January 12 Update: The Next Step In ACA Repeal. At 1:30 on the morning of January 12, 2017, the Senate took the next step toward repealing the Affordable Care Act, passing a budget resolution instructing the Senate Finance and Health, Education, Labor, and Pensions Committee to prepare recommendations for repeal. The resolution passed 51 to 48, with Senator Paul voting with the Democrats because of his opposition to the budget generally, not to repeal. A budget resolution need only pass by a simple majority vote and does not need presidential approval.

More than 100 amendments to the budget resolution were proposed, most by Democrats attempting to get Republican senators on record opposing popular provisions of the ACA. One or two Republicans joined Democrats in voting for various amendments to protect Medicare, Medicaid, Veterans, or rural hospitals, but no amendments passed in seven hours of voting. An amendment to permit drug importation from Canada failed with 12 Republicans voting for it but 13 Democrats voting against. An amendment proposed by five Republican senators to delay the date by which the committees must report on repeal from January 27 to March 3 was withdrawn, but with an understanding that the January 27 date was flexible and might be extended. The legislation now goes to the House for a vote.

Even as repeal moves forward, the Obama administration continues to make its case for not repealing the ACA. On January 11, 2017, the HHS Assistant Secretary for Planning and Evaluation released a brief on the role of the ACA in combating the opioid epidemic, which took 33,000 lives in 2015. The report noted that the share of hospitalizations for substance use or mental health disorders in which the patient was uninsured fell from 22 percent at the end of 2013 to 14 percent by the end of 2014, as the ACA was implemented. In states that expanded Medicaid for which data was available, the uninsured share fell from 20 percent at the end of 2013 to 5 percent in mid-2015. The share of people foregoing mental health care because of cost dropped by about one third for people with incomes below 400 percent of the federal poverty level. Medicaid expansion has resulted in an 18.3 percent reduction in unmet need for substance abuse disorder treatment among low-income adults.

ASPE projects that the states with the highest rates of drug overdose deaths—West Virginia, New Hampshire, and Kentucky—would see their uninsured rates triple if the ACA were repealed. Mental health disorders are one of the most common preexisting conditions, but one third of individual insurance policies did not cover substance abuse disorder treatment before the ACA. ASPE had earlier projected that 30 percent of those who would gain coverage through the ACA’s Medicaid expansions would have mental health or substance use disorder problems. The report also noted other administration efforts to combat opioid abuse.

Also on January 11, Democratic Senators released data from a Harvard/New York University study that showed that repeal of the ACA would reduce funding for opioid abuse treatment by $5.5 billion a year.

Original Post

On January 10, 2016, the Centers for Medicare and Medicaid Services (CMS) released its fourth marketplace open enrollment report for HealthCare.gov and the state marketplaces, covering the period of November 1 to December 24, 2016. Enrollment remains strong, with over 11.5 million individuals either selecting plans or being auto-reenrolled in coverage. This is an increase of 286,000 over the comparable period in 2015 for 2016 enrollees. However, as many as 70,000 Louisianans with incomes between 100 and 138 percent of poverty moved from HealthCare.gov to Medicaid due to Louisiana’s Medicaid expansion, so coverage is expanding at rates significantly ahead of last year.

Enrollment will continue to grow through the end of open enrollment on January 30, 2017. Because plan cancellations are tracked in real time this year, it is possible that further enrollment growth will not be as large as last year, but it will be closer to actual effectuated enrollment numbers when those are reported in the spring.

The totals include 8.9 million returning consumers and 2.6 million new. As the marketplaces mature, it is to be expected that a higher percentage of enrollees will be returning from a prior year. Five million, or 56 percent, of returning enrollees actively reenrolled in coverage, compared to 51 percent last year. Of active reenrollees, 53 percent switched plans, while 47 percent remained with their 2016 plans. A total of 9.2 million consumers—81 percent of all enrollees—will receive advance premium tax credits to pay for their coverage, which average $386 per person per month for HealthCare.gov enrollees.

Regarding age, 2.29 million enrollees, or 26 percent, are between 18 and 34 years old. This is the same percentage as last year, but 32 percent of new consumers are in this coveted age group. Although the report does not provide data on this, high turnover among this age group would be expected as individuals find employment with benefits.

In conjunction with the January 10 report, the Council of Economic Advisors released “Understanding Recent Developments in the Individual Insurance Market.” This report is intended to counter recent claims that the individual insurance market is in a “death spiral, collapsing of its own weight.” The report first asserts that continued growth in individual market enrollment, as reported in the contemporaneous CMS report, establishes that 2017 premium increases are not having substantial adverse effects on individual market enrollment. Because premium increases are largely covered by increased premium tax credits for most enrollees, the premium increases are not deterring consumers from coverage. Enrollment is essentially growing at the same rate in areas with high as compared to low premium increases. And claims costs do not seem to be increasing as premiums increase, which would be expected were a market in a death spiral.

Second, the report contends that the 2017 premium increase are an attempt by insurers to catch up from initial underpricing premiums during 2014 and 2015. They also reflect the phasing out of the reinsurance program, which subsidized premiums for the first three years. They are not based on claims growth, as claims for marketplace insurers grew more slowly than claims in private insurance overall in 2014 and 2015. In fact, premium growth has been greatest in areas where premiums were initially the lowest, suggesting that initial underpricing has been a major reason for recent premium increases.

Finally, changes insurers have made in premiums and plan design, together with recent policy changes such as those involving third party payments of coverage, have stabilized the market, the report says. Premium increases in the future are likely to be much more moderate and insurers that have left the marketplaces are likely to return. Policy actions could be taken to further stabilize the market, such as increasing financial assistance or offering a public plan. Alternatively, the repeal of significant portions of the ACA could seriously damage the individual market.

Efforts To Repeal The ACA Underway In Congress

The budget reconciliation process explained in an earlier post is now underway. It seems likely that the Senate will vote on the budget resolution, the first step in this process, on January 11 or 12, 2017. More than 100 amendments have been offered for the resolution, most by Democrats who want to put Republicans on record for voting against popular provisions in the ACA. Most of these will be voted on in a vote-a-rama process without debate.

Once the budget resolution passes, four House and Senate committees will begin drafting repeal, and possibly replace, language for a budget reconciliation bill. The outlook was complicated by President-elect Trump’s promise today that his administration would submit a proposal to repeal and replace the Affordable Care Act “essentially simultaneously.”

Effects Of Individual Mandate And Advance Premium Tax Credits

Two of the ACA’s provisions that are most at risk as Congress debates repeal are the individual responsibility requirement, which imposes a tax on individuals who are not covered by health insurance and do not qualify for an exemption, and the provision for advance premium tax credits, which makes health insurance affordable for low- and moderate-income Americans. An important question, therefore, is how many people are affected by these provisions, and how are they being affected?

On January 9, 2016, Internal Revenue Service Commissioner John Koskinen sent Congress a report containing preliminary data on tax filings for 2014 and 2015 relating to these two provisions.

As of December 15, 2016:

  • About 5.3 million taxpayers had claimed on their tax filings $19.2 billion in premium tax credits (PTC) for 2015, with an average credit of $3,620. About 49 percent claimed less than $2,000, 29 percent between $2,000 and $5,000, 22 percent between $5,000 and $10,000, and 5 percent over $10,000.
  • About 5.8 million taxpayers had claimed $20.7 billion in advance premium tax credits (APTC).
  • About 2.4 million taxpayers received less in APTC than they were entitled to, and thus received extra PTC when they filed their taxes. The average amount received was about $670, though most received less than $500.
  • About 3.3 million taxpayers received too much APTC and had to pay some back. The average excess was about $870 and the total was $2.9 billion. About 75 percent reported owing less than $1,000 and 62 percent with excess APTC still reported a refund. About 921,000 taxpayers reported excess APTC above the caps the ACA imposes on repayments, for a total of about $874 million.

Approximately 7.3 million taxpayers received APTC in 2015. Of these:

  • 5 million filed an 8962 reconciliation form processed through the end of October 2016.
  • 243,000 filed for an extension but didn’t file a tax return by the end of October.
  • 647,000 taxpayers with APTC did not file a return or request an extension.
  • 884,000 taxpayers with APTC filed a return but did not file an 8962 to reconcile.

The report notes that the numbers do not accurately reflect compliance because some taxpayers who received APTC are reconciled on the filings of other taxpayers and the numbers do not account for late filings and compliance efforts. About 80 percent of recipients of APTC filed and reconciled for 2015, up from 70 percent for 2017. About 1.7 million taxpayers who filed a tax return but did not attach an 8962 received a letter from the IRS and about half responded with the necessary information. The IRS and the marketplaces continue to reach out to those who have not filed and reconciled, who will not be eligible for PTC for 2017.

The report states that 80 percent of the 117 million tax returns processed through mid-December for 2015 reported coverage for the entire year, and thus in compliance with the individual responsibility requirement. An additional 6.9 million filers were dependents who did not need to report coverage, raising actual compliance with the mandate to 85 percent. About 12.7 million taxpayers claimed exemptions from the individual responsibility requirement, with the most common being exemptions for persons with income below a certain threshold and who live in a state that did not expand Medicaid, U.S. citizens living abroad and certain noncitizens, and persons who cannot afford coverage.

Approximately 6.5 million taxpayers reported about $3 billion in individual shared responsibility payments, with the average payment being $470 and the median $330. The vast majority, 77 percent, of individuals who owed the penalty still collected a refund. As the penalty increases for 2016, it is more likely to exceed the amount of refunds due to taxpayers and will become harder to collect, as the IRS cannot use criminal penalties or liens or levies to force payment. The 6.6 million taxpayers who owed the penalty for 2015 is down from the 8 million who owed it for 2014.

Judge Refuses To Dismiss Insurer Suit For Risk Corridor Payments

On January 10, 2016, Judge Margaret Sweeney of the United States Court of Federal Claims denied the government’s motion to dismiss in Health Republic Insurance Company v. the United States. This is one of the more than a dozen cases that have been brought by insurers challenging the government’s failure to pay the full amount allegedly due to marketplace insurers under the ACA’s risk corridor program for 2014 and 2015. Judge Sweeney recently certified the Health Republic case as a class action, so her decision may have wide consequences.

The government had moved to dismiss the Health Republic case asserting that the court had no jurisdiction under the Tucker Act, which permits lawsuits in the Court of Federal Claims. The government also argued that the case was not yet ripe for adjudication, since the risk corridor program was a three-year program and has not yet been terminated, so there is still the possibility that the insurer will be fully paid. The decision does not address the merits of the insurer’s claim — the question of whether the money is actually owed and can be collected through the Court of Federal Claims. (Another judge in the Court of Federal Claims has already dismissed one of the other risk corridor cases on the merits.)

Judge Sweeney’s lengthy decision first holds that the Court of Federal Claims does have jurisdiction over the case because the claim is essentially a claim for damages under a “money-mandating” statute. Second, the judge finds that the claim is ripe because both the statute and implementing regulations contemplated annual risk corridor payments; thus, payments for 2014 and 2015 are now due. She did, however, dismiss Health Republic’s claims for special damages, equitable relief (an injunction), and prejudgment and post-judgment interest, as these are forms or relief that the Court of Federal Claims cannot award.

The case will now proceed to the merits, unless it is first settled, a prospect that seems increasingly unlikely with the departure of the Obama administration.