Proposed Changes to the Affordable Care Act Would Destabilize the Individual and Small Group Insurance Market

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Tuesday, March 13, 2018

Congressional leaders have, at least for now, abandoned plans for a full repeal of the Affordable Care Act (ACA) after four failed attempts to do so in 2017. Congressional leaders and Administration officials continue to discuss a variety of proposals that aim to stabilize the marketplace and improve affordability. But several proposals gaining traction could destabilize the individual and small employer insurance market because they chip away at key consumer protections created by the ACA. In this blog we outline some of these proposals and how they could erode the stability of the ACA marketplace.

Most Americans receive health care coverage through their employer or an existing government program like Medicaid or Medicare. The ACA, sometimes referred to as “Obamacare,” was conceived in part to help people living with so-called pre-existing conditions like epilepsy. These are some of the most vulnerable Americans who had no choice but to go without health care for years. The Epilepsy Foundation has supported the ACA because it made it possible for people with pre-existing conditions like epilepsy to gain affordable access to quality health care. We have also been outspoken about the need for improving access and affordability so the promise of the ACA can be realized. You can learn more about our engagement in support of protections created by the ACA at advocacy.epilepsy.com/ACA.

Affordable Care Act Repeal and Replace Attempts

Republican members of Congress have been talking about plans to repeal and replace the ACA since it was enacted into law in 2010. One of their first priorities after President Trump took office was to work toward a full repeal of, and later a replacement for, the ACA. From March 2017 to September later that year, Republican members worked together to propose a series of bills aimed at achieving their goal.

Each of these initiatives failed to garner the required votes to pass in the Senate. After the last initiative failed in September 2017, Republican leaders announced they would not seek a full repeal and would instead focus on other policy initiatives, such as tax cuts. Bipartisan efforts led by Senators Alexander and Murray have also gained broader Congressional support in the aftermath of failed repeal and replace.

Repealing the Individual Mandate

On December 20, 2017, Congress passed tax reform legislation that was later signed by the President. Included in tax reform were various health care initiatives that cut away at some ACA-era policies. The biggest health care policy change included in the bill was a repeal of the ACA individual mandate, which requires most Americans (other than those who qualify for a hardship exemption) to carry a minimum level of health insurance or face a fine paid through their taxes. The repeal of the individual mandate does not go into effect until 2019, but the individual market will feel the effect of the repeal sooner.

Issue: Destabilizing the Risk Pool

The goal of requiring every citizen to carry health insurance is to ensure the individual market has a balanced risk pool, both young and healthy consumers as well as individuals with chronic conditions. Younger individuals, who tend to be healthier and typically have much lower health care costs, pay into the market and help offset costs for those who are older or have more complex chronic conditions. By balancing out the risks, the average cost of insurance is lower.

Without the individual mandate, younger and healthier citizens may be more willing to forego comprehensive health insurance and withdraw from the individual and small group market completely. This would cause a shift in the risk pools, because those who have lower health care costs will not be paying into the system to help offset the cost of health care for individuals with chronic conditions. As a result, health insurance premiums would be expected to rise to make up for the money lost by having a healthier population leave the marketplace.

Issue: Rising Premium Costs

According to the Congressional Budget Office (CBO), repealing the individual mandate will cause 13 million fewer Americans to be insured by 2027. The CBO also predicts that premiums in the marketplace will spike 10% without the individual mandate, because the number of individuals with higher medical needs will disproportionately outnumber those who are healthier.

Association Health Plans

The Administration has proposed other changes to the health insurance market. President Trump asked federal agencies to explore how to allow small firms and sole proprietors to form “small business health plans” based on their location or industry. A proposed rule released in January would allow association health plans (AHPs) to be regulated the same way plans for self-insured large employers are regulated. As such, AHPs would not be required to guarantee patient protections created by the ACA, including offering comprehensive coverage of Essential Health Benefits (EHBs).

EHBs, taken together, are meant to cover the basic health care needs of all Americans. Included in EHBs are:

  • Ambulatory services
  • Prescription drug coverage
  • Emergency care
  • Mental health services
  • Hospitalization
  • Rehabilitative, preventive, and laboratory services
  • Pediatric, maternity, and newborn care

Issue: Limiting Coverage of Basic Health Care Needs

Because AHPs are not required to provide EHBs, insurers may choose not to cover certain services or benefits to keep premiums lower. If your small employer decides to pursue a limited benefit plan, you would find yourself in a bind trying to secure coverage for your health care needs much like before the ACA.

Issue: Allowing Plans to Charge More Based on Factors like Age and Gender

Under the proposed rule, AHPs would be allowed to base rates on gender, age, and industry. This can result in younger men paying less, but older workers and women paying much more. Under the ACA, companies are banned from basing premiums on gender or industry, and there are limits to the increased amount that may be based on age.

The proposed rule would preserve the ban on allowing insurance companies to set premiums based on a beneficiary’s health status. But AHPs could simple not cover, or cover at a high cost, services for complex chronic conditions to discourage people from enrolling in their plan, also known as discriminatory benefit design.

Issue: Market Disruption That Destabilizes the Risk Pool

Much like with the repeal of the individual mandate, AHPs will disrupt the individual market, which will raise premiums for those covered under the ACA. Currently, small businesses and sole proprietors are not eligible to join association health plans, and employees must purchase insurance through the individual marketplace. As more employers join AHPs, more employees will pull out of the individual market, which will again disrupt risk pools and change the pricing mechanism for those who remain.

Issue: Lack of Transparency That Limits Consumer’s Ability to Make Informed Decisions

We are also concerned about AHP transparency: Will individuals and employers clearly understand what benefits are not included in the plans so they can make informed decisions about coverage? The AHP proposed rule doesn’t have strong transparency requirements. Because the proposed rule does not require AHPs to cover EHBs like ACA plans, AHPs need to clearly explain which EHBs they are covering, and which they are not. AHPs with low premiums may initially sound good to some consumers until they realize their medical needs are not covered. It is imperative that AHPs are transparent to help individuals make fully informed decisions when choosing whether or not to join an AHP.

Short-term Limited Duration Plans

In February 2018, the Departments of Treasury, Labor, and Health and Human Services released a proposed regulation that would increase the maximum length of short-term, limited duration (STLD) insurance policies to one year. Like with the AHP proposed rule, these plans would not be required to comply with the ACA consumer protections.

Under current law, STLD plans are designed to provide coverage for a limited time — up to three months. These plans are intended to help people maintain coverage, for example, between jobs. If an individual requires health insurance for more than three months, they must use the individual marketplace.

Issue: Market Instability Leading to Higher Premiums

The proposed rule would allow these plans to be effective for up to 364 days. In essence, STLD plans could replace annual health insurance plans that are obtained through the individual marketplace and governed by the consumer protections in the ACA.

Like with the repeal of the individual mandate and the expansion of AHPs, STLD plans that can serve as annual coverage will contribute to the instability of the individual and small group market, leading to increased premiums. As younger and healthier individuals pull out of the individual marketplace in favor of cheaper insurance with less medical coverage, those plans governed by the ACA will be left with an increasingly higher number of people with high medical needs. The risk pool will shift and premiums will continue to rise for those who rely on the EHBs that may not be found in either AHPs or STLD plans.

Issue: Lack of Consumer Protections and Transparency

Because STLD plans are not required to cover EHBs like those plans purchased under the ACA marketplace, it is imperative that there are measures in place to ensure consumers are well informed about which benefits are not included when they sign up for these plans. While some consumers may value the cheaper price tag over some EHBs, it is essential that they are fully informed so they can make that decision for themselves. If this information is not readily available in an easy to understand form, consumers will unknowingly sign up for a plan that does not cover needed services.

Issue: Sales Broker Incentives

Under the proposed rule, health insurance brokers may be incentivized to guide individuals to sign up for STLD plans rather than a plan under the ACA individual market because they receive a higher commission from non-ACA compliant plans. Because of this, there may be a surge in the number of people who sign up for STLD plans—much higher than the number anticipated by the Departments. This will contribute to further market instability, which in turn leads to higher premium prices. There must be transparency with the incentives contained in the proposed rule so consumers are fully informed while they make their health insurance decisions.

Our Goal: Protecting Consumers

We know that access to quality health care and health insurance is essential to all individuals, especially those with chronic conditions. The patient advocacy community continues to advocate against policies that chip away at key consumer protections created by the ACA, while supporting bipartisan Congressional efforts to stabilize the individual and small insurance marketplace. Learn more at advocacy.epilepsy.com/ACA.

Authored by: Beatriz Duque Long | Epilepsy Foundation Senior Director Government Relations on 3/2018

Our Mission

The mission of the Epilepsy Foundation is to lead the fight to overcome the challenges of living with epilepsy and to accelerate therapies to stop seizures, find cures, and save lives.

 
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