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You are here: Home / Anderson On Health Insurance / Proposed Rule and Cassidy-Collins

Proposed Rule and Cassidy-Collins

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I chased my kids through a museum yesterday.  Part of the day had them go through a butterfly’s life cycle and there were parts where grown-ups were just too big for it.  So I stepped aside and thought about health policy.  Specifically the proposed rule that widens the actuarial value bands from +/-2 to -4/+2.  A Silver plan under that rule could range from 66% AV to 72% AV instead of 68% to 72%.

We’ve looked at the distributional consequences of that rule last week.  Now let’s think about the legislative consequences.  The major distributional improvement is that low utilizing people who are not subsidized get slightly lower premiums.  Most of the work of that rule will be increasing out of pocket maximums for either unsubsidized but expensive individuals or subsidized individuals.

In some markets (Indianapolis is a likely target), the premium of the second least expensive Silver which sets the subsidy benchmark will decrease as plans go from 68% AV to 66% AV.  In those markets the benchmark premium (which no one besides CMS and the CBO cares about) will decrease.  The federal premium tax credit subsidy is calculated as the gap filler between an individual’s capability to pay which is a function of the federal poverty line (FPL) and the benchmark premium.  A lower benchmark premium shrinks this gap.  This will lead to a lower CBO score for the same number of people covered.

Some of the lower premium tax credit payments will be counter-balanced by higher cost sharing reduction subsidies but on net anyone who is making between 250% FPL and 400% FPL and is receiving a subsidy will see a smaller subsidy.

Why does this matter for Cassidy Collins?

Their plan is to take the entire pool of ACA money that a state would have received from the ACA and take a 5% haircut.  From that smaller pool of money, states could elect to continue with an opt-in ACA as is or move towards an opt-out HSA high deductible and catastrophic plan system in their alternative methodology.

This administrative rule shrinks the CBO score for the pool of money that states would be eligible for so it shrinks the pool of money available for Cassidy Collins by a few percentage points.  This is critically true for the alternative methodology as their plan spreads the same amount of money (after the 5% haircut) over a much broader population (subsidized, unsubsidized and unenrolled) so the baseline plans that can be paid for with either just the subsidy OR the subsidy plus the same ACA individual contribution are far skimpier with far higher deductibles.  This rule will increase the deductibles that Cassidy-Collins would have to charge by several hundred dollars more per person.

Reader Interactions

23Comments

  1. 1.

    Sab

    As always, thank you for the information. I am planning to call my Ride senator tomorrow and it’s helpful to be up to date on what is in the works. I cannot stand my senator or his values, but he is at least a competent, intelligent and informed human being, so possibly we can convince him that those on the other side are also aware and watching. He won with 65% so he knows a fair number of Ds voted for him this time and will not the next time if he screws up too badly.

  2. 2.

    Buskertype

    Thanks for the info… it’s a good reminder to me to get back to hounding Sen. Capito’s staff (she’s a cosponsor) about the details of Cassidy-Collins. So far all they have offered is boilerplate and BS.

    My two main questions are: How high is the deductible in these High-Deductible plans, and what are the rules/structure of an HSA… (what can you spend it on? How big is the government contribution? Etc.)

  3. 3.

    scottinnj

    So basically this means what people hated about Obamacare – the high deductibles and high premiums – gets worse. Maybe premiums flat but deductibles up. Not that Dems should vote for this but net net seems as reasonable an outcome as we can get in this world.

    Fortunately this means the Dems have an easy target – ‘Ryan/McConnell/Trump/Your Local GOP Congressman stuck you with higher insurance deductibles (video of someone who couldn’t afford the deductible and is now terminal) to give rich folk (Mar A Lago video) a big tax cut vote Team Dem”. Our Democratic Leadership, of course, is too inept to actually think through the obvious and will probably run some inspration video to Fight Song again.

  4. 4.

    Russ

    How long before enough people drop insurance due cost/deductible/coverage changes that the whole of ACA crumbles? I ask because republicans play long games and death by a thousand cuts would be one.

  6. 6.

    Kristine

    @Russ:

    How long before enough people drop insurance due cost/deductible/coverage changes that the whole of ACA crumbles? I ask because republicans play long games and death by a thousand cuts would be one.

    This is the game I assume they’re playing because repeal/replace with something that actually works is too tough, if not impossible, as well as counter to their present philosophy**. So they’ll defund/underfund a little here, a little there, all the while saying that it’s the ACA’s/Dem’s fault for being a lousy law written by lousy legislators.

    The ACA had to be perfect out of the box in order to survive, and that was never going to happen–what law that complex is ever perfect? It needs to be tweaked and repaired in places, but the R’s point to any and every weakness and shout “the law sucks–tear it all down!”

    The logical extension of that philosophy is what helped lead to T***p. If the system doesn’t work for you, pull it out root and branch, sow salt, and see what happens.

    It’s really hard not to hate these people, even the ones who genuinely didn’t realize who/what they were voting for.

    **only the rich deserve health insurance

  7. 7.

    David Anderson

    @Buskertype: As to how high the deductible could go for the catastrophic plan, I do not know. I know it will vary by state. States with both high uptake of subsidized individuals and large gaps between the #1 and #2 Silver (California) will have lower deductibles as they have a much bigger pot of money to play with per capita than states with relatively low uptake of plans and low benchmark premiums.

  8. 8.

    MomSense

    @David Anderson:

    The catastrophic plans are worthless. It’s a huge trap for people because you end up paying g for everything out of pocket so most people just skip screenings.

  10. 10.

    Another Scott

    Thanks for this information.

    You’ve been keeping up with this stuff much more than just about any normal human being. Maybe you can answer these questions too:

    1) There were noises earlier about some “continuous coverage” requirement. Does C-C have that?

    2) Donnie’s EO gave the HHS secretary the power to waive the “have insurance or pay a fine/tax/penalty”. Does C-C have an individual mandate or equivalent? Or does it have a back-door requirement via #1?

    3) Does C-C or any of the other floated plans do anything about prohibition on lifetime caps, or can the feds/state simply dump someone on a “high-risk” pool if they get to be too expensive (through some explicit mechanism, or through making anything but a catastrophic plan too expensive for the people in that boat)?

    Obviously, the point of these “tweaks” like C-C is to reduce the federal/state headline cost of Obamacare (even if it really doesn’t, and even if it also makes everyone else pay more). I worry that the headlines about changes to premiums and +/- actuarial values are shiny objects that are hiding other potentially more important changes.

    (Lawyers and lobbyists are very, very good about changing a few words in bills so that they can drive trucks through provisions in the law.)

    How well will PK’s 3 legged stool work going forward with the proposed changes? Is it more dangerous than simply a funding strangulation (the 5% cut) which could easily be reversed given a sensible Congress?

    Thanks again.

    Cheers,
    Scott.

  11. 11.

    cmorenc

    @Russ:

    How long before enough people drop insurance due cost/deductible/coverage changes that the whole of ACA crumbles? I ask because republicans play long games and death by a thousand cuts would be one.

    I think this is the real game many in the GOP leadership are playing – dither on their “replacement” plan while meanwhile incrementally sabotaging the ACA by sawing out enough of its support posts until it falls of its own weight. And then, they put forward a replacement plan that is mostly a Spartan, high-deductible “catastrophic” insurance scheme as the only long-term financially viable plan, since the ACA has purportedly, obviously failed. It’s also probable that the way they will structure this alternative plan is along the lines of Medicaid – block grants to the states, with the catastrophic insurance plans being sold across state lines in the manner of credit cards – with this type of health insurance being governed by the law of the state offering the fewest cumbersome regulations burdening participating insurers.

  12. 12.

    jacy

    @MomSense:

    I had a catastrophic plan the first year — which was the year I was diagnosed with ovarian cancer that July. Living in Louisiana, I fell into the “Jindal Hole,” where I made too much money for Medicaid but not enough money to qualify for a subsidy. It was a nightmare. Out-of-pocket cap was supposed to be $6,300 after a $4,200 deductible (which was a fortune that I couldn’t afford anyway…), but having a major diagnosis meant that I racked up bills so fast that they couldn’t even process the claims to figure out when the insurance would kick in. Fast forward to October, where I was standing at the reception desk of the oncologist’s office, crying, because I couldn’t pay the $5,000 copay to get the chemotherapy I was scheduled for that day. I was paying almost $500 a month for insurance, had spent borrowed and spent nearly $7,000 in copays and deposits to meet my deductible and and out-of-pocket cap, but none of that mattered. I had to postpone chemotherapy and spent the next several days on the phone trying to get someone to authorize treatment or find some way to come up with thousands of more dollars on the spot.

    The next year, I made enough money to get a silver plan, and I was paying $128 a month in premiums, with a $200 deductible, after which everything was totally covered. I would not have survived another year on the catastrophic plan. Having gone so far into debt and exhausted all my resources that first year, I literally would not have been able to afford treatment.

  14. 14.

    David Anderson

    @Another Scott: My long analysis of Cassidy-Collins https://balloon-juice.com/2017/01/23/live-blogging-a-first-read-on-cassidy-collins/#comments

    Yes, they use continual coverage requirements instead of a mandate but they match that with an opt-out instead of opt-in so there will be low leakage (most people will be “in” via some type of baseline catastrophic plan)

    Three legged stool is not community rating/guarantee issue +subsidy +mandate it really is community rating/guarantee issue + subsidy + pool participation mechanism (of which the mandate is one viable form)

    So CC + auto-enroll could be a viable pool participation mechanism.

  15. 15.

    amygdala

    @cmorenc: Ayep. Ryan’s already doing it with his assertions (without proof) that the ACA is in a death spiral.

    @jacy: I’m so sorry. That you’re coping with such a serious illness and that you’ve had all of this additional and unnecessary stress on top of it.

  16. 16.

    Matt McIrvin

    I went with my family to the Boston Museum of Fine Arts yesterday. My daughter is 10, getting old enough to be interested in art museums, but her tolerance for them is strictly time-limited. I was worried that we’d come too late in the day to spend much time there, but I needed to calibrate my expectations–she was pretty much done after just a couple of hours. Still, I got to show her the Japanese room with the samurai armor and swords, which is one of my favorite spots there.

  17. 17.

    MomSense

    @jacy:

    Oh Jacy I remember when you got the diagnosis and I think your marriage ended at the same time. We were all so worried for you. The last thing you needed when fighting for your life was to deal with all that insurance bullshit.

    Sending a big hug to you and so grateful you are doing well now.

  18. 18.

    Another Scott

    @David Anderson: Thanks for the pointer to the earlier thread. I should have remembered that, given all the comments I had there. ;-)

    In doing some other searching, I came across this OpEd at the Washington Examiner (generally a RWNJ newspaper):

    By SALLY PIPES, CONTRIBUTOR • 1/30/17 2:32 PM

    On Jan. 23, Sen. Susan Collins, R-Maine, and Sen. Bill Cassidy, R-La., introduced an Obamacare “replacement” plan to the Senate. Dubbed “The Patient Freedom Act of 2017,” this legislation would repeal some aspects of Obamacare while giving states “that like Obamacare” the chance “to keep Obamacare” or adopt a market-based alternative subsidized by the federal government.

    Let’s be clear: The proposal in no way counts as an Obamacare replacement. A more accurate description of the bill was given by the Washington Examiner’s own Philip Klein, who called it “Obamacare Forever.”

    For one, it all but guarantees that Obamacare will live on indefinitely in states that choose to maintain the status quo. Moreover, the bill keeps in place some of the health law’s most disastrous provisions, including 95 percent of the law’s federal insurance subsidies and the requirement that insurers accept all customers regardless of their health status.

    This last feature, known as the “guaranteed issue” rule, is one of the chief drivers of the rising premiums and deductibles that are fueling Obamacare’s “death spiral.” Failing to wipe this rule off the books isn’t a legislative compromise, but rather a forfeit.

    Worse, the senators’ “New State Alternative” option, the so-called “market-based” option available to states that scrap Obamacare, adds its own horrors to our broken healthcare system.

    Under this plan, states would be free to auto-enroll their residents in an insurance plan of the state’s choosing. The argument for this provision is that it would raise coverage rates while also bringing more healthy people into the insurance market to help subsidize care for those who are older or sick.

    Of course, Obamacare’s individual mandate was supposed to serve this same purpose. That policy was a drastic government intervention into the insurance market that forced Americans to purchase coverage or pay a tax penalty. Auto-enrollment goes one step further, effectively purchasing coverage for consumers whether they want it or not. In other words, it takes one of Obamacare’s most paternalistic and least popular components and makes it worse.

    Voters have handed Republicans a historic chance to repeal and replace Obamacare. The Cassidy-Collins proposal squanders that opportunity on a plan that neither repeals nor replaces the previous president’s misguided health law.

    Let’s hope that Republican lawmakers rally around a single comprehensive replacement plan very soon. They’ve delayed this process long enough.

    Sounds like C-C may have a lot of trouble with the Teabaggers in the House if it makes it through the Senate…

    We’ll see what happens.

    Thanks again.

    Cheers,
    Scott.

  20. 20.

    jacy

    @amygdala:

    Thanks for the kind words. I had a lot of health problems subsequent to the cancer diagnosis (chemotherapy left me with, thankfully temporary, severe cognitive and physical deficits, and I had several surgeries related to parathyroid hyperplasia that were a nightmare, and nearly died from anaphylactic shock from one of the chemotherapy drugs, and I’ve been two years in treatment for severe depression/anxiety from the breakup of my marriage, which occurred two weeks before the cancer diagnosis) The good news is I’ve been no-evidence-of-disease for 18 months, and am currently off all medications and feeling pretty good. Still have to be screened for cancer every six months and I see a therapist weekly , but I’m definitely a medical success story.

  21. 21.

    amygdala

    @jacy: You are made of strong stuff to have endured all of that. I’ve seen it so often, with patients of mine and sometimes family and friends, dealing with coverage concerns in the face of major illness. It makes no sense.

    So glad you’ve gotten through it all. All best wishes for continued good health.

  22. 22.

    Buskertype

    @David Anderson: if I understand it correctly then, under CC money will be allotted to the states based on their subsidized enrollment numbers now, and those allotments would be more or less permanent going forward? So weird!

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