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Thursday, March 15, 2018

Passing No Health Insurance Stabilization Package is Better than Senator Alexander’s Plan

Enacting the new proposal from Senator Lamar Alexander (R-TN) will be worse for consumers than if Congress does nothing at all to stabilize the individual insurance market. If this is the best package members can produce, we encourage Congress to reject it.

Late yesterday, Senator Lamar Alexander (R-TN) released a brief two-page summary of his proposal designed to stabilize the individual insurance market. Unfortunately, this plan would be a bad deal for most low- and moderate-income families purchasing coverage in the individual marketplace.

Given the political dynamics and Republican opposition toward the ACA, it's unrealistic to expect that this proposal would improve on the affordability of health insurance under the ACA. But this proposal would put consumers at a significant disadvantage financially. Therefore, we prefer the status quo.

Premium reduction claims are misleading
Senator Alexander’s summary contends that the Congressional Budget Office has estimated that reinsurance funding included in the proposal would reduce premiums by 10 percent next year nationwide, and by 20 percent for certain states in 2020-2021. Separately, it quotes a private study arguing that this package would reduce premiums by 40 percent beginning in 2019. While Families USA supports funding for reinsurance, the summary’s claims of substantially reduced premiums are, at best, misleading and at worst, simply incorrect.

  • The vast majority of people purchasing coverage in the individual marketplace (roughly 80 percent) receive premium subsidies. The CBO estimates appear to focus on gross premiums, rather than the net premiums that people will actually pay after receiving subsidies.
  • The Alexander proposal would only reduce premiums for a portion of the unsubsidized population. Because of the phenomenon known as “silver loading,” the 80 percent of consumers who receive marketplace subsidies would likely pay MORE in net premiums to get the level of protection they receive today.
  • The summary points to an estimated 40 percent premium reduction beginning in 2019 in an Oliver Wyman study. That study assumes that all states would receive significant pass-through of premium savings through the 1332 reinsurance waiver mechanism envisioned in the Alexander proposal. In reality, not all states would apply for, nor receive, waivers, and among those that do, the amount of pass-through available will vary widely among states.

Policies that move the market backward
In addition to funding for reinsurance, the proposal includes a number of policies that will actually reduce coverage and access for many people:

  • Hyde Amendment – The Hyde amendment blocks federal funds from being used to pay for abortion, except in cases of rape, incest, or when a pregnancy would endanger a woman’s life. Although ACA plans already prohibit federal subsidies from being used for any portion of a plan’s premium that covers abortions, the bill language could go even further and forbid any federal payments going to health plans that cover abortions (except with those narrow exceptions.) Families USA opposes any extension of the Hyde Amendment in the individual market. This policy only serves to reduce access to needed care for millions of women.
  • Copper Plans – Copper plans would cover only pay 50 percent of covered expenses on average, though they would still include the essential health benefits. These catastrophic plans will provide such a minimal level of coverage that unsuspecting consumers may find themselves with unaffordable medical debt, which will have repercussions for the entire health care system.
  • Changes to Section 1332 Amendments – The changes proposed in the package could allow states to obtain waivers from the Affordable Care Act that allow them to offer less comprehensive coverage or coverage that is not as affordable to low-income consumers. This would fundamentally weaken the consumer protection “guardrails” in current law.
  • CSR Funding – The package proposes to fund cost-sharing reductions (CSRs), which bring down deductibles and cost-sharing in marketplace plans. However, states and plans have already continued to provide these cost-sharing reductions and build them into plan rates. Last week, Families USA released an analysis showing why, counter-intuitively, due to the phenomenon known as “silver loading,” funding CSR payments to plans today would actually increase premiums substantially for most people currently receiving premium tax credits.

Critical policies that are missing from this package
Families USA supports a comprehensive package to stabilize the individual marketplace. In the House, Reps. Frank Pallone (D-NJ), Richard Neal (D-MA), and Bobby Scott (D-VA) have introduced such a comprehensive package. The bill includes several provisions that would be necessary to truly stabilize the individual market in the short- and long-term:

  • More Generous Subsidies: The Pallone/Neal/Scott bill would increase premium subsidies for individuals with incomes below 250 percent of the federal poverty level (FPL), and make cost-sharing subsidies available for people with incomes of up to 400 percent of the federal poverty level.
  • Stopping the Sale of Sham Insurance: The legislation would prohibit the Administration from finalizing regulations that would allow for the expansion of Association Health Plans (AHPs) and Short-Term Limited-Duration (STLD) Plans. If fully implemented, these regulations would firmly create a two-tiered individual market. Predatory insurance companies would be allowed to sell sham insurance to young and healthy consumers. AHPs could be designed to only attract healthy individuals and small businesses with relatively healthy enrollees. Protections against fraudulent AHP operators are scant to non-existent. Short-term plans can freely discriminate based on age and pre-existing conditions. The “coverage” available in these sham plans can be so limited as to be nearly worthless. Older people, and those with pre-existing conditions, would be barred from purchasing STLD plans, thus leaving them in an unbalanced risk pool with skyrocketing and ultimately unaffordable premiums.
  • Funding for Outreach, Marketing, and Consumer Assistance Programs. The bill would restore funding for outreach, marketing, and in-person enrollment assistance that was cut by the Trump Administration last year. This will ensure people have the information and help they need to get covered so that the individual market includes a wide array of people to create a balanced risk pool.

Families USA continues to believe that a properly aligned stabilization package could benefit the millions of people who purchase health insurance coverage in the individual market. The Alexander proposal will actually make most consumers worse off. If this is the best package Congress can design, we encourage lawmakers to reject this proposal.