Dylan Scott at Vox had a great piece earlier this week. He tried to imagine what the ACA looks like in 2020 as the Open Enrollment period for 2021 was gearing up just before the Presidential Election. We talked for a while and he represented my thinking quite well. There is one thing that I think he is missing which makes me more optimistic than most people in the story.
Over the past three years, Republicans never found a plan to repeal and replace the health care law that they could actually pass. But the dream that they could still end the law entirely prevented any bipartisan measure to stabilize the law from being enacted.
President Donald Trump, meanwhile, has nicked and cut the ACA wherever he could….
The people whose income qualified them for the ACA’s tax subsidies could still find affordable coverage, available for as little as $150 a month. But when somebody making too much for that assistance checked their choices — like a single woman making $75,000 a year — they didn’t see any prices that most middle-class people would be comfortable paying every month…..
Health insurers didn’t abandon the law’s market. The incentives were too good: They can price their rates as high as they want, and those 9 million people should continue to buy their plans because they are protected from the hikes by the federal subsidies….
The entire piece neglects probable state waivers. This is critical.
I am assuming that CSR will never be directly appropriated. The political and policy incentives don’t line up for sixty votes in the Senate and the the Senate Parliamentarian has said that CSR funding is not germane to a reconciliation bill. The Congressional Budget Office projects that not directly appropriating CSR means the Federal government will spend $194 billion more in net advanced premium tax credits. Some of that increased spending is due to higher enrollment as more people are able to buy $0 Bronze plans and low dollar Gold plans so the under 400% FPL buy/no-buy decision encourages more people to buy subsidized policies. Most of the incremental spending is from the elevation of the benchmark Silver premium leading. More people who would have bought a subsidized ACA policy get bigger subsidies.
We know that CMS is willing to approve waivers. We know that the CMS is applying the applicable guardrails as laid out in the 2015 guidance. These guard rails require any waiver to be at least as good as standard ACA in terms of the number of people covered, cost of coverage, cost sharing and comprehensive federal budget neutrality.
We also know that Iowa and Oklahoma had waiver applications either submitted or in the pipeline for reinsurance and a whole lot more.
Reinsurance waivers are the simplest waivers for CMS to approve. Alaska and Oregon have reinsurance waivers approved that lowered premiums. Minnesota had a reinsurance waiver approved that flat-lined premiums. These three waivers were approved in the universe where CSR was assumed to be funded. The math for reinsurance waivers is straightforward. There are no benefit guardrails that need to be tested and the inter-action effects on budget neutrality are simple. More complex waivers were proposed by Oklahoma and Iowa but withdrawn due to timeliness or budget neutrality calculations.
In a world of no CSR payments, states can use baseline costs plus the CSR windfall to fund very aggressive reinsurance waivers. Reinsurance in a no-CSR world could cover more claims and more dollars. States could choose claim-based reinsurance or prospective diagnosis based invisible risk sharing or there can be a mix of diagnostic and catastrophic surprise based retrospective reinsurance. The mechanics don’t matter too much. These types of waivers would lower the index premium which lowers the costs that non-subsidized buyers pay.
More creative waivers could be built. States may be able to design waiver programs that cap total premiums for all people as a function of annual income. It would smooth the income cliff of 400% FPL (single individual earning under $48,080) so that the work disincentive fades and the aggressive financial engineering is discouraged. They may also be able to create Medicaid buy-in programs for higher income individuals. There are a number of waiver programs that I can not imagine or fully describe which states have the flexibility under current guidance to implement.
The ACA has always been a state by state story. It is always a county by county story as the pricing spread from the Benchmark plan varies widely. It will become a program with even greater variation. The lack of CSR appropriations lowers the cost and complexity of the waivers that can enable states to address the known problems of the ACA which makes it more likely, in my opinion, that many states will at least try to smooth off some of the rough edges. We saw with the preparation for a no CSR universe that there is widespread ideological diversity. Wyoming chose the same policy approach as California and Massachusetts. Protecting one’s own citizens through available tools tends to be a good local political idea.
States that want to cover their population with good health insurance can and will find ways to do so. States that don’t, won’t. I’m optimistic that based on how states responded to CSR uncertainty, that quite a few states will use the waiver process for the 2019 or 2020 policy years to help their citizens.
Gin & Tonic
Well, yeah, that mistermix post that was here for a second will be a lot of fun.
Chris
Hi David-
NC guy here…51 not receiving any subsidies. One of your posts a few weeks back suggested that someone in my situation should probably check around directly with the insurers. (In my zip code its 1000/month for the silvers from BCBS) I went directly to bcbs’s site and it appeared to quote me the same packages as on the exchange. Are there different plans available if I go to an agent? Thanks for all the knowledge you impart here…I try to pass it along to all my less engaged friends.
David Anderson
@Chris: Call an agent, it won’t hurt, but if BCBSNC is showing the same products on and off exchange, that is probably what they are offering.
Ravi
It is hard to see waivers as the case for optimism when the waiver-granting authority is eager to be actively malevolent. I think you have to assume that good waivers will not be approved and that the administration will work overtime to find grounds for approving bad ones (which will then be challenged legally). Maybe a few improvements will sneak through because of incompetence, but waivers, like every other administrative lever, are just another tool that the next administration might use to improve things.
David Anderson
@Ravi: I disagree. CMS is calling a tight but consistent strike zone. Good waivers will get through
Donyeel
As always, I appreciate all of the great info and analysis.
As an aside, I think the general usage of terms like “400% FPL” that reference a number many people don’t know can distance a reader from the analysis. Is it common knowledge what the FPL is? I only had a vague idea, until I looked it up (it’s $12,060 for an individual, and $24,600 for a family of 4). It’s like writing about a policy that will impact “states with over 300 miles of coastline”. A person living in North Carolina who doesn’t study maps or geographic statistics isn’t necessarily going to realize their state is impacted.
For instance, the Vox quote refers to a single woman making $75,000 as making too much for subsidies — that’s accurate, but a single woman/man making $49,000 is also making too much for subsidies, or a couple making $65,000 combined. That impacts many more people.