Trying to plan a response to health care reform these days is like telling a man on fire to find water. Most agents are reeling after being slaughtered on individual and small group commission reductions during a time when the process of ensuring people became 10 times more difficult with mandates, changing plans/networks, tax credits and penalties. President-elect Trump has stated that he intends to repeal, at least in part, The Patient Protection and Affordable Care Act (ACA or Obamacare) enacted in 2010 by President Obama. Estimating what the new president will approve, or at least support, is a bit easier knowing that one political party, the Republicans, control the whole enchilada, and can essentially approve, cancel or choose not to enforce selected provisions of the law. Speaker of the House Paul Ryan has shed a little light in public comments on the issue, but details have not been provided. The central question on everyone’s mind is, “What provisions will change in 2017?” The blank-eyed mantra is “repeal and delay.” That oxymoron speaks for itself.
Focusing energy on 10 primary ACA features in the 2,310 page law is helpful. Provisions setting costs, coverage and access provide better insight. These features include potential elimination, or “benign-neglect” non-enforcement (by executive order) of:
- Employer mandates and penalties
- Individual mandates and penalties
- Tax credits for individuals and small employers
- Ten Essential Health Care Benefits
- Unlimited 10 essential benefits
- Preexisting medical condition exclusion prohibition
- Minimum Medical Loss Ratio requirements related to premium refunds
- Marketplace reinsurance program protecting sponsoring carriers
- Legislated Open Enrollment and Special Enrollment periods
- Medicaid eligibility expansion or retrenchment
No one has a crystal ball, but having a little vision and history of the previous moves provides direction and focus. Despite the rhetoric, few people believe the entire ACA can be repealed without destabilizing markets, and especially without a new plan that will protect hospitals forced to treat people regardless of their ability to pay. Speaker Ryan was recently reported saying, “No one will be worse off” and on 60 Minutes, “People that make less income should get more help paying for insurance.” Speaker Ryan has a published plan that includes tax credits. Whatever his published “plan” is, eliminating tax credits to individuals in 2017 is practically impossible given the fact that it would expose the Federal Government to being sued by 15,000,000+ people promised the credit in their eligibility letters from HHS. Few targets offer a more attractive target to large legal firms specializing in class action suits against the government for breach of contract.
The current rhetoric declares concern for NOT destabilizing markets. Given the strong big-business view of President-elect Trump, the employer mandate penalty is ripe for either repeal or simply benign-neglect and/or non-enforcement – like occurred previously in 2015, when employer penalties were waived or delayed that year despite the IRS’s mandate in the law. It is apparent that total repeal is not being seriously considered, despite the rhetoric.
Gauging unintended consequences of removing tax credits, along with the potential exit of at least 10 million insured people currently getting substantial credits, hospitals would be exposed to insolvency. 2017 may be a year of many hospital insolvencies as they struggle to adapt cost-ineffective management practices to rapidly changing reimbursement programs (see QPP at www.providerrisk.com Glossary). Many who follow medical claim reimbursement standards know that the new ICD-10 68,000diagnosis codes and 72,000 procedure codes, up from the simpler ICD-9 14,000 diagnosis codes and 3,800 procedure codes, make up-coding and up-billing more difficult. Not being able to up-code for more reimbursement will force change that has been delayed for years. The culling of hospitals federally obligated to treat the poor has already been delayed by the federal premium tax credit subsidy. Repeal of the tax credits will certainly reduce the insured ranks, and accelerate hospital insolvencies.
Premiums for individual and small groups have increased wildly since 2010 when the ACA became law. Removal of mandated 10 essential benefits, unlimited benefits and preexisting medical condition prohibition would undo several key ACA provisions designed to protect the public. Eliminating these federal requirements would not solve the problem of extremely expensive and fragmented medical care. One recent case included a $6.8 million bill for 82 days in the hospital, with the hospital claiming that every penny spent was for care that was medically necessary. Like the patient, who did not survive, many hospitals are taxed with unintended-life-threatening consequences of NOT changing to match sustainable funding.
The United States Office of the Inspector General (OIG) reported that 29% of the entire federal budget was slated to be used to pay for major medical care. From 2015-2016, Marketplace individual premiums increased an average of 23% in one year. It is clear that the feared “underwriting-death-spiral” has occurred in Marketplace individual plans, where the healthy young people are not buying insurance on the exchange, and the sick ones that buy insurance leave as soon as the care is delivered – and stop paying the premiums.
Make no mistake, the ACA fixed many problems, but at a Cadillac price and coverage. A coverage that partnered with hospitals and physicians maximizing procedure production is driving the entire industry into a cost structure that is simply not affordable, and unsustainable – despite what the law intends.
Federal health policy of guaranteeing access to quality and affordable health care has little chance of radical change. Regional and local hospital systems will certainly struggle to ply business-as-usual management styles in an era of reduced reimbursements to thrive or survive. Many well entrenched hospital oligopolies protected by State CON (Certificate of Need), and practical immunity from Sherman and Clayton Antitrust Acts are failing – because they have not made the dangerous leadership decisions to align physician support with access to extremely expensive hospital expenses and management. Hospitals will drive their facilities within sustainable reimbursement structures, or will not survive over the long term. Eliminating tax credits accelerates the process.
What is certain is that the people in the United States consider access to quality health care at an affordable price to be a right. The Affordable Care Act addresses it with standardizing benefits and tax credits to assist people earning under 400% of the federal poverty level of income. The massive increases we have experienced in individual and small group insurance premiums make it more difficult for the private market to afford insurance. Should it become even more expensive, we can expect federal and state governments to try and step in to support local hospitals from closing as more and more people simply give up on funding insurance, and take their chances without it.
Past history speaks for itself. One cannot avoid the conclusion that costs being simply out of reach for many people i.e., $350 per month premium means $4,200 per year, or 21% of a $20,000 annual income. If at least 7,000,000 “newly-insured since 2010” people receiving tax credits out of a total of over 20,000,000 reported Marketplace enrolled lives lose the credit, lots of experience tells us that hospitals will be left with the check. The “happy” balance of getting people to take “some” responsibility for health care costs takes real vision and leadership. For example, in Miami, Florida, Dade County passed a one percent sales tax, and a $600 million bond, in order to keep their Public Health Trust afloat. There are no simple political one-liners that pay for much, and still fund our perceived “right” to health care “access.”
If Trump were to choose to totally repeal the ACA, he would be eliminating the federal reinsurance reimbursement program too. Very few people even know that it insures only $45K - $250,000, and NOT unlimited benefits. It also imposes a maximum three percent profits for On-Exchange plan sales. You can decide if your own legislator knows about, or understands its effect on plan offerings, premiums, and carrier solvency safety-net. We note that United, Aetna, Cigna and Coventry have abandoned the Marketplace plan offerings for 2017. A total repeal of ACA would mean statutorily eliminating: preexisting medical condition exclusion prohibition, unlimited EHB, and the maximum out of pocket cost limit consumer protection to $7,150 (2017) - thereby exposing people to potentially unlimited out of pocket costs on “all” medical charges most people presume in error are insured. It is very clear that very few people even realize how “out of network care” is being completely denied by carriers as uninsured, which creates real problems for people who “thought” they had insurance, and end up with giant bills that plans deny, or limit due to the “out of network” stated coverage “language” exclusion. Worse, none of it attributes to deductible or maximum out of pocket cost limit protection. Ignoring out of control medical costs and hospitals going out of business by treating uninsured people is a plan, but a plan that will have lasting consequences.
2017 Future Watch…
- We do not expect much 2017 change in ACA on:
- Ten Essential Health Benefits (EHB)
- Medical Loss Ratio & premium refund underwriting rules at 80% & 85%, or community rating rules
- Maximum out of pocket cost limitations (in network)
- Preexisting medical condition prohibition exclusions within OEP (Open Enrollment Period)
- Individual (and SHOP for small employers) tax credits
- ACA reinsurance eligibility inclusive of 3% maximum profit limitation
- Federal Marketplace exchange distribution funding and management
- State exchange distribution & management
- Federal Government re-negotiation of Rx for Medicare and Medicaid, etc.
- Age compression rule that lowers premiums for people age 55-64
- Federal Medicaid eligibility income retrenchment
Legally, any president must honor the law. However, all presidents can, and do, rule by executive order or “decree.” It appears unlikely that the $530 million three-year contract given to the software company (writing/running) the Federal Marketplace will be renewed. This leaves about 14 states using it with real problems enrolling people – especially since most of the major carriers have cut agent commissions 90%-100% and essentially eliminated the distribution network.
Since ERISA, self-insured medical plans are used by most big-businesses; the new president will likely be moved to act on the employer mandates and penalties in 2017 by executive order. The “repeal and delay” rhetoric will make that difficult to avoid in 2017, especially since the Republicans tried to repeal it over 50 times without success. In addition, strengthening federal ERISA law means superseding many state laws prohibiting smaller employers from self-funding at lower deductibles, etc. There is no doubt that paying “fully-insured” premiums is massively more expensive than self-funding at much higher deductibles managed by willing employers. The ACA previous agenda was actively moving toward gutting ERISA and driving healthy, younger workers into the pool to offset the underwriting-death-spiral. The president and the Republicans could strengthen ERISA by superseding restrictive state laws. Taking power away from any state means real challenges – especially where conservative ideology is in play. Not addressing the death spiral means loading a few remaining carriers (typically not for profit companies) with the sickest people, potentially causing eventual insolvency. Blue Cross reported last year that they lost $1.5 billion. They don’t call it “risk” for nothing.
President Trump promised to cut taxes. The effect on our current $19 TRILLION+ federal debt is certain to be important.
- Republicans will likely keep:
- Open Enrollment and Special Enrollment periods (OEP/SEP)
- Individual and small group tax credits (similar to Speaker Ryan’s plan) for individuals but modify “cost sharing” finance and eligibility
- Ten Essential Health Benefits (EHB)
- Unlimited EHB
- Preexisting medical condition underwriting prohibition during OEP and SEP
- Reinsurance program guidelines in place for 2017, inclusive of the imposed 3% profit limit
- MLR in place until the Republicans can come up with a better plan.
- President Trump may look to eliminate by executive order in 2017:
- Employer mandate and penalty
- Individual mandate and penalty
- Federal Marketplace exchange funding ($530 million 3-year contract) at future date
Super important: Where no carrier (or agent) is willing to offer or sell insurance, our “right” to healthcare will (eventually) be provided by federal mandate within the context of well-established federal policy and programs like: Medicare, Medicaid, Tricare, etc. Meaning, where the (quasi) “free” market fails, the government historically steps in to guarantee access to care. Whatever our Republican-controlled government does, President Trump will have to own it.
- President-elect Trump’s plan: https://www.donaldjtrump.com/positions/healthcare-reform
- Speaker of the House Ryan’s Plan: http://abetterway.speaker.gov/_assets/pdf/ABetterWay-HealthCare-PolicyPaper.pdf
Average individual ACA plan premium inflation increased 2,300% (or 23 times) in 2016 more than our about one percent reported inflation. In March 2016, our Congressional Budget Office (CBO) published, “CBO and JCT currently estimate that in 2016 the federal subsidies, taxes, and penalties associated with health insurance coverage will result in a net subsidy from the federal government of $600 BILLION (about 29% of the Federal Budget), or 3.6 percent of gross domestic product (GDP)” (Federal Subsidies for Health Insurance Coverage for People Under 65: 2016 to 2026). Speaker Ryan said on 60 Minutes News Magazine, “We cannot NOT manage the Medicare fund that runs out of money in 10 years. We must make changes to assure it is there for the millennials.” Absent massive war costs yet to be paid off, the single fastest growing federal budget expense is guaranteeing major medical access as a “right”, so there is no way to ignore it (29% of the federal budget) for long without titanic consequences to our $19 TRILLION federal debt. When Clinton left office our federal debt was about a $300 BILLION SURPLUS, and when W Bush left it was about $1 TRILLION in DEBT. It is over $19+ TRILLION now, having grown over 1,900% in seven (7) years. Governing entitlement spending is key to sustaining our brand of democracy.Also View Article on THE EXEC RANKS