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Trump Throws Exchanges into Even Greater Chaos

Trump Throws Exchanges Into Even Greater Chaos

With Donald Trump’s executive order last week to allow the creation of association health plans (AHP’s) to sell across state lines and his related decision to suspend monthly payments of the Exchanges’ cost sharing reduction (CSR) subsidies, the President has thrown American healthcare into even greater chaos. While we understand the President’s penchant for deal making, leverage and high drama, the moves are mind-boggling and show utter contempt for the millions of Americans who rely on Exchange coverage and could lose it due to health plans pulling out of markets or unaffordable premiums.

We have written often about the significant warts of Obamacare. As much as conservatives deserve blame for acting politically now in refusing to craft a reasonable path forward for healthcare, an equal amount of blame goes to the Democrats who, in 2010, also politically acted alone in passing a huge new government entitlement. We think the Affordable Care Act (ACA) needs reform. Its benefits, subsidies and regulations are too rich, costly and onerous.

Nevertheless, millions of Americans have come to rely on this imperfect program and the President seems to look for ways at every pass to undermine its already crumbling foundation. Earlier this year, the administration reduced the open enrollment period and made other changes that will likely increase adversity in the program. The CSR subsidy elimination is the death blow. After numerous insurance commissioners (and even staffers at the Centers for Medicare and Medicaid Services (CMS)) lobbied hard and called in favors with insurers to offer coverage in all U.S. counties for 2018, the prospect of areas with no insurers is again real.

The elimination of the subsidies could lead to insurers pulling out at the last minute. And who could blame them? Without those subsidies, health plans have to absorb losses providing coverage to people with low incomes and high needs. Even if insurers stay in these markets, premiums are likely to rise even more than they already have for 2018. While some plans have already baked in the loss of the CSR subsidies to some degree in rate filings, others have not. Studies suggest that the CSR elimination could lead to an additional 20 percent increase in premiums next year.

We are sympathetic to the fact that the CSR subsidies are technically illegal. A court has determined that the subsidies should be appropriated by Congress. And that should happen.Therefore, the lawsuits filed by numerous attorneys general to force Trump to continue funding them outside of the appropriation process are not likely to succeed. But Trump’s unilateral action to suspend them is wrong given the negative impact on so many Americans and the fact that these subsidies have been paid for almost four years now.

From a sheer public finance perspective, the elimination does not really save the oft-quoted $7 billion and could actually increase government subsidies. The majority of Americans who purchase insurance through Exchanges receive subsidies to pay their premiums and those premiums will go up. Most Americans already pay their maximum share under the law, so Uncle Sam will pick up most of the cost for higher premiums when the CSR subsidies go away. Indeed, additional Americans may qualify for premium subsidies because expected increases trigger a subsidy under the law for certain middle-income families.

But the elimination of the subsidies hurts in so many ways:

  • It undermines confidence in the healthcare system. The chaos alone could drive out healthy people who might assume the system will crumble soon and they will not have to pay a fine/tax.
  • It destabilizes the financial paradigm. As bad as finances in the Exchange have been for health plans (save for a few who have made it work), this makes things even worse.
  • It may lead to plan pullouts; if not in 2018, certainly in 2019.
  • It will lead to additional premium hikes on top of already massive ones the past few years and already booked for 2018. CMS and states are allowing rate adjustments prior to open enrollment.
  • It disenfranchises many of the 7.5 million Americans who don’t get premium subsidies today and will no longer be able to afford coverage due to the premium increases.
  • It erodes the move toward quality-based care, just as the nation is beginning to see real progress.

So, we simply do not understand the President’s motives here, unless this is simply a cruel leverage game to force action in Congress. (Rumor is that the CSR move was a snap decision accompanying the executive order that key Exchange officials at CMS were not even aware of.) If leverage is the point, Trump’s game was pitifully played. Consider this: the President first announced he was suspending CSRs and that the payments were a bailout for greedy insurance companies (despite the fact they support low-income member cost-sharing reductions). A short time later, he seemingly endorsed the bipartisan efforts of Sens. Lamar Alexander and Patty Murray who were busy trying to agree on a stabilization bill. After frantic phone calls from irate conservative GOP lawmakers and discovering that the bill actually would restore the same subsidies he just tanked, the President pulled his support of the bill. Leadership?

Prospects for some sort of bipartisan deal are remote at any rate, even though serious efforts are being made. Responsible Republicans and moderate Democrats are on board to fund the subsidies and take steps to provide some flexibility to states to deal with the flaws of the current system, without touching essential benefits or the pre-existing coverage mandates.They would also expand the ability of Americans of all ages to buy catastrophic plans to keep the relatively healthy in the market. Another bipartisan bill just introduced would also create so-called Copper plans (below Bronze plan benefit levels but above those for Catastrophic ones) to provide lower cost alternatives. But the conservative wing of the GOP wants nothing to do with a bill that will prop up Obamacare. In addition, the Republican leadership in each House is skeptical at best, and antagonistic at worst, about passing a stabilization measure. House Speaker Paul Ryan announced his opposition to the Murray-Alexander Senate bipartisan deal.They know it will drive a stake through the heart of efforts to ultimately repeal Obamacare.

The one small opening is to force the Obamacare stabilization effort into some required spending measures later this year. Theoretically, opponents would then have no choice but to bite their tongues and vote. But, again, would they? The Senate appears to have enough moderate Republicans and all Democrats in support of the stabilization bill’s inclusion in a late-year spending bill. But it would need to be made more “conservative” to get concurrence in the House and to meet a new demand by the President that some steps be taken to dismantle Obamacare. (One small victory: it has been determined that appropriating the subsidies would not be “scored” despite the termination of the payments by the President. This means Congress would not have to find money to appropriate them.)

The executive order itself will have little impact anytime soon, if ever. It seeks to expand AHPs (where businesses pool funding together to reduce risk and premiums) and allows buying of insurance across state lines. The order also calls on departments to consider expanding coverage through low-cost, short-term, and limited-duration coverage options. Theoretically, AHPs and other low-cost plans (which would not be subject to ACA provisions such as pre-existing-condition coverage and essential benefit requirements) could create a dual system of coverage, where the young and healthy abandon the Exchanges sending them into a rate death spiral. Then again, departments of the federal government still need to sort out what to do on AHPs and the other directives in the Trump order he says are needed to provide “the best healthcare” (italics added for sarcasm). Regulations could be months or years in the making.

So, it is the CSR decision that really matters. And for all the reasons above, this was an impetuous move by Trump that even the American public does not support. Consider a Kaiser Family Foundation poll from October 13:

  • About two-thirds of Americans (43 percent of GOP voters and 67 percent of independents) want Congress to work to reform Obamacare rather than repealing and replacing it.
  • 71 percent of Americans (48 percent of GOP voters and 74 percent of independents) want Trump to make the ACA work rather than make it fail.
  • About 60 percent of Americans want the CSR funding to continue (38 percent of GOP voters and 62 percent of independents).
  • 70 percent of Americans are not too confident or not at all confident that Trump and Congress can work together to improve the ACA.
  • 54 percent of Americans want a healthcare solution to be a priority.

Separately, 53 percent of respondents in an Economist/YouGov poll said they opposed the CSR cutoff.

We don’t pretend to offer sage political advice in this healthcare blog, but the President and the right flank of the GOP seem to be catering to a minority of Americans in their pursuit of pummeling the ACA into oblivion. In fact, the independents and Republicans cited in the statistics above came out en masse to elect the President and return the GOP to Congress. Many of these same Trump voters benefit in a great way from the Exchanges and the ACA. We would think smart politicians could craft sensible reforms and still seize the political mantle of Obamacare repeal and replace. The American public already seems to be there.

Marc Ryan

Marc S. Ryan serves as MedHOK’s Chief Strategy and Compliance Officer. During his career, Marc has served a number of health plans in executive-level regulatory, compliance, business development, and operations roles. He has launched and operated plans with Medicare, Medicaid, Commercial and Exchange lines of business. Marc was the Secretary of Policy and Management and State Budget Director of Connecticut, where he oversaw all aspects of state budgeting and management. In this role, Marc created the state’s Medicaid and SCHIP managed care programs and oversaw its state employee and retiree health plans. He also created the state’s long-term care continuum program. Marc was nominated by then HHS Secretary Tommy Thompson to serve on a panel of state program experts to advise CMS on aspects of Medicare Part D implementation. He also was nominated by Florida’s Medicaid Secretary to serve on the state’s Medicaid Reform advisory panel.

Marc graduated cum laude from the Edmund A. Walsh School of Foreign Service at Georgetown University with a Bachelor of Science in Foreign Service. He received a Master of Public Administration, specializing in local government management and managed healthcare, from the University of New Haven. He was inducted into Sigma Beta Delta, a national honor society for business, management, and administration.

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