2018 MIDTERM ELECTION

Time: D H M S

Claire McCaskill proposes interesting solution to "bare county" problem which I just don't see working.

One of the biggest Achilles' heels of the ACA exchanges has always been that participation in them by private insurance companies is completely voluntary. There's nothing compelling any particular carrier to offer policies on the exchanges aside from them hoping to make a profit by doing so thanks to the additional policy enrollees, mostly from people who are receiving subsidized coverage via Advance Premium Tax Credits (APTC) and/or Cost Sharing Reduction (CSR) assistance.

Since participation in the exchanges (either individual or small business) is purely voluntary in most states, this has led to a real problem: What happens if none of the insurance carriers decide to participate in a particular county or an entire state? This scenario nearly came true in Pinal County, Arizona this year, but that crisis was averted when Blue Cross Blue Shield of AZ agreed to jump in at the last minute. It looked like it was gonna happen across 16 counties in Tennessee next year, but so far it appears that BCBSTN is riding to the rescue there as well.

Sooner or later, though, at least one or more counties is likely to find themselves without any carriers offering individual market policies on the ACA exchange...or potentially even off of the exchange in some cases.

Now, there are a few exchanges which have come up with policies to mitigate or eliminate this problem: Until recently, the state of Nevada tied participation in the individual ACA exchange to managed Medicaid contracts, which I think is a fantastic idea. Carriers who want a slice of that sweet, sweet MCO (Managed Care Organization) money also had to agree to offer at least a couple of policies on the ACA exchange as well. They abandoned that rule last year, but only partly: Instead, Nevada now gives "bonus points" to MCO applicants who also offer exchange policies, meaning they have a far better chance of winning the contract.

In Vermont, for the first couple of years of ACA exchange operation, state law required that any carrier offering either individual or small group policies do so exclusively via their exchange--no off-exchange sales were allowed at all. This rule was weakened for the small business market due to ongoing technical problems with the exchange, and was mostly abandoned for the individual market as well at some point or another; the vast majority (84%) of indy market enrollees still run through the exchange, but a few thousand are off-exchange at the moment.

Finally, there's the DC exchange, which has a couple of special circumstances. First of all, like Vermont, DC implemented a regulation requiring all individual and small group policies to be sold via their ACA exchange only. Unlike Vermont, however, DC has not abandoned this policy for either market to my knowledge.

Personally, I think Nevada should've stuck with their original policy...and, for that matter, I think DC's policy makes even more sense. Both of these are among the 20 policies I think should be made nationally to improve, stabilize and strengthen the ACA as a whole. However, for the moment, these are restricted to DC, VT (sort of) and NV (sort of).

The other unusual thing about the DC small business exchange (SHOP), of course, is that due to an odd amendment baked into the ACA (with a long and stupid history behind it), a huge chunk of DC's SHOP enrollees are actually members of Congress and Congressional staffers. The short version is that the only way for Congress/their staff to receive the generous financial assistance on their policies that other federal employees receive is if they enroll through the DC SHOP exchange.Since the Federal Employees Health Benefits (FEHB) program covers a substantial chunk of the premiums, this means that thousands of Congressional staffers (and their bosses) are enrolled via the DC SHOP exchange. Legally, under the ACA, "Congress" is designated as a "small business" for purposes of health insurance. It's kind of silly, but Republican Senator Chuck Grassley insisted on it, so there you go.

In any event, aside from NV, VT and DC, none of the other states have as of yet resolved this potential problem. GOP Senator Lamar Alexander of Tennessee has proposed simply allowing people living in counties without any on-exchange opitions to receive the same APTC/CSR assistance if they enroll in off-exchange policies instead. I pointed out that while this seems like a simple, obvious solution, there are some serious problems with it, both logistically and practically:

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!

The second, and more practical problem with Sen. Alexander's idea is that one of the reasons some carriers drop ACA exchange participation while still offering pretty much the same policies off of the exchanges is that they don't want lower income enrollees, period. Off exchange enrollees have to pay full price, while 85% of exchange-based enrollees are subsidized...which by definition means their incomes fall between 100-400% of the Federal Poverty Line. Since lower incoome people tend to be higher risk as well, while higher income people tend to be lower risk, some insurance carriers have decided that they can reduce their claims by only offering policies off-exchange to full-price enrollees. Presto! Wealthier people can pay full price while lower-income people can't afford to do so and end up going without.

So, what does this all have to do with Senator Claire McCaskill? Well...

BREAKING: Claire introduces bill to allow ppl in counties w/out insurers on individual marketplace to buy same plans available to Congress. pic.twitter.com/jLvBxmTRgS

— McCaskill Office (@McCaskillOffice) May 18, 2017

On a call w/ MO press today, Claire announced the bill, which would allow people in provider-less counties to access the DC health exchange.

— McCaskill Office (@McCaskillOffice) May 18, 2017

I haven't seen any actual news stories about McCaskill's proposal, so I have no further details, but here's the three most obvious potential problems I can envision which would have to be addressed:

  • First and most obvious: A DC policy doesn't do much good to someone living in Tennessee unless they want to drive hundreds of miles for a regular checkup. The answer to that is the same as that for Congressional enrollees: The DC SHOP exchange includes policies with nationwide networks of doctors/hospitals. That's how members of Congress and/or their staff from all 50 states are able to use those policies. I presume that McCaskill's proposal would allow anyone living in a county without any exchange participants to enroll in one of the same DC exchange policies with nationwide networks.
  • Second: How would APTC/CSR be handled? APTC/CSR is currently only available on the individual exchanges; the SHOP exchanges have a whole different setup and formula for financial help since it's designed for small businesses, not individuals buying for themselves...and even then, the assistance is a lot less generous than APTC/CSR is anyway. Is McCaskill proposing that individuals could use the DC Indy exchange? If so, does DC HealthLink even offer nationwide network plans on the individual exchange, or are they limited to SHOP plans?
  • Finally, assuming both of those issues are resolved, this still opens up the exact same problem as Senator Alexander's "off exchange subsidies" proposal.

This year, the DC exchange has exactly 4 insurance carriers offering policies on both the Individual and Small Business (SHOP) exchanges: Aetna, CareFirst BlueCross BlueShield, Kaiser Permanente and UnitedHealthcare. They have a total of 171 poliicies total...151 SHOP and 20 Individual policies are available.

Now, Aetna recently announced that they're dropping out of the entire individual market nationwide next year. They didn't specify DC, but I assume they're included, which would leave just 3 carriers on the DC exchange: CareFirst, Kaiser and United.

To the best of my knowledge, these three companies are doing just fine in both of the DC markets (indy and SHOP)...but again, that's based on their existing enrollment numbers and risk pool mix, which is currently limited to District of Columbia residents + about 11,000 members of Congress and their staff.

What would happen if they were suddently told that they have to also sell to, say, 40,000 Tennesseans from Nashville?

Would that improve their risk pool? Perhaps, but probably not. Certainly it would potentially double or triple the number of enrollees, which could be a good or bad thing depending on the numbers and the mix.

The point is that while DC may legally require carriers to use the ACA exchange if they want to sell individual or small business policies...there's nothing legally requiring them to offer those policies at all. CareFirst, Kaiser and United are all huge, multi-state companies; they could drop the DC market altogether the way that Aetna is apparently doing without losing more than a small chunk of revenue in the process.

I don't know the details of Senator McCaskill's plan yet, of course, but this is something I'd look out for. Saying "if there aren't any plans available in your state, use DCs" doesn't work if there aren't any available there either.

UPDATE: A couple of other important points came up last night via a Twitter discussion with David Anderson, Louise Norris, Rebecca Stob and Wesley Sanders:

  • The counties most likely to "go bare" are bound to be rural ones, which means very different demographics from what DC insurers are used to
  • The counties which would become eligible would likely change dramatically from year to year, both in total population as well as geographic region (it dcould be 16 counties in Tennessee one year, 5 counties in Arizona the next, etc...)
  • Worse yet, the DC carriers would have to set their preimum pricing early in the summer...but might not know which/how many bare counties would be joining their potential pool until late summer/early autumn every year.

In short, unless all of these issues are addressed in McCaskill's bill, I just don't see how this idea would work.