ICHRA: GOP House passes an otherwise good bill with a poison pill

Last week, I reported that the Republican-controlled House Ways & Means Committee had passed a bill which would codify Individual Coverage Health Reimbursement Arrangements, or ICHRA for short. As Louise Norris explains:

An individual coverage health reimbursement arrangement (ICHRA) is a new type of health reimbursement arrangement in which employers of any size can reimburse employees for some or all of the premiums that the employees pay for health insurance that they purchase on their own...ICHRAs represent a departure from previous ACA implementation rules that forbid employers from reimbursing employees for individual market premiums....

  • Large employers can use an ICHRA to satisfy the employer mandate as long as the ICHRA benefit is substantial enough to make an individual health insurance plan affordable.
  • ...There are no limits on how much an employer can reimburse under an ICHRA (unlike a QSEHRA, which does have limits).
  • An employer cannot offer an employee a choice between a group health plan and an ICHRA; it has to be one or the other. An employer can offer both a group health plan and an ICHRA, but they have to be offered to different classes of employees so that no employee has an option to choose between the group plan and the ICHRA.

I took a deeper dive into ICHRA's in my prior post, but the bottom line is that this is among the few healthcare-related programs launched under the Trump Administration which I approve of...or, at worst, I don't see it as causing more net harm than good overall. I only had two significant concerns about the ICHRA program at the time:

  • First, the current ICHRA program includes a provision which applies to #ShortAssPlans (non-ACA compliant, short-term, limited duration plans)
  • Second, as noted in that third bullet above:
  • An employer cannot offer an employee a choice between a group health plan and an ICHRA; it has to be one or the other. An employer can offer both a group health plan and an ICHRA, but they have to be offered to different classes of employees so that no employee has an option to choose between the group plan and the ICHRA.

The good news is that the #ShortAssPlans language (aka "Excepted Benefit HRAs") doesn't appear to be included in the bill passed by W&M.

As for the "different class of employees" concern, the problem, as explained by Rachel Schwab, is that:

...employers could easily discriminate against sicker, older workers by offering them HRAs instead of traditional group health insurance as a way to ease the employer’s financial burden. The California DOI argued that employers may treat the individual market as their “very own high-risk pool,” leading to adverse selection and market instability, including higher premiums. The D.C. marketplace echoed these concerns, further advising that the excepted benefit HRAs will increase the prevalence of “junk plans,” particularly among young and healthy workers; this could result in higher premiums for the workers who are too sick to opt for the excepted benefit HRA. The Minnesota DOI advised the excepted benefit HRA could siphon healthy risk out of the small group market...

The proposed rule contains provisions meant to prevent this sort of risk segmentation, but the states in our sample were skeptical of the current proposal’s effectiveness.

Now, in practice, this concern appears to be a non-issue so far according to several insurance brokers in the know I've consulted about it...and so I concluded last week that:

Honestly, I'm a bit ambivalent about ICHRAs. I've long been an advocate for breaking the locked-at-the-hip "employer/group coverage" system in the U.S. which ties healthcare coverage to your employer...which, ironically, the ACA itself underscores via its employer mandate penalty. Frankly, I'd be fine with the small group market, at least, being phased out in favor of the ACA-compliant individual market. There are strong arguments to be made in favor of the ICHRA system as long as its properly regulated...which, of course, is the critical key.

One element I do find irritating is the provision which pushes people to enroll in off-exchange ACA plans; I'd much rather move all individual market coverage onto the exchanges. Overall, however, I don't really have any strong feelings for or against codifying it (depending on the details).

In any event, this is a true rarity: Healthcare-related legislation with Republican support which, depending on your POV, actually strengthens the Affordable Care Act and increases healthcare coverage...while being opposed by Democrats.

It will likely pass the GOP-controlled House, but it will be interesting to see whether it makes it past the Dem-controlled Senate. If it does, it will also be interesting to see whether President Biden vetoes the bill, especially given that he's allowed the existing ICHRA rules to remain in place so far.

Sure enough, via this morning's Washington Post Health 202:

House Republicans passed legislation yesterday that includes a provision to codify a Trump-era rule expanding health reimbursement arrangements.

The chamber voted 220-209 along party lines to advance the CHOICE Arrangement Act, which is likely to face head winds in the Democratic-controlled Senate after catching heat from some patient advocacy groups and the Biden administration.

In a statement of administration policy yesterday, the White House said it “strongly opposes” the bill and called it “yet another attack on the Affordable Care Act.”

So what's going on here? Are House Democrats and the Biden Administration really opposed to the ICHRA program? Well, I can't speak for House Dems, but seeing how the Biden Administration hasn't shut down ICHRA so far, I can't imagine they really have that much of a problem with it--or if they do, it clearly hasn't been a high priority seeing how it's been allowed to continue for the past year and a half.

Furthermore, if you read the opposition statement from the White House, some of it seems head-scratching if you only look at the main bill itself:

The Administration strongly opposes H.R. 3799, which is yet another attack on the Affordable Care Act and its critical health care protections. This legislation is just the latest in a long line of attacks on Americans’ ability to access the health care they need.

Under H.R. 3799, small businesses and their employees could once again face higher premiums based on pre-existing conditions or gender, and employees could lose access to guaranteed coverage of key benefits such as maternity care, mental health, and substance use disorder treatment. This bill would raise health insurance premiums and increase costs for small businesses and their employees who need comprehensive coverage, and would enable fraud leading to insolvency and unpaid medical bills. The Administration will not support policies that would disrupt our health care system, reverse our progress, undermine the ACA, and hurt consumers and small businesses by removing critical health care protections that have been in place for years. Instead of undermining the ACA, we should be looking for ways to build upon it and lower health care costs for American families.

The ICHRA program by itself doesn't appear to do any of these things, since any employee who takes up the offer would be required to enroll in an ACA-compliant healthcare policy, so what's this statement talking about?

Well, that's where the "Association Health Plan" amendment to the bill comes in...and that's where the "employee class discrimination" issue rears it's head again. As noted by Virginia Rep. Bobby Scott:

Madam Chair, I yield myself such time as I may consume. Madam Chair, the proposals in H.R. 3799 are yet another recycled, futile attempt to sabotage the Affordable Care Act and actually make it harder for workers and families to find affordable, high-quality health insurance.

This legislative package includes two bills that were marked up by the Committee on Education and the Workforce.

The first is the Association Health Plans Act. This act undermines a core promise of the ACA, access to affordable healthcare for all. This faulty legislation may provide lower costs for some enrollees, but it would do so by skimping on benefits and increasing costs for everybody else.

Specifically, the bill would allow association health plans to cherry-pick low-risk, young individuals for a pool separate from the ACA marketplace. You may hear my colleagues on the other side of the aisle tout the bill's nominal protections against discrimination based on preexisting conditions, but they omit the details regarding the other large loopholes that leave consumers vulnerable in this bill, such as charging higher risk groups more so that the plan will not be attractive to them and charging low-risk groups less so that they will be the ones that come in.

In fact, this legislation explicitly authorizes AHPs to set premiums based on the ``specific risk profile'' of employer members, enabling them to charge higher premiums to groups based on their age, gender, and other factors. AHPs could also exclude certain categories of coverage, such as maternity care, mental health, or substance abuse disorder, to dissuade certain groups or individuals from enrolling. Under the bill, association health plans could also evade essential health benefits and other consumer protections under State and Federal law.

It is a bad idea because of simple arithmetic. If healthy, low-risk individuals can leave the Affordable Care Act marketplace risk pool and join a separate association and pay lower rates on average, those that did not get into these plans will, on average, pay higher premiums. Let's be clear. Only low-cost groups will be in these plans because if you are a high-risk group, the cost will be too much and will not be attractive. If they are high-risk groups with preexisting conditions, older groups, and whatnot, they will not be able to form groups that charge less than the ACA marketplace, and nobody will want to join.

Under the ACA, everybody pays an average. If you have a preexisting condition or do not have a preexisting condition, everybody pays the same, and everybody gets insurance at an affordable cost.

Everybody enjoys all the essential benefits under the ACA. Association plans, for example, do not have to provide coverage for essential benefits like maternity benefits. All the costs of maternity care will be borne by fewer and fewer people.

The average cost of insurance for those not in the plans will slowly grow as the number of association plans grows.

It's been years since I've written much about Association Health Plans (AHPs), aka the "Ass" part of #ShortAssPlans. Here's the basics (again, via Louise Norris, who everyone should follow):

Associations can offer group health insurance plans (association health plans, or AHPs) specially designed for their members and that give their members purchasing power because of the group’s larger pool of enrollees.

In October 2017, President Trump signed an executive order that calls for, among other things, “expanding access” to AHPs. The idea is to let small businesses (either in the same geographical area, or in the same industry) join together in order to offer large group coverage, rather than each small business having to obtain its own small group plan.

This is an attractive idea for some small businesses (primarily those with healthy employees), because the ACA places far fewer regulations on large group plans. While small group plans have to cover the essential health benefits and cannot base premiums on the group’s medical history, those rules do not apply to large groups.

As Robert Pear explained in the New York Times back in 2017:

But these health plans, created for small businesses, have a darker side: They have a long history of fraud and abuse that have left employers and employees with hundreds of millions of dollars in unpaid medical bills.

The problems are described in dozens of court cases and enforcement actions taken over more than a decade by federal and state officials who regulate the type of plans Mr. Trump is encouraging, known as association health plans.

In many cases, the Labor Department said, it has targeted “unscrupulous promoters who sell the promise of inexpensive health benefit insurance, but default on their obligations.” In several cases, it has found that people managing these health plans diverted premiums to their personal use.

To simplify the problem: ICHRAs in and of themselves would be fine as long as it's all or nothing (ie, a small employer offers either a small group plan to all their employees or an ACA-compliant individual market plan ICHRA to all of their employees)...but the expansion of AHPs would make it far too easy to effectively place employees and their dependents on junk plans. Instead of the "Short" part of #ShortAssPlans being included in the ICHRA bill, it's the "Ass" part which made the cut.

If they hadn't thrown the AHP amendment into the mix, I would've (mildly) supported HR 3799. With it included...forget about it. Pass.