (QHP) Assessment Fee

Jim Lombard, Chief Financial Officer in the Covered California Financial Management Division, led the discussion of the 2017-18 proposed budget and QHP Assessment Fee. Lombard updated the Board and public on fiscal year 2016-2017:

CC FY 2016-17 Slide

FY 2017-18 Proposal Overview

Click here for the Covered California FY 2017-18 Proposed Budget.

Covered California proposes a budget of $314 million in FY 2017-18. Covered California predicts a stable market with a good risk mix among the 1.4 million actively enrolled consumers. Covered California will sustain the market by investing in marketing, outreach, and customer service. The budget prepares for uncertainty by entering the fiscal year with over $298 million in reserves to react to any changes in health care laws or policies. The budget reflects a commitment to delivering value to consumers and driving for better care and lower costs.

FY 2017-18 Proposed Expenditures

CC FY 2017-18 Proposed Expenditures

FY 2017-18 Budget Conclusion

According to Lombard, the budget is balanced for FY 2017-18. The forecast predicts an assessment rate of 4 percent for the individual market with the option to decrease in the future. At the Covered California Board Meeting on June 15, the Board will be asked to approve assessments for the 2018 plan year. Covered California proposes assessments for individual and dental market health plans at 4 percent of premium, and 5.2 percent of premium for Covered California for Small Business (CCSB). In addition, the Board will take final action to approve the Covered California FY 2017-18 Budget at $314 million.

Regulation Amendments

Drew Kyler, Deputy Director for Outreach and Sales Division, requested Board approval to amend the following regulations:

  • Plan-Based Enroller Program Regulations – Approved
  • Certified Application Counselor Program Regulation – Approved
  • Enrollment Assistance Permanent Regulations Amendment – Approved
  • Medi-Cal Managed Care Enrollment Assistance Program – Approved

The regulations, amendments, and program changes are aimed at streamlining the entity application for alignment with the new program portal efficiencies.

Updated Board Calendar

June 15, 2017
July 20, 2017 (possibly no meeting this month)
August 17, 2017
September, 2017 (no meeting this month)
October 5, 2017
November 16, 2017
December 21, 2017 (possibly no meeting this month)

California Budget Conference Committee Considers Coverage Expansion for Young Adults

While federal policymakers consider legislation that would eliminate coverage for 23 million Americans, California considers expanding Medi-Cal to all low-income California residents up to age 26

 

Late last week, the two-house budget conference committee of the California Legislature began deliberations on the 2017-2018 state budget. The conference committee will take up multiple budget items affecting health care and coverage.

One significant issue before the conference committee continues the state’s move toward coverage for all and extends Medi-Cal coverage to low-income young adults up to age 26. Both houses passed a version of the budget that includes the coverage expansion, but at different funding levels, making it an item the conference committee can and will consider.

The 2017-2018 budget proposal follows California’s 2016 expansion of Medi-Cal to cover all low-income children, regardless of immigration status. The number of uninsured children in the state dropped from 437,000 in 2014 to fewer than 100,000 in 2017, according to the California Children’s Health Coverage Coalition. The proposed Medi-Cal expansion for young adults mirrors provisions in the federal Affordable Care Act (ACA) that allow young adults to stay on their parents’ coverage until age 26.

The 2016 presidential election shifted the national political landscape and led to current efforts by the Republican President and Republican majorities in both houses to repeal the ACA.  In a striking contrast, last year California voters considered 17 ballot initiatives, including Proposition 56, which raises new revenues for state health care programs. Proposition 56 passed with overwhelming support and imposes a $2 per pack excise tax on cigarettes and similar taxes on other tobacco products.

Governor Brown’s 2017-18 budget proposes allocating $1.3 billion Proposition (Prop) 56 revenue for expenditure growth in existing Medi-Cal programs for base managed care capitation payments, base dental expenditures, high-cost drugs, drug treatment and specialty mental health programs – growth that would normally be funded by state general fund revenues.

Both the Senate and the Assembly budget subcommittees rejected the Governor’s proposal and instead propose that a portion of Prop 56 funds be dedicated for Medi-Cal coverage of an estimated 80,000 currently uninsured, low-income young adults, regardless of immigration status. If adopted, California would achieve near universal coverage for residents under age 26, a significant achievement considering the current political climate for health care at the federal level.

The budget passed by the Assembly included $54 million to cover low-income young adults in 2017-2018, continuing annually thereafter, based on the estimate provided by stakeholder proponents. The Senate approved $63.1 million in FY 2018-19, and $85 million annually thereafter, to provide full-scope Medi-Cal coverage for all individuals up to age 26 beginning July 1, 2018. The Senate developed an independent estimate with technical assistance from the Administration. The Administration estimated costs to reach $300 million.

The Budget conference committee, the legislative forum charged with reconciling differences in the Senate and Assembly budget plans, will consider this issue as part of the budget deliberations.

Other health coverage items before the budget conference committee include:

  • Prop 56: Although both the Senate and Assembly allocate Prop 56 funds to increase Medi-Cal provider payments for dentists, family planning providers, some physicians and specialists, each house allocated different funding levels and articulated different requirements for the funds. For example, the Senate proposes a high-need specialty access pool for physician and specialist rate increases consistent with the results of the Access Assessment study (required by the Medi-Cal 2020 waiver), network adequacy standards or to more closely align Medi-Cal rates with the Medicare program. The Assembly dedicates Prop 56 funds for a physician incentive payment program.
  • Medi-Cal Optional Benefits: Both houses restore Medi-Cal optional benefits eliminated during the recession including optician/optical laboratory, audiology, incontinence creams and washes, podiatry, speech therapy and full restoration of dental benefits. However, the Senate relies on Prop 56 funds for the restoration and the Assembly allocates state general funds for this purpose. In addition, the Assembly included general funds for restoration of chiropractic services while the Senate did not.
  • Medi-Cal for Seniors and Persons with Disabilities. The Assembly budget plan, but not the Senate, includes $30 million general fund to increase the income eligibility for the Medi-Cal Aged and Disabled Federal Poverty Level (FPL) program from 123 percent FPL to 138 percent FPL. With ACA implementation, income eligibility for no share-of-cost (SOC) Medi-Cal increased for most Medi-Cal programs up to 138 percent FPL. The Assembly proposal expands access to no SOC Medi-Cal for beneficiaries in the Aged and Disabled FPL program up to 138 percent FPL.

Newly Qualified Immigrants (NQIs). Through budget negotiations, Senate, Assembly and the Administration agreed to include placeholder trailer bill language eliminating the statutory authority for the Newly Qualified Immigrant (NQI) Affordability and Benefit Program. NQIs are legal permanent residents, legally in the U.S. for less than 5 years, and therefore ineligible for federal Medicaid. In 2013, California passed legislation to transition NQIs over age 21 without children into Covered California. As envisioned, the “wrap” program would cover premium costs (minus the advance premium tax credit) as well as any cost-sharing charges for NQIs enrolled in Covered California. NQIs are currently eligible for full-scope, state-only funded Medi-Cal. The budget language authorizes the Department of Health Care Services (DHCS) to seek federal designation as minimum essential coverage (MEC) for the existing, state-funded Medi-Cal program for NQIs. Full-scope Medi-Cal meets the MEC requirements; and therefore, NQI Medi-Cal coverage should be eligible for federal MEC designation. DHCS has never applied to the federal government for an MEC designation for this coverage program.

The ACA individual mandate requires most tax filers to have MEC or face a tax penalty. Securing MEC designation for the Medi-Cal program for NQIs protects NQIs from this penalty.

The conference committee will meet in the coming days to develop a final compromise budget prior to the June 15 Constitutional deadline for the state to pass a budget.

CBO Confirms Devastating Consequences of the House-passed American Health Care Act

On May 24, 2017, the Congressional Budget Office (CBO) released an updated cost estimate for the American Health Care Act passed by the U.S. House of Representatives on May 4, 2017, adjusting their analysis for last minute amendments to H.R. 1628. (See ITUP summary of AHCA here.)

The March 23, 2017 CBO analysis of a previous version of H.R. 1628 estimated that more than 24 million Americans would become uninsured under the AHCA compared to current law under the Affordable Care Act (ACA). CBO estimates that the amended bill results in slightly more people with health insurance but would still leave more than 23 million Americans uninsured.

CBO estimates:

  • By 2018, 14 million more people would be uninsured because of AHCA and by 2026 a total of 51 million people under age 65 would be uninsured, compared to 28 million under the ACA.
  • According to CBO, the AHCA would disproportionately increase the number of uninsured among older people with lower incomes; people between 50 and 64 years of age with incomes below 200 percent of the federal poverty level (FPL).
  • AHCA as passed by the House would reduce federal deficits by $119 billion, down from $337 billion in the prior version. The savings come primarily from cuts to Medicaid and the replacement of ACA premium tax credits with less generous tax credits adjusted only for age. ACA tax credits are adjusted by age, geography and income to reflect different premiums by region and to provide more assistance to lower income individuals.
  • Health insurance premiums would be lower, but CBO attributed the lower premiums, in large part, to coverage with lower benefits, covering a smaller proportion of an individual’s health care costs.

CBO repeated its conclusion that under ACA health insurance markets remain relatively stable, although in some areas of the country there is more limited participation of insurers. After considering the impact of state waivers available in the AHCA, CBO concludes that markets would also be relatively stable in states that do not apply for waivers or in states that obtain waivers from the community rating provisions of the ACA (allowing insurers to charge individuals higher premiums based on health status).

However, markets in states that obtain waivers to both the community rating provisions, and the ACA requirement of essential health benefits, would start to become unstable in 2020. CBO estimates that about one-sixth of states would obtain the dual waivers.

According to CBO, waiver of community rating would result in a rise in premiums over time for those with preexisting or newly acquired medical conditions.  These individuals would ultimately be unable to purchase comprehensive coverage on the individual market, if they are able to purchase coverage at all. Additional funding in the AHCA to help reduce premiums would be insufficient, according to the CBO (MacArthur amendment). The ACA protections, such as the requirement to offer and renew coverage regardless of pre-existing conditions, retained in the AHCA, would be meaningless for these individuals because affordability of coverage would once again become the issue.

In states that secure waivers of the ACA essential health benefits (EHB) requirement, some people in individual coverage would experience substantial increases in what they spend for health care in the form of out-of-pocket costs.  CBO estimates that benefits likely to be excluded in states with the EHB waiver include maternity care, mental health and substance abuse benefits, rehabilitative and habilitative services, and pediatric dental. CBO also points out the ACA ban on annual and lifetime benefit limits would not apply to health benefits no longer defined by states as essential.

The latest CBO analysis confirms that the AHCA would lead to millions more uninsured compared to the ACA. Although much of the federal debate surrounding AHCA focused on insurance markets and coverage for individuals with pre-existing health conditions, much of the federal savings and the increase in the uninsured follows from the dramatic cuts to the Medicaid program ($880 billion) under the AHCA.  The President’s just released budget for 2018 continues and adds to the reductions in federal Medicaid spending.

For more about what’s at stake for California from the proposed Medicaid cuts, see the latest issue of ACA Watch, “The ACA and Medi-Cal: What’s at Stake?

Click here for the ITUP summary of the President’s proposed 2018 federal budget.

ITUP ACA Watch, Issue 4 — The ACA and Medi-Cal: What’s at Stake?

This issue of ACA Watch highlights program and population changes that re-shaped Medi-Cal under ACA. In addition to expanding coverage for some of the state’s most disenfranchised residents, the ACA dramatically altered the demographic profile and scope of the Medi-Cal program.

Download ACA Watch, Issue 4 here. 

California Moves to Protect ACA Consumer Cost-sharing Reductions (CSRs)

On May 18, 2017, California and New York led 13 other states and the District of Columbia in filing a motion to intervene in the federal lawsuit affecting payments that reduce out-of-pocket costs for low income individuals enrolled in Affordable Care Act (ACA) marketplaces.

Under ACA, individuals and families with incomes below 250 percent of the federal poverty level (FPL) are eligible to enroll in silver-level benefit plans with lower deductibles, copayments or coinsurance than the standard silver plan. Health plans must provide the reductions at the point of care for enrolled consumers and the federal government then reimburses health plans for the costs.

While silver-level benefit plans cover 70 percent of the medical expenses under the policy (70 percent actuarial value), the Cost-Sharing Reductions (CSRs) increase the actuarial value up to 73 percent, 87 percent or 94 percent, depending on the income of the individual enrolled. CSRs help low-income consumers afford to use their health care coverage and access services. For example, in California, in 2016, an individual in a silver-level benefit plan with standard cost-sharing would pay $45 for a primary care visit, while an individual in the most generous CSR plan would pay only $5.

Kaiser Family Foundation estimates that, nationally, insurers would raise premiums for silver-level benefit plans by about 19 percent on average to compensate for the loss of CSR payments.

The Centers for Medicare and Medicaid Services (CMS) estimates that in 2016 more than 6 million Americans (56 percent of total enrollees in ACA marketplaces) enrolled in CSR plans. Covered California reports that 50 percent of enrollees in the state marketplace selected CSR benefit plans.

The Lawsuit and the States

The U.S. House of Representatives brought the original lawsuit (House v. Burwell) challenging the CSR payments being made by the Obama administration, arguing that Congress had not appropriated the funds for the payments. The House won in the lower court but the judge stayed the order pending appeal. The Obama administration appealed but the House requested additional time, including a second request for more time after the Presidential election of 2016. The Trump Administration has yet to take a formal position on whether the payments are legal, but the President has threatened on multiple occasions to stop making the payments. On May 22, the House and the Trump Administration requested an additional 90-day delay in the lawsuit.

In the motion, the states assert that they have a unique, sovereign interest in ensuring stable insurance markets, sufficient competition in state exchanges and protection for consumers from increasing premiums. The states contend that the loss of CSRs would result in higher insurance premium costs for consumers because, absent a change in federal law, health plans would have to provide the CSRs but would not be reimbursed. The motion also recognizes that increased premiums would have the greatest impact on those not eligible for federal premium subsidies and points out that additional individuals might become uninsured if the higher premiums end up relieving them from the federal coverage requirement should their share of premium exceed 8 percent of household income.

The motion argues that continued uncertainty year-to-year as to whether the federal government will provide the CSR payments would make state regulation of health insurance “more complex, unpredictable, and expensive.” In addition, the states argue that President Trump’s numerous statements that he does not intend to make the payments demonstrate that the administration cannot adequately represent the states’ interests in defending the payments. For these and other reasons, the states assert that they have a legally protected interest in the litigation and should be allowed to intervene. (For more on the legal case and the states’ arguments see Health Affairs Blog.)

California Impact

Covered California commissioned an analysis on the potential consequences of ending CSR payments. The study modeled the impact on consumer benefit plan choices should premiums rise. The analysis found that premiums for consumers in silver benefit plans would increase by 16.6 percent in 2018. The increased premiums would result in a parallel increase in the advanced premium tax credits, an average of $60 per month for each subsidy-eligible individual. However, for unsubsidized individuals, premium increases are not accompanied by increases in premium tax credits. These individuals might switch to other coverage levels, primarily to bronze. The model showed that the loss of CSRs would increase federal costs by 29 percent in premium tax credits to cover the increase.

The loss of CSRs would lead to higher premiums in California and increased federal costs for premium subsidies. Moderate income individuals and families experiencing large premium increases might decide to drop coverage or choose lower priced plans that increase their out-of-pocket costs at the point of care. The number of uninsured could increase if individuals cannot afford higher premiums or are relieved of the federal requirement to maintain coverage if higher premiums exceed 8 percent of premium.

Conclusion

Ending CSR payments does not appear to accomplish any of the stated policy goals of the Trump Administration and Congressional Republicans – cutting federal expenditures, lowering deductibles or decreasing premiums. However, the continuing uncertainty on whether the federal government will make the payments does threaten to de-stabilize ACA markets. Given the potential increase in federal costs, canceling CSR payments seems to be more about political leverage than about improving health care and health coverage.

Covered California March 2017 Board Meeting

On March 14, 2017, the Covered California Board convened its monthly Board meeting. The Board Meeting Agenda included Closed Session, an Executive Director’s Report, and Covered California Policy and Action Items. (more…)