Tim Jost at Health Affairs is THE go-to source for fast, accurate and informative health policy reads on legislation and rule making. On the 28th he highlighted three bills that could start working their way though Congress that have actual health policy implications.
Let’s take a look at these three bills and figure out what is happening and what a liberal who wants a functioning individual market should think about these actions.
TLDR: These are technical correction bills that should have been going through committee and debated in 2014 and 2015 and 2016
Bill #1 Special Enrollment Periods:
The first bill would (for plan years beginning on or after January 1, 2018) prohibit insurers from making coverage effective for new enrollees who enroll during special enrollment periods (SEP) until HHS verified that individual’s eligibility for SEP enrollment. The bill directs HHS to create a SEP eligibility verification process through interim final rulemaking (rulemaking without prior notice and opportunity for public comment). The bill provides that the verification process should be similar to the review and assessment process described in the preface to the 2017 final payment rule, which merely called for the collection of and assessment of documentation to assess eligibility. HHS has already begun a pilot program for verification of eligibility for some SEP applications beginning in June of 2017, but this bill would extend full documentary verification to all SEP applications.
The problem it is trying to address is the belief that some healthy people are gaming the exchanges by staying uninsured until a major medical event happens. At that point, the claim is that these individuals then use the special enrollment period to get a high actuarial value plan and run up massive charges while not paying into the pool for long or for much money.
There is decent evidence that this is a bit of a problem. Covered California (Feb 2016 board meeting) has a good discussion about the different behavior of SEP enrollees versus open enrollment enrollees.
The first observation is that SEP enrollees have a higher per member per month cost than OEP enrollees. Secondly, SEP members are about two years younger than OEP members, which exacerbates the cost difference. Third, health plans are reporting their strong belief that substantial SEP enrollment does not meet requirements of SEP criteria. When comparing the SEP cost difference between their off exchange and on exchange, the cost difference between SEP and OEP drops at least 50%
Off-exchange SEP enrollment is verified while on exchange on-enrollment is not verified.
The goal of this bill is to tighten up the screening mechanisms so that more people who are relatively healthy buy insurance in the open enrollment period and pay in during low use months.
Bill #2 Age Banding
A second bill would increase the ratio by which insurers may vary the rates charged to older enrollees in the individual and small group market to the rates they can charge younger enrollees from the current ratio of three-to-one to a ratio of five-to-one, or to any other ratio established by a state. Insurers have long complained, with some justification, that the three-to-one ratio is not actuarially accurate and that a five-to-one ratio is more so.
The argument is that young people are subsidizing old people too much and therefore healthy young people are not signing up in sufficiently high numbers to create a balanced, healthy pool. I think there is a caveat that we need to throw in here. This does not apply to subsidized individuals. If a person is receiving a subsidy they don’t care about the list price of the policy that they are buying. They care about the post-subsidy price. A 5:1 band for an above benchmark Silver will have a slightly lower post-subsidy price for a 22 year old than a 3:1 banded above benchmark Silver but it is a small effect that should be swamped by the spread between the lowest cost Silver and the benchmark Silver. This policy matters more for non-subsidized buyers. More younger adults (U-35) would buy off-Exchange if the policies were cheaper at the cost of fewer older adults who would now be facing more expensive non-subsidized policies. The concern is that the most valuable and profitable member for an insurer is a 64 year old who uses no services. That individual is less likely to buy. Whether or not and then how much of a good idea this is will dependent on the dueling actuarial models.
Bill #3 Shorter Grace Periods
A third bill would, for plan years beginning during 2018, reduce the ACA’s 90-day grace period to catch up on missed payments for individuals who are receiving premium tax credits; the grace period would instead be the period established by state law or, if there is none, to one month. Under current rules, insurers must cover claims for the first 30 days of the grace period, but may then pend claims for the remaining two months and only pay them if the enrollee catches up with missed premiums. Only after 90 days may the insurer terminate coverage for the rest of the year
The argument is that under current law, healthy and devious people can pay for nine months of coverage and get twelve months of actual coverage. The thought process is very similar to the one way option that exists in COBRA where coverage can be retroactively started up to 63 days after reciept of the COBRA rights notice. People who are healthy under this scheme would incur few claims as they pay their premiums through September. In October, they don’t pay their premium. At this point, the insurer is on the hook for the claims. In November and December, the still healthy person would not pay their premiums. However if they are run over by an egg nog addled elf and his octect of reindeer, the person who is not in the ICU would pay their premiums for October-November-December and get the insurer to pay tens of thousands of dollars in claims.
Now what should Democrats do about these bills? I say, actively engage on them is the right thing to do as these are the types of technical correction bills that a major social welfare program needs especially a new one. None of these bills threaten the core structure of the ACA individual market coverage expansion. The bills are actively grappling with known trade-offs and problems in the ACA and trying to do things that are not actuarially impossible.
If the Republican Party is moving to the point where they realize that throwing 20 million people off of their insurance right before an election either through active legislation repealing the law without a replacement or systemic and obvious sabotage will produce protests that make this week look like a Boy Scout jamboree and thus are seeking to repair and rename, I have no problem with that. The ACA text is not infallible. It had a bunch of trade-offs in it and assumptions about behavior. We now have good data on those trade offs and assumptions. We should course correct when possible.
Proudgradofcatladyacademy
Yes to all 3! Grace periods are the bane of my life as the major billing advocate. Also those SEPs, I can’t prove it but when I see 23 year old who didn’t bother to pay her .46 cent premium call us and say can I get reinstated and two weeks later there’s a SEP and she is telling at us to pay her claim…Well it’s hard not to think uncharitable thoughts that our health insurance is not like eggs you only get to buy what you need the half dozen for the emergency potluck cake or the full dozen for the potluck and Sunday brunch.
But I think people on the exchange treat Healthcare like a right and try to use it that way, which is how it should be but not how it works.
low-tech cyclist
No strong opinions on these, though #1 and #3 seem like they’re probably good ideas, despite the powerful SEP field around #1 especially.
But in general, yes, the Dems should engage here. The more the Republicans are drawn into technical adjustments to the ACA, the less they’re thinking about ditching the whole thing.
If they want to make a bunch of overdue tweaks to the ACA, rename the whole thing FreedomCare or something, and call it done, I’m good with that. I don’t care who gets the credit as long as everybody can still get decent insurance.
David Anderson
@low-tech cyclist: But I want a super classy, YUUGE Black card with gold lettering for my Trump Care— it is going to be sooooo classy
dr. bloor
If the Republicans were smart, they’d pass these, announce the replacement of ACA with TrumpCare, and declare victory.
Unfortunately, they’re not smart.
newtonmarunner
Actuary here. Definitely opposed to 2 — changing the premium variation by age from 3:1 to 5:1, even though it would, by making insurance more affordable to younger people like me (well, at 37, I’m not that young anymore). Was opposed to the 5:1 age rating when it was in Max Baucus’s original Finance Committee proposal, and I oppose it now. Even at 2:1 age and no smoker rating here in MA, premiums are still awfully high for older adults. I also think the amendment has long-term consequences as we transition from an employer-based market (where workers are actuarially rated by group) to an Exchange Market where even those in large employers get their health insurance through the Exchange where more and more people don’t qualify for the subsidies, and must pay the full cost of insurance — particularly in places where health insurance is more expensive, like Boston and NYC. We do not want to have a 5:1 age rating in this type of market as more and more people who currently get their health insurance through their job now getting insurance on the Exchange without subsidies.
Bodacious
OK, tweek away…..but as a boomer who just got laid off and am 10 years away from Medicare, #2 is going to leave a mark. Both myself and spouse were kicked out from the same company closing. Though, our big beef is the non-coverage away from hometown more than the cost. We can bear the cost…..it will hurt….but we want COVERAGE when we are more than 30 miles away from home. For that reason we stuck with cobra, because ACA plans were too geographically restrictive. Any hope on the horizon for that? (Actually, with Rome burning right now, this seems pretty trivial to both of us in the grand cluster*uck)
newtonmarunner
For SEP, I like the idea that you can’t enroll in Gold or Platinum policies, and that between years, you can only move one tier in either direction (e.g., Bronze and Silver can’t move to Platinum the next year, and Gold and Platinum can’t move down to Bronze the next year) a better policy.
PaulW
Down here, my coworker spotted a full two-page ad in the center of the Lakeland Ledger’s main section, it has no name on it and all it says is “after years of complaining about health care, finally someone listened” with a band-aid over a healthcare logo.
We’re thinking it’s one of the “Yay Obamacare is dead” people, but it’d be nice if they were brave enough to sign their damn handiwork so we know who to kick in the nuts when this is all over.
By the by, Healthcare.gov website no longer works.
Edmunddantes
Did you mean “bunch of trade offs” or were you thinking Thailand parliament fisticuffs to get ACA enacted?
Great article as usual.
David Anderson
@newtonmarunner: But it is a reasonable thing to talk about and see if 2:1 or 3:1 or 5:1 or unrestricted makes sense and run the goddamn models to inform policy. A lot of things should be brought up into committee and then go nowhere once people who know the subject (like you do) weigh in.
I think if there was no max cap on subsidies, 5:1 could make more sense but yeah, the 64 year old in decent health would get rogered hard
john b
@PaulW:
opened up just fine for me just now. Or do you mean some more fundamental crippling of its capacities?
Barbara
SEP and age banding issues are major issues and fine tuning to avoid gaming and achieve better balance in risk pool allocations are fine. COBRA style gaming after coverage has terminated is a really small issue — and by that I simply mean that it affects relatively so few people that it doesn’t really threaten the risk pool balance of the program. It just drives insurers crazy to see people getting away with what amounts to fraud. It’s like checking out of your hotel and then charging breakfast to the room before the system has been synced. Now, of course, they just charge your card again, but people actually used to do stuff like this. As I tell people, the human brain is not made for intuitive understanding of insurance. A lot of people think that if they paid a premium and didn’t use the coverage, they have wasted their money. They especially think that when it comes to paying COBRA premiums after they have just become unemployed.
Raven Onthill
From my perch, this is making a tight-fisted system even more tight-fisted. We either tolerate some overpayment, or make the system so tight it shuts out people who genuinely need care and are entitled to it. With (1) the question to ask is what percentage of enrollees are gaming the system? I suspect it is minuscule. With (2) the rates for coverage for people over 55 are already too high, so no. With (3), the 90 day grace period is a way for cutting slack for the working poor, who are often in the situation they can’t make their payments in a month, so no.
This, by the way, is the usual path of a means-tested social insurance system: it is cut. The access is tightened and tightened, until it is near-useless and it is made so invasive and controlling that people who might benefit from it decide it isn’t worth it.
Barbara
@Raven Onthill: I don’t know whether SEP gaming is a big problem, but closing loopholes strikes me as no more than making the system work the way it was supposed to. The age banding is more problematic, because it is really a policy choice that is trying to balance the need to get more healthy people into the pool, with lower rates being one kind of incentive. The policy issue is, what’s fair and reasonable and necessary to keep the pool balanced? However, for some people rates could never be low enough to override the sense of obliviousness to the possibility of risk among people who have never known anything but good health. A better way to deal with this kind of problem — which would at least partially address the SEP issue as well — is an opt-out auto-enrollment process, whereby you find yourself enrolled in a plan unless you formally opt out. Inertia is almost always the big winner whatever the rules are — if the default is opt-in, you will get a lower rate of coverage no matter what the premium levels are than if the default is opt-out. So maybe that would be a better place to start. And then see if there still needs to be fine tuning.
The SEP and post-termination premium payment issues are also issues of equity, meant to keep the system from being perceived as open to abuse and gaming, which can make those problems escalate as more people perceive that “everyone is doing it.”
So I do agree that underfunding is a general problem with social programs, but I don’t think that ignoring gamesmanship is much of an answer for that problem.
Raven Onthill
@Barbara:
1. The policy issue is providing health care, not insurance. The pool is a means to that end, not an end in itself.
2. The sensible and fair way to get healthy people into the pool is to fund the system through a graduated income tax. I suspect tinkering with the insurance market will never do it.
3. The new SEP rules will inevitably become excuses to deny coverage. I’ve been through the “prove you are poor enough” process and, if one is self-employed, it is a huge amount of work. The first denial will be enough to put many people out of the system and it will invariably shut out honest people, while the people skilled in gaming the system will continue their games.
newtonmarunner
@David Anderson: All of these bills will probably die a bloody death in the Senate as I can’t see any of them breaking a filibuster.
The reach of the subsidies is only 400 percent FPL, so some do one the Exchange pay the full cost of the insurance (about 12 percent, iirc). [Obviously, most with incomes above 400 percent FPL get health insurance through their employer.]. Older adults tend to have higher incomes than younger adults, so the increased premium from the wider age rating will adversely affect older adults.
My bigger problem is if more employers decide to drop coverage, and put their workers on the Exchange, and as we move further and further away from employer-based health insurance, that’s going to hit older workers hard (assuming they don’t qualify for the subsidies).
We really need to see an entire health care plan rather than these piecemeal ideas. Suppose after passing a 5:1 age rating (which they can’t do through the budget reconciliation process), Republicans change the subsidies so they are a fixed credit and not in the form of premium caps (which they can do through the budget reconciliation process), then wouldn’t you regret — if you’re a Democratic Senator — voting to widen the age rating? That’s why I suggest no member of Congress vote for anything until they see and score everything. Unintended consequences…
Debg
I thought only grandmas got run over by reindeer, so that makes the 5:1 ratio attractive /snark.
David, another great article. I’m not a down-in-the-weeds reader for health care policy stuff, but I always read your posts for big-picture info.
newtonmarunner
@David Anderson: Yikes, my reading comprehension sucks. We’re pretty much on the same page.
I agree with you that once the models are run on their plans, conservatives will be running for the Himalayas. Random thought: One thing to keep in mind is that the CBO’s models, though they did pretty good at predicting Obamacare, don’t consider interactive effects. That’s a big deal with insurance policy.
At the end of the day, we need to see everything, and run the models with everything before voting on anything. Health care reform cannot be done piece by piece; it has to be done with one big bill.
[Fwiw, I’m actually in life insurance.]
Barbara
@Raven Onthill: You are simply changing the subject. Is there a better way to do this? Sure, there is. But if this is the way, then it is a good idea to close loopholes because one of the easiest ways to undermine any program is to point out that it is subject to fraud and abuse.
Fake Irishman
Um, wow, this was a relatively measured and thoughtful discussion. You guys disappointed me here.