By Susan Blumenthal, M.D. and Alexis Boaz
Despite months of Congress’ repeal and replace attempts and President Trump’s executive actions seemingly aimed at sabotaging the Affordable Care Act (ACA), open-enrollment for the ACA Marketplace — which started on November 1st and runs until December 15th — has surged, up 47 percent compared to this time last year. However, a robust sign-up for insurance plans in the ACA’s Marketplace is just one component necessary to keep the ACA strong and intact. Senate Republican’s tax reform bill’s inclusion of repealing the ACA’s Individual Mandate and its passage through the Senate budget committee yesterday , combined with the Trump Administration’s assaults on different provisions of the ACA beginning after the President’s inauguration on January 20, 2017, continue to chip away at the significant progress made by ACA since its enactment. For example, the uninsured rate, which reached a historic low of 8.8 percent in January 2017 under the ACA, has already increased to 12.3 percent as of October 20, 2017, and is projected to rise as a result of the Administration’s ongoing efforts to undermine the law.
Even though many stakeholders, governors, mayors, and a majority of the polled public have called for bipartisan solutions to strengthen the ACA, the Trump Administration’s multi-pronged approach to destabilize the ACA Marketplaces — through termination of Cost Sharing Reduction (CSR) payments, ACA-undermining Executive Orders, and funding decreases for ACA public outreach encouraging insurance enrollment — continues to endanger the ACA’s future. The Administration’s actions significantly increase the risk of adverse-selection in which some of the young and healthy abandon the ACA Marketplaces in pursuit of less comprehensive, high-risk, cheap coverage. If Congress successfully repeals the Individual Mandate through the tax reform legislative process, adverse-selection would be further exacerbated if the young and healthy flee the ACA insurance market altogether. The Congressional Budget Office (CBO) has already projected that ACA Marketplace premiums would rise an additional 10 percent every year for the next decade as a result of repealing the Individual Mandate through tax reform with the number of uninsured increasing by 4 million in 2019 and 13 million in 2027. This self-perpetuating cycle would significantly increase the price of premiums as insurance companies offset the risk-pool imbalance by charging the remaining sicker and older Americans higher premiums.
The peril invoked by the Trump Administration’s strategy of unraveling key provisions of the ACA, combined with continuing Republican Congressional efforts to repeal and replace the legislation, constitutes a political chess game that poses significant harm to the U.S. healthcare system.
Destabilizing the Marketplaces
In its most damaging move thus far to destabilize the ACA, the Trump Administration announced it would halt CSR payments and signed an executive order on October 12, 2017, to significantly weaken the ACA-established Marketplaces. While the Administration characterizes CSR payments as “bailouts”, the $7 billion CSR subsidies paid from the Executive Branch directly to insurers offsets discounted co-pays and deductibles offered to qualifying low-income individuals for the purchase of Silver health plans in the Marketplace. Halting CSR payments —less than a month after the September 27th deadline for insurance companies to finalize their Marketplace plans — pulled the rug out from under many insurance companies, now leaving the ACA Marketplace vulnerable to instability.
President Trump’s announcement immediately ending the CSR payments was the culmination of months of speculation and uncertainty stemming from the White House’s unwillingness to commit to the continuation of cost-reduction subsidies. This uncertainty had already catalyzed instability in several regions of the country as insurers threatened to raise premiums or leave ACA markets in anticipation of such a devastating action. A September 2017 CBO report projecting a 15 percent premium increase for 2018 mainly attributed the rise in costs to “short-term market uncertainty” and insurers’ lack of clarity “about whether federal funding for certain subsidies [would] continue to be provided,” further stating that the move would also increase the deficit. Additionally, the Kaiser Family Foundation (Kaiser) had previously estimated that premiums would rise by approximately 19 percent with the loss of CSR payments.
Because insurance companies remain statutorily obligated to provide cost-sharing reductions to qualifying individuals, the cessation of CSR payments forces insurers to find alternatives to avoid losses – which in many cases results in passing costs directly to consumers. As of October 27, 2017, Kaiser found insurer’s response and adjustment to the termination of CSR payments included increasing consumer’s premiums for all beneficiaries inside and outside of the Marketplace, increasing premiums for all Silver plans inside and outside of the Marketplace, and increasing premiums for only Silver plans inside the Marketplace.
The two groups with the highest risk of being significantly hurt by the Administration’s actions are individuals not qualified for marketplace subsidies and the federal government due to the resulting projected increase in the Federal deficit that would occur. There are four tiers of Marketplace insurance plans that provide different cost-sharing arrangements depending on the amount of premiums paid. Lower cost Bronze “catastrophic” plans cover 60 percent of beneficiaries’ health costs, moderate cost Silver plans are the most commonly purchased providing 70 percent coverage, more expensive Gold Plans cover 80 percent, while the highest cost Platinum plans cover over 90 percent of beneficiaries’ medical expenses. The impact of halting CSR payments would mainly impact Silver plans, which are the only Marketplace plans to which CSR payments apply. The current attachment of government-sponsored subsidies to the price of Silver plan premiums means that as Silver plan premiums rise, subsidies will rise. While this insulates individual’s receiving subsidies, premium increases will most adversely impact individuals not receiving Marketplace subsidies, which constituted about 15 percent of Marketplace enrollees in 2017. Premium increases would particularly negatively impact states that chose not to expand Medicaid — typically Republican states — with more individuals relying on the Marketplace after finding themselves in the insurance gap between not qualifying for Medicaid while not receiving employer-sponsored health insurance. The CBO report analyzing the impact of halting CSR payments released on August 15, 2017, previously projected that the federal deficit would increase by $194 billion due to elevated federal government spending on rising premiums. Subsidy amounts would increase accordingly with Silver plan premium increases, so in addition to paying higher subsidy amounts for current Marketplace participants, the government would potentially need to subsidize new beneficiaries who might choose to enter the market instead of remaining uninsured as increased subsidies might enable consumers to purchase Bronze plans at no cost or more expensive Gold level plans at a lower cost than previously available.
The President’s Executive Order issued on October 12, 2017, included additional strategies to destabilize the Marketplace. This Executive Order requires the U.S. Department of Health and Human Services (HHS) to examine extending the time period in which consumers can be covered by “short-term limited-duration insurance” (STLDI) plans, which — as their name suggests — are actually meant to be short-term, cheap, bare-bones health plans designed to fill gaps between more comprehensive coverage. The Obama Administration had restricted coverage for individuals by these plans to three months because STLDI plans, referred to by some as “junk plans,” allow exclusion and price variation for consumers with pre-existing conditions, impose annual caps, and do not cover certain medical services or prescription drugs while failing to meet various ACA consumer protection and coverage standards. Increased enrollment in these plans would further fuel Marketplace instability as individuals seeking cheaper insurance exit ACA Marketplaces for skimpier coverage which could leave individuals and families vulnerable to financial risk in the case of a medical emergency or chronic illness. The Executive Order also promoted expansion of association health plans that might similarly be exempt from ACA regulations.
Adverse-selection would be further exacerbated by the full repeal or a weakening of the ACA’s Individual Mandate, the adverse-selection fighting provision that imposes a tax for individuals opting out of buying insurance coverage. On November, 14, 2017, the Senate announced that the newest version of their Tax Cuts and Jobs Act tax reform legislation, a 1.5 trillion dollar package, would include a provision to repeal the Individual Mandate. While the U.S. House of Representatives passed their Tax Cuts and Jobs Act tax reform bill on November 16, 2017, without such a provision, House leadership suggested willingness to repeal the Individual Mandate during reconciliation if the Senate’s proposed bill passes successfully. While the Senate Republican’s bill passed out of the Senate Finance Committee on November 16th, and passed out of the Senate Budget Committee yesterday both along party lines, and will now proceed to the Senate floor, some Senators have criticized inclusion of repealing the Individual Mandate in the tax reform legislation, which has the potential of hindering passage of the bill. Furthermore, reports suggest that the White House does not want Individual Mandate repeal to obstruct tax reform legislation passage, leaving open the possibility of striking this provision from the Senate bill. However, even if Senate Republicans fail to repeal the Individual Mandate — either through striking the provision or if tax reform legislation does not pass — further executive actions could nonetheless still weaken enforcement of the Individual Mandate continuing to threaten the stability of the ACA. Even though the Internal Revenue Service (IRS) is currently enforcing the Individual mandate penalty provision, as of November 10th, the White House has reportedly already drafted another executive order to weaken Individual Mandate enforcement in the future.
Repealing the Individual Mandate would not only create an influx of adverse-selection by depleting the Marketplace of many young and healthy individuals who abandon the Marketplace while seeking “skimpy” insurance plans, but might also result in the Marketplace becoming victim to an exodus of individuals abandoning purchasing health insurance altogether. On November 26, 2017, the CBO reported that repealing the ACA’s Individual Mandate might increase the number of uninsured Americans by 4 million by 2019 and by 13 million by 2027 while reducing the federal budget deficit by less than originally forecast. Sick and older Americans, some of the most vulnerable individuals needing insurance coverage, would likely remain in the Marketplace and be subject to higher premium prices — projected to increase an additional 10 percent over the next decade — resulting from instability caused by adverse-selection.
Other measures that have been implemented by the Trump Administration to weaken the ACA include shortening the open-enrollment period for purchasing insurance — which started on November 1st — to run until December 15th instead of January 31st like in previous years. Open-enrollment is the time period in which individuals can compare and purchase health insurance plans in the ACA’s individual marketplaces, either on the federally-facilitated Healthcare.gov or on state-run marketplaces. The various tiers of health plans described above require a baseline of coverage — Essential Health Benefits — available for consumer purchase regardless of pre-existing conditions and gender. The ACA’s Community Rating Provision ensures further consumer protections by requiring that insurers charge beneficiaries the same price for the same coverage after adjusting for age and by prohibiting insurers from charging older Americans more than three times the amount of premium costs of younger Americans. Additionally, despite an August 2017 Kaiser Health poll finding that 80 percent of the public disapproved of the Administration’s actions to decrease ACA outreach initiatives, the Trump Administration announced on August 31st that it would reduce the ACA 2018 open-enrollment marketing budget from $100 million to $10 million while also cutting funding from $62.5 million to $36 million for consumer-assisting “navigators” that help people choose insurance plans.
Bipartisan Actions to Strengthen the ACA
To address the Administration’s market-destabilizing actions of stopping the CSR payments, the Senate held hearings and convened meetings to develop a bipartisan solution to fund the CSR payments. On October 13, 2017, the Senate released a bipartisan bill seeking to stabilize the insurance markets while reducing the deficit. The “Bipartisan Health Care Stabilization Act of 2017” ensures two years of CSR funding, increases flexibility for states to adapt their ACA programs through innovation waivers, and expands access to lower-premium Copper insurance plans. The bill also requires HHS to develop regulations for insurance to be sold across state lines. The CBO reported that this legislation would reduce the deficit by $3.8 billion by 2027, while not substantially increasing the number of uninsured.
Although this bipartisan Senate bill has 12 Republican and 12 Democratic cosponsors and is endorsed by over 200 health and business groups, the Administration has not expressed support for the legislation, instead calling the plan a “quick fix”, referring to the CSR payments as “bailouts to insurance companies”, and requesting more conservative changes. Accordingly, Senate leadership has stated that the legislation would not be brought up for a vote without President Trump’s approval, despite estimates that the legislation would have enough support to pass the Senate.
The Administration’s use of CSR payments as a bargaining chip to negotiate for more ACA-eroding provisions from Congress has resulted in disruptions to the ACA Marketplaces that the CBO had previously projected would remain “stable in most areas of the country”. The Administration’s unwillingness to act on the Senate’s bipartisan legislation to stabilize the insurance marketplaces further highlights this intention. Some additional Trump Administration actions including allowing “employers with religious or moral objectives” to opt out of the ACA’s contraception coverage provision (which has provided access to health services for millions of women); rolling back initiatives that tie physician reimbursement to quality care over the quantity of procedures and services; and potentially stopping ACA initiatives to make hospitals more accountable for patient’s health outcomes — continue to undermine the ACA’s comprehensive provisions to achieve effective and equitable health care in America. Senate Republican’s inclusion of the Individual Mandate repeal provision in the pending tax reform legislation further underscores the risks facing the ACA on many fronts now and in the months ahead.
The Path Forward
The Executive and Congressional actions being taken to sabotage and undermine the ACA’s effectiveness pose a threat to the health and well-being of tens of millions of people in the United States. Instead, now is the time for Americans to work together to safeguard and strengthen the ACA. Congress should pass the Bipartisan Health Care Stabilization Act of 2017 in its current form which would help prevent destabilization of the U.S. health insurance system, particularly since bipartisan leadership of the Senate Committee on Health, Education, Labor, and Pensions has signaled that the bill could be passed as part of the upcoming end-of-year funding package upon President Trump’s approval. Additionally, repeal of the Individual Mandate should not be included in the proposed Tax Cuts and Jobs Act tax reform legislation that may be brought to the Senate floor this week. Another way that Americans can show their support of the ACA is to sign up for insurance during the open enrollment season — which ends on December 15th this year. Consider this: a recent Kaiser study found that 77 percent of market-placed eligible uninsured individuals who face an Individual Mandate penalty would actually qualify for premium subsidies, while over half of uninsured people could buy health insurance for less than the cost of the Individual Mandate penalty. The 2017 penalty for not having insurance is the higher amount of either 2.5 percent of household income with a maximum of the total yearly premiums for a Bronze plan or $695 per adult and $347.50 per child with a family penalty maximum of $2085. Other actions to strengthen the ACA include implementing national and state-wide marketing campaigns to encourage more young healthy individuals to purchase insurance; offering a public option, “A Healthy USA Plan” to increase marketplace competition in an effort to lower premium prices; and addressing prescription drug price regulation. The astronomical $323 billion spent on prescription drugs in 2015 in America will soar to a projected $610 billion by 2021. Currently, the United States is the only country in the developed world that does not negotiate pharmaceutical costs, which has resulted in drug prices that are 40 to 60 percent higher than in other nations. Kaiser recently conducted a poll to assess the health care priorities of the public going forward and found that the top two priorities for those surveyed were reauthorization of the State Children’s Health Insurance Program (CHIP), which 75 percent found to be important, and passing legislation to stabilize ACA marketplaces, which 69 percent found to be important. Other proposals ranked highly by those surveyed in the poll included allowing individuals to buy-in to Medicaid (reaching 66 percent favorability), letting younger people buy-in to Medicare (reaching 63 percent favorability), and establishing a single-payer system (reaching 32 percent favorability).
While the ACA is not perfect, it has provided an important pathway for moving from peril to progress in strengthening America’s health care system. It is important to remember that in 2008, prior to the ACA’s enactment, 82 percent of Americans wanted an overhaul of the U.S. health care system at a time when over 47 million people — or 18 percent of the U.S. population — lacked health insurance. The historic passage of the ACA signed into law by President Obama in 2010 represents the most significant and comprehensive health care legislation since the establishment of Medicare and Medicaid in 1965 and it has transformed the U.S. healthcare system. Through its reforms, the legislation has enabled 20.4 million people to gain insurance coverage by 2016. Medicaid expansion itself covered 11 million people, including nearly two million Americans in rural areas. Furthermore, the ACA’s coverage mandates protect the nearly 129 million Americans with pre-existing conditions — or one in two people — from being charged discriminatorily higher premiums or denied coverage. The ACA’s provisions also put into place payment reforms that incentivized quality care over quantity of medical services provided and fueled a prevention revolution through the provision of preventive services at no cost to consumers in their insurance plans, the establishment of a Prevention and Public Health Fund to support community prevention programs, and the creation of a National Prevention Strategy with the participation many governmental departments and numerous stakeholders.
This is not the time to sabotage the ACA legislation but rather the very moment to strengthen it. Since the establishment of the Affordable Care Act in 2010, much progress has been made to advance America’s health care system in communities, states and nationally. The significant achievements made since the law’s enactment highlight the importance of working together to safeguard, improve, and expand on the ACA’s progress to improve the health of all Americans now and in the years ahead.
Rear Admiral Susan J. Blumenthal, M.D., M.P.A. (ret.) is the Public Health Editor of the Huffington Post. She is a Senior Fellow in Health Policy at New America, Senior Policy and Medical Advisor at amfAR, The Foundation for AIDS Research and a Clinical Professor at Tufts and Georgetown University Schools of Medicine. Dr. Blumenthal served for more than 20 years in senior health leadership positions in the Federal government in the Administrations of four U.S. Presidents including as the first Deputy Assistant Secretary of Women’s Health, Assistant Surgeon General of the United States, and as Senior Global Health Advisor in the U.S. Department of Health and Human Services. She also was a White House Advisor on health. Prior to these positions, Dr. Blumenthal served as Chief of the Behavioral Medicine and Basic Prevention Research Branch and Chair of the Health and Behavior Coordinating Committee at the National Institutes of Health (NIH). She has chaired numerous national and global commissions and conferences and is the author of many scientific publications. Admiral Blumenthal has received awards including honorary doctorates and has been decorated with the highest medals of the U.S. Public Health Service for her pioneering leadership and landmark contributions to advancing health in the United States and worldwide. Named by the New York Times, the National Library of Medicine and the Medical Herald as one of the most influential women in medicine, Dr. Blumenthal was named the Health Leader of the Year by the Commissioned Officers Association and as a Rock Star of Science by the Geoffrey Beene Foundation. She is the recipient of the Rosalind Franklin Centennial Life in Discovery Award.
Alexis Boaz is a third year Juris Doctor and Master of Public Health candidate at The George Washington University Law School and The George Washington University Milken Institute of Public Health. Alexis is a former White House Intern for the Obama Administration, a Health Policy Fellow with the U.S. House of Representatives, and a Health Policy Intern with the U.S. Senate. Alexis has held several health policy internship positions in D.C., including interning in three different offices within the U.S. Department of Health and Human Services. Alexis Boaz was a Graduate Health Policy Intern at New America in Washington D.C. during the Spring of 2017. She graduated with a Bachelors of Science in Health Care Management and Policy from Georgetown University’s School of Nursing and Health Studies in 2015.