On the morning of April 4, 2017, rumors are flying regarding continuing Republican efforts to repeal and replace parts of the Affordable Care Act (ACA). It is reported that Vice President Pence is discussing a compromise with conservative Republican House of Representatives members that would allow the Department of Health and Human Services to waive the ACA’s essential health benefits and community rating requirements for states that requested waivers. The legislation would also provide funding for state high-risk pools. The legislation could be introduced as early as today, April 4, 2017.

It is far from clear that these proposals, which would likely reduce coverage even further for individuals with pre-existing conditions, could gain support of enough house Republicans to pass and it would likely face procedural and political challenges in the senate.

HHS has also reportedly stated that funding for the ACA’s cost-sharing reduction payments will continue during the pendency of the House v. Price litigation. The litigation is currently on hold indefinitely, with status reports on May 22 and every 90 days thereafter. Insurers are understandably nervous about whether the payments, which come to about $9 billion a year, will continue to be available to cover the cost-sharing reductions they are legally obligated to make for lower-income enrollees. Whether oral statements that the funding will continue will be enough to bring them back for 2018 remains to be seen.

The Alexander-Corker Bill: General Effects And Special Relevance To Tennessee

In a recent post I examined legislation proposed by Senators Lamar Alexander and Bob Corker (both Republicans from Tennessee) that would allow individuals who live in a rating area or county that that has no qualified health plans offered through an Affordable Care Act exchange (or marketplace) to receive premium tax credits to assist them in purchasing coverage. I did not have the language of the statute at that time and was puzzled as to why an insurer would only sell coverage off-exchange if it was interested in selling coverage paid for by premium tax credits and how premium tax credits and cost-sharing reduction payments would be paid to the insurer if it did not participate in an exchange.

I have now obtained the language of the statute, and the mysteries have been cleared up to some extent. The legislation does address a real problem. One third of the counties in the United States, containing over one fifth of the population, are served by only one ACA exchange insurer, and, given the confusion created by efforts to repeal and replace the ACA, it is likely that some markets will have no insurers at all for 2018.

The Alexander/Corker Health Care Options Act (HCOA) provides that if no qualified health plans were offered through an exchange in a rating area or county, the Secretary of HHS would certify that this was the case. The individual responsibility requirement would not apply in such counties. Individuals would thus be free not to purchase any coverage at all, or to purchase excepted benefit or short-term coverage that does not comply with the ACA.

Individuals would also be permitted under the HCOA, however, to receive premium tax credits to purchase coverage off the exchange. In most, if not all, parts of the country insurance is offered off the exchange which complies with ACA requirements but which insurers choose not to offer on the exchange. As noted in my earlier post, there are certain requirements that apply only to exchange plans, including the exchange user fee, that insurers avoid by offering coverage off-exchange; this might make offering coverage off exchange more attractive, although one study comparing exchange and off-exchange plans found that the off-exchange plans were more expensive and had higher administrative costs than on-exchange plans. In any event, in parts of the country where insurers were willing to sell insurance off but not on the exchange, the HCOA might help make coverage available to people eligible for premium tax credits with no exchange-plan options.

The bill, however, has special relevance in Tennessee. It would also make premium tax credits available for the purchase of plans offered by “a not-for-profit membership organization organized under State law and authorized under State law to accept member contributions to fund health care benefits for members and their families.” That clause describes the Tennessee Farm Bureau.

Under a special Tennessee statute, the Farm Bureau is authorized to sell self-funded association plan health coverage to its members but is not considered to be insurance under state law. Because Farm Bureau coverage is not insurance, it is not subject to the ACA, which only applies to state-licensed insurance plans. “Traditional” Farm Bureau plans, therefore, health status underwrite, exclude pre-existing conditions, do not cover preventive services to the extent required by the ACA, and are not otherwise required to comply with ACA insurance reforms. Farm Bureau “traditional” coverage has not heretofore been considered minimum essential coverage that would satisfy the individual responsibility requirement, and thus individuals who purchased only such coverage would have to pay the penalty. But the HCOA would waive the requirement, removing this impediment. I do not know of similar arrangements in other states, so this may be a provision that would only apply in Tennessee.

Allowing premium tax credits to be used for off-exchange health insurance (or non-insurance) raises the problem of how premium tax credits and cost-sharing reduction payments would be paid to the plans. The HCOA simply provides that they would not. Premium tax credits for non-exchange coverage would not be available in advance but only at time of filing. Cost-sharing reductions would not be available at all. The statute would only benefit, therefore, those who have sufficient income to pay premiums in advance until they file their taxes in the following year and cover full cost sharing themselves. It would probably, therefore, only help those who have relatively high income levels and not those who receive the greatest benefits under the ACA.

The maximum amount of premium tax credits would still be set relative the second-highest cost silver plan available to an individual. The scheme would only work, therefore, if some insurer in a rating area were still offering silver plans. Farm Bureau “traditional” coverage would not meet silver plan requirements, although silver plan coverage is available off exchange in Tennessee.

The statute amends ACA reporting requirements to require off-exchange plans that provide minimum essential coverage to an individual who would qualify for premium tax credits under this provision to report the amount of the premium paid by the individual, the months during which such coverage was provided, and the cost of the second-lowest cost silver plan available to the individual. It is not clear, however, how an insurer would know how much the second-lowest cost silver plan, which might be offered by another insurer, would cost. Moreover, Farm Bureau “traditional” coverage is not minimum essential coverage, so it is not clear that the Farm Bureau would be covered by the reporting provision. But without information as to the cost of the second-lowest cost silver plan, it is not possible under the statute to determine the amount of the premium tax credits owed to off-exchange enrollees. The statute is an interesting idea, therefore, but needs further work.

CMS Releases Interim Risk Adjustment Data

On March 31, 2017, the Centers for Medicare and Medicaid Services released an Interim Summary Report on Risk Adjustment for the 2016 Benefit Year. The risk adjustment program is based on the premise that premiums should reflect differences among plans in benefits, quality, and efficiency and not in the health of the plans’ enrollees. The risk adjustment program transfers funds, therefore, from insurers in the individual and small group markets that enroll a healthier population, who must pay charges, to those that enroll a less healthy population, who receive payments.

CMS puts out an interim report in the spring reporting

  • statewide average premiums,
  • average plan liability risk scores (considering the risk scores of all plan enrollees),
  • average allowable rating factor scores (considering the age of all plan enrollees),
  • the state average actuarial value (considering the actuarial value of the plans in which enrollees in the state are enrolled), and
  • total billable member months for the states.

Reports are only released for states where all creditable insurers submit data of sufficient quality and quantity, but this year that was true of all states but Hawaii (and Massachusetts, which conducted its own program.) Last year only 21 states qualified.

Plans can compare their own plan data to statewide data to get some idea as to the charges they will have to pay or the payments they will receive from the risk adjustment program when the final reports are released on June 30.

The interim report also compares interim and final risk adjustment scores for 2015. In 2015, 10.5 percent of insurers in the individual market and 15.3 percent of insurers in the small group market had risk adjustment transfers that changed direction (from a charge to payment or vice versa) between the interim and final report. Of the 190 individual market insurers, 5.8 percent changed from an interim calculated charge to a final risk adjustment payment and 4.7 percent from a calculated interim payment to a final charge. Of the 229 small group insurers, 10 percent went from an interim calculated charge to a final payment and 5.2 percent from an interim calculated payment to a final charge. (This adds to 15.2 percent, rather than 15.3 percent, because of rounding.)

Most of the insurers that reversed direction, however, were close to the overall average, so the changes were not great. Most of the risk adjustment variables did not change significantly from the interim to the final report, with the exception of the average risk scores, which increased by 7.8 percent in the individual and 5.7 percent in the small group market. Presumably plans continued to compile risk data on their enrollees until the final report was due.