Just months ago, the Affordable Care Act was on life support: with congressional Republicans close to passing legislation to repeal and replace the landmark law, the U.S. was on the brink of a radical overhaul of its health care system, its second in less than a decade.
Then, thanks to votes from a trio of Republican senators, poof — repeal and replace collapsed. The inability of the Senate GOP to get behind a single repeal plan, and unified Democratic opposition to all of their plans, ensured that, for now, Republicans would not make good on their seven-year promise to get rid of Barack Obama’s health care law.
Since that late night vote in July, there have been murmurings of resuscitating repeal-replace legislation, but GOP’s window is closing fast. A plan advanced by Sens. Lindsey Graham and Bill Cassidy, which shares many elements with past GOP plans, faces uncertainty as a September 30 deadline to advance legislation with a simple majority through the budget reconciliation process looms.
So, Obamacare may be back from the brink, but it is far from being in the clear: uncertainty from Washington, among other things, has thrown the system’s insurance marketplaces into disarray. Across the country, millions of people face rising premiums, while insurers face pressure to pull out of markets due to unworkable costs.
As insurance companies face an imminent deadline — September 20 — to set their premium rates for fiscal year 2018, Congress is trying to figure out ways that it can stabilize Obamacare, curb premium increases, and help the system work better.
With the repeal-replace fight hardly distant in their rearview mirror, Republicans and Democrats in Congress are coming to the table on the issue in ways Washington hasn’t seen in years.
Paying the insurers
All year, experts have warned that insurance companies — who are navigating an environment of profound political uncertainty in D.C. — will raise premiums and stop offering coverage in many places if Congress does nothing by September 20, when insurers set their premium rates for the next fiscal year. (Those rates become public September 27.)
That’s because insurers are dealing with the mounting effects of years of difficult economics in the Obamacare marketplaces.
In general, fewer younger, healthy people are purchasing coverage, even though it is mandated by the ACA, while older and sicker individuals remain in the markets — giving insurers a much costlier pool of people to insure.
At the same time, the insurance companies have not gotten the financial support from Washington that they were promised after the law was passed. So-called risk corridor payments, or billions of federal dollars meant to offset insurers’ losses in the first decade of Obamacare’s implementation, were cut by Republicans in 2015.
Over the past several years, this combination of factors has led to skyrocketing premiums, and insurance companies exiting markets where they were losing too much money. Three companies have left Iowa, while people in 49 U.S. counties currently have no Obamacare option at all.
To prevent a continuing rise in premiums and insurers from fleeing markets, Republicans and Democrats are discussing ways to shore up Obamacare through so-called cost-sharing reductions, sometimes called cost-reduction subsidies.
These payments are made by the federal government to insurance companies, and they are intended to compensate insurers for lowering the out-of-pocket medical costs for low-income patients, which is required under Obamacare.
The subsidy bill totals about $10 billion for this coming year, and the program helps 7 million people access coverage.
Democrats are vocal proponents of cost-sharing reductions, and they want Congress to act now to authorize the payments for at least two years, ideally three. Republicans are open to some long-term authorization of the subsidies, but they want something in return: some flexibility to give states options to let insurers offer plans that don’t meet all the conditions currently required by the ACA.
‘The blame will be on every one of us’
Last week, the Senate health panel held hearings about the ACA’s individual insurance market, featuring testimony from state insurance commissioners and a group of Democratic and Republican governors.
At the outset of the hearings, committee chair Sen. Lamar Alexander of Tennessee said that Republicans and Democrats both need to accept concessions in order to reach a compromise.
“Democrats will have to agree to something — more flexibility for states — that some may be reluctant to support,” he said. “And Republicans will have to agree to something, additional funding through the Affordable Care Act, that some may be reluctant to support.”
“The blame will be on every one of us,” Alexander said, if senators don’t reach a compromise.
But Republicans are mulling something that could be a red line for Democrats: allowing states to apply for waivers allowing the sale of plans that don’t meet Obamacare’s minimum standards for coverage.
Under Obamacare, insurers are required to include coverage for ten so-called essential health benefits in any plan they offer on the individual market. The essential health benefits include things like maternity care, mental health care and prescription drug coverage.
Currently, states can use “innovation waivers” to ask for permission from Washington for changes to their insurance marketplaces. There’s a desire among Republicans to push for a more expansive use of the waiver process, so that states can exempt insurers from offering plans that have to meet some of the essential health benefits.
According to Lynn Blewett, a professor of health care policy at the University of Minnesota, this is a similar dynamic as when Republicans were debating which elements of Obamacare they would keep and which they would scrap in their repeal and replace plans.
Republicans’ argument is that allowing insurers to offer more bare-bones plans will lower premiums and entice more people onto the market, lowering costs across the board. But Democrats argue this will harm Obamacare’s protections for those with pre-existing conditions. (This was a major element of the debate over the House’s repeal and replace plan.)
DFL Sen. Al Franken said that weakening essential health benefits would “unravel everything.”
“I don’t think there’s any appetite on the Democratic side for that,” he said. He added that state flexibility is broadly a good thing, but said that the testimony so far in the Senate has made it very clear that lawmakers should authorize cost-sharing reductions for the next few years.
“Pretty much every one of them,” Franken said of the governors and insurance commissioners who testified last week, “has said we should do it for at least two years. One year, we’d be right back in the same process again… If you polled the Senate committee right now, most would say at least two years.”
Any plan the Senate advances would need approval in the House, where hard-line Republicans have more sway. They might be reluctant to cast a vote to prolong the cost-sharing subsidies, which some denounce as slush funds for insurers. Beyond that, the House’s repeal and replace bill included an amendment that expanded the waiver process for states, throwing essential health benefits in jeopardy.
Third District Rep. Erik Paulsen, who voted for the House bill, said he is in favor of extending the cost-sharing reductions to address the crisis the insurance markets face right now.
“At a minimum, obviously, it needs to be a year, from the perspective of building a base to the next legislative solution,” he said, adding “I don’t think we should go too far out.”
“I don’t think it needs to be a really long reauthorization in that respect, but a little more long-term thinking is appropriate.”
But even if Washington does not accomplish much this month to shore up insurance markets, hope might not be lost: there’s ample room for states to lead the way in innovating on health care policy.
Minnesota could be one of them: earlier this year, the state legislature authorized a reinsurance plan for the state, which would, if approved by federal regulators, lower premiums by an average of roughly 20 percent and stabilize the state’s individual market.
The plan, which could cost up to $540 million over two years, would provide relief for insurers facing especially costly claims by reimbursing them 80 percent of the cost of any claim that ranges from $50,000 to $250,000.
Both Franken and Paulsen touted the reinsurance plan as a positive development, and an example of the progress Democrats and Republicans could make together on the health care front.
The reinsurance plan must be approved by Washington through a waiver process, however, and the federal Centers for Medicare and Medicaid Services, or CMS, is currently reviewing Minnesota’s application.
Ross Corson, a spokesperson for the Minnesota Department of Commerce, which oversees insurance, his department is in regular communication with Washington to secure “timely approval” of the reinsurance program.
“Commerce has stressed the time sensitivity of the waiver approval in order to finalize 2018 health insurance rates by October 2 and ensure that Minnesotans benefit from significant premium relief through the reinsurance program,” he said.
According to Blewett, out-of-pocket health care costs for Minnesotans in the coming year will be tied more to what happens with the reinsurance program than what happens with cost-sharing in Congress. Only 13 percent of Minnesotans who purchase their coverage through MNSure, Minnesota’s insurance exchange, receive cost-sharing reductions, she explains, while in other states, over 50 percent of people on the individual market do.
In some states, insurers offer two different sets of rate changes: one that takes into account cost-sharing reductions, and one that does not. In Minnesota, insurers provide two different sets, but one takes into account the reinsurance plan, and the other does not. (The sets of rates, which are available here, are much higher if reinsurance is not approved in time.)
Washington gave Alaska the green light for its reinsurance program in July. Alaska and Minnesota, if successful, could be models for other states in developing solutions in the face of little meaningful action from Congress.
“There’s no reason not to plug these holes until Congress gets its act together,” Blewett says.
Still, she believes a compromise from Congress on CSRs would have wide-reaching positive effects. “It would send a signal that there is some ability for Congress to do something in a bipartisan way that is more middle of the road,” she explains.
“That signal would give insurance companies some indication that maybe this is a viable market in the long-term.”