Update: Life Support for the ACA
This week (3-20-18) the ACA bill is again up for spending review and is also in a tussle with health insurers. The administration may pad the omnibus spending bill with enough cash to preserve the law through the 2020 election but there are no assurances of a fix anytime soon.
Congress is debating how to handle cost-sharing reductions (payments to insurers for defraying out-of-pocket costs or deductibles for low-income individuals). These payments were stopped last year; now Washington is seeking a “stability” deal for ACA as the price of repealing the law’s penalty for declining to purchase health insurance in the tax bill includes billions in cost-sharing payments and reinsurance, which subsidize high-cost patients to lower premiums for everyone else.
But the latest proposal is $30 billion of reinsurance over three years. This is a blowout compared with the roughly $5 billion over two years in reinsurance proposed last year. Many groups oppose the package as a bailout for insurers, but the problem is that the original law was written to guarantee that insurers get paid one way or another, and they are now becoming more demanding.
Case in point: Premiums are higher without the cost-sharing payments. The law’s tax credits grow in generosity as premiums rise, so insurers get the money either way. Insurers in a phenomenon called “silver loading” have piled huge annual premium increases on the silver plans that are tethered to the tax credits. The dysfunctional reality is that cost-sharing payments are cheaper for taxpayers than expanding the tax credits.
Good faith negotiations have seen modest improvements in state flexibility waivers. One would clarify that short-term health insurance can be renewable without medical underwriting, and the administration has a forthcoming rule on short-term plans. That rule could revive an individual market in which consumers can choose options tailored to their price range or preferred benefits.
Another solution proposes health-savings accounts, which would allow individuals to save pre-tax dollars for health expenses. The memo suggests increasing contribution limits and allowing the accounts to be integrated with a broader number of plans.
There may be as solution if these decisions can move as part of this week’s government spending bill. Health insurers say that without cost-sharing and reinsurance payments, they’ll announce huge premium increases this fall.
Most regrettable is that this three-year cash infusion probably pushes the political incentive for any serious legislative reform of ACA past the 2020 election; there is hope that they can keep the ACA on life support. But without meaningful reform that offers more health-care freedom, the real price will be the law’s ultimate preservation.
WSJ Editorial Board – 3-20-18