This overview is a very early attempt to get you up to speed on the areas of health reform that are likely to emerge from the confirmation process of Rep Tom Price. There’s a temptation to dismiss everything being discussed as rhetoric or too early in the regulatory process. However, there are key themes and elements that will impact employer-sponsored healthcare that are likely to survive. In addition, other market trends are unlikely to change and as a result, require our continued vigilance and strategic discussion. In other words, the cavalry has not arrived in our battle with rising costs.
Tom Price’s Empowering Patients First Act (H.R. 2300) is of particular interest. It is unlikely to be accepted as a “replacement” bill but it offers keen insights into the GOP mindset guiding the notion of “repeal and replace”. It is likely if any legislation is approved, it would take years to completely implement and not unlike the ACA, reform could be whipsawed by another sudden political shift. Given the profile of the 2018 mid-term elections, its unlikely the GOP grip on the WH and Congress will change – at least until 2020 – more than enough time to drive a new legislative solution.
H.R. 2300 is important because its the only GOP-authored proposal that incorporates many elements of a “repeal” plan; and, despite the partisan acrimony of today’s confirmation interviews, Price is likely to gain confirmation and guide Health & Human Services and those charged with setting policy for commercial insurance, Medicare and Medicaid.
It’s impossible to summarize H.R. 2300 in one page but we wanted to underline and key talking points for you should you get cornered by anyone requesting a point of view on what employers should expect over the next four years. With the help of a recent Kaiser Foundation white paper, we want to offer an opinion. Clearly, it’s going to be a challenge to confidently predict whether the new administration will/can meet its promises. Yet, we are taking the liberty of staring deeper into the crystal ball and offering some insights. In no particular order:
H.R. 2300 Key Elements: Repeal ACA entirely, including individual and employer mandates, private insurance rules, standards for minimum benefits and maximum cost sharing, and premium and cost sharing subsidies. Provide refundable tax credits of $900 to $3,000 based on age to individuals to purchase insurance in the individual market. Require insurers to offer portability protections for people who maintain continuous coverage. Pre-existing condition exclusions and rate surcharges based on health status can otherwise apply. Implement state high-risk pools with federal grant support for three years. Establish Association Health Plans and Individual Membership Associations through which employers and individuals can purchase coverage. Permit sale of insurance across state lines.
Encourage use of Health Savings Accounts. Cap the tax exclusion for employer-provided health benefits and permit employers to contribute toward workers’ premiums for non-group health policies. Permit enrollees of public programs, and employer-sponsored group health plans to opt out of coverage in favor of private non-group insurance with tax credit subsidy. Repeal Medicaid expansion. Repeal Medicare benefit enhancements, savings provisions, and premium for higher-income beneficiaries, taxes on high earnings, and quality, payment and delivery system provisions. Eliminate certain constraints on private contracts between physicians and Medicare beneficiaries and the amount that can be charged for services. Individual mandate no requirement for individuals to have coverage
Commentary: This legislation is about establishing universal “access” to the individual market and to create a robust range of products whose coverage and cost will vary dramatically – well beyond the percentage of AGI and actuarial values mandated by the ACA. The creation of tax credits and vouchers to purchase in the individual market and guarantee issue based on coverage continuity could create opportunities for employers to offer financial incentives for employees to opt into coverage pools other than those of the employer. H.R. 2300 relies on financing much of the legislation through a cap on the taxation of benefits
Premium subsidies to individuals – Provide a refundable, flat, tax credit for the purchase of health insurance in the individual market ($900 per child, $1,200 age 18-34, $2,100 age 35-49, $3,000 age 50 and over; indexed by CPI.) Tax credit can be applied to any individual health insurance policy sold by a licensed insurer, including short-term policies, but not excepted benefits (e.g., insurance only for specific disease); excess credit can be contributed to HSA. Permit individuals eligible for other health benefit programs to receive a tax credit instead of coverage through the program. Repeal ACA cost sharing subsidies.
Commentary: It’s likely the number of those insured under reform will reduce if the government moves toward less generous tax credits as well as grants Medicaid block grants to states to manage those expenditures as they see fit. The increasing of uninsured and a greater emphasis on high deductible plans could lead to higher incidents of bad debt and increases in unreimbursed care.
Benefits Design/Reporting – Repeal ACA essential health benefit standards, preventive health benefit standards, mental health parity requirements for individual market and small group market policies. Repeal ACA prohibition on lifetime and annual limits. Repeal ACA limits on annual out-of-pocket cost sharing. State flexibility to mandate benefits; state benefit laws preempted for policies sold through associations, or by insurers selling across state lines. Proposed Price bill/legislation is silent on self-insurance exemption for larger self-insured employers.
Small employers can buy coverage through association health plans (AHPs). For fully insured small group AHPs, state rating laws and mandated benefits are preempted. Self-insured AHPs permitted; for federally certified self-funded associations with membership of at least 1,000, State regulation is preempted. Maintain dependent coverage to age 26. Repeal ACA minimum loss ratio standards, rebate requirements for insurers with claims expenses less than 80% of premium revenue (85% for large group policies). Repeal ACA right to independent external appeal of denied claims. Repeal ACA transparency standards, including requirement to offer standardized, simple summary of benefits and coverage, and requirement to report periodic data on denied claims and other insurance practices.
Commentary: Insurers are likely to benefit from specific changes although Price has historically been at odds with insurers – particularly in areas where insurers attempt to intervene between a treating physician and a patient. Employer reporting requirements should be simplified and the most cumbersome elements of the ACA are likely to be eliminated.
Employer requirements and provision – No requirement for large employers to provide health benefits that meet minimum value and affordability standards; repeal prohibition of excessive waiting periods. Cap annual tax exclusion for employer-sponsored benefits at $8,000 for self-only/$20,000 for family coverage, indexed annually to CPI. Require employers that sponsor group health plans to offer employees an equivalent defined contribution for the purchase of health insurance in the individual market. Permit employers to automatically enroll individuals in the lowest cost group health plan as long as they can opt out of coverage. Wellness incentives up to 50% of cost of group health plan permitted. Encourage use of Health Savings Accounts (HSAs) with one-time refundable tax credit of $1,000. Also raise annual tax-free contribution limit to $5,500; Allow tax-free transfer of HSA balances at death to any beneficiary. Repeal ACA prohibition on pre-existing condition exclusions. For people with at least 18 months of continuous prior coverage, no pre-existing condition exclusion period can be applied. For people with less than 18 months of continuous prior coverage, exclusion periods up to 18 months are permitted, but must be reduced by prior continuous coverage.
Commentary: Capping the annual exclusion for health benefits at $8k/$20k is credible foreshadowing that the taxation of benefits is on the horizon. Those that breathed a sigh of relief that delay and subsequent change of POTUS meant the defeat of the Cadillac tax, must be prepared to review the value of their plans. Taxation could set in motion a mass migration toward high deductible plans. Offering an equivalent defined contribution to employees to purchase on the individual market could give rise to associations and individual purchasing groups competing with or attracting employees into alternative purchasing groups. The emphasis on defined contribution could further accelerate the move toward private exchanges.
Health system performance- Health care professionals engaged in negotiations with private insurers and health plans over contract terms are exempt from federal antitrust laws. Create a health plan and provider portal website to provide standardized information on health insurance plans and provider price and quality data. Provide states with funding to implement the standardized health plan and provider portal website.
Commentary: Doctors can now organize purchasing cooperatives and in doing so likely to drive up unit cost through more collective bargaining with insurers.
Tax revenues – Repeal ACA tax changes, including the individual and large employer mandate tax penalties, Medicare Health Insurance (HI) tax increases on high earnings, Cadillac tax on high-cost employer-sponsored group health plans, and taxes on health insurers, pharmaceutical manufacturers, and medical devices
Commentary: Revenue increases from new cap on tax exclusion for employer-sponsored group health benefits
Source of policy insights on H.R.2300: The Henry J. Kaiser Family Foundation http://kff.org/health-reform/issue-brief/proposals-to-replace-the-affordable-care-act/