Law of the Land? States Attempt At Circumventing the ACA

Since its passage into law, the Affordable Care Act (ACA) has weathered a barrage of rhetoric to repeal it or undermine its constitutionality. And although attempts at repealing the law are all but considered dead in Congress, other actions, from a number of states, are very much alive.

Recent passage of the tax reform bill provided one such opportunity. The law stripped the individual mandate from the ACA and opened the door for states to consider other types of health plans to offer. Further actions by President Trump also offered states the opportunity to develop alternative health plans, including low-cost, short-term limited duration insurance plans.

This middle ground of ACA circumvention includes ongoing efforts by states that continue to want to eliminate the ACA altogether by legally challenging its constitutionality and states working hard within the law of the ACA to address its legitimate problems such as escalating and costly premiums.

State-Based Plans

One area where states are attempting to circumvent the ACA is by offering alternative health plans that essentially offer minimal coverage at a lower price. For proponents, these plans provide more options and lower cost plans to consumers who cannot afford ACA plans. For opponents, these plans undermine the very fabric of the ACA by pulling out the healthy consumers from the market and increasing cost for the patients who need health coverage the most.

“There are states that are looking at trying to allow for plans that would not have been covered under the ACA to be sold through their exchanges as they move forward, so there is a move back toward allowing for less comprehensive coverage and more catastrophic care,” Neil Minkoff, MD, Founder and Chief Medical Officer of EmpiraMed, said. “The downside is that these plans are less comprehensive, so there is less in the way of coverage, including formulary and behavioral health coverage, and some of the other protected areas under the ACA.”

All eyes are on Idaho as the first state to test the boundaries between what states can do to develop and implement these alternative health plans under the ACA. In January, Idaho’s governor issued an executive order authorizing state-based health benefit plans that comply with pre-ACA state insurance requirements. The proposed state-based health plans that emerged from this order, submitted by Blue Cross of Idaho, included a number of provisions intended to make these plans more affordable, such as charging higher premiums for people with pre-existing conditions, not providing coverage for essential health benefits, omitting coverage in some plans for maternity care and dental and vision care for children.

To date, the Centers for Medicare and Medicaid Services (CMS) have rejected Idaho’s state-based plans as violating the ACA and emphasized that any insurer who sells insurance policies in noncompliance of the ACA will be penalized. The maximum penalty is $100/day for each person affected by the violation of the ACA.

“If Idaho goes ahead and offers the state-based plans, Blue Cross will be penalized by $37,000.00 per year for each enrollee,” said Timothy Stoltzfus Jost, JD, Emeritus Professor, Washington and Lee University School of Law, Harrisonburg, VA. “So that doesn’t make financial sense.”

Mr Jost, who said Idaho’s proposed state-based plans are clearly outside the federal law, emphasized the difficulty of eliminating the main consumer protections under the ACA such as a ban on pre-existing conditions. “The ACA provides strong consumer protections, and the states cannot ignore these requirements,” he said.  

For Melissa Andel, MPP, Health Policy Director, Applied Policy, the proposed plans in Idaho represent a real debate about access to care. “I think the biggest concern or potential impact is what these changes will have on access and continuity of care,” she said.

“I’m sure there are patients now who don’t have health coverage but otherwise would if they had access to one of these lesser regulated plans that states are talking about,” she said.

However, she worries that continuity of care, particularly for people with chronic illnesses, will be disrupted by plans, particularly short-term, limited-duration plans currently being debated by Congress.

As of mid-March, Idaho officials in discussions with CMS indicated that they intend to move forward with making adjustments to their proposed state-based plans.

However, Iowa recently announced a new strategy for getting around the ACA requirements, offering association health plans that “shall be deemed not to be insurance,” and thus are not subjected to federal and state regulations surrounding health insurance.

A recent executive order has asked that the short-term, limited-duration health plans lasting 90 days under the ACA be extended to 364 days. A bill to do this is currently pending and open for public comment.

In addition, Ms Andel worries that providers may opt not to accept these short-term or state-based plans and thereby further eroding access to care.

“I wonder if we are going to continue to perpetuate a two-tiered health system in this country where we have an underclass of people who don’t have the same access to care,” she said.

For Dr Minkoff, a major difficulty driving the debate over these alternative health plans is the lack of focus of the ACA to begin with. “The ACA would have been better had it been more clearly focused on which patients it had wanted to help and why and how, rather than becoming a grab bag for all sorts of competing medical policy ideas,” he said.

For him, allowing states to develop their own plans on the exchange market may be the better option as states, he thinks, know what is best for their state. “The closer you get to the people buying the insurance, the better off we probably are,” he said.

Legal Challenges to the Constitutionality of the ACA

Although the constitutionality of the ACA has been upheld by numerous lower courts and the Supreme Court, 20 states are once again legally challenging its constitutionality based on the recent elimination of the individual mandate through the new tax bill.

“The basic argument is that the individual mandate tax has been repealed and therefore the whole rest of the ACA is unconstitutional,” said Mr Jost, who suggested the argument is weak at best given a prior Fifth Circuits Court decision that upheld the unconstitutionality of the individual mandate but which nonetheless maintained that the rest of the ACA was constitutional.

Calling the case frivolous and more of a political messaging case than a serious legal one, Mr Jost, who writes extensively about health law including as a regular contributor to the journal Health Affairs, says he “doesn’t think there is a serious argument that the ACA is unconstitutional.”

“The Supreme Court has considered the constitutionality of the law and have upheld it, and there has been numerous lower court decisions considering various issues, all of which have been upheld,” he said.

A decision on the current lawsuit will be months in the making, needing to move through the lower courts.  The lawsuit by the states has been filed in a federal court in the North District of Texas.

Working Within the ACA

While some states try to circumvent the ACA and others try to eliminate it altogether, other states are focused on working within the ACA to make it function better. Ms Andel suggests that this is what states should be focusing on.

“People are still fighting about whether the ACA is good or bad but it is here to stay so we should be talking about how we fix it,” she said.

One way to fix it is through a bipartisan push within Congress to stabilize the individual insurance market. A handful of state governors are also offering ways to stabilize the market as documented in a bipartisan blueprint for a health system overhaul released at the end of February.

One proposed way to stabilize the market is by offering a guarantee to insurance companies that they will not have to pick up the tab for high-cost patients whose expenses fall outside a given margin.

“If you’re a health plan and you sustain costs outside a specified margin, the federal government will reinsure against your losses,” explained Ms Andel, noting that this is still a permanent part of Medicare Part D that has worked for 12 years.

The ACA had such a reinsurance plan between 2014 and 2016, but it was designed as a temporary measure and has since ended. Minnesota, Alaska, and Oregon have adopted their own state reinsurance programs since 2016, with Wisconsin being the latest state to seek federal approval to enact into law its proposed state reinsurance plan.

On Capitol Hill, a bipartisan push is on by lawmakers to include funding for a federal reinsurance program in a temporary spending bill due in late March. Recently released preliminary CBO projects found that restoring the reinsurance, or cost-sharing subsidies, could reduce the average cost of premiums by 10% in 2018 and 20% in 2020 and 2021.

Medicaid Expansion

As some states move to stabilize the individual insurance market, Virginia is seriously considering expanding Medicaid coverage in its state, and would be the first state to do so under President Trump. Recent elections that shifted power within the state’s House have narrowed Republican control and pushed Medicaid Expansion to the fore. To date, the state legislature has not reached an agreement on whether to expand or not.

Mr Jost, who is from Virginia, called it a “head scratcher.” The governor, he said, included funding of $400 million in the state budget for Medicaid expansion, which the House accepted (albeit with some conservative measures such as work requirements) but the Senate rejected. “Medicaid expansion would save the state over $400 million,” he said. “But now the Senate has to cut $400 million out of education and other budget parts so they can oppose the expansion.”

Although he said it is true that states that have expanded Medicaid are now starting to pick up some of the tab (6% and eventually 10%), Mr Jost explained that federal money still picks up the substantial bulk of the cost.

Without the expansion, Mr Jost emphasized that the cost of caring for persons who otherwise would be covered by Medicaid does not go away.  For providers and hospitals, particularly rural hospitals, continually to provide uncompensated care can be unsustainable.

“It costs money to cover people through Medicaid, but it costs a lot, and in some states a whole lot more, to not cover them through Medicaid,” he said.

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