Trump Executive Order

Chapter 1

Issam Zeinoun - October 13th 2017

Get ready to talk the talk with your friends, because it's not over yet. The main provisions of the Executive Order that took the industry by surprise can be summarized as follows:

1. Discontinue the Cost Share Reduction Payments to Insurers.

2. Expand the reach of Association Health Plans across state boundaries.

3. Extend Short Term Insurance from 3 months to 12 months.

4. Expanding Health Savings Accounts usage by employers.

Provisions 2, 3 and 4 clearly require a change in the law, new plan designs, etc. and thus will take time to become a reality, say 9 months minimum. However, the first issue is a hairy one; I'll explain why below. For now, you need to know that the Acting HHS Secretary, Eric Hargan (appointed by Trump on 10/11/2017) declared it effective immediately on 10/12/2017, referencing an opinion letter written by Attorney General Jeff Sessions, on 10/11/2017.

Know it with Some Depth

CSR payments go to Insurers to cover for discounts on member out of pocket costs, i.e., Copays and Deductibles. CSR Payments are a provision in ACA Section 1402 which basically says that Health Insurers must reduce member costs on Silver Plans, for eligible insureds, but HHS will compensate the difference so it does not come out of the Insurer's pocket.

The question that remains unanswered is, “How and who will pay for it?”. ACA did not specify where that money will come from and how to provision these funds. In the past four years, CSR payments were coming from IRS funds, somewhat justified by an IRS law 31. U.S.C Section 1324. President Trump and his supporters are saying that Section 1324 is not clear on payments to Insurers, and as such, the payments should be stopped.

What’s Next?

It remains to be seen what will really happen because the ACA clearly relieves Insurers from pocketing the imposed Out of Pocket reductions. Despite the headwinds, the industry continues to move forward toward sustainable business models for all stakeholders, and innovative approaches that overcome traditional barriers.

Stay tuned for our next chapter of President Trump's Executive Order on Healthcare and read more on Fiercehealthcare.com.

Chapter 2

Issam Zeinoun, created 10/22/2017 updated 11/15/2017

As premiums continue to grow to the tune of 25% per year, with or without CSR payments, states struggle to increase subsidies, assisting insurers and consumers. The trend in congress is to relax some of the ACA restrictions to allow less comprehensive coverage at reduced prices. Payers will need to further excel in product innovation, operational efficiencies, risk containment and care coordination.

States Take Action

Maryland's commissioner approved Silver Plan rate increases nearly doubling the HMO rate increase for 2018. Commissioner Redmer’s press release has only two participating plans: CareFirst and Kaiser.

Colorado's commissioner had anticipated Cost Sharing Reduction (CSR) cuts prior to the 2018 rate filings and had requested all insurers submit two rate tables, one with CSR and another without. In its October 19th public forum, the Department of Regulatory Agencies said that without CSR, the average rate increase would be 34.3%, instead of the 26.7% with CSR.

Oregon requested rate increases to compensate for CSR losses on October 12th, with a 36-hour comment period starting October 16th. The commissioner allowed the addition of 7.1% to the original approved Silver Plan rates, making the new rates published 2x and 3x their original values. Though the Division of Financial Regulation did not specify subsidizing this increase, it said on October 20th that CMS funding for a reinsurance state-program is targeting the reduction of all rates by 6%, which almost compensates for the 7.1% add-on.

Other states had anticipated the CSR disruption and allowed insurers to build this into their rate submissions. Florida approved rates on September 25th that included a 31% hike in rates for Silver Plans to compensate for a predicted CSR cut.

California is locked into fire control and is focused on ensuring that homeowners get their fair share of support from their home insurers. Despite the raging fires, California's commissioner expressed his great dissatisfaction with the CSR cuts and plans to sue the federal government in 2018 as mentioned in his press release on October 13th.

Congressional Efforts

The proposed bipartisan agreement of senators Patty Murray and Lamar Alexander guarantees two years of CSR Payments to insurers. The bill has various compromises attached, including the permission for states to offer less comprehensive plans than is now required by the ACA. The bipartisan response comes at a time when CMS is predicting that almost 61 counties could be left with zero carriers, and 25% of the market having only one carrier.

Public Opinion

Referencing the October Kaiser Health Tracking Poll, the majority of Americans favor stabilizing the current ACA marketplace over a repeal (66% vs. 29%) [See poll for a breakdown by party affiliation]. To that end, roughly 69% (across all parties) support continuing CSR payments but giving states more flexibility in plans sold in their marketplaces.

Chapter 3

Issam Zeinoun, 10/31/2017

Since the writing of Episode 2, the Congressional Budget Office released a report on the Bipartisan Health Care Stabilization Act of 2017, estimating savings of $3.8 billion over ten years [source]. Concurrently, discussions continue on the opportunities and pitfalls of Association Health Plans, and states are stuck with the reality of the CSR issue, working with Insurers to increase rates on Silver Plans and offset the cost to consumers with deeper subsidies.

The Bipartisan Health Care Stabilization Act (BHCSA)

The BHCSA helps states make use of Section 1332 of the ACA, to waive or revise ACA’s provisions, including its mandates, subsidies, and benefits; as long as no one is turned down or priced based on pre-existing conditions.

But Section 1332 has two complications: a) A complex approval process, and b) a vague requirement for “comprehensive” benefits. For now, the focus is on resolving the first issue: Expedite and simplify the approval process. But many are calling out the need to clearly define “comprehensive” benefits, so that states can better innovate around plan designs [source].

Another provision of the BHCSA is the expansion of Catastrophic Plans (Copper Plans), today only available to 30 year-olds or younger. Such plans would be cheaper and still support advanced medical needs. However, low coverage for preventative care usually leads to higher medical cost in the long run. Also, these plans will attract the healthy, pushing the sicker into higher metal plans, eventually pushing those prices even higher.

In return for these changes, the BHCSA will continue CSR payments to insurers for two more years, containing premium levels to a certain extent. It’s unclear if the BHCSA will pass as a law, but it has started a necessary dialogue and is bringing new ideas to the table.

Association Health Plans

AHPs have been talked about for 20 years [source], and now Trump’s Executive Order (EO) is bringing them back. AHPs allow small businesses to join together under a single insured entity, increasing the risk pool and creating negotiation powers otherwise only available to large corporations. To further extend their size and reach, the EO wants AHPs to be regulated at the federal level, and bypass state insurance regulations. The idea is scaling to reduce prices.

Three issues come to mind here [source]: a) The quality of these health plans, b) the adverse selection and market segregation that could result, c) the financial stability of these entities. Though these issues can be regulated to some degree, the question is whether the overhead costs of managing and regulating AHPs would leave much savings to consumers.

Conclusion Health insurers are regulated to spend no more than 15% of their revenue on administration, and 85% on medical costs. Today’s focus is on that 15%, whereas most of the opportunity lies in that 85%. It’s time to refocus on improving overall population health and optimizing utilization and costs of medical care.