Friday, June 30, 2017

Policy-Speak Translated to Consumer Impact: An evaluation of the Senate Bill

Since the Patient Protection and Affordable Care Act launched six years ago, California has shown how a competitive market can work for consumers and health plans, as well as the state and federal governments. Millions have gained coverage through the expansion of Medi-Cal and the subsidies provided through Covered California. California’s uninsured rate is now 7.1 percent, less than half of what it was in 2013, with an uninsured rate of those eligible for financial help of about 3.5 percent. In many ways, California is on the edge of providing universal coverage.

In addition, millions of consumers who receive no subsidies have also benefited from historically low rates of increases in health insurance premiums that have averaged 7 percent over the past three years. Consumers have benefited from protections against the denial of coverage and staggering health care costs because vitally needed care can no longer be defined as a “non-covered benefit.” Many of these achievements have come in California because the state has put consumers first in terms of policy making, benefit design and creating competitive markets.

However, the gains enjoyed by California and the rest of the nation could be significantly impacted the bill currently being debated in the Senate. Some impacts are clear, such as the proposed cuts in financial support to states to support the Medicaid program. These cuts would leave millions uninsured, increase uncompensated care to providers and place a heavy strain on state budgets. Other policy changes are more complicated: changes to actuarial value (AV),  repealing funding for cost-sharing reduction (CSR) subsidies, the reduction or elimination of essential health benefits, the elimination of the medical loss ratio (MLR), and swapping the individual mandate penalty for a six-month waiting period. These issues are complex, but each of them raises critical potential impacts for consumers.

What follows is an attempt to provide a quick road map to how these “wonky” elements have very real implications for consumers. The Senate Bill would:
  • Reduce the “benchmark plan” to a 58 percent actuarial value, leading to reductions in covered benefits: The benchmark plan provides one of the key factors on which subsidy levels are calculated. Currently, the Affordable Care Act bases subsidies on the Silver tier, 70 percent AV plan. At the Silver tier, deductibles in California are $2,500 for an individual and $5,000 for a family — and no outpatient care, tests or prescription drugs are subject to the deductible.

    By contrast, as detailed in a recent report issued by the National Academy of State Health Policy, “Barely Covered: Initial Analysis of Coverage and Affordability Impacts to Consumers under the Proposed Better Care Reconciliation Act,” a 58 percent AV plan would have a deductible of $7,350 for an individual and more than $14,000 for a family — with nothing likely covered before the deductible is met.  As such, the Congressional Budget Office concluded, “few low-income people would purchase any plan.”

    To provide context, the average employer-sponsored health plan today has an AV of about 83 percent; the blended AV of all 1.4 million people who have insurance through Covered California is about 77 percent. The reduction of coverage to cover only 58 percent of the cost of care would do more than require   more skin in the game” from consumers — it would likely put care beyond reach.
  • Limit innovation for HSA accounts: One concept that deserves further inquiry is expanding the use of health savings accounts (HSAs) for those with lower income, which can put more responsibility on consumers. However, without providing the funding for those accounts — particularly for lower-income Americans — HSAs are a concept that cannot deliver the tax advantages that HSAs can provide to Americans with higher incomes. Providing low-income individuals with funding for their HSAs through subsidy dollars (as has been done with Indiana’s Medicaid program) is a theory that the subsidy levels in the current Senate Bill put out of reach. Covered California has begun evaluating the concept of providing pre-funded HSAs. It would offer annual funding of an HSA account of $600 (either in a lump sum or at $50 per month) with a $2,500 deductible plan that would have an AV of 81 percent. However, the level of subsidies proposed in the Senate Bill would not provide states with the resources to support real patient-centered innovation for HSAs. 
  • Repeal funding for cost-sharing reduction subsidies would result in higher costs when people get care: The Senate Bill would fund CSRs for 2018 and 2019, but then repeal the CSR program which brings direct care within reach of millions of Americans. The CSR subsidy program is based on the recognition that income matters — charging the same $40 office visit fee to someone who earns $20,000 a year and someone who earns $200,000 will lead to different impacts. The lower-income individual will often skip needed care because they can’t afford the cost-sharing. In California, because of the CSR subsidy, the office visit charge for the lower-income individual is only $5. They still have “skin in the game,” but not so much that they will forgo care. As discussed later, the “stability funding” does not provide a way to make up for the loss of CSR funding, which will mean the low income consumer will face financial barriers at the point of care.
  • Remove the individual mandate penalty with no viable replacement: Many policy discussions revolve around removing the penalty for not maintaining coverage that is part of the Affordable Care Act. However, it is important to bear in mind the intent of the penalty and what would happen if it were removed. First, the reason the vast majority of consumers do or do not get health insurance is based on affordability. Covered California has surveyed thousands of consumers and held innumerable focus groups across the state and the results are clear: Consumers want health insurance, and will buy and keep it if they can afford it and if that insurance provides them with peace of mind. Affordability, however, is about both the monthly premium and what is covered by the policy. The penalty is about fairness. When someone goes without insurance, the rest of us end up paying the bill through increased costs from hospitals and other providers who are forced to spread the expense of uncompensated care. In addition, the biggest beneficiaries of the improvement of the risk pool that results from covering a greater number of healthier individuals — the group the penalty encourages to enroll — are those who get no subsidy but gain from lower premiums. The Senate Bill recognizes that removing the penalty will have an impact, and in its place calls for a six-month “waiting period.” However, it is unclear that the proposed waiting period will sufficiently encourage enough enrollment to have an impact on reducing premiums for those without subsidies.
  • Provide insufficient “stability funding” over the long term: The Senate Bill calls for $15 billion in both 2018 and 2019 (decreasing to $10 billion for 2020 and 2021) to “address coverage and access disruption.” Generally, if spread nationally in the form of reinsurance, each billion dollars would result in a one percent drop in premiums — meaning that these funds could result in up to 15 percent premium decreases in 2018 and 2019. This would likely be close to offsetting the premium impact of the non-enforcement of the penalty. But what happens after 2021, when the “short-term” funding goes away? “Long-term” funding is available starting in 2019, and is $14 billion in both 2020 and 2021, then decreasing to $6 billion in 2022 (with state matching requirements kicking in). Taken together, these funds would provide up to $23 to $24 billion annually for 2018 through 2021, and then drop to $6 billion. The impact of healthy individuals’ dropping their coverage does not stop in 2022. Additionally, the CBO estimates that “few low-income people would purchase any plan.”  There are discussions in the Senate regarding “targeted” support in the tens of billions to fund efforts to address the opioid epidemic may address a real public health issue. However, this targeted funding will not likely bolster stability in the insurance market or make coverage more affordable for Americans who need it.
  • Allow for elimination of essential health benefits for millions of Americans: The Senate Bill would allow states to modify the essential health benefits standards using waivers, and would even provide billions of dollars in incentives for states to do just that. But waiving essential health benefits for consumers could mean a return to the pre-Affordable Care Act coverage world in which whole categories of care were not covered and no annual or lifetime limits applied. The Congressional Budget Office projects that this could impact half of Americans. Additionally, millions of Americans who have lose or leave job coverage and come to the individual market will be faced with a very uncertain coverage world outside of their employer.
  • Allow states to remove medical loss ratio (MLR) standards: The Senate Bill also contains a provision that would allow states to eliminate the MLR standards established by the Affordable Care Act. For five years, we have spent countless hours negotiating rates with a dozen health plans. We know, based on our experience, that health plans can “make it work” very well with at least 80 percent of the premium dollar they collect spent on actual health care.
Many of the elements of the Senate Bill would result in significant changes to scope and affordability of coverage currently available to millions of Americans. We know from our own analysis, coverage and benefit designs will be impacted; and, premiums will likely rise particularly for low-income and older Americans and those who live in high-cost regions. Those who can afford to remain covered will likely pay more for less comprehensive coverage.

The details in the potential revisions to Senate Bill will need to be thoroughly examined - not only in how the changes differ from the original bill but also in how they compare to the protections and benefits that consumers have under current law. As the proposal evolves, we will continue to assess the potential impacts with the goal of helping to inform the ongoing dialogue on health reform.