Congress passed the $1.3 trillion omnibus spending bill, avoiding the third government shutdown since January or a sixth stopgap spending bill in the fiscal year that started on October 1, before leaving Washington for a two week congressional recess. Meanwhile, the Trump Administration released a report suggesting that insurers have profited from the Affordable Care Act (ACA), and suggested possible exemptions to the ACA’s tax penalty for uninsured. We cover this and more in our weekly health care review.
President Signs Spending Bill After First Threatening Veto
After first suggesting he may veto the new 2,232 page budget bill (HR 1625) passed by Congress, President Trump signed the huge $1.3 trillion budget bill on March 23, funding the federal government through October, and averting a third government shutdown.
The House of Representatives approved the bill by a 256-167 vote on Thursday and the Senate approved it 65-32 early Friday morning, after Senator Rand Paul (R-KY) relented on his apparent threat to withhold his vote over what he called excessive spending. Paul forced a brief shutdown in February after refusing to allow the stopgap spending bill to come to the floor.
The bill provides $78 billion (a $10 billion increase) in funding for the Department of Health and Human Services (HHS) and an additional $3.6 billion to combat the opioid crisis, but kept funding flat for the Centers for Medicare and Medicaid Services (CMS). However, most notably, not without a last ditch effort to include health insurance stabilization measures for cost-sharing reduction (CSR) payments and reinsurance.
On Monday, March 19, Senate Health, Labor and Pensions (HELP) Committee Chair Lamar Alexander (R-TN), Senator Susan Collins (R-ME), House Energy and Commerce Committee Chair Greg Walden (R-OR), and Representative Ryan Costello (R-PA) introduced legislation for the market stabilization package – the Bipartisan Health Care Stabilization Act of 2018. The bill would have provided $30.5 billion over three years for reinsurance programs, in addition to funding for CSRs for plan years 2019 through 2021, flexibility for states requesting section 1332 state innovation waivers, and expanded catastrophic plans.
Without CSRs or reinsurance, insurers are expected to increase exchange premiums when they start to set rates in October, though Senator Murray expressed hope that legislators could go back to the table and resume bipartisan talks. For the past seven months, senators Alexander and Murray have been working on a bipartisan measure to stabilize the ACA market and reduce premiums. Senators Collins and Nelson (D-FL) have also been working on reinsurance legislation. Without many remaining “must pass” bills, and the split between some Democrats and Republicans within their own ranks, it’s unclear if either bill will ever reach the House or Senate floors in an election year.
Senator Elizabeth Warren Introduces Consumer Health Insurance Protection Act
On March 21, Senator Elizabeth Warren (D-MA) introduced the Consumer Health Insurance Protection Act, which aims to make insurance more affordable, protect enrollees from premium hikes, allow more people to qualify for tax credits, and impose tighter controls on private insurers.
The bill would:
- Establish an 85 percent MLR irrespective of group size (the ACA sets an 85 percent MLR only for large groups, 80 percent for small group and individual plans
- Guarantee that every exchange enrollee has access to a plan that covers 80 percent of out-of-pocket costs and costs no more than 8.5 percent of income in premiums
- Cap out-of-pocket prescription drug costs for those on private plans at $250 a month, or $500 per family
- Set limits on insurance company profits to match what those private insurers can earn from Medicare and Medicaid
- Provide additional funds for ACA outreach and enrollment efforts.
- Require patients to be notified when doctors are dropped from the network and are protected if they rely on an inaccurate provider directory or have a plan discontinued while in an active course of treatment
- Prohibit surprise bills for emergency room care
- Protect against unreasonable premium increases with stronger rate review standards
The bill is co-sponsored by Democratic Senator Kamala Harris (CA), Maggie Hassan (NH), Kirsten Gillibrand (NY) and Tammy Baldwin (WI), in addition to Independent Bernie Sanders (VT); many of whom are likely to run on the more progressive wing of the Democratic Party in the 2020 presidential race. This bill isn’t going anywhere this year, but Senator Warren and the bill cosponsors appear to be floating a plan that could win broad support within the party and actually pass in some form if they retake Congress and the White House in 2020.
Democrat Wins Pennsylvania House Election
On March 21, Republican state Representative Rick Saccone conceded the March 13 special election in Pennsylvania’s 18th Congressional District to his Democratic opponent Conor Lamb.
Lamb held a lead of only 668 votes (out of more than 200,000 cast) at the time of Saccone’s concession. National and state Republicans had been asking voters to send in reports of irregularities, and the state party has sent letters to the Pennsylvania Secretary of State and the Department of Justice asking them to look into alleged irregularities. These efforts are essentially a moot point given Saccone’s concession. “While there are less than 800 votes separating us, the people of the 18th District deserve to have a voice representing them in Congress,” Saccone said in a statement.
The election has not been officially certified and it’s unclear when Lamb will be sworn in. More significant than the seat itself, which in its current form will disappear following a state Supreme Court mandated restricting map, is the tone the result sets for Democrats nationwide. It is a district that President Trump won in 2016 by 20 points, and where Democrats failed to even field a candidate to face Tim Murphy (who resigned last fall following a personal scandal) in 2014 and 2016. Lamb’s victory also puts Democrats one seat closer to the 23 seats they now need to retake control of the House of Representatives in November.
Lamb’s victory might also convince some Republicans in more competitive districts to retire. On March 24, Representative Ryan Costello (R-PA) reportedly informed state and local Republican officials that he would not seek a third term representing the state’s 6th congressional district. Costello was facing a difficult midterm race in a district with a growing Democratic voter base. Costello is the 39th Republican lawmaker to announce retirement this year.
Health care was ranked as a top issue by 52 percent of voters, according to a survey by Public Policy Polling, a left-leaning firm traditionally aligned with Democrats. The health care voters broke hard for Connor Lamb: 64 percent of those who said it was their No. 1 issue backed the Democrat, and 62 percent of the people who said it was very important supported him. Meanwhile, 52 percent of district voters opposed Republican plans to repeal the ACA, while only 39 percent approved
House Passes ‘Right to Try’ Bill on Second Try
On March 21, the House adopted a so-called ‘Right to Try’ bill (HR 5247) that would give terminally ill patients the right to seek drugs in clinical trials, but not approved by the Food and Drug Administration (FDA), 267-149. The House voted 259-140 on March 13, which fell seven votes short of the two-thirds majority needed for passage under suspension of the rules. The March 21 vote required only a simple majority for passage, since it was taken under regular order
The Senate passed a similar bill by unanimous consent in 2017, though it differs enough from the bill under consideration that the House and Senate will have to reconcile the two bills. U.S. Senator Ron Johnson (R-WI) took to the floor immediately after the Senate passed its government spending package, and asked for unanimous consent to proceed to immediate consideration of the House bill. Minority Leader Chuck Schumer (D-NY) objected, but suggested that he would work with him on a Senate bill that address changes to the House bill.
Both bills would allow terminally patients to access drugs that have completed a Phase 1 clinical trial, and remove FDA from the process of signing off on certain patients accessing experimental treatments and instead allow institutional review boards to essentially make such decisions. However, neither bill would mandate or encourage companies to provide such treatments to those with terminal illnesses, which is usually the rate-limiting step as FDA typically signs off on 99 percent of all expanded access requests.
House Members Launch Health Care Innovation Caucus
A bipartisan group of House members have launched a new caucus to promote federal policies that will shift the U.S. health system toward value-based payment models. Representatives Ami Bera (D-CA), Mike Kelly (R-PA), Ron Kind (D-WI), and Markwayne Mullin (R-OK.) said the new Health Care Innovation Caucus will look to “advance a legislative agenda that encourages innovative policy ideas to improve the quality of care and lower costs for consumers.”
In their official announcement, the members stressed the need to maintain the rapid pace of change driven by the transformation from volume-based payment models to value-based ones. The group will promote legislation encouraging value-based policies, including innovative payment models and the new technologies that underlie them.
“Old and outdated payment models stand in the way of innovation and quality care,” said Mullin.
On March 21, the White House Council of Economic Advisers released a new report, finding that despite initial financial losses in the individual market after the ACA went into effect, health insurers have prospered under the law.
“Despite significant initial financial losses in the individual market after the key provisions of the ACA took effect, health insurer profitability in the individual market has risen due to substantial premium increases, government premium tax credits that pay for those premium increases, and the large, government-funded, Medicaid expansion,” the report concludes. It adds that those insurers “can expect to become more profitable this coming year due to the recent tax reform.” Some of the largest health insurers expect net income to increase between 8.7 percent and 19.6 percent in 2018 over the previous year, due in large part to the tax cuts, according to the report.
Health insurers’ stocks have strongly outperformed gains in the S&P 500 since the ACA’s main provisions began taking effect in 2014. Stock prices of health insurance companies rose by 272 percent from January 2014 to 2018, resulting in improved profitability and surpassing S&P gains by 106 percent the council wrote.
The findings are viewed by some as an implicit rebuttal to critics who have accused the Administration of “sabotaging” the law, and the timing of the release suggests that it may have been intended to signal opposition to the market stabilization provisions that were ultimately not included in the omnibus budget bill. Profit margins notwithstanding, a March 19 Robert Wood Johnson Foundation report found that insurers in the ACA markets still face uncertainty given the rollback of the individual mandate and the risk that an expansion of short-term, limited-duration plans and association health plans could further disrupt ACA market stability.
Rising Health Insurance Premiums Loom as an Election Issue
With health insurance premiums expected to jump right before the November elections, a result of Congress’s omission of insurance stabilization measures from its new spending package, a political battle has already begun over how to cast the blame for the expected rate increases.
Democrats blame Republican congressional leaders for the failure of negotiations over the stabilization funding; arguing that Republican leaders suddenly inserted abortion restrictions they knew would be unacceptable to Democrats. Republicans argue that they negotiated in good faith and that Democrats rejected reasonable rules on abortion.
The finger-pointing comes as healthcare is expected to be a top issue in November’s midterm elections. Both parties face political risks, although polls have voters are more likely to hold Republicans responsible for higher costs and an increase in the uninsured. In a Wall Street Journal/NBC News poll, 43 percent of voters said Democrats would do a better job handling health care, and 26 percent said Republicans. Moreover, a Kaiser Health tracking poll released earlier this month found that 54 percent of respondents said they had a favorable view of the ACA – the highest favorability for the law in more than 80 tracking polls taken since 2010.
Policy experts disagree on how much a stabilization bill would have helped as higher premiums will be offset for many people by other subsidies. Even some supporters of the law expressed concern that the stabilization plans could backfire because additional public funds would allow insurers to keep premiums lower, thereby reducing the size of individual subsidies. Adding to the mix, House and Senate conservatives have framed stabilization funding as a bailout of insurers in the past, and were concerned they would be punished for giving billions to private companies and shoring up a law that they have continuously promised to repeal.
Still, many incumbents of both parties worry they could face political blowback in October (when insurers announce premiums for 2019) due to the optics of dramatically higher premiums. Expect Democrats to remind voters of the Congressional Budget Office (CBO) estimates that insurance stabilization would reduce premiums by 10 percent in 2019 and by 20 percent in 2020 and 2021.
Self-Insured Plans Gaining Among Small Businesses
New research by the Employee Benefit Research Institute (EBRI) finds that small and midsized companies are increasingly providing self-insured health plans to their employees, but the number of large firms doing the same has declined since the enactment of the ACA in 2010.
EBRI’s Issue Brief, Self-Insured Health Plans: Recent Trends by Firm Size, 1996‒2016, found that the percentage of private-sector employers offering health plans at least one of which is self-insured has continued a growth trend that started in 2000. In 2016, 40.7 percent self-insured at least one of their health plans, up from 39 percent in 2015.
The increase has been ongoing among small and mid-sized employers. The analysis shows that between 2013 and 2016, for small employers, the percentage increased from 13.3 percent to 17.4 percent (a 31% increase), with most of the increase occurring in 2016. For mid-sized establishments, the percentage increased from 25.3 percent to 29.2 percent (a 15.4% increase).
Between 2013 and 2016, the self-insurance trend for large employers continued to decline, falling from 83.9 percent to 78.5 percent. Because many more employees work for large firms, the increase in self-insurance among small employers was not large enough to offset the decline among large firms, resulting in a decrease in the percentage of covered workers enrolled in self-insured plans. Between 2015 and 2016, the percentage of enrollees in self-insured plans fell from 60 percent to 57.8 percent.
Experts and analysts predicted that more employers of all sizes would turn to self-insured health plans as the ACA was fully implemented, as the plans tend to be less expensive to offer.
“While these data are consistent with the perspective set forth … that the ACA would cause more small employers to adopt self-insured plans, there are now questions as to why the recent movement to self-insured plans in the midsized market may be reversing itself,” according to the report.
In The States
Connecticut Individual Mandate Bills Stall in Committee
Two bills that would establish an individual mandate in Connecticut failed to pass out of committee, but Senate President Martin Looney suggested that he would consider reviving the proposal by offering an amendment to other legislation.
Under a bill submitted by Governor Dannel Malloy (D), residents would be fined $500 or 2 percent of their annual income if they didn’t comply with the state mandate for the entire year — or 1/12th of that for each month that they were not in compliance. The second bill, introduced by the Assembly Insurance Committee, would impose a penalty of 9.66 percent of their income each year (capped at $10,000) if residents failed to obtain coverage. The Assembly bill also provides a consumer choice — pay the penalty or place 9.66 percent of income each month into a health savings account managed by the state that could be withdrawn for health care expenses. The Internal Revenue Service reported that 60,000 state residents paid the federal penalty in 2016.
Nine states are considering mandate laws this year – California, Connecticut, Hawaii, Maryland, Minnesota, New Jersey, Rhode Island, Vermont and Washington, as well as the District of Columbia.
Maryland Closer to Establishing State Reinsurance Pool
Maryland Governor Larry Hogan (R) and the state’s Democratic legislative leaders have reached bipartisan agreement on a one-year plan to stabilize skyrocketing individual health insurance premiums.
On March 23, the Senate passed a bill (SB 387) levying a $350 million surcharge on insurers that do business in Maryland, roughly equal to the amount they are saving in federal taxes this year because of a one-time exemption provided by the recently-enacted tax reform legislation. The Senate also approved a bill (SB 1267) that would require Maryland’s health exchange to apply for a 1332 federal waiver that would provide long-term funding for the reinsurance program, as a handful of other states have done.
The House, Senate and governor’s office have been working closely on the legislation. Governor Hogan has promised to sign the measures when they reach his disk, which have so far sailed through the Democratic-controlled legislature with no fanfare and little opposition.
“We have people paying more for their health insurance than they’re paying for their mortgage for their house,” Hogan said in his first public comments. “They’re making choices between buying groceries and having health insurance. It shouldn’t be that way.”
Arkansas Becomes Third State to Win CMS Approval for Medicaid Work Requirements
CMS Administrator Seema Verma announced approval of Arkansas’ request Monday to impose work requirements on certain Medicaid recipients. The state joins Kentucky and Indiana in receiving such a waiver, but Arkansas plans to put the requirement into effect earlier than the other states. At least eight other states have filed similar waivers and another nine are exploring the issue.
The requirement will be implanted in two phases. The first group of 30-to-49 year olds will be required to begin work-related activities June 1st in order to keep Medicaid coverage. In 2019, another 30,000 enrollees between the ages of 19 and 30 will be subject to the new restrictions.
Those who fail to meet the requirements for three months of a plan year will not be able to re-enroll until the following plan year. Roughly 39,000 people don’t meet current exemptions.
Enrollees must work 80 hours a month in some combination of work, school, volunteering, job training, or job searching. There are exemptions from the work requirements, including the medically frail, students, caretakers for an incapacitated person or child under 6, pregnant women and those in substance abuse treatment. The rules apply to people between 19 and 64 years old.
Arkansas submitted an 1115 federal waiver request to CMS last year, which also sought to roll back part of the ACA’s Medicaid expansion, proposing to limit Medicaid eligibility to residents with income at 100 percent of the federal poverty level. That portion of the waiver has not been approved but Governor Hutchinson and Seema Verma have indicated said they were working on the proposal, which cause approximately 60,000 people to lose coverage.
The Week Ahead
The U.S. House of Representatives and Senate will stand in recess the week of March 26-30.
March 24-27: National Association of Insurance Commissioners annual meeting in Milwaukee, Wisconsin