Louisiana's law replicating the ACA if it's struck down by their own Attorney General runs into a tiny snag

As my regular readers know, I've been a strong proponent of encouraging states to pass laws locking in as many ACA "blue leg" protections as possible in the event that the ACA itself is actually struck down by the idiotic #TexasFoldEm lawsuit (again: the ruling by the 5th Circuit Court of Appeals is due to drop at any time).

However, I've also tried to make it clear that there would be a trade-off involved: If you're going to lock in all of those "Blue Leg" protections (Guaranteed Issue, Community Rating, Essential Health Benefits, No Annual/Lifetime Caps, etc), that will mean that the premiums/deductibles will be higher than they are without those protections.

This is precisely why so-called "short-term, limited duration" policies (aka #ShortAssPlans) and other non-ACA compliant policies cost so much less at the front end...they cherry pick their enrollees and don't cover the more expensive treatments many people require.

Personally, I still think states should lock in those protections anyway, since there's only two ways this can play out:

  • Either the ACA is upheld, in which case duplicating these protections becomes moot (although not really, since the Trump Administration keeps weakening the protections anyway via regulatory tinkering...having tighter controls at the state level is still an important fallback), or
  • The ACA is struck down, in which case it forces the individual states to confront reality: There's a literal cost to those protections, so they're gonna have to either replace the federal revenue currently going towards ACA subsidies and Medicaid expansion themselves or they'll have to find a way of seriously cracking down on actual healthcare costs throughout the system...everything from provider reimbursement rates to administrative, billing & delivery overhead and so on...or more likely both.

The point is, you can't have it both ways: If you want people covered with comprehensive care without being discriminated against, you have to either raise taxes to pay for it, find a way of dramatically lowering the cost of the healthcare itself, or a combination of both. The math simply doesn't add up any other way.

I'm bringing all of this up again today because of a development in Louisiana.

Back in June, I wrote about a new bill which has since been signed into law which attempts to tackle this seeming paradox...sort of:

Louisiana’s legislature has given final approval to a GOP-crafted alternative to Obamacare, leaving Democratic Gov. John Bel Edwards in a pickle as he faces reelection this fall.

The new bill, pushed by Republican Attorney General Jeff Landry, went through the House on a 90-9 vote last week, after previously passing the state Senate unanimously.

...His legislation, the Health Care Coverage for Louisiana Families Protection Act, calls for the state’s insurance commission to open the health market to anyone not covered by an employer’s plan. Companies would then bid to offer insurance.

You know...like the ACA healthcare exchanges do today.

The crux of the plan would be to establish a high-risk “guaranteed benefits pool,” a designation that would not be known to the buyers. Those plans would be subsidized by the state, with the money coming from a monthly charge on every policy sold in the state, as well as some Obamacare money.

Um...wait a minute...

The bill itself appears, on the surface, to perfectly replicate nearly all of the ACA's current protections:

  • Guaranteed Issue
  • Community Rating (although it'd allow a 5:1 age band instead of the ACA's 3:1 limit)
  • Essential Health Benefits
  • No Annual/Lifetime Limits
  • Young Adults On Parents Plan Until 26
  • Limited-Time Open Enrollment Periods
  • Maximum Out of Pocket Expenses
  • Minimum actuarial value (although I couldn't tell from the text whether it sets the minimum at 60% as the ACA does for Bronze plans)

I made sure to note the jaw-dropping irony of this bill given who was behind it:

...E and F are rather amazing and amusing...they literally just say "copy whatever the ACA requirements were as of January 2019." This is used in several other places throughout the bill's wording. Considering that this bill is only necessary because of AG Landry's lawsuit, and is being pushed by Landry, the hypocrisy is stunning. He's basically admitting that his biggest problem with the Patient Protection & Affordable Care Act is...that it was passed by a Democrat at the federal level instead of by Republicans at the state level.

However, this is also where the bill runs head first into the problem:

§1130. Applicability

A. The provisions of this Subpart shall be effective or enforceable only in the event that the tax credit authorized in Section 1401 of the Patient Protection and Affordable Care Act of 2010, P. L. 111-148, as amended by the Healthcare and Education Reconciliation Act of 2010, P. L. 111-152, and codified in Section 16B of the Internal Revenue Code, is held to be valid by a court of competent jurisdiction or is otherwise enforceable at law, or unless adequate appropriations are timely made by the federal or state government in an amount that is calculated in a similar manner as the tax credit in Section 1401 of the Patient Protection and Affordable Care Act.

BOOM. THIS is the critical part of the last point I made a couple of weeks ago: While I fully support locking in all of the "Blue Leg Protections" of the ACA, and support the Red Leg as well, those protections necessarily make insurance policies way too expensive for most people to afford without financial assistance...aka, the Green Leg, aka the federal tax credits and CSR assistance.

I estimated that Louisiana would need to generate at least $330 million per year just to replicate the ACA exchange subsidies for the 90,000 or so Louisians enrolled in federal ACA exchange policies this year (and this doesn't even begin to address the $2.9 billion or so they'd need to cover the balance of Medicaid expansion for 466,000 residents). The bill is basically saying that if the entire ACA is torn down, the whole bill becomes null & void.

Louisiana's total annual budget is around $30 billion/year, so the state would have to effectively raise taxes by at least 1.1% in order to match current ACA subsidies (and that doesn't include the $10 - $20 million/year which would have to be spent establishing their own state-based exchange, of course, since Louisiana relies on HealthCare.Gov).

In other words, Louisiana's new law only goes into effect if the ACA's protections are struck down but its subsidies are kept in place or if the state itself comes up with a way of replacing that funding. Since Landry himself, as a TexasFoldEm plaintiff, is formally calling for the entire law to be struck down--and since the Trump Administration's Justice Department now agrees with that as the "solution" to the lawsuit--it seems pretty likely that the only way the law would go into effect is if the state comes up with the cash.

Since that time, I've actually crunched the numbers and come up with more accurate estimates of just how much money would actually be needed: Around $385 million per year for current APTC subsidy levels (this also includes the CSR funding...the state would have to require similar contractual arrangements with their insurers), plus another $2.6 billion/year if they wanted to keep paying the remaining 90% of Medicaid costs for 460,000 Medicaid expansion enrollees.

So again, they'd have to raise total state spending by between around 2% - 10% depending on whether they wanted to keep the individual market subsidies only or both subsidies and Medicaid expansion. The law only refers to the individual market...apparently the 460K on Medicaid would be kicked to the curb either way.

All of this brings me to today's update via David Jacobs of The Center Square:

Louisiana seeking Affordable Care Act replacement without a funding source

A Louisiana task force is working on a replacement if the Affordable Care Act is overturned by the courts, though they don't know how the state would pay for it.

Much of the discussion has focused on a Maine program that created an “invisible” reinsurance pool. Consumers with high-cost health conditions would buy the same policies with the same premiums available to buyers without pre-existing conditions, possibly without realizing their costs were offset with tax dollars.

This appears to be referring to Maine's reinsurance waiver program under the ACA. It's a bit odd that they'd use Maine as the example, since far more robust reinsurance programs have been set up in a dozen other states, but whatever.

But there again is the rub:

But as members of the Protecting Health Coverage in Louisiana Task Force discussed Wednesday, Maine had help paying for high-risk residents from federal dollars that might not be available if the ACA is declared unconstitutional. A multistate coalition that includes Louisiana Attorney General Jeff Landry has argued the law should be thrown out.

“If the ACA were to go away, that part of the Maine model, and the funding most importantly, would go away as well,” said Matthew Block, general counsel for Gov. John Bel Edwards.

Frank Opelka, deputy commissioner of health, life, and annuity with Louisiana Department of Insurance, agreed the option to seek funding through an ACA waiver like Maine and other states have done would go away. But he said the federal government might create a similar program as a “bridge” if the ACA is thrown out.

Um...yes, they "might" do that. Then again, they "might" not, seeing how the Trump Administration and your own state Attorney Gerneral are the ones pushing to strike down the ACA in the first place.

“The goal of what we’ll present is to identify who’s at risk, what plans there are available to minimize that risk, and how much funding would be needed to fund those plans,” Opelka said.

He said his report is due in March. According to estimates discussed during this year’s legislative session, replacing the ACA’s protections and subsidies could cost the state more than $800 million per year.

Hmmm...that's kind of an interesting number. It's far higher than the amount in subsidies I've estimated, but it's far lower than the subsidies + Medicaid expansion, so I'm not sure where they're getting $800 million from. The point is, it's a buttload of money that the state would have to come up with on their own.

At the end of the day...

How well such programs work largely depends on how well-funded they are, said Charles Gaba, a health care analyst who generally supports the ACA, in an interview earlier this year.

“No matter how you slice it, none of these things reduce the total cost of all these medical expenses,” he said.