They may have done it. The apocryphal bipartisan deal to “fix” Obamacare is being struck (at least by two important Senators, for now, in part …). Today, Senators Lamar Alexander of Tennessee and Patty Murray of Washington announced they are converging on an agreement on a short-term package to help stabilize the individual insurance market.
Even better, the policies included would likely be somewhat successful in achieving their purported purpose. This post will explore each of them in some detail and consider the impact they may have, as well as the probability Congress will send the legislation to President Trump, who has said he would sign it. The post is based on information about the bill now available, and will likely need to be updated once we see the final language.
Funding For Cost-Sharing Subsidies
The key component to the deal is stable funding for the cost-sharing reduction (CSR) subsidies that President Trump last week said he would no longer pay. These subsidies lower out-of-pocket costs for individuals enrolled in the Affordable Care Act exchanges with incomes between 100 and 250 percent of the federal poverty level.
The legality of the Obama (and then Trump) Administration’s making these payments has been the subject of a legal dispute over whether Congress has actually appropriated the money to fund the requirements of the underlying ACA provisions. Complicating matters further, 19 state attorneys general just filed a lawsuit seeking to compel continued funding of the program.
Regardless of the status of the funding, insurers are obligated to furnish eligible enrollees with the discounts. What the President did last week was stop reimbursing plans for the cost of doing that, which equates to higher premiums as insurers then pass through those additional costs to consumers.
In fact, the Congressional Budget Office (CBO) estimated that terminating CSR payments would increase premiums by 20 percent in 2018. Further, and importantly for the viability of this bill, they also said eliminating CSRs increases Federal spending – in the form of increased premium subsidies for those facing these higher premiums – by $194 billion over the next 10 years.
It would stand to reason then that appropriating these funds would save the government money, but that remains to be confirmed by CBO. Their analysis of the Better Care Reconciliation Act (BCRA) found that extending CSR subsidies would have no impact on Federal spending.
If the cost of terminating CSRs equates, even fractionally, to savings for restoring them, the Alexander-Murray deal should be self-funded, with perhaps some extra offset room for must-pass legislation such as extending the Children’s Health Insurance Program (CHIP) or financing state reinsurance programs for the individual market.
One potential pitfall for this element, which we understand is the focal point of ongoing negotiations, is the possibility insurers could “double dip” on the CSR funding by receiving these payments and keeping rate increases they had filed under the assumption the policy would be terminated. If insurers are required to refile their rates to avoid double dipping, the administration may need to delay or extend the 2018 open enrollment period, which is only two weeks away. Keep an eye on this one.
Changes To Section 1332 Waiver Rules
Probably the counterbalancing pole of the package for Republicans is a loosening of criteria for the section 1332 waiver process under the ACA which allows states to alter some of the law’s individual market coverage parameters. Most importantly, it changes the requirement that state proposals be “as affordable as” ACA coverage would be; it requires only that they have “comparable affordability.” Unlike some of the repeal and replace proposals we saw earlier in the year, no changes could be made that would undermine protections for people with preexisting conditions or eliminate essential health benefits.
This component of the deal would also cut Center for Medicare and Medicaid Services’ (CMS) review of state waivers from 180 to 90 days and create a new 45-day emergency approval pathway. The maximum waiver period would be extended from five to six years and “me too” waivers—state waivers that match a previously approved waiver—would be automatically approved.
Restored Funding For Outreach And Enrollment
The pending agreement also includes up to $106 million to restore consumer outreach efforts that the Trump Administration had rescinded. These funds would initially be made available to states; however, if a state didn’t use its allotment, the money would be returned to the Federal government, which would be required to spend that amount in the relevant state for enrollment purposes. These dollars reflect a redirection of existing health insurer user fee funds.
Expanded Access To “Copper” Plans
Another common component of Republican repeal and replace proposals, also endorsed by some Senate Democrats, has been to expand access to catastrophic coverage plans. Referred to more commonly as Copper plans (keeping with the metallic tier theme of the ACA), these plans are currently only available to individuals under the age of 30 or those who qualify for an economic hardship waiver. Their deductibles are set at the maximum allowed under the ACA and those purchasing them are not eligible for premium tax subsidies otherwise provided to lower income consumers.
The Alexander-Murray deal would allow anyone to buy a Copper plan, regardless of age or income level. They would still not be eligible for tax credit subsidies but their enrollees would be treated as in the same risk pool as all others in the Exchanges. This is an important point because the key goal of the Copper plan strategy is to bring healthier individuals in to the market to balance the costs of higher-need patients.
Authorization Of Funding For State Reinsurance Programs
The package also authorizes funding for state reinsurance programs, reviving a modified version of one of the original “three R” premium stabilization initiatives under the ACA that expired after its third year. If CBO determines there are excess savings in the bill, they may be allocated to appropriate real dollars to this policy. Otherwise, Congress would need to act separately to fund it.
Finally, the legislation would compel CMS to generate regulations implementing the section 1333 interstate compact component of the ACA, which so far have not been issued. While some states have taken steps to open themselves up to the sale of health insurance products originating in other states, no actual interstate agreements have been effectuated yet.
We could spill a lot more ink weighing the debate around selling insurance across state lines, but this policy avoids that to a large degree by maintaining the requirement that states voluntarily choose to participate in cooperation with other partner states.
On its face, the Alexander-Murray deal would appear to meet Senate Leader McConnell’s standard that funding for CSRs be paired with market-based reforms and new flexibility for states. Minority Leader Schumer has already spoken out in support of the measure and has urged the House and Senate to send it swiftly to the President’s desk.
President Trump, too, has signaled support for the measure. In a Rose Garden announcement today, he characterized it as a short-term deal so that “we don’t have this very dangerous little period.” This appears to represent a shift because, just four days ago, his budget chief Mick Mulvaney said the President would veto a Murray-Alexander bill. Like the deal itself, we count the President’s support as tentative for now.
The biggest hurdle for the bill may be in the House, where opposition in the Republican caucus to anything with a whiff of improving the ACA runs deep. Moreover, opponents characterize Federal CSR funding as an insurer bailout, because the dollars flow to plans instead of consumers.
A mildly positive signal came shortly after the initial Alexander-Murray announcement though, in the form of a statement from conservative Freedom Caucus Chair Mark Meadows. Rep. Meadows called the deal something “we can build on,” though he stopped short of a full-throated endorsement. As we count votes, it’s important to remember that this bill would require the support of 60 Senators before it could move forward, a threshold that’s higher than preceding repeal and replace efforts but not insurmountable for a bipartisan agreement.
So, we don’t yet have final bill text or a CBO score, but we have some details on policies that should help stabilize consumer access and premiums in the individual market in the next few years. For now, hats off to Senators Alexander and Murray who are doing business the old fashioned way: together.