Andy Slavitt, former head of CMS, is explaining the lay of the land going forward:
9/ The tools for synthetic repeal are:
– An Executive Order coming next week
– The budget/tax plan
– Sabotage of the ACA (not even denied)— Andy Slavitt (@ASlavitt) October 5, 2017
10/ The EO allows "association health plans"– ability for plans to be offered with no pre-ex protections & turn ACA into a high risk pool.
— Andy Slavitt (@ASlavitt) October 5, 2017
The short version of this tweet storm is that Synthetic Repeal will produce incredible variance in outcomes between states that give a damn and those that don’t. Furthermore the scheme looks a lot like what Senator Cruz (R-Tx) proposed over the summer. Wonkblog has a good explainer:
The proposal, the brainchild of Sen. Ted Cruz (R-Tex.), would let health insurers offer plans that don’t follow Obamacare’s rules as long as they offer one that does. Which is to say that they’d once again be free to not only sell skimpy plans that didn’t cover things like mental health or maternity care or prescription drugs, but also charge people with preexisting conditions more for them — if they didn’t just deny them outright….
The health insurance market, in other words, would split into two. Healthy people would buy plans that wouldn’t actually cover much, and sick people would try to buy plans that would actually cover them.
Effectively the individual insurance market would split into three components.
The Executive Order (if it passes legal muster), would create an underwritten, healthy cherry picked pool of low cost and low risk individuals. This group would be almost everyone who makes over 400% Federal Poverty Level (FPL) and a lot of younger guys who make under that income level.
The second group would be the subsidized exchanges. These effectively work as a well subsidized high cost risk pool for people earning between 100% and 400% FPL. States have options. If they elect to assume that CSR will not be paid and load all costs onto Silver plans and then also mandate strong meaningful difference regulations in order to maximize both the gap between the first and second Silver plans as well as the gap between the benchmark Silver and most Gold plans, they can protect their citizens. States that elect to assume that CSR will be paid and encourage weak meaningful difference regulations will see low enrollment. The people in this group, no matter what, will consist of a good number of people who make under 200% FPL and anyone with a significant pre-existing condition who makes between 100% to 400% FPL. It will be a sicker pool as the healthy people will have left to join the underwritten plans.
The third market cluster will be Off-Exchange and non-subsidized guaranteed issued policies. These policies will be extra-ordinarily expensive. Only the sickest people will buy non-subsidized policies.
Under this plan, people who are healthy are better off. They pay less and get a whole lot less. People who qualify for subsidies are probably no worse off. People who make more than 400% FPL and have a significant pre-exisiting condition are harmed. They will either be facing premiums of several thousand dollars a month or looking to find ways to lose enough countable income to qualify for a subsidy.
The Exchange would be a de-facto reasonably well funded high cost risk pool for people who qualify for subsidies. It would also serve as the catastrophic backstop to the underwritten markets. Anyone in the underwritten individual market who is diagnosed with an expensive condition will be dumped into the Exchange as soon as possible. And this system could mostly work if the high cost and high risk pool was subsidized for everyone. It would be inefficient but not ineffective. Katherine Hempstead lays out the logic at the Health Affairs blog:
In its promotional literature for its Premiere Choice plan (not currently available on the Internet), the Freedom Life Insurance Company of America offers prospective enrollees the opportunity to purchase a rider, which allows them “a onetime right to additional coverage…without additional medical underwriting.” But this additional coverage is effectively a one-way ticket out of the plan, designed to help enrollees “bridge the gap” between the limited benefit plan and “the earliest possible effective date of coverage for an ACA qualified health plan that could be purchased by you.”
These plans practice an extreme form of cherry picking that governs both entry and exit. While they may be affordable to the people who buy them, this is largely because they are free-riding on the ACA-compliant market. Even members of an underwritten cohort that enter an insurance product without any preexisting conditions have some likelihood of developing costly health problems through an accident or illness. These plans don’t price for that risk but create a virtual trapdoor through which they drop these unfortunate customers back into the guaranteed issue market at the next available opportunity. It is hard to argue that they are priced “actuarially fairly,” when in fact they don’t pay for the right tail of their distribution—that cost is exported to the ACA-compliant market to be shared by its customers and US taxpayers. The idea that these plans represent a type of competitive alternative to the ACA that should be embraced in the name of freedom of choice ignores the reality that the entire business model is built upon using the guaranteed issue market as a source of free reinsurance.
States that want to offer some protection for the non-subsidized individuals need to file immediate 1332 reinsurance waivers to go into effect on January 1, 2019. These waivers need to be filed now so that 2017 enrollment and 2018 premiums are part of the analytical baseline. States can hold the subsidized harmless and re-route federal money to lower net of reinsurance premiums down.
satby
It’s all too confusing and too much of a mess at this point. When I need medical care as I get older, I’m going to become an expatriate.
HeleninEire
@satby: WOO HOO. Welcome to the club.
JGabriel
David Anderson:
Is that really better off? It seems like they’d be screwed if something happened – hit by a bus, diagnosed with cancer, positive HIV result, trauma and post-traumatic stress, and so on – by not having sufficient health care coverage.
Ohio Mom
My eyes are glazing over but this is what I think I understand: the methods of fighting against something straightforward like Graham-Cassidy are easily identified and relatively simple to implement, but synthetic repeal is guerilla warfare, and therefore will probably be very difficult to derail.
I don’t know the specifics but I’ve read that Australia had some kind of universal coverage but repealed it. The backlash was so great that universal coverage was reinstated. At this point, I fear that might be the best case scenario for us.
I know we have to fight them everyday but there is a reason I identify as a peacenik. I am not suited for constant battle, though I will do what I must. As soon as somebody explains what specifically needs to be done.
satby
@HeleninEire: except I don’t think I can afford Ireland, much as I wish I could!
HeleninEire
@satby: Maybe not a city, but check out places like Carrick on Shannon. A 1 bedroom apt can be had for less than €500 a month.
daveNYC
@JGabriel: They as a group are better off. Any given individual within that group could be banking a few extra hundred bucks a month in savings or on the express train to medical bankruptcy.
That’s a remarkably broad executive order. Makes Bush look like an amateur.
Major Major Major Major
@daveNYC:
Can you just give states free rein to ignore laws like that??
Matt
So as per usual, privatize the profits and socialize the losses. For FREEDUMB.
daveNYC
@Major Major Major Major: The rules lawyering in play here seems to be that they can ignore the law’s requirements as long as there’s at least one policy that does follow the law. So they’re not saying you can flat out ignore the thing, but this is a hole big enough to drive anything through. I’m not sure how you stop this though. Who would have standing to sue?
Mart
I always thought once I got into my late 50’s I would be safe, like in the Bush cut the safety net proposals – they would not apply if 55 or older. Us old people are the R base dammit. But now the fuckers got me right in their crosshairs. Love the AARP comments when they publish fact based summaries of the ACA kill bills. AARP is too damn liberal, fake news and all.
Brachiator
Aside from letting insurance companies kinda return to the status quo, what conservative principles are served by this idiotic plan?
It seems to me that the primary idea of insurance is to get as many total people into the risk pool as possible so that the costs of those who get sick can be managed. But this is the point pretty much of all insurance, not just health insurance.
Conservatives seem to fixated on this false idea that the healthy should not have to subsidize those who get sick. Some of these idiots also seem to think that being healthy is a matter of being virtuous, of deciding to be healthy and then living a healthy life. Reality (like germs, genes, luck) don’t seem to exist for these morons.
And there seems to be something morally, emotionally and psychologically wrong with Trump. He wants to undermine and destroy the Affordable Care Act as a matter of ego, totally unconnected from any intellectual policy or agenda.
prob50
The problem with that is this: You and everyone else is healthy – until they are not. Suddenly having bare-bones, poor coverageor no coverage at all seems a lot less attractive.
Cheryl Rofer
OMG, David, I just can’t follow this at all.
Could you do a post in which you tell us:
1. How likely this nonsense is to take place
2. What we can do to jam a crowbar into it?
prob50
@Brachiator:
Any accomplishment associated with Obama is personal to Trump. He would rather work at discrediting BO or reversing his accomplishments than in actually accomplishing anything worthwhile himself. Obama is everything Trump is not. Intelligent, thoughtful, thorough, graceful and gracious, and right on down the line, including his personal and family life as well. Trumps’ resentment just oozes through almost every crazy-assed, harmful, regressive act and declarative tweet and action.
Cheryl from Maryland
Please do a post telling us how we can combat this. I get the general — the Rethugs are trying via executive order what they could not do via legislation. In effect, they are ignoring the will of the people and regular order in Congress for a back door repeal of the ACA. But how do we stop it other than publicity, which might hopefully create shame, some Congresspersons getting active as their role has been replaced and court action?
David Anderson
@Cheryl from Maryland: That is about what can be done.
RIght now, cheer on the lawyers, stay on the look-out, share information and as things happen, get on your state regulators.
Bonnie
It seems to me that sabotage of the ACA is a violation of the president*’s oath of office; and, thus, an impeachable offense.
rikyrah
Thanks for the information Mayhew.
Bob Hertz
Thanks Dave for a very significant post.
Let me respond to just one aspect of it…………..i.e the question of whether healthy persons are harmed by having cheap and skimpy limited benefit insurance.
I think this is an open question. Assume the price of a qualified ACA plan is $500 a month, and the price of a limited benefit plan is $150 a month.
If a healthy person buys a limited benefit plan, they save $350 a month. That is a lot…we have had economic hiccups in America when the price of gas went up only $50 a month.
Of course there is a small chance that a healthy person will have an accident or serious illness. Assume that chance is 1%.
(remember that these are people with no pre-ex conditions, and remember that car insurance and workmen’s comp cover some accidental injuries).
So, buying a limited benefit plan makes my financial life better 99% of the time, and there is a 1% chance that I will have to declare bankruptcy. Other than embarasment, bankruptcy is not so awful. I have done it.
The ACA is a perfectionist plan. It wants all insurance to have no exclusions and no lifetime maximums. But A lot of Americans who get no subsidies resent the perfectionism, and will be drawn to limited benefit plans. It is not clear to me that they are being wrong.
StringOnAStick
@Bob Hertz: and for the people who do have pre existing conditions and are therefore forced into the high cost, high risk pool, what about them? My ultra fit, healthy eating husband would be a cheap plan’s dream, rarely sick, no ortho or heart issues except that he’s been diagnosed with a chronic form of leukemia. Based on genetic tests he shouldn’t have any symptoms for decades but you never know. If he could get a bare bones policy, should he take that risk? If he can’t, do we go bankrupt so he has any form of coverage at all?
Healthy people get older, and things change.
Bob Hertz
I was also diagnosed with CLL in 2015. Thank god I was on Medicare.
Actually I have written that Medicare should be the high risk pool. That way the costs are distributed over all taxpayers. We did this with dialysis over 40 years ago.