Federal Policy Decisions Eroding Health Insurance Stability

It’s been a few weeks since I’ve written about what’s happening with the Affordable Care Act- and there’s been some recent action- so here goes.

First of all, there’s good evidence that stable health insurance coverage helps people get preventive and primary care services that improve outcomes and downstream healthcare spending.  The Affordable Care Act included several provisions that helps people get these kinds of preventive services.  One of the primary goals of the ACA was to create broad access to robust health insurance coverage through: 

  • Employer mandated coverage for large employers;
  • An mandate to be insured or face a tax penalty to encourage full participation;
  • Subsidies and out-of-pocket protections for purchasing in the individual federal marketplaces;
  • Guaranteed issue and community rating of premiums;
  • Expansion of Medicaid to low-income adults; and
  • Ten essential health benefits for all marketplace insurance sold on the individual federal marketplaces, which includes requirements to cover services for mental health, substance abuse, and reproductive health.

It’s been working.  In the last several years the percentage of uninsured working-age adults decreased from 20% in 2013 to 12% by 2016 (nationally).  It would have been an even bigger decrease if all states had expanded Medicaid.  This  coverage expansion has led to increased access to preventive services, higher rates of having a usual source of primary care and increased affordability of care. 

However, progress is now stalling because of policy changes that have been made by the President like:

Cost Sharing Reduction Payments Stopped

In October 2017, the President announced that he was ending cost-sharing reduction payments (a program that previously reimbursed health insurance companies for the out-of-pocket protections available to some individuals who purchased coverage on the individual marketplaces). This caused higher premium rates in the individual marketplaces this year. 

Short Term Health Plans

The President also issued Executive Order 13813, which expanded “association health plans” and short-term, limited duration insurance. These plans create parallel markets in which healthier individuals move to cheaper plans that offer barebones coverage, destabilizing the marketplace.

Last week HHS and the US Department of Treasury followed through on the EO and issued a final rule that will allow consumers to buy short-term health plans to provide coverage for up to 36 months. These plans don’t need to comply with ACA requirements like covering essential health benefits, pre-existing conditions or the requirement to sell to any consumer regardless of health status.

These plans will likely attract younger, healthier and drive them out of the risk pool, which will increase costs in the ACA compliant plans.  It’s estimated that about 600,000 Americans will enroll in these short-term health plans, increasing federal spending on marketplace subsidies by $200M in 2019 and $28B over ten years.

Individual Mandate Effectively Expiring

As part of the new federal tax law, the individual mandate tax penalties will be $0 starting on January 2019, which will further erode the goal of increasing coverage and stabilizing insurance markets. In July 2018, the Commonwealth Fund predicted that eliminating the tax penalty will result in at least 2.8 million fewer Americans with coverage.  The nonpartisan Congressional Budget Office estimates that the number of people with health insurance will decrease 4M by 2019 and 13M by 2027.   CMS also cut funding for the federally-facilitated Exchange Navigator Program which will also contribute to decreased enrollment rates.

Risk Adjustment Payments

CMS announced in July that it would freeze $10.4B in 2017 risk adjustment payments. Luckily CMS released a final rule a couple of weeks ago to reinstate payments, so that’s an additional destabilizing thing that thankfully won’t happen at least for now.

Everyone benefits from access to primary and preventive services (including behavioral and reproductive health services), specialty care, and culturally appropriate care. If the individual insurance market continues to destabilize or doesn’t include affordable plans that offer comprehensive services, consumers may face expensive and inaccessible healthcare options. 

Many of the decisions that the President has been making make that outcome more likely in my opinion.