There is now talk about a bi-partisan deal in the Senate on minor, technical fixes to the ACA. We need to be careful and think through the mechanics of the changes.
Axios has the Republican wish list:
-
Funding for the Affordable Care Act’s cost sharing reduction subsidies, which are currently being paid by the administration.
-
A reinsurance program that would help insurers pay for high-cost enrollees, blunting the impact of these enrollees on overall premiums.
-
Expanded state innovation waivers, which would allow states to waive some of the ACA regulations, like essential health benefits. (A similar proposal was part of the Senate’s repeal-and-replace bill.)
-
Allowing everyone in the individual market to buy plans that only cover catastrophic care. The ACA limits those plans to people younger than 30.
The first two items make perfect sense to me. Expanding the innovation waivers is something that I really need to see the language and the intent. I could see an explicit proposal that allows states to elect to link their Section 1115 (Medicaid) with 1331 (Basic Health Plan) and 1332 (ACA Innovation) waivers as long as the Office of the Actuary rules that apply to 1332 then apply to everything involved in a linked waiver. This could be contentious but there is grounds for an agreement somewhere.
The one big conflict I see is the last item. Catastrophic coverage is roughly 57% actuarial value coverage with minimal initial benefits (I think it is 3 PCP visits) and then a $7,000 deductible. It is sold on and off Exchange with severe limitations. The strongest constraint is that subsidies can not be used for it. The second constraint is that except in very limited circumstances, only people under the age of 30 can buy it. There is another mechanical quirk to the Catastrophic plans — they are a distinct rating risk pool. It is a carve out of a small, young population from the general single risk pool.
Catastrophic has never been a popular plan. In 2017, 1% of all on-Exchange purchases were for Catastrophic. Catastrophic is not offered in all counties. Healthcare.gov covered 2,722 counties in 2017. 340 counties did not have an offered Catastrophic plan. Another 515 counties have the least expensive catastrophic plans being more expensive than the least expensive Bronze plans. Bronze plans offer slightly better benefits and access to subsidies.
I think the intent of this bullet point is to offer cheaper plans to healthier buyers. From there, the logic would be that this would make the risk pools healthier and thus lower average premiums for non-subsidized buyers.
There is a major problem. The Catastrophic risk pool is segregated from the general risk pool.
If the goal is to actually get cheaper policies sold, then going to a “Copper” model as proposed in 2014 by former Senator Begich (D-AK) would make more sense.
Right now, minimal essential coverage for people over the age of 29 and those not facing a hardship is a Bronze plan. That plan covers 60% of the average expected acturial cost. All Bronze, Silver, Gold and Platinum policyholders from a single company in a single state make up a unified risk pool. The metallic band plans are subsidized by tax credits. Minimal essential coverage for people 29 and younger is catastrophic coverage which covers less than 50% of the expected actuarial cost. Catastrophic coverage has its own separate risk pool and is non-subsidized.
The copper plan would be a redefinition of essential minimum coverage for most people from 60% actuarial value to 50%. This is a 16% decrease in expected coverage value, and it is getting insurance to the point where it is truly hit by the bus coverage. The 16% decrease in coverage will probably lead to an 18% to 20% decrease in premium pricing if the pricing differentials between the same insurer/same plan design Bronze-Silver-Gold-Platinum hold up. To get that decrease in actuarial value, the maximum out of pocket levels will increase from the current $6,350 to between $8,000 and $10,000 (I’m not a pricing expert). It is a trade-off between lower guaranteed monthly payments and the possibility of much higher oh-shit payments. That is a legitimate trade-off for insurance.
Splitting the risk pool any more by pulling out healthier individuals is one of the last things that should be done to the ACA. Keeping healthier individuals in the general risk pool with Copper plans that are eligible for subsidies will be more effective at achieving the goal of offering lower cost policies to the non-subsidized market without destabilizing the risk pools.