March 22, 2018

Bipartisan Health Care Stabilization Act Of 2018

NOTEWORTHY

Background: The Bipartisan Health Care Stabilization Act of 2018 would temporarily fund cost-sharing reduction subsidies and risk mitigation programs, and make other changes to Obamacare. The first draft of the bill was released on October 19, 2017, as an agreement between Senators Alexander and Murray with 24 cosponsors: 12 Republicans and 12 Democrats. The Lower Premiums Through Reinsurance Act of 2017 has since been incorporated into the latest bill. It was first introduced by Senators Collins and Nelson on September 19, 2017, and is aimed at stabilizing the individual market by funding risk mitigation programs.

Floor Situation: Last year, Majority Leader McConnell stated that he supported adoption of both the Alexander-Murray and Collins-Nelson bills. The combined bill could come up for a vote this week.

Executive Summary: The bill funds CSRs for part of 2017, for plans that did not silver load in 2018, and for 2019, 2020, and 2021. It also provides $30.5 billion in new funding for states that use 1332 waivers to establish invisible high-risk pools or reinsurance programs. It also makes changes to Obamacare’s section 1332 waivers, which allow states to waive certain Obamacare requirements and pursue state-based reforms. It creates more flexibility in the affordability requirements for waivers, rescinds restrictive Obama-era guidance and regulations, and makes the approval process faster and less burdensome for states. The bill also opens up catastrophic plans for all consumers, temporarily directs exchange user fee dollars to go toward enrollment and outreach activities for the Obamacare exchanges, and requires the HHS secretary to issue regulations regarding a provision of Obamacare that helps facilitate the purchase of insurance across state lines. 

OVERVIEW OF THE ISSUE

In October, President Trump ended the illegal payment of Obamacare’s cost-sharing reduction subsidies. Without the direct payment of CSRs, insurance companies have increased their premiums, which has significantly increased premium tax credits for Obamacare’s individual market health plans, . This bill temporarily funds cost-sharing subsidies, provides $30.5 billion in new funding for states to establish risk mitigation programs and makes other limited changes to Obamacare. Abortion funding restrictions, often referred to as Hyde restrictions, would apply to the provisions of this bill, just as it does for the rest of the Labor, Health and Human Services, and Education division on the omnibus.

NOTABLE BILL PROVISIONS

Section 602 – Waivers for state innovation; cost-sharing payments

The bill makes several changes to Obamacare’s section 1332 waiver, which allows states to receive funding to develop different health insurance reforms using existing federal spending. The bill’s changes make it faster and easier for states to obtain approval of 1332 waivers. It also gives states greater flexibility on certain aspects of Obamacare, allowing for more significant reform of their health insurance markets.

Background on 1332 waivers: Under current law, a state is able to waive many elements of Obamacare with a 1332 waiver, including:

1.    Definition of “qualified health plan,” including requirements related to essential health benefits, actuarial value, and limits on cost-sharing;

2.   Establishment of health insurance exchanges;

3.   Cost-sharing reduction subsidies;

4.   Premium tax credits;

5.   Individual and employer mandates

However, a state may only obtain a waiver if the secretary of HHS determines that the state’s plan complies with four “guardrails”:

1.    Provides coverage at least as comprehensive as under Obamacare, which is to be certified by the office of the CMS actuary;

2.   Provides coverage and cost-sharing at least as affordable as under Obamacare;

3.   Provides coverage to at least as many people as under Obamacare;

4.   Will not increase the federal deficit

Faster, easier, more flexible waivers: The bill amends the existing waiver to change the affordability requirement, which has been cited as a barrier for states applying for waivers that could significantly alter their markets. The affordability guardrail is changed from “at least as affordable” to “of comparable affordability” to give states more flexibility in their reforms. This change will allow states to offer value-based insurance plans. It will also give them more flexibility to vary cost-sharing and other design elements more than they can under the current affordability guardrail.

The deficit guardrail is also amended to clarify the time period for which the waiver must not increase the deficit. Under current guidance from the Department of Health and Human Services, a waiver must be deficit neutral over each year of the waiver, which can limit reforms in their first year. This change would clarify that the waiver may be approved for state plans that would not increase the deficit over the term of the waiver and in the 10-year budget window. It also allows the HHS secretary to consider the waiver’s impact on federal spending for other programs in the deficit calculation.

The bill allows for spending for the Basic Health Program to be used as pass-through funding, and clarifies that portions of Obamacare tax credits and CSRs can be used as pass-through funding for waivers.

Under current law, a state must pass a law to implement the state plan developed through the waiver process. This bill would also allow certification by a state’s governor as another option for state approval.

The bill reduces the approval deadline for the secretary from 180 days after receipt of the application to 120 days. In addition, it creates a 45-day, expedited approval process for states experiencing an urgent issue in their insurance market, for waivers that are substantially similar to a waiver already approved in another state, or for a waiver that establishes an invisible high-risk pool or reinsurance.

The maximum term of the waiver is extended from five years to six years and it cannot be terminated by the secretary unless the state has failed to comply with the terms and conditions of the waiver.

The bill requires the secretary to issue guidance containing examples of model waivers that states could pursue that meet all of the approval requirements, not later than 30 days after enactment.

The bill rescinds restrictive Obama-era guidance and regulations on the date of enactment, giving the Trump administration broad authority to interpret and implement the statutory changes in the bill immediately.

The bill provides federal funding for invisible high-risk pools and reinsurance programs established as part of a 1332 waiver. It includes appropriations of $10 billion a year for 2019, 2020, and 2021 to support states in establishing these risk mitigation programs. It also includes $500 million to help offset the administrative costs states face in applying for waivers that include these programs.

Background on CSRs: Insurers are obligated by Obamacare to reduce cost-sharing levels for eligible enrollees, regardless of whether the government pays them or not. Obamacare does not include a regular appropriation for CSRs and Congress never appropriated funding for them. Despite this, CSRs have been paid since 2014. The Trump administration stopped the illegal payment of CSRs in October 2017.

Cost-sharing reduction subsidies reduce the out-of-pocket expenses – deductibles, copayments, and coinsurance – enrollees are responsible for covering. These subsidies are only available to people enrolled in silver plans who have incomes between 100 percent and 250 percent of the federal poverty level. In 2017, this range is $12,060-$30,150 for an individual and $24,600-$61,500 for a family of four. CSR subsidies vary in generosity depending on the eligible income level.

People who qualify for CSR subsidies are offered “variants” of silver plans that have increased actuarial values, depending on their income. The higher the actuarial value, the more costs are covered by the insurance company using federal CSR payments.

Under current law, qualified health plans may not use federal funds to pay for abortion services. If a QHP provides coverage for abortions, federal law requires that the insurer segregate the funds. The Trump administration announced on October 6, 2017, that it would enforce this requirement more strictly than the Obama administration, with the potential for decertification or civil monetary penalties.

The subsidies are given directly to the insurance companies to subsidize their costs for providing the more generous plans. Through the first half of 2017, 68 percent of all Obamacare subsidized enrollees were receiving cost-sharing reduction subsides, for a total of 5.8 million people, at an estimated annual cost of $7 billion or almost $600 million a month.

For 2018, in the absence of a CSR appropriation from Congress, insurers in almost every state are offsetting the cost of the increased actuarial value of plans by charging higher premiums for silver plans, known as “silver-loading.” CBO has estimated that premiums would increase by an average of about 20 percent for benchmark silver plans on the exchange in 2018. When insurance companies raise premiums, low-income people who get subsidies do not pay more for the benchmark plan because, under Obamacare, recipients spend a certain percentage of their income on health insurance premiums and the rest is covered by the premium tax credit. For subsidized enrollees, it does not matter how much their premiums rise, because the amount they pay is capped. Indeed, with increased benchmark plans, subsidies have increased so much that many consumers are offered zero-premium plans in the exchange.

In addition, there are roughly 9 million people, about half of the individual market, who continuously face increasing premiums under Obamacare and have no relief, as they do not qualify for premium tax credits or CSRs. These people, along with taxpayers, pay for the increased premiums and subsidies.

The bill would fund CSRs for the 2017 payments that were not paid, for plans that did not silver-load in 2018, and for all of 2019, 2020, and 2021.

Section 603 – Allowing all individuals purchasing health insurance in the individual market the option to purchase a lower premium copper plan

Under Obamacare, catastrophic health plans are only available to people under the age of 30 who qualify for a hardship exemption. This provision of the bill allows anyone to buy a catastrophic plan regardless of age or hardship status. These changes would be effective for plan years beginning January 1, 2019.

Section 604 – Consumer outreach, education, and assistance

For plan years 2019 and 2020, the bill requires the secretary of HHS to issue biweekly public reports during the annual open enrollment period on the performance of the federal exchange and the Small Business Health Options Program exchange. Each report will include a summary of information on the open enrollment season including the number of website visits, accounts created, calls to the call center, number of people who enroll in a plan and what enrollment path they took, e.g., website, broker, or call center.

In addition, it requires the secretary to issue an “after action” report on the enrollment season that includes data on plan enrollment and activities related to Obamacare’s navigator program. Navigators are federally funded and help educate and enroll consumers into health plans.

The secretary must issue a report on advertising and consumer outreach for the 2019 plan year, including information on spending for these activities.

The bill also stipulates that of the amounts collected from federal exchange user fees for plan years 2019 and 2020, $105.8 million shall be obligated each year for outreach and enrollment activities.

Section 605 – Offering health plans in more than one state

Obamacare includes a program to facilitate the interstate purchase of insurance, called Health Care Choice Compacts. However, rules for the program have never been promulgated. This provision requires the secretary of HHS, in consultation with the National Association of Insurance Commissioners, to issue regulations implementing Obamacare’s Health Care Choice Compacts.

Section 606—Consumer notification

State insurance commissioners shall require that issuers of short-term, limited-duration health plans prominently display information regarding the coverage differences between these plans and Obamacare’s qualified health plans in marketing materials, the contract, and application materials.

COST

The Congressional Budget Office and the Joint Committee on Taxation estimate that the bill would increase the deficit by $19 billion over the 2018-27 period compared to the baseline. However, CBO also provided a separate estimate of the CSR provisions included in the bill that included the impact of increased premium subsidies due to insurers’ “silver-loading” practices. Under that alternative estimate, the CBO estimates funding CSRs would reduce the deficit $29 billion over 10 years, which would offset the $19 billion in spending.