Michigan: An Open Letter to All Democratic Candidates (a work in progress)

2018 MIDTERM ELECTION

Time: D H M S

 

NOTE: I'll be live-updating this over the next few days, but several people have asked about it so I'm publishing the unfinished version early.

Dear Democratic candidates for Michigan State House, State Senate or Governor this November:

If you're familiar with me and this site, you probably know three things about me:

  • 1. I strongly support achieving Universal Healthcare coverage, and I'd ideally prefer to utilize some sort of Single Payer system as the payment mechanism to do so.

Here's why: The most optimistic scenario from a federal single payer advocate perspective would be as follows:

  • Massive Blue Waves in 2018/2020, retaking the House, Senate and White House
  • Progressive Democratic President takes office January 20, 2021
  • Bernie Sanders' Medicare-for-All bill (or similar) is immediately introduced, passed by a Democratically-controlled House and Senate
  • The M4A bill is signed into law in early 2021, kicking into effect starting January 1, 2022
  • It takes 4 years to fully ramp up, completely replacing the entire current U.S. healthcare system by January 1, 2026

I'm aware that there are some transitional period provisions in the M4A bill, but the bottom line is that even under the rosiest scenario, the ACA (or at least the parts which haven't been wounded by Trump and the GOP) will still remain in place for at least the next 4 years or so...and it does have some serious problems which need to be addressed immediately. Some were inherent in how it was designed, or due to mistakes made in how it was implemented by the Obama Administration. Some are due to years of undermining by the GOP even before Donald Trump took office. More recently, the rest are due to more aggressive sabotage by the Trump Administration.

In other words, unless there's some astonishing turn of events in which both Donald Trump and Mike Pence are impeached and removed from office (thus inserting the presumably Democratic Speaker of the House into the Presidency), the odds of any significant positive ACA legislation becoming law at the federal level before 2021 are slim at best.

That leaves things up to the states.

Now, I'm aware that Abdul El-Sayed is campaiging on his MichCare state-based single payer platform. I wrote a generally positive in-depth analysis of it last month. I'm also aware that State Rep. Yousef Rabhi has introduced his own "MiCare" single payer proposal, which sounds very similar to El-Sayed's (including both proposals requiring a change to the state constitution and two federal waiver approvals by the Trump Administration to redirect federal Medicare, Medicaid, CHIP and ACA funding towards the new system).

However, again, even in the rosiest of scenarios, either of these would still take time to pass, sign into law and implement. Less time, perhaps, than a federal M4A law, but still at least a few years.

There's also something like Julia Pulver's state-based Michigan Public Option proposal, which would still involve significant changes but which wouldn't be nearly as disruptive (employer-based coverage, Medicare, Medicaid, CHIP and subsidized ACA enrollees would be left mostly intact) and which, just as importantly, wouldn't require federal funds to be redirected, since federal funding for those programs would stay pretty much as they are today (I think there would still be at least one federal waiver sign-off involved).

My point is that the ACA will still need at least some fixes/improvements at the state level (at least temporarily) no matter what the Next Big Thing is.

Here's the good news: There's plenty of less dramatic, less complex but still important legislation to protect, repair and strengthen the ACA which can be done right here in Michigan.

You already know what some of these measure are...because you already included a few items on the list with last years Michigan Health Care Bill of Rights resolutions.

I agree with everything you laid out then...but the situation has gotten worse since then. The purpose of this letter is to provide a full list of the ACA protection, repair and strengthening bills I strongly recommend you campaign on and try to pass into law starting next January regardless of whether you retake the state House, Senate and/or Governor's office.

Democratic state legislators in other states have already introduced, passed, and/or implemented several of the items on this list, including Alaska, California, Colorado, D.C., Hawaii, Maine, Maryland, Massachusetts, Minnesota, New Jersey, New Mexico, New York, Oregon, Rhode Island, Vermont and Washington State.

With that in mind, here's the bills I'd recommend. A couple of these may require a federal waiver sign-off, but these are cases where Trump's CMS Administrator has already approved of similar waivers in the past.


PROTECTIONS: Legislation which would lock in existing ACA protections in the event they're stripped away at the federal level (these are mainly the items included in the MI Health Care Bill of Rights):

  • 1. Guaranteed Issue: Health insurance companies cannot deny coverage to anyone for having a pre-existing condition, nor can they subject enrollees to medical underwriting.
  • 2. Community Rating: Health insurance companies cannot charge people higher rates or deductibles for a policy for having pre-existing conditions.
  • 3. Gender Equality: Health insurance companies cannot charge more for a policy based on gender.
  • 4. Limiting the Age Tax: Prior to the ACA (and under GOP repeal bills), seniors were often charged 5 times as much as younger enrollees; the ACA restricts the premium age band to a 3:1 ratio.
  • 5. Essential Health Benefits: All health insurance policies must include coverage of at least the same 10 Essential Health Benefits mandated by the Affordable Care Act.
  • 6. No Annual or Lifetime Coverage Limits: Health insurance policies cannot include caps on annual or lifetime benefit limits on policies.
  • 7. Minimum Actuarial Value: Health insurance policies must cover at least 60% of enrollees' healthcare expenses on an actuarially-determined level.
  • 8. Free Preventative Services: The ACA mandates a list of services such as annual physicals, mammograms, drug screenings etc. which enrollees cannot be charged any out-of-pocket fees for (as long as the provider is in-network).
  • 9. Medical Loss Ratio: Health insurance companies are required to spend at least 80% of premium revenue on actual healthcare services for individual (nongroup) or small group market policies; anything under that has to be rebated to the policyholder. In the case of the large group market, the threshold is 85%.
  • 10. Cap on Maximum Out of Pocket Costs: The ACA mandates that health insurance policies include a cap on the maximum amount that enrollees have to pay for medical services out of pocket regardless of how much the deductibles, co-pays and coinsurance are.
  • 11. Young Adults on Parents Plans: Under the ACA, young adults are allowed to remain enrolled on their parents or guardians' insurance policies until they turn 26 years old.
  • 12. Rate Review Protection: Under the ACA, insurance carriers which ask for rate increases of more than 10% per year have to undergo an additional regulatory process to review and justify those increases.

REPAIRS: Legislation which would restore ACA protections/regulations which have already been stripped away at the federal level either legislatively or via regulatory changes by the Trump Administration:

  • 1. Regulate Short-Term, Limited Duration Plans:

The ACA didn't actually ban STLDs, which don't include most of the protections listed above; instead, it laid out what provisions a policy had to include in order to qualify as ACA-compliant coverage to avoid having to pay the Individual Mandate penalty. Therefore, someone could still enroll in an STLD if they wanted, but they'd still have to pay the ACA penalty. In 2016, the Obama Administration put some additional restrictions on STLDs, limiting enrollment in them to no more than 3 months per year (thus keeping them "short-term") and forbidding them from being renewed within the same year (thus keeping them "limited duration"). Because of this (as well as the fact that STLDs fall far short of comprehensive coverage and are often junk plans), only a small number of people have enrolled in STLDs over the past few years, limiting their adverse selection impact on the ACA market risk pool.

Last December, however, Congressional Republicans effectively repealed the ACA's Individual Mandate (technically it's still there, they just changed the penalty amount to $0 or 0% of income). Then, the Trump Administration removed the 3-month and non-renewable regulatory limits on STLDs at the federal level, pushing the throttle wide open for junk plans to flood the market with no disincentive involved...other than the fact that these plans allow pre-existing condition denials, pricing discrimination, don't cover all 10 EHBs, have no minimum AV threshold, have annual/lifetime caps and so on. Basically, these are exactly the types of junk policies which the ACA set out to get people off of in the first place.

Michigan does currently have partial regulation of STLDs. According to the Commonwealth Fund, in Michigan...

  • Total contract period for STLDs, including any renewal periods, cannot exceed 185 days out in a 365-day period
  • Michigan keeps STLDs a small part of an insurer’s individual market portfolio by limiting the share of individual market premiums an insurer can collect from them.

However, I urge MI lawmakers to go further. Ideally, I'd like to see them eliminated entirely, as New Jersey does, and as California is in the process of (hopefully) doing. However, short of that, I strongly urge you to at least codify the Obama regulations restricting STLDs to no more than 3 months per year and preventing them from being renewable, as DC, Hawaii and Maryland are doing/have done (Illinois is trying to pass a bill limiting STLDs to 6 months). This wouldn't likely have a significant impact on premiums in Michigan given the limited protections already on the books, but even a 1% drop would save tens of thousands of Michiganders ~$60/year apiece.

  • 2. Restore the Individual Mandate Penalty:

Repeal of the Individual Mandate is causing average individual market premiums to increase by at least 5% next year. That's an extra $300 per person for unsubsidized individual market enrollees. Restoring the mandate should, in turn, result in 2020 rates dropping by at least 5 percentage points. I know very well that this may be considered Kryptonite politically, but New Jersey, Vermont and DC have all done it, which means at least 4 states (yeah, I know, DC isn't a state) will have it in place for 2020 (the original mandate penalty law in Massachusetts is still on the books from the RomneyCare days). Many healthcare analysts feel that the ACA's penalty ($695/adult + $348/child or 2.5% of household income) was too weak to be properly effective, but I have to imagine that increasing it beyond that amount would be a bridge too far, so I'd recommend simply restoring it to the ACA levels.

As an alternative, Maryland has been working on a clever twist on the Individual Mandate: Under their proposed legislation...

Marylanders would be charged a fee on their tax forms if they failed to buy coverage. But the state would apply that fee to enroll the uninsured in health-care plans. Those who are due federal premium subsidies and can get a zero-dollar health-care plan would be automatically enrolled, unless they opted out. Those who would have to kick in their own money could use the fee toward the cost of insurance during the next open enrollment period. Rather than a penalty, the proposal’s backers call it a health-care “down payment,” reflecting the less punitive nature of the policy.

Unfortunately, this bill died in the Senate this year, but it's become a major issue in the MD Governor's race, with every Democratic candidate (including primary winner Ben Jealous) pledging support for it if they win (Republican incumbent Governor Larry Hogan is noncommittal on it).

STRENGTHEN: These are improvements to the ACA which take the ACA as it was supposed to be implemented to the next logical phase. Again, none of these steps go as far as either Single Payer or even a Public Option, but even a handful of them would dramatically improve & expand coverage and lower costs for enrollees.

  • 1. REINSURANCE!

When the ACA exchanges first launched for the 2014 Open Enrollment Period, the law included three individual market stabilization programs. One of the programs was called reinsurance, and it worked pretty well. Unfortunately, the federal ACA reinsurance program sunsetted after only three years, at the end of 2016, which is part of why rates spiked so much in 2017 (they shot up in most states in 2018 as well, but for very different reasons).

In response, several states (Alaska, Minnesota and Oregon) have enacted their own, state-level reinsurance programs, and several more are on the way (New Jersey, Maryland and Wisconsin). It's a fairly cut & dry way of keeping premiums down (or even lowering them in some cases) which requires no additional federal spending and much less state spending than you would think.

I've written a (hopefully) straightforward tutorial on how reinsurance works. The beauty of it is that looking at some of the other states which have implemented similar programs, it's likely that hte federal government would end up covering anywhere from 35% - 85% of the cost.

How much would this cost in Michigan in real dollars?

Well, in 2017 Michigan's individual market was around 373,000 people. I'm assuming it's dropped to perhaps 350,000 people this year. In 2018, enrollees pay an average of around $493/month last year. That's a total of around $2.07 billion in total premium revenue. Let's assume that 80% of those premiums are actual medical claims (to meet the 80/20 MLR rule). That means Michigan ACA individual market enrollees rack up around $1.65 billion in insurance claims each year, or around $4,800 apiece.

Let's suppose we established a reinsurance program identical to New Jersey's, and the enrollee cost breakout in Michigan was something similar to the following:

 

In this scenario, $165 million of the total expenses would be covered by the reinsurance program, or almost exactly 10% of the total cost.

However, thanks to the way the ACA federal waiver program works, as I explained here, a good chunk of that $165 million...perhaps half of it...would actually be covered by the federal government as a portion of the no-longer-needed ACA subsidies are redirected towards the reinsurance budget.

Put another way, it would only cost the state of Michigan $80 million to cut healthcare premiums by 10% for over 120,000 enrollees.

Obviously the actual cost and impact on premium reductions could very widely depending on what the actual claim breakout is across the enrollees, how the program is structured and how much medical claims for high-risk enrollees are. In New Jersey, which actually has fairly close individual market demographics to Michigan, they expect rates to be about 15% lower than they would be otherwise next year.

If you want some real-world examples of how effective reinsurance programs can be, in Alaska, premiums dropped by a whopping 23.6% this year. In Minnesota, they only dropped by 6.3%, but next year are estimated to drop by another 8% or so even with the impact of mandate repeal sabotage. Oregon's reinsurance program isn't quite as robust; it only kept rates down by around 6% this year vs. what they otherwise would be, but that's still hundreds of dollars in savings per unsubsidized enrollee.

REINSURANCE: IT'S A VERY GOOD THING.