Administration actions could wreck state insurance marketplaces

The year 2017 has been like no other. In less than six months, the Congress confronted us with four terrible health reform bills. Miraculously, all of these have failed. Now, the administration has confronted us with decisions that have the potential to destroy the individual health insurance market.

On October 12, the president issued his 50th executive order intended to accomplish three objectives: Expand access to Association Health Plans (AHPs), which could potentially allow American employers to form groups across state lines; expand coverage through low-cost, short-term limited duration insurance (STLDI); change Health Reimbursement Arrangements (HRAs) so employers can make better use of them.

One can make several immediate observations on the AHPs and the HRAs. The AHPs would benefit employers financially, with no guarantee of better or even the same quality health insurance benefits for employees of these firms. Similarly, the increased cost of the HRAs would be borne by employees, not employers. Hence, both of these are not-so-subtle moves to decrease healthcare costs for employers and to increase them for employees.

Of the three, the most troubling, by far, is the effort to promote short-term insurance. Given the option, many people would flock to STLDI simply because of the lower cost, with little or no consideration that the benefits would be dramatically more limited than in an Affordable Care Act (ACA) Marketplace Plan.

Further, of great concern to us, the STLDI would have no Essential Health Benefits. This would potentially lead to plans that offer greatly reduced or no mental health or substance use benefits. For the same reason, there would be no parity requirement in such plans.

Looked at in a very practical sense, the young and healthy would reject the ACA plans with better benefits in favor of lower cost STLDI despite greatly reduced benefits. Persons who are more disabled and older would remain in the ACA plans. Their premiums would escalate dramatically as young people continued to depart. Some early estimates suggest that premium increases would be in the range of 20% higher in the first year alone.

The bright side of this issue is that none of these three changes can be made simply by executive order. Both the Department of Health and Human Services and the Department of Labor would need to issue new regulations before any of these changes could take effect. Such regulatory efforts would be time-consuming, and they would require public input.

Premium subsidies

If all of this were not enough, the administration also announced in a press release on October 12 that it is ending all premium subsidies immediately for those up to 400% of the Federal Poverty Level who purchase health insurance through an ACA State Health Insurance Marketplace. Clearly, such a change would be devastating for large numbers of those who receive their insurance through a marketplace, because they would no longer be able to afford health insurance without the subsidy. Very early estimates are that between 1 million and 7 million persons would lose their health insurance coverage.

Departure of the young from ACA plans and elimination of the premium subsidies likely would toll the death knell for the individual health insurance market. Premiums would begin to rise uncontrollably for those who remained, and the adverse selection death spiral of insurance would take over.

What actions are being taken to counter these disastrous proposals by the administration? As of this writing, the states of New York and California have been joined by 13 other states in a lawsuit to prevent the Department of Health and Human Services from discontinuing the premium subsidies. These subsidies are recognized in the ACA, and they have been planned for as part of the FY2018 federal budget. Hence, a change of law likely would be required to halt them.

Further, under the leadership of Senator Lamar Alexander (R-Tenn.) and Patty Murray (D-Wash.), the Senate Health, Education, Labor and Pensions (HELP) Committee has been making good progress on efforts to stabilize the state marketplaces. Further effort will be needed to translate their efforts into a bill that can be passed by both Houses of Congress and become veto-proof.

And finally, in just one day, all major factions of the health community have coalesced once again to condemn these latest actions by the administration. That advocacy will continue to build in the coming days.

We all need to engage in this advocacy—with our congressional senators and representatives, with our governors, and with our county boards. All of these officials must come to appreciate that health is a matter of life and death, not just political wrestling.