2018 MIDTERM ELECTION

Time: D H M S

Lamar Alexander "solves" one problem by creating several more.

As noted a few weeks ago, Humana has already decided that regardless of what actions Donald Trump, Tom Price or Congressional Republicans end up doing (or not doing), they expect the 2018 individual market to be a big mess they want no part of...either on or off the exchanges:

...based on its initial analysis of data associated with the company’s healthcare exchange membership following the 2017 open enrollment period, Humana is seeing further signs of an unbalanced risk pool. Therefore, the company has decided that it cannot continue to offer this coverage for 2018. Through the remainder of 2017, Humana remains committed to serving its current members across 11 states where it offers Individual Commercial products. And, as it has done in the past, Humana will work closely with its state partners as it navigates this process.

Again, it's important to stress that Humana isn't just bailing on exchange participation, but to the best of my knowledge, they're pulling up stakes off-excahnge as well.

The net result of this move is that 156 counties across 11 states just lost a carrier option...and in 16 of them in Tennessee (all of which voted heavily for Trump), there aren't any carriers currently scheduled to participate on the exchange for 2018. Of course, that could change by this fall--last year, Pinal County, Arizona almost faced this problem, but Blue Cross jumped into the county at the last minute.

As I've said for years now: This is the main Achilles' heels of the ACA exchanges: It completely depends on the whim of private, profit-based insurance carriers. That is to say, yes, most of the carriers which have dropped out of assorted counties/states to date have done so because they were losing money in the individual market (although many were simultaneously making record profits in other divisions), but there's at least one major example where they've bailed on whole states in which they were profiting. The point is that they can pull of the exchanges in a given county/state for pretty much whatever reason they wish, whether doing so makes business sense or not or whether doing so harms thousands of people or not.

Well, last fall, Tennessee Republican Senator Lamar Alexander came up with his own proposed solution to this problem:

Alexander Bill Would Extend Subsidies to Off-Exchange Plans

Sen. Lamar Alexander is introducing a bill Wednesday that would extend Affordable Care Act subsidies to plans off of the exchanges for some eligible consumers.

The Tennessee Republican is proposing that states could opt to expand the Obamacare subsidies to plans sold off of the exchanges. For states without enough competition on the exchanges, governors could choose to have the subsidies to plans offered off the exchanges so consumers have more choice, he said.

...The bill would also waive the individual mandate for consumers in states where governors’ opted to extend the subsidies to plans outside of the exchanges.

As I noted at the time, this does solve the problem, sort of...but it does so in a way which would create several more.

Alexander's original proposal was released in September, before the election, and long before Humana announced their decision. Given both of those events, yesterday Alexander released what I believe is a slightly modified version of the same proposal...and while the problem he hopes to resolve has gone from theoretical to real (ie, at least 16 counties in his home state facing no exchange carriers at all), the problems it would create haven't gone away:

With health care reform stalled, Sen. Lamar Alexander announced Wednesday he intends to file legislation that would provide temporary relief for millions of people who live in areas where there are no insurers selling policies on the federal health insurance marketplace.

Alexander’s proposal would let people who get government subsidies to buy insurance use that money to purchase any state-approved plan on the private market if there is no insurer selling policies on the federal exchange, or marketplace, in their area.

...Alexander’s bill also would remove the tax penalty for failing to buy a policy if Americans who receive federal subsidies have zero options on the exchange. That fine can total as much as $2,000 for a family of four.

...But, “this is not a permanent solution,” he said. “Congress has a responsibility to continue its work to solve this problem and to give Americans more choices of lower-cost health insurance.”

If it wasn't for the fact that the GOP is doing everything in their power to destroy the ACA as a whole (and being absurdly open and blunt about that fact), I'd believe that Alexander is operating in good faith here. And it's possible that he is doing so personally.

OK, so this would solve the problem officially: No carriers on the exchange? Let them get tax credits off the exchange!

However, it also presents some additional problems.

First of all, it's important to remember that there are two main reasons why the exchanges exist (and are the only way of getting tax credits) in the first place:

  • I'm assuming that private brokers/carriers aren't legally allowed to hook into the IRS, INS, SSI and other federal/state government agency databases to verify your legal residency status, income and other details in order to make sure you qualify for APTC and/or CSR financial assistance on a month-to-month basis. I could be wrong about this, of course, but that's always been my understanding: That there's a practical reason for limiting credits to on-exchange policies only. There are several private online brokers which do hook into the exchange system (eHealth, GoHealth and so on) to sell exchange policies...but they're still integrating with the ACA exchange platform itself, not "off-exchange".
  • To provide a "safe haven" one-stop shop for people to a) be certain that all of their options are fully ACA-compliant and b) to be able to comparison shop. Again, eHealth, GoHealth etc. do the same thing...but once again, they're still hooking into the exchange system at the back end.

Now, under the ACA, tax credits can be applied either month to month or all at once when filing your tax return the following year. I'm pretty sure that Alexander's idea could only work if everyone receiving tax credits did so the second way (as part of their tax return the following year). The problem with this is that most of those receiving APTC have to apply it month to month...if they could afford to pay the full premium price up front for the entire year, they probably wouldn't need the tax credits at all!

I admit that I could be wrong about this, however.

The second, and larger problem, however, is this: Why do some carriers offer individual policies both on and off the exchange while others offer them off-exchange only? All of the policies they're selling have to be ACA-compliant, right, so why would they care where those policies are sold? Shouldn't they welcome more people being exposed to their products?

Well, there's a simple reason for that, as both Sabrina Corlette and I have written about before:

There’s no question that the Affordable Care Act (ACA) is a complicated law. But there is at least one part of it that’s not complicated. And that’s the requirement that insurance companies stop discriminating against people with pre-existing conditions. It’s very simple. You. Can’t. Discriminate. Against. Sick. People.

Yet some insurance companies appear confused by this rule. Or they’re just unable to stop the old tactics of avoiding risk that made them so much money in the past. To wit, the admission of at least one insurer – CIGNA – that they have stopped paying commissions to brokers for enrolling people in gold level health plans.

Corlette was addressing attempts to manipulate enrollees away from Gold plans by denying commissions to brokers for signing people up, but this strikes me as an even more direct version of this practice. She even speculates that this may technically be illegal:

How is this impermissible? The Federal law is pretty clear: insurers “cannot employ marketing practices…that will have the effect of discouraging the enrollment of individuals with significant health needs in health insurance coverage…” It’s hard to see here how discouraging enrollment in gold level plans wouldn’t have the effect of discouraging the enrollment of people with health care needs.

Here's what you have to remember: The vast majority (nearly 90% or so) of exchange-based enrollees earn less than 400% of the Federal Poverty Line. This makes sense, since APTC assistance cuts off at 400% FPL; there's little reason for anyone who's confident that they'll earn more than that to enroll on the exchange; why go through the extra paperwork, etc, right? In fact, 71% of exchange enrollees earn less than 250% FPL.

Well, the carriers obviously know this. And they know that low-income people tend to also be less healthy. My guess is that they assume that lower income people are also more likely to move on short notice, lose their job/have major income changes and so forth; basically, more likely to be less reliable customers.

In other words, a carrier which sells indy plans off-exchange but not on-exchange automatically guarantees that just about all of their enollees will be in a higher income bracket.

Now, let's suppose you're a carrier executive. You've been selling off-exchange plans but avoiding the exchanges because you don't want the exchange population enrolling.

Suddenly, because NO ONE is on the exchange, Sen. Alexander's bill is triggered, allowing anyone to sign up for your plans off-exchange, because they'll receive tax credits regardless.

In that scenario, I'm fairly certain that you'd pull out of the off-exchange market as well, leaving the entire individual market.

Which is exactly what Humana announced 3 weeks ago.

So, let's assume that no one is selling ACA-compliant policies in a given county/state either on or off the exchange. What does that leave?

That leaves short term and/or "mini-meds"...basically, non-ACA compliant policies which aren't comprehensive, have annual/lifetime caps on coverage, may deny coverage based on pre-existing conditions, don't cover the 10 Essential Health Benefits and so on.

Not only would tax credits be provided for these non-compliant policies, but there'd be no mandate penalty for enrolling in them either.

Which means the ACA's requirement to cover EHBs, pre-existing conditions, annual/lifetime cap removal and so forth would be effectively out the window.

Again, I'm going to be generous and assume that Sen. Alexander doesn't intend for that to happen...but it would almost certainly be the end result.

OK, you say, but this is temporary...it would only be valid until at least one carrier jumps back onto the exchange in that area, right?

Right...but why would they do so after bailing? What incentive would there be? The only reason for any carrier to even consider jumping back into the exchange market is because that's the only place anyone can get the tax credits in the first place.

In other words, the "temporary" policy would most likely become a permanent one from year to year.

A bill like this would be--intentionally or not--a Trojan Horse, destroying the fabric of the ACA from the inside.