Will Trump’s push for flex­i­bil­ity save or sink in­surance mar­kets?

Modern Healthcare - - News - By Shelby Liv­ingston

STATES AND EM­PLOY­ERS are get­ting a lot more lee­way in the types of health in­surance they can of­fer res­i­dents and work­ers, en­sur­ing the like­li­hood that dif­fer­ences in ac­cess and af­ford­abil­ity of cov­er­age will con­tinue to widen in the name of ex­pand­ing con­sumer choice and re­duc­ing reg­u­la­tory bur­den.

But ob­servers are di­vided over whether the Trump ad­min­is­tra­tion’s moves last week to al­low states to side­step cer­tain as­pects of the Af­ford­able Care Act through new 1332 waiver guid­ance and al­low­ing em­ploy­ers to pay for work­ers’ in­di­vid­ual mar­ket pre­mi­ums through health re­im­burse­ment ar­range­ments will ul­ti­mately harm the mar­ket­place and its en­rollees. Ul­ti­mately, it will de­pend on how states and em­ploy­ers choose to ex­er­cise their new­found flex­i­bil­i­ties.

Health­care providers, too, worry that un­der­min­ing the ACA in the guise of in­creas­ing choice could hurt their op­er­a­tions, both fi­nan­cial and clin­i­cal.

“The ap­proach that will prob­a­bly be taken by many states will be to turn the clock back in the in­di­vid­ual mar­kets with prod­ucts that may ap­pear to have a good price tag but will prove to be penny-wise and pound-fool­ish if con­sumers be­come sick,” said Chip Kahn, CEO of the Fed­er­a­tion of Amer­i­can Hos­pi­tals, which rep­re­sents in­vestor-owned hos­pi­tals.

The CMS’ over­haul of the 1332 waivers states use to by­pass or al­ter ACA el­e­ments like the in­di­vid­ual and em­ployer man­dates re­places an Obama-era guid­ance—crit­i­cized by some states for be­ing too rigid—and lifts sev­eral re­stric­tions that limit the changes a state can make.

Among the big­gest shifts, the fed­eral gov­ern­ment will now eval­u­ate waiver ap­pli­ca­tions based on how a state’s pro­posed changes would af­fect the avail­abil­ity of com­pre­hen­sive and af­ford­able cov­er­age even if res­i­dents don’t en­roll in that cov­er­age. Pre­vi­ously, the CMS as­sessed a waiver ap­pli­ca­tion’s im­pact on the cov­er­age peo­ple pur­chase. The new guid­ance also ex­pands the def­i­ni­tion of cov­er­age to in­clude short-term plans and as­so­ci­a­tion health plans, which don’t in­clude all the con­sumer pro­tec­tions found in ACA-com­pli­ant plans.

And while waivers were de­nied un­der the pre­vi­ous guid­ance if a state’s plans would re­duce cov­er­age for the low-in­come, el­derly or sick, the CMS will con­sider a pro­posal that “makes cov­er­age much more af­ford­able for some peo­ple and only slightly more costly for a larger num­ber of peo­ple,” the guid­ance stated.

Matt Fiedler, an econ­o­mist with the Brook­ings In­sti­tu­tion, warned that the guid­ance would al­low for waivers that shift costs from higher in­come peo­ple to those with lower in­comes. He pre­dicted some states could re­duce or take away sub­si­dies for ACA-com­pli­ant cov­er­age and in­stead use it to sub­si­dize peo­ple who en­roll in short-term plans. As health­ier peo­ple left the ACA ex­changes, the ACA mar­ket would be­come sicker, prompt­ing in­sur­ers to raise pre­mi­ums that few could af­ford with­out fed­eral fi­nan­cial as­sis­tance.

CMS Ad­min­is­tra­tor Seema Verma con­firmed last week that states could change who gets sub­si­dies and po­ten­tially ap­ply sub­si­dies to short-term plans, which are not avail­able to peo­ple with pre-ex­ist­ing con­di­tions.

That wor­ries health­care providers. “We see pa­tients when they are most in need, and if they were short­changed in their in­surance pur­chase then they are go­ing to have un­af­ford­able cost-shar­ing, or they may ac­tu­ally lack cov­er­age for needed ser­vices when they are sick,” Kahn said. “That means we have to worry about the fi­nan­cial re­la­tion­ships be­tween the hos­pi­tals, physi­cians and pa­tients when all of us should be fo­cus­ing on care for the pa­tient only.”

Molly Smith, vice pres­i­dent for cov­er­age and state is­sues at the Amer­i­can Hos­pi­tal As­so­ci­a­tion, said in an emailed com­ment that while the AHA sup­ports the use of waivers, short-term plans “will lead to in­creased bad debt, with un­der­in­sured pa­tients un­able to af­ford the

care they need but that is not cov­ered.”

Still, oth­ers doubted the guid­ance would harm the in­di­vid­ual mar­ket. Doug Badger, a health­care pol­icy ex­pert at the con­ser­va­tive Her­itage Foun­da­tion, said sim­i­lar fears were present when the in­di­vid­ual man­date penalty was ze­roed out, yet pre­mi­ums next year are go­ing down. A more press­ing prob­lem is that peo­ple are opt­ing to forgo cov­er­age rather than pay an un­af­ford­able pre­mium; the 1332 guid­ance “will let states be a lit­tle more cre­ative to at­tack the prob­lem,” he said.

The re­quire­ment that waivers con­tinue to be bud­get-neu­tral could limit state ac­tions that would in­crease in­di­vid­ual mar­ket pre­mi­ums, said Tri­cia Beck­mann, a di­rec­tor at Fae­gre Baker Daniels Con­sult­ing, adding that as bench­mark pre­mi­ums in­crease, so do the amount of fed­eral sub­si­dies, and the state may have to fig­ure out how to off­set that cost.

Some doubt that many states will run with the in­creased waiver flex­i­bil­ity. Be­cause of the guid­ance’s em­pha­sis on pro­mot­ing pri­vate cov­er­age over pub­lic pro­grams and de­creas­ing reg­u­la­tion, Demo­cratic-lean­ing states might have a harder time push­ing pub­lic op­tions or Med­ic­aid buy-in pro­grams through the waiver process. While some states may be very in­ter­ested in pur­su­ing a waiver, bar­ri­ers may pre­vent them from mak­ing dra­matic changes, said Joe An­tos, a health pol­icy ex­pert at the right-lean­ing Amer­i­can En­ter­prise In­sti­tute.

For in­stance, the guid­ance al­lows gov­er­nors to push a waiver with­out leg­isla­tive ac­tion. But gov­er­nors would still want to main­tain the sup­port of law­mak­ers and the in­dus­try or they’ll have trouble in the next elec­tion, An­tos sug­gested.

Only eight states have ob­tained waivers so far and most of them were for rein­sur­ance pro­grams to lower pre­mi­ums. Idaho and Iowa both aban­doned ef­forts to es­tab­lish al­ter­na­tive in­surance mod­els un­der 1332 waivers.

Idaho In­surance De­part­ment Di­rec­tor Dean Cameron said he is un­likely to pur­sue a 1332 waiver un­der the new guid­ance. The state’s push for a dual 1332 and 1115 Med­ic­aid waiver failed to get through the Leg­is­la­ture this year. And Cameron won’t pur­sue a waiver for Idaho’s “state-based plans” that would al­low in­sur­ers to get out of some ACA rules if they also of­fered ACA-com­pli- ant plans. He said the guid­ance changes don’t go far enough. Al­low­ing states to by­pass ACA rules in­clud­ing the re­quire­ment that in­sur­ers use a com­mu­nity rat­ing to set pre­mi­ums would save con­sumers the most money, he said.

Ques­tions re­main over how the guid­ance jibes with the law. Katie Keith, a health pol­icy ex­pert at Ge­orge­town Univer­sity, said 1332 waivers do not al­low states to waive con­sumer pro­tec­tions in­clud­ing the ban on pre-ex­ist­ing con­di­tion ex­clu­sions and un­der­writ­ing based on health sta­tus. Yet the guid­ance al­lows the ex­pan­sion of short-term plans, which do both of those things.

Nick Bagley, a Univer­sity of Michi­gan law pro­fes­sor, ex­pects to see law­suits once HHS grants a waiver.

More op­tions for em­ploy­ers

Whether many em­ploy­ers jump at the chance to ditch their group health plans and send work­ers to the in­di­vid­ual mar­ket to buy cov­er­age with a tax-free health re­im­burse­ment ar­range­ment is also in ques­tion.

Em­ploy­ers with fewer than 50 work­ers al­ready have this op­tion, thanks to the 21st Cen­tury Cures Act. But a pro­posed rule is­sued last week by HHS and the depart­ments of La­bor and Trea­sury would al­low com­pa­nies of all sizes that don’t have group health plans to pay for em­ploy­ees’ in­di­vid­ual pre­mi­ums through HRAs, and do­ing so would sat­isfy the re­quire­ment that em­ploy­ers with more than 50 work­ers of­fer health in­surance, fed­eral of­fi­cials said.

The pro­posed rule would also al­low em­ploy­ers that do of­fer group health plans to fund HRAs with up to $1,800 that work­ers could use to buy cer­tain ben­e­fits, like den­tal in­surance or pay for short- term plan pre­mi­ums. The U.S. Trea­sury ex­pects 10 mil­lion em­ploy­ees spread across 800,000 em­ploy­ers would have in­surance through HRAs, and al­most 1 mil­lion would be newly in­sured.

Some em­ploy­ers could find the flex­i­bil­ity at­trac­tive, par­tic­u­larly those in in­dus­tries like re­tail or hos­pi­tal­ity with high em­ployee turnover or lots of sea­sonal work­ers, said John Bar­kett, se­nior di­rec­tor of pol­icy af­fairs at Willis Tow­ers Wat­son.

On the other hand, em­ploy­ers that have long of­fered health­care ben­e­fits to at­tract and keep their ta­lent may stick with their cur­rent strate­gies.

Some crit­ics worry that in­te­grat­ing HRAs with in­di­vid­ual cov­er­age would lead em­ploy­ers to dump their sick­est work­ers into the in­di­vid­ual mar­ket­place. That would lead to a sicker in­di­vid­ual mar­ket over­all and higher pre­mi­ums as a re­sult. That con­cern led the Obama ad­min­is­tra­tion in 2013 to for­bid such a move.

It’s log­i­cal that em­ploy­ers would dump the un­healthy, but “I think it’s sim­i­larly easy to con­clude your startup com­pany with 28-year-olds doesn’t want to of­fer a group health plan,” said Chris Con­deluci, a health pol­icy con­sul­tant and for­mer GOP Se­nate staffer. “They just want to give their em­ploy­ees money to pur­chase a health plan. So now you have a bunch of 28-year-olds en­ter­ing the in­di­vid­ual mar­ket and that ar­guably has a pos­i­tive ef­fect on the risk pool.”

To mit­i­gate the in­cen­tive to dump the un­healthy, the pro­posed rule pre­vents em­ploy­ers from of­fer­ing both a group health plan and an op­tion to seek in­di­vid­ual cov­er­age with an HRA. It’s one or the other. It also stip­u­lates that em­ploy­ers who opt to pro­vide HRAs for in­di­vid­ual cov­er­age must of­fer the same terms to all in a class of em­ploy­ees, such as full­time or sea­sonal work­ers.

Even so, Kahn said, un­der HRAs em­ploy­ers could shift more costs onto their em­ploy­ees. While giv­ing work­ers more “skin in the game” in choos­ing how to ac­cess care might sound like a good idea, “fre­quently em­ploy­ees aren’t able to build up enough fund­ing to have the kind of re­sources they need when they are sick.” ●

Source: AHA An­nual Sur­vey Data, 1990-2016

Un­com­pen­sated care pro­vided by hos­pi­tals

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