Republicans in Congress have expressed their intention to quickly repeal the Affordable Care Act (ACA) while delaying the effective date of repeal for certain ACA provisions until a replacement is adopted. This “repeal and delay” strategy appears to be designed to mitigate potential disruption in the individual health insurance market until replacement legislation is adopted. Health plans may, however, respond to the market uncertainty by withdrawing from the Exchanges or significantly increasing premiums. Stabilizing measures could potentially mitigate the effects of such uncertainty during the transition period before a replacement plan is adopted.
There is a tension between a “repeal and delay” strategy premised on the perceived need to repeal the ACA and simultaneously taking steps to temporarily stabilize the Exchanges. That is, a political agenda premised on the ACA being unworkable could conflict with efforts to support the ACA Exchanges, even on an interim basis. This tension may influence which stabilizing measures are feasible to adopt.
Even if policymakers believe interim measures would in fact bring stability to the Exchange market for the transition period following “repeal and delay,” legislators and the executive branch will have a narrow window to influence the 2018 coverage decisions facing health plans. Given the extended time it takes health plans to price coverage options and complete the regulatory review and approval process, actions intended to stabilize the market for 2018 would need to occur as early as the first calendar quarter of 2017 or shortly thereafter if they are to have their intended effect.
This post describes the deadlines facing health plans as they make decisions about whether to continue participating in the Exchanges in 2018. We then offer a menu of options that Congress and the executive branch could use to stabilize the Exchanges and encourage continued health plan participation. As attorneys who work with health plans and other health care clients every day, we think it is important to move the debate to the very specific issues involved in maintaining robust marketplaces during a transition from the ACA to whatever comes next.
Repeal and Delay and the Challenge of Uncertainty
Our analysis is premised on Congress moving quickly to pass a repeal bill through the reconciliation process similar to the one Congress previously passed in early 2016 that would have repealed portions of the ACA if not for President Obama’s veto. That prior legislation repealed, among other things, the ACA’s premium and cost-sharing subsidies, effective in two to four years, with the repeal of the individual mandate to take effect more immediately. We also assume that the new Administration and House Republicans will resolve the House’s lawsuit and fund cost-sharing reductions during the transition period to avoid a potential collapse of the Exchange market.
The reconciliation process, which was created by the Congressional Budget Act of 1974, allows a simple majority in the Senate to avoid a filibuster and repeal provisions that affect revenues and spending. A reconciliation bill would likely not repeal many of the provisions that are part of the ACA’s insurance market reforms, such as guaranteed availability, modified community rating, dependent coverage to age 26, and the prohibition on pre-existing condition exclusions. These provisions do not appear to have a direct budget impact and therefore likely could not be repealed through reconciliation.
If Congress uses a reconciliation bill to repeal the ACA along the lines described above, in 2018 there would be no coverage mandate but premium and cost-sharing subsidies would be available. Health plans would also be subject to the guaranteed availability requirements and premium rates could not take into account an individual’s health status. The ACA’s temporary reinsurance and risk corridor programs also would have expired, so there would be no financial safety net against greater than expected health care costs.
Concerns regarding the Exchange risk pools would not be a new phenomenon. For 2017, a number of health plans either exited the Exchanges or reduced their footprint significantly. Also, in the 38 states using the Healthcare.gov platform, the number of counties with only one health plan available increased four-fold to 960 counties and premiums increased by an average of 25 percent for the second-lowest cost silver plan. The Department of Health and Human Services (HHS) narrowly avoided having any counties with no health plans during 2017, but continued departures for 2018 could result in certain counties with no Exchange coverage available, thereby cutting off access to the ACA’s premium and cost-sharing subsidies.
Repeal and delay is unlikely to significantly affect existing coverage in 2017 as long as subsidies remain available. A “repeal and delay” strategy could, however, cause the premium and participation trends from 2017 to be even more acute in the 2018 benefit year. For example, the Urban Institute estimates that immediate repeal of individual mandate while retaining guaranteed availability, community rating, and subsidies would cause roughly 4 million people to drop coverage. The American Academy of Actuaries has also raised concerns about health plan withdrawals and the stability of the risk pool following “repeal and delay.”
A Narrow Window Exists if Congress and the Executive Branch Choose to Act
Given the potential disruption “repeal and delay” could cause for 2018, Congress and/or the executive branch may consider adopting measures to stabilize the Exchange market on an interim basis.
As mentioned above, in light of the regulatory review process and time needed to make insurance coverage and rating decisions, Congress and/or the executive branch would need to adopt any stabilization measures by the first calendar quarter or shortly thereafter if they are to influence pricing and Exchange participation decisions for 2018. Health plans will need to submit their rates and products to regulators well in advance of open enrollment for 2018, and there are separate deadlines to decide whether to exit the Exchanges or the individual market entirely.
|State rate filings (projected deadlines based on filing dates for 2017 coverage)||April 8 to July 15 (the deadline will vary by state)|
|Exchange application submitted (Healthcare.gov states)||May 3, 2017|
|Federal rate filings in states without an effective rate review program (Missouri, Oklahoma, Texas, and Wyoming)||May 3, 2017|
|Deadline for notice of individual market withdrawal (i.e., no longer offering individual market coverage)||July 4, 2017|
|Federal rate filings in states with effective rate review programs||July 17, 2017|
|Exchange participation agreement signed||September 15, 2017|
|Deadline for notice of individual product discontinuance||October 2, 2017|
|Beginning of open enrollment||November 1, 2017|
If “repeal and delay” occurs, regulators could extend some of these deadlines. Premium rates and product offerings are not, however, solely driven by regulatory deadlines. Health plans would need time to analyze any legal changes to the ACA, build them into their pricing models, and then determine how to proceed. The longer it takes to adopt stabilizing measures, the less likely such measures would affect health plans’ decisions regarding 2018.
Congressional Actions to Support Exchanges
There are a number of stabilizing actions that industry groups have proposed or that have been discussed in press reports analyzing the future of the ACA. Some of these actions likely would require Congressional rather than executive branch action. The more effective steps to stabilize the market are likely to involve financial protections for health plans, such as:
- Funding temporary high-risk pools outside of the single-risk pool that is used to cover Exchange enrollees;
- Funding a temporary reinsurance program similar to the one that was in effect from 2014 to 2016 that covered a portion of an individual’s medical expenses above a certain threshold; and,
- Funding a temporary risk corridor program where the federal government would cover a portion of health plan losses above a certain threshold. In order for this program to be credible, it would likely need to be fully funded at the outset given the shortfall experienced by health plans for the risk corridor program in effect from 2014 to 2016 years.
These proposals arguably relate to the budget, so it might be possible for Congress to consider such measures using the reconciliation process.
There are other steps Congress could take that likely could not be adopted through reconciliation because they do not appear to directly affect revenue or spending. For example, increasing permissible age rating bands—the maximum ratio by which premiums for older enrollees may exceed those for younger enrollees—from the ACA’s 3:1 to 5:1 has been suggested as an option to make the health insurance market more attractive to younger individuals. Certain Republican reform plans, such as Speaker Ryan’s A Better Way proposal, also propose a continuous coverage requirement to encourage healthy individuals to obtain coverage. Implementing these and other changes not related to the budget would seem to require bipartisan support in the Senate to avoid a filibuster, so the accelerated timeframe to affect 2018 business planning could pose a challenge. Also, these requirements, which could improve the risk pool, may be more likely to be adopted as part of a permanent replacement plan rather than as temporary measures during a transition period.
Executive Branch Actions to Support Exchanges
As an alternative or complement to Congressional action, the executive branch, through HHS, could support the Exchange markets by quickly adopting interim final rules, issuing subregulatory guidance such as letters, FAQs, or executive orders and/or selectively utilizing its enforcement discretion. These administrative actions could encourage participation in Exchanges for 2018 by permitting health plans to offer less comprehensive coverage and improving the risk pool, but it is unclear whether such actions could stabilize the Exchanges on their own.
Adopting a regulation typically requires the agency to engage in the notice and comment rulemaking process that can take months or longer to go from a proposed to a final rule. Agencies are permitted, however, to adopt interim final rules on an expedited basis for “good cause”; HHS may have a reasonable argument that good cause exists in this case, given the short window for action and the potential harm to enrollees from inaction.
HHS could adopt certain stabilizing measures on through expedited rulemaking. The ACA grants HHS broad authority to adopt Exchange requirements, and there are other statutory provisions that defer to HHS to fill in the details. Such authority could be used to:
- Relax the scope of essential health benefits;
- Limit special enrollment periods that allow individuals to purchase coverage outside of the standard open enrollment window; and,
- Amend the grace period regulation that currently requires health plans to continue to cover claims (rather than pend claims) during the first month an individual fails to pay his or her premium.
There are a number of other steps that HHS could also take through subregulatory guidance that arguably would not require the agency to amend or issue new regulations. For example, HHS could:
- Change its interpretation of the maximum out-of-pocket requirements to allow plans to offer less comprehensive coverage for family coverage by having only a single aggregated out-of-pocket maximum for each family policy rather than lower out-of-pocket maximums for each person covered under a family policy;
- Relax its network adequacy requirements to encourage narrow networks;
- Exercise its waiver authority under ACA § 1332 to waive ACA requirements for states that implement alternative ways of providing access to coverage (though the short timeframe for action makes it difficult to see the waiver authority providing relief for 2018); and,
- Determine whether individuals covered under “grandmothered” plans—which the administration temporarily allowed consumers to keep despite their noncompliance with the ACA—will be transitioned to fully ACA-compliant coverage on January 1, 2018, as currently required under the Obama administration’s guidance.
HHS could also consider exercising its enforcement discretion or encouraging states to exercise enforcement discretion related to certain statutory or regulatory requirements. This could be modeled after the Obama administration’s action to permit the grandmothered plans that was just mentioned. Although the legality of such an approach has been questioned, it could allow the new Administration to move quickly to support the Exchange risk pools without relying on Congress. Although this post focuses on Federal actions to support Exchange markets, states retain broad authority over insurance markets, so relying on enforcement discretion could require state cooperation to be successfully implemented.
There are certainly steps that Congress or the executive branch could take to stabilize the Exchanges during a transition period following repeal, but the window for taking action to affect 2018 Exchange pricing and participation is narrow. It will be a significant challenge to enact adequate and timely steps to stabilize the Exchange market following adoption of any ACA “repeal and delay” legislation.