An attempt to destabilize Obamacare

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{***Noah***}

Coming up on Harvard Chan: This Week in Health…President Trump takes aim at the Affordable Care Act.

{***Ben Sommers Soundbite***}

(They are not interested in stabilizing the marketplaces. They are not interested in making it work better for consumers. Their goal is to, as much as they can, make it seem that the marketplaces are doomed to fail. It’s hard to view this as anything other than a direct attempt to hamper the markets and to hurt the ability to cover people.)

In this week’s episode, health policy expert Ben Sommers explains how two moves from the Trump administration could destabilize Obamacare—and make it more difficult for consumers to find affordable insurance coverage.

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{***Noah***}

Hello and welcome to Harvard Chan: This Week in Health. It’s Thursday, October 19, 2017 and I’m Noah Leavitt.

{***Amie***}

And I’m Amie Montemurro.

This week we’ll be talking about recent action by the Trump Administration that took aim at the Affordable Care Act.

{***Noah***}

Last week the President said that the government will stop making cost-sharing reduction payments to health insurance companies. These payments are intended to subsidize plans offered to lower income Americans under the ACA.

And in a separate move, President Trump issued an executive order which would ease the rules and regulations for health plans offered under Obamacare and open the door for the creation of association health plans.

{***Amie***}

The move comes just weeks before the open enrollment period begins on November 1.

While the changes are not likely to affect plans offered during the upcoming enrollment, they could lead to higher premiums and co-pays and potentially destabilize insurance markets over the long-term.

{***Noah***}

To understand these moves from the Trump Administration and their implications, I spoke with Ben Sommers, associate professor of health policy and economics here at the Harvard Chan School.

Take a listen.

{***Ben Sommers Interview***}

NOAH LEAVITT: President Trump took aim at the Affordable Care Act in two key ways. And I want to start with the decision to end the subsidies to health insurance companies. So can you just explain what these subsidies are, and then what the impact of this is likely to be?

BEN SOMMERS: It’s interesting that they really have become framed as a question of subsidies to the insurance companies. Their purpose is to make care more affordable for lower and middle income families. The idea is that the ACA has these tax credits in place to help make premiums more affordable, depending on your income. But once you get that coverage, we also worry that cost can be a barrier. And in particular, if you are in a low or a middle income family, you buy coverage through the marketplace or under the Affordable Care Act, you might face a deductible of several thousand dollars. You might have very large co-pays before you can use your care.

And so the Affordable Care Act set up a system of cost-sharing reductions that would make these plans more generous for these families, and would make it easier for them to pick up their prescription drugs, to have doctor’s visits, to pay for hospitalizations if they need it.

Now, the way that the law chose to do that was by saying to the insurance companies, if you have people in this income range, you have to provide that discounted care, and then we’ll pay you back for it. So the money was never really intended to help the insurance companies. The goal of the money is to make care more affordable for families.

But the way to make that done more seamlessly was that, instead of having people pay it themselves and then try to get reimbursed by the government, the insurance company took care of it, and then the federal government paid the costs.

But what happened was the law was drafted in a way that didn’t guarantee that money was going to be allocated by Congress. And so even though the law requires the insurance companies to provide these services for people, the question was whether there was going to be the money paid back to them that they were essentially owed. And for several years, the Obama administration made these payments, as members of Congress, the Republican leadership in Congress, said, well, you don’t have the right to do that, because the law specifically say that we’re paying that.

And so they ended up in the courts for several years. It was going back and forth. And essentially what the Trump administration announced this week is they’re going to stop making the payments, because they say they don’t have the authority to do it. And it becomes up to Congress to decide.

So the reality of this is that the insurance companies still have to cover it for people. They still have to provide these reduced cost-sharing levels for these lower and middle income families. But they don’t get paid back for it at the end. And so if you’re running an insurance company, this leaves you two pretty unpleasant options.

One is to say, well, if the government’s not going to pay you back for it, but I still have to pay it, then I’ve got to jack my prices up. And so we’ve seen some insurers say that they’re going to raise premiums by 20% if the government stops making these payments to them.

The other option is simply to get out of the business– to say, the marketplace is not a good place for us to operate. Without these cost-sharing subsidies it’s way too expensive. We don’t like the political uncertainty that’s going on right now. And this is the strongest signal to date, building on a bunch of smaller steps that the Trump administration has taken, that they are not interested in stabilizing the marketplaces. They are not interested in making it work better for consumers.

Their goal is to, as much as they can, make it seem that the marketplaces are doomed to fail. They think that this is a form of negotiating leverage that they have with moderates in the Republican Party, and with Democrats. Whether that strategy works politically is unclear. But as policy, it’s hard to view this as anything other than a direct attempt to hamper the markets and to hurt the ability to cover people.

NOAH LEAVITT: And so you touched on it there, but health insurance companies have said that this could destabilize the insurance markets. So is that what you’re talking about, where you might see higher premiums, fewer coverage options? What would that destabilization look like for the consumer who’s looking to purchase insurance through the marketplace?

BEN SOMMERS: Yeah. So it’s really two issues. One is the prices that insurance companies are going to charge when people buy their plan, so the premiums that they face. Now, the majority of people who get these marketplace plans do get tax credits. That’s part of the Affordable Care Act’s way of making coverage affordable. And so those families wouldn’t be directly affected by the premium increases.

But there are a good number of people who are buying plans without a premium subsidies or higher income families. And they would potentially see these 20% or more increases in premiums that are solely attributable to this decision by the Trump administration.

This is separate from any ongoing question about is there enough competition in the marketplace, and whether Obamacare was set up in a good way. This is simply the Trump administration’s made a decision that is going to force insurers to raise their premiums by 20%, which flies in the face of the president’s statement for several months that he wants people to have more options and more affordable care.

The other possibility would effect a much broader range of people, is if the insurance companies simply decide that they’re going to stop participating. This is yet another source of stress and uncertainty for the market, where insurance companies don’t know– are they going to be able to make a profit? Are they going to be able to stay in and keep a customer base and satisfy their consumers? And the fact that they have to jack up their prices, and that they’re dealing with potentially more changes down the road from the Trump administration, where they think they’re going to have trouble staying in the market, it may just be easier for them to say, we’re going to turn our back on this. We’ll focus our energy on other things that we do.

We sell plans to employers. We sell insurance as Medicaid managed care and Medicare Advantage. We’ll do that. We have enough other business that we can do that we’ll get out of the marketplaces that are uncertain and unreliable. And that means that people will have fewer options. And in some cases, in the extreme, some counties may have no insurers available in the marketplace, in which case, there’s really no good way for people to get coverage there.

NOAH LEAVITT: And so I know the second part of this was the executive order that kind of called for this broad, new array of health insurance products. And as far as I understand it, they would largely offer less coverage for consumers. So can you explain what that executive order does? And then again, what does that mean for someone who will– we have open enrollment starting in a month or so. So what does that mean for people who are looking to buy insurance?

BEN SOMMERS: Yeah. This one is a little more down the road in terms of its real world implications. Essentially, what the administration said is they wanted– it was an executive order instructing the executive branches, or the departments and agencies that are related to insurance oversight, to allow much more permissive rules for so-called association plans, association health plans.

Basically, association health plans are a way for groups of people to ban together and buy insurance, buy health insurance. And this can include people who are in a community organization, or people who are in a particular job guild or a church to buy insurance.

The issue is that the administration has basically said we’re going to exempt these association plans from most of the requirements of the Affordable Care Act in terms of how health insurance works– things that actually most consumers are very satisfied with under the Affordable Care Act. So for instance, you can’t charge people with preexisting conditions more. Well, that requirement would potentially be out for the association plans.

You have to cover essential health benefits in 10 categories, including prescription drugs, maternity benefits, mental health. Those protections could be removed in these association health plans. The overall level of coverage in terms of what percentage your expenses will be paid for by the health insurer…that could be up in the air.

So it remains to be seen exactly how these regulations will get written. This was just the first step in that process. It’s also not clear– just because the regulations are out there doesn’t mean that there will be a lot of association plans available. But I think what some analysts are worried will happen– and some of the large insurers have said the same thing– that there will be some association health plans, and if the regulations are really permissive, what you’re going to see are bare bones plans that really just don’t cover very much. And they’re going to primarily target young healthy people for enrollment, because if you have a lot of health problems, you either might not be able to get a good price for it, or you’d say, well, why would I want a plan that’s not going to cover anything I need?

And that becomes a real risk, again, to then the stability of the marketplaces, because if all the young and healthy people sign up for these cheap bare bones plans, what’s left for the people who are trying to buy the Affordable Care Act plans, the ones that do cover preexisting conditions, the ones that do cover essential health benefits– well, if the only people left in those markets are really sick, again, premiums go way up. And in some cases, insurance companies drop out of the market.

So this is a longer term process that’s going to play out over several months or a year or more. But the risk is that the protections that many consumers really value in the Affordable Care Act could go away because of the risk of these, the threat of these association health plans.

NOAH LEAVITT: And I want to talk about the timeline. But just a quick aside, because I know a lot of your research has focused on really the health benefits of access to expanded coverage. So are you concerned, from that perspective, of, if you see more of these bare bones plans, we’re likely to see some potential negative health effects for the people in those plans? I mean, is it possible to offer a prediction of how that could play out?

BEN SOMMERS: Well, there’s not been a lot of research on the health impacts of higher versus lower cost sharing plans. There’s a classic experiment that was done in the ’70s, where they looked at plans that were very generous versus less generous. This is was Rand health insurance experiment. And they found, actually, that for middle and higher income families, different cost sharing didn’t make a big difference. But whether that applies to something like a really bare bones health association plan I don’t think we know.

The bigger risk, from my perspective, is not that some young healthy people will go sign up for these plans, though I think that probably leaves them in bad shape if they have an unexpected illness or an injury. The bigger risk is that– it’s the people who have chronic health issues. If their marketplace essentially destabilizes and goes away or becomes far too expensive for them to afford, that’s where you’re talking about people who have real medical problems and real need for care who simply lose the insurance that became available to them under the ACA.

So both aspects of it are troubling, but from the public health perspective, the particular concern is that the ACA marketplaces that have been such a valuable option for people who don’t get insurance through work and have incomes too high for Medicaid, that they would no longer have access to meaningful coverage because the markets would essentially crumble.

NOAH LEAVITT: And so at the state level, if there’s a state that opposes these moves, is there anything that states can do with their marketplaces? Do they have any options or recourse to maybe kind of alleviate some of those concerns you mentioned, where people with chronic conditions maybe going for some of those lower cost plans?

BEN SOMMERS: Well, on the first issue, the cost-sharing reductions, states have taken different approaches to engaging in this issue, not just now, but well in advance, because for months, there’s been the question of whether the Trump administration was going to pull these payments.

And so in some cases, we know that state regulators essentially told insurance companies, you can submit two different bids. You can tell us what premium you’d like to charge, assuming the cost-sharing payments continue, and a backup option in case they go away.

And to some extent, that helps with the possibility of plans leaving. If plans have been able to price it in and have gotten assurances in advance that they would be allowed to do this, they’re less likely to flee now. But then we still see the big price increases.

In other cases, though, states and the insurers are kind of scrambling to figure out what they’re going to do now. And that is a major challenge for insurance regulators as well as the insurers. And then the impact of who bears the burden of that will be the patients.

The second question on the association health plans– the way the regulations are being discussed, states would have very little recourse here, because essentially, these would be federal regulations that would exempt these plans from not only the Affordable Care Act protections, but in most cases, probably state regulation.

So these would be really out of the hands of the traditional state insurance regulators, the state legislature, or the governor. And so what you’re seeing in the short term is actually several states are filing lawsuits– in particular, right now, actually, on the cost-sharing subsidies. But we may see something follow suit on the association plans, when those regulations become clearer.

And essentially, what the states are arguing is that this move puts their marketplaces in severe jeopardy, and that Congress never intended for this to be the case. When the Affordable Care Act was passed, the assumption was these payments would be made.

And now, the fact that the Trump administration is not paying them has thrown this all into potential chaos. And that’s obviously a major concern for states, particularly states that have opened their own marketplaces and have been very assertive about trying to implement the ACA in a comprehensive way.

NOAH LEAVITT: And so in both of these cases, it seems like there are some things that are still kind of very much up in the air, that still need to be worked through. So what is kind of a timeline here for these changes to either take effect, for there to be lawsuits to play out? What should people keep in mind in terms of just watching as this all plays out.

BEN SOMMERS: Well, the first thing is open enrollment is happening within the next month. So there’s not a lot of time for that time frame to get sorted out on the cost-sharing subsidies. Every state is trying to, in the immediate short term, figure out exactly what this means for the premiums that are offered, what plans are staying in. And that’s a state by state basis. You really got to read your own local paper to know what’s happening with that.

The lawsuits– this is an interesting circumstance, because this is already in the courts. It’s been in the courts for several years, but essentially, what’s happening now is the White House’s base has signed off and said, we no longer want to make these payments, whereas under the Obama administration, they were being sued by the House of Representatives. The House said you don’t have the authority to spend this money, and Obama’s Department of Justice of saying we do.

Now, Trump has come in. And they’re basically saying, no, we don’t want to make the payments anyways. And you have a third group, which is the States Attorney Generals in primarily Democratic-leaning states saying, no, we do need these payments. So it’s legally a very unusual circumstance. And exactly how this plays out– I’m not a legal scholar, but I’m not even sure the legal scholars know yet how this is going to play out.

So that’s up in the air. The other big deadline to watch on this is Congress still needs to pass a budget for next year. And part of that is tied up in the tax bill being debated or the potential tax bill being debated in Congress, and still the question of whether they’re going to revisit the Affordable Care Act.

Congress could solve this cost-sharing subsidy issue in a snap. If they passed a bill that said, of course we meant to make those payments and those payments should be made as long as the ACA is the law of the land, this issue would go away, and it wouldn’t be up to the Trump administration anymore whether to pay it. It would be very clear in the language of the law.

That seems unlikely to happen. It could still happen through a bipartisan compromise. But the indications from Senate leadership and from Paul Ryan’s office, the Speaker’s office, and from the White House is that they don’t really want that to happen. And so that makes it much less likely that this can make its way through Congress and become a law.

So the wrinkle is that Congress also needs to pass a budget. And at least most analysts expect that this will require some Democratic votes to accomplish. So some Democrats have said, we’re not going to sign any budget that doesn’t pay for this. We’re not going to allow a budget to go through that continues to sabotage the Affordable Care Act and not make these payments that the insurers need to keep care affordable for middle and lower income families.

Whether that’s a winning argument, whether the Democrats will stand by that, whether they’ll achieve some sort of compromise– all up in the air. But that’s something that would likely happen in the next two to three months. And so there’s plenty of action still to come on this question.

NOAH LEAVITT: What is at stake if this cost-sharing doesn’t continue and lower income Americans are hit particularly hard? What is at stake for them from a public health perspective?

BEN SOMMERS: Well, because of the way that these subsidies are set up, again, it’s an odd thing. The purpose of the subsidies is to make care more affordable for people who have coverage, who are lower and middle income families. But because the insurers have to do that part of it anyways, it’s not so much that I worry for the lower and middle income families who have coverage through the marketplace.

My fear is that some of them won’t be able to get it anymore if the marketplace is destabilized. And it’s not just the lower and middle income families. It’s higher income families who never got the cost-sharing subsidies may get squeezed out of the market because the premiums go way up, or because insurers leave their area.

Now, the reality is if this is the only remaining shoe to drop in terms of the marketplaces, probably most parts of the country will continue to have a marketplace that has at least some insurance options. The premiums will be much higher than they would have been otherwise. But most people who want to get coverage, at least the families that get tax credits, will still be able to do so.

Some higher income families may say, well, I don’t get any help, and the premiums just went up 20%. I’m going to drop it. There’ll be some areas, though, of the country, in particular, that already only have one or two insurers, where they might drop out, and we might see what are often described as bare counties– counties just with no insurers.

And if that becomes a bigger issue, we’re going to see swaths of the country where we have people losing insurance and no real way to find another option. And again, given the research that we and others have done on the implications of coverage, this has real effects on ability to access care, on how people feel, on chronic disease management, preventive care, and in the long run, potentially even survival.

NOAH LEAVITT: And so I know we’ve talked a lot about the stabilization of the ACA marketplace. But I’d be interested to know if we’re likely to see effects just on larger insurance, for people who get insurance through their employers. Are they likely to see higher premiums because insurance companies are compensated for what’s going on in the marketplaces? Are there going to be effects outside of the Affordable Care Act?

BEN SOMMERS: You know, the cost sharing subsidy reduction probably doesn’t have much impact elsewhere. You could potentially see some small spillovers, that people who wanted to go in the marketplace now say, well, the marketplace isn’t working very well, and so instead, I’m going to try to make sure I can find a job that gives me coverage through work.

But those are fairly small, indirect effects. For most people who get insurance through work, people who are on Medicare or Medicaid, this part of the Trump administration’s actions probably won’t have a big impact.

Now, the association health plans is a little bit different, because it really depends on how those regulations get written and who’s allowed to create an association plan, how bare bones can it be. You might see, in some cases, people leaving employer coverage for these plans if they’re much, much cheaper, and particularly, if they’re healthier.

But that’s pretty speculative. It’s hard to say. And so right now, my sense is this is mostly hitting the beneficiaries who have coverage through the marketplace plans. Whether it starts to spill over into other areas, that, I think, is less likely, but still remains to be seen.

NOAH LEAVITT: I mean, this is kind of just the latest– I guess, for lack of a better word– attack on the ACA. We’ve had the repeal and replace effort in Congress. Now, this. On a really broad scale, what are your thoughts on the future of the ACA?

And if you’re someone who is relying on the marketplace for coverage, should people be concerned? What would be your message are those people?

BEN SOMMERS: I think they certainly should be concerned. It has been largely a bargaining chip or theoretical tactical move discussed for almost 10 months that the administration might stop payments on these cost-sharing reductions. But now, they’ve actually done it. They pulled the plug. They’ve put the insurers and the people who rely on them in a position of great uncertainty.

And the likelihood that the administration is going to turn the corner at some point and say, well, we tried to repeal It, we didn’t get what we wanted, now let’s at least make sure the law works– that seems vanishingly small now. These two moves right back to back seem pretty clearly intended to say, even if Congress can’t pass something to change the Affordable Care Act, we have no interest in making it succeed. And whatever moves we can take that both undermine its ability to cover people and lead to alternatives, the alternative forms of coverage that the ACA had outlawed, they’re going to push ahead with.

So if you have coverage right now through a marketplace, I think it is much less certain that that will still be there in a year than it was before they made these announcements. And then again, the repeal debate is not dead either. Both votes, the very high profile votes that the Senate had on this over the past several months, were essentially a vote or two away.

And not all of the objections were the same. Some of the senators voting against it were unhappy that it wasn’t repealing enough of the Affordable Care Act. Or objections, for instance, very prominently by John McCain– he didn’t really object to the content of the bills. He objected to the process.

So given that, it seems quite possible that the Senate, with a similar composition down the road, could find a way to repeal it. And then, of course, in 2018, we’ll have new elections. And that’ll change the composition of the Senate. And it’s a map that is pretty favorable to the Republicans in terms of the number of seats they’re defending versus the number of seats the Democrats are defending.

So if the Republicans pick up two or three more seats and those are seats that are in the party rank and file, the same repeal bill that failed this year could easily go through. So there’s a lot at stake for people who care about health policy and who worry about coverage and access. And it’s both before, leading up to, and then aftermath of the 2018 elections.

{***Noah***}

That was our interview with Ben Sommers about potential changes to the Affordable Care Act.

{***Amie***}

And again, if you will be shopping for insurance on the ACA marketplace, open enrollment runs from November 1 to December 15—which is shorter than past years.

If you do need to enroll in an insurance plan, you can visit healthcare.gov.

We’ll have a link on our website, hsph.me/thisweekinhealth.

{***Noah***}

That’s all for this week’s episode. A reminder that you can always find us on iTunes, Soundcloud, or Stitcher.