Health Insurance and Managed Care

Public Health: Bipartisan Health Proposal Is Too Late for 2018, but a Salve for 2019

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It would make it easier for state governments to tweak Obamacare’s rules on how they run their markets, easing the way for more experiments. The draft bill would make the application process for such “state innovation waivers” easier to complete, but would still require that the state plans cover a similar number of residents and offer insurance with “comparable affordability” to plans established under the Affordable Care Act.

It would allow more Americans to sign up for very high-deductible insurance plans known as catastrophic insurance under the Affordable Care Act. The current law limits those plans to customers under 30 years old, or those who have demonstrated they cannot afford other insurance options.

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The draft legislation would also ensure that the federal government assigns money for advertising about the Obamacare enrollment period and for hiring professionals to help customers select and sign up for plans; the money would be a portion of the fees it collects from insurers selling plans on HealthCare.gov. The Trump administration had slashed the budget for both programs in August.

It does not include one of the industry’s biggest requests: funding that would protect insurers from high costs associated with very expensive patients. Insurers and other experts who testified before the Senate health committee said such a program could help substantially lower premiums. But states may be able to use innovation waivers to establish such programs themselves. Alaska has already had such a waiver approved by the Trump administration.

The insurers were generally supportive of the plan, and one of the main associations, America’s Health Insurance Plans, came out with a statement in favor of the proposed bill. But some emphasized that the legislation does not fix all of what ails the market. “We’ve stated repeatedly that the individual market is not stable,” said Joseph R. Swedish, the chief executive of Anthem, a large for-profit insurer that offers Blue Cross plans in several states, although he praised lawmakers’ efforts to provide more certainty in 2019.

The deal’s prospects in Congress remain uncertain. Though some senators from each party have endorsed its approach, several Republicans have spoken out against it. In the House, a spokesman for Speaker Paul Ryan said that “the Senate should keep its focus on repeal and replace of Obamacare.”

But even if the deal moves forward quickly, it is unlikely to affect next year’s health plans. Carriers in most states have raised their prices substantially to make up for the canceled federal payments, and there is little time for them to lower them again if the payments are restored. (The draft bill tries to address this problem, by asking states to establish a new rebate program, where carriers who get paid twice would need to pay back the federal government.)

“For 2018, it probably won’t happen in time,” said Timothy Jost, an emeritus professor of law at Washington and Lee University, who monitors health legislation closely. “The carriers are thinking now about 2019, and it’s very important for 2019.”

Insurance plans for each year go on sale during the prior fall, but the process of devising plans and setting prices begins months earlier. This year, many current insurers announced their exits from the 2018 Obamacare markets months ago, some explicitly naming President Trump’s threats about the cost-sharing payments as a reason. Analysts said it was unclear whether the plan might lure reluctant insurers back into the markets, but they said the funding would cause many insurance premiums to fall in 2019.

But the lengthy planning process of insurers means that the proposed bill’s two-year funding cycle could lead to another round of price increases in 2020, if an extension bill isn’t passed far in advance. Many insurers had been hoping that the Alexander-Murray legislation would make the funding permanent.

While Mr. Trump has insisted he will not support any legislation that he believes to be a bailout to the insurers, policy experts say the insurers are getting only what they are due under the law. Because the insurers set the prices for their 2017 plans assuming they would receive the federal funding, the president’s decision represents more than $1 billion in lost payments, according to a recent analysis from Avalere Health, a consulting firm.

The funding has not contributed to outsize profits for the insurers selling individual policies under the law, in spite of Mr. Trump’s recent tweet about the insurers “who have made a fortune w/ O’Care.” “Most insurance companies have lost money trying to pursue these exchange markets,” said Dan Mendelson, Avalere’s president. Under the Affordable Care Act, insurers are not allowed to pocket more than 20 percent of their premium dollars for overhead and profits. If they earn more, they are required to return the excess to consumers through rebates.

The insurers generally lost money in the first three years of the Obamacare market, said Deep Banerjee, an analyst for Standard & Poor’s, though it appears they were faring better this year, before the cancellation of government payments. “It is not a market that has been profitable for them,” he said. While there are exceptions, most insurers are making their money in other insurance markets like the government programs Medicare and Medicaid as well as in the much larger employer market.

“It gives the market some measure of predictability,” Mr. Banerjee said, but he emphasized that the legislation “is not a permanent solution.” Much of what it does is restore the funding that already existed before President Trump’s announcement that he was cutting it off. “It’s not a huge additional support for the market.”

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Wendy Pettit

Wendy Pettit is a writer for NYT and writes for other publications on her spare time. She lives in Chicago with her husband and her dog Zuko.

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