Bill Cassidy’s New Health Plan Is Obamacare on Steroids

On Tuesday, Sen. Bill Cassidy (R-LA) released a policy white paper with ideas he claimed would “make health care affordable again.” By and large, however, the plan would do no such thing.

Some of the plan’s ideas—promoting consumer transparency in health care, for instance, promoting primary care, and cracking down on monopolistic practices that impede competition—have merit, although people can quibble with the extent to which Washington can, or should, solve those problems.

Fake Flexibility

Cassidy bases his plan on a state-based block-grant funding model, similar to the legislation he and Sen. Lindsey Graham (R-SC) developed last fall. Cassidy cites various state experimental programs to argue that a block-grant approach would allow more room for innovation.

However, the last sentence of the proposal undermines the rest of the discussion: “Flexibility to states would not jeopardize protections for individuals with pre-existing conditions.” That phrase implies that Cassidy believes, as the Graham-Cassidy bill indicated, that Obamacare’s federal insurance requirements regarding pre-existing conditions should remain in place.

That sentence belies the idea that states would get true flexibility to construct their insurance markets however they like. Instead, the Cassidy plan would represent a variation on Obamacare, whose state waiver program essentially lets them add more requirements and more government to their insurance markets, but not take requirements away. Put another way, the Cassidy plan would give states the “flexibility” to do what Bill Cassidy wants them to do, and only what Bill Cassidy wants them to do. That isn’t flexibility at all.

Costly Requirements Remain in Place

For instance, loosening Obamacare’s essential health benefits while keeping the pre-existing condition requirements will encourage insurers to stop covering treatments like chemotherapy. Because they must continue to accept all sick patients, and charge them the same rates as healthy ones, insurers will try to limit their losses by not covering cancer drugs, thereby discouraging cancer patients from applying for coverage.

The combination of these two policy dilemmas could result in the worst of all possible worlds, from both a political and policy standpoint: A plan that does not reduce premiums appreciably—because it keeps the most costly federal insurance requirements intact—yet still encourages insurers to discriminate against the sick.

Throwing Money at the Problem

Rather than trying to solve the problems Obamacare’s federal insurance requirements have caused, as I previously suggested, Cassidy’s plan goes to great lengths to avoid them. He endorses the health insurance “stability” (read: bailout) measure proposed by Sens. Susan Collins (R-ME) and Lamar Alexander (R-TN) earlier this year. Rather than lowering premiums by removing the federal insurance requirements, that plan would lower premiums—albeit only temporarily—by throwing more taxpayer funds at insurers.

Moreover, the need for more federal funding belies Cassidy’s claim that his plan would “make health care affordable again.” States should not need any more funding to encourage insurance enrollment, particularly if they receive sufficient flexibility from federal requirements to bring down premiums. Cassidy knows that any flexibility will prove illusory. As with a “stability” package, he proposes making coverage more “affordable” by throwing other people’s money at the problem.

Neither Repeal Nor Reform

I wrote last April, well before lawmakers ever contemplated the Graham-Cassidy measure, that “Republicans have a choice: They can either retain the ban on pre-existing condition discrimination—and the regulations and subsidies that go with it—or they can fulfill their promise to repeal Obamacare.” Judging from the ideas in his policy paper, Cassidy has made his choice: He supports Obamacare.

But more of the same—more spending to finance the same costly insurance because of the same costly federal insurance requirements—doesn’t constitute a repeal of Obamacare. It doesn’t even come close. Would that Cassidy, and his colleagues in Congress, actually thought about keeping their word and enacting the repeal they promised.

This post was originally published at The Federalist.

“Stability” Bill Will Not Reduce Premiums in 2019 Compared to 2018

A PDF version of this document is available online here.

Backers of Obamacare “stability” legislation claim it will lower premiums. However, most studies suggest that even after Congress spends tens of billions of dollars, premiums will still rise in 2019 compared to 2018. If the “stability” bill won’t deliver on its promise of lower rates, why enact such controversial legislation…?

CLAIM: “Oliver Wyman projected premium decreases…40% lower premiums…”

THE FACTS:
1.     Half of supposed premium decrease depends on states enacting their own reinsurance programs.

2.     Oliver Wyman’s own report admits most states will not get reinsurance programs enacted in time for 2019 open enrollment—less than eight months away.

3.     10% of supposed premium decrease comes from appropriation of cost-sharing reductions (CSRs).

4.     In all but six states in 2018, individuals can purchase plans with premiums unaffected by cancellation of CSR payments. Therefore, most unsubsidized enrollees will not see any premium reduction in 2019 if Congress appropriates CSR funds—because they never saw a premium increase to begin with.

5.     Does not consider impact of Association Health Plans (AHPs) or short-term plans. If either AHPs or short-term plans achieve sizable enrollment, they could siphon off healthy individuals from the Exchanges—raising premiums for those who remain.

REALITY:     Eliminating the effects of waivers most states won’t receive by year-end, and CSR payments that didn’t affect most unsubsidized enrollees to begin with, Oliver Wyman believes premiums in 2019 will decline only by about 10%. If health costs rise substantially, or short-term plans become popular, those modest premium decreases will disappear—and if both occur, individuals will likely face double-digit premium increases in 2019, even after the “stability” measure.

CLAIM: “CBO projected premium reductions…2019: Average 10% premium reduction…”

THE FACTS:
1.     Both CBO and the Trump Administration believe the elimination of the individual mandate penalty will raise premiums by roughly 10%—completely offsetting the effects of the “stability” bill next year.

2.     CBO has yet to analyze whether and how short-term plans and AHPs will raise Exchange premiums.

3.     While the Trump Administration thinks short-term plans will raise Exchange premiums only slightly—because a small number of people (100,000-200,000) will enroll in them—higher take-up of short-term plans could raise Exchange premiums substantially. The Urban Institute believes that 4.3 million individuals will enroll in short-term plans—and that this high enrollment in short-term plans (where they are offered) will raise Exchange premiums by 18.3 percent.

REALITY: At best CBO believes that the “stability” bill will mitigate the effects of eliminating the mandate penalty next year. But that makes premium increases for 2019 inevitable, and double-digit premium increases quite possible—even after the “stability” bill takes effect.

Republicans Omit Obamacare Bailout from Omnibus — DO NOT CONGRATULATE

Congressional leaders finally released the massive, 2,232-page omnibus spending bill late Wednesday, a measure they want Congress to pass within 24 hours. The version released Wednesday night omits language of an Obamacare “stability” package that Republican lawmakers released separately on Monday.

But, to borrow a phrase echoing throughout the Capitol since a Washington Post story appeared Tuesday night, “DO NOT CONGRATULATE” Republicans for leaving the bailout provisions out of the draft. On both process and on substance, congressional leaders did not cover themselves in glory. Far from it.

Republicans Bad on Substance…

A cynic would question why Republican leaders found this particular issue non-negotiable. After all, Republicans ran for four straight election cycles—in 2010, 2012, 2014, and 2016—on repealing Obamacare, only to turn around and propose more than $60 billion in spending to prop it up. From Democrats’ perspective, since Republicans did a complete 180 on repealing Obamacare, why not expect the GOP to perform a similar U-turn on taxpayer funding of abortion?

…And Just as Bad on Process

In general, the process surrounding the omnibus—as with most appropriations legislation, and most major legislation in general—stinks. After completing a secretive drafting process among a small group of staff behind closed doors—the swamp personified—leaders now will turn to ramming the legislation through Congress.

Facing a potential government shutdown at midnight on Friday, they will rush through the massive bill spending trillions of dollars in a matter of hours, well before members of Congress or their staff will have time to read, let alone digest and understand, its contents.

One specific issue stands out: As I previously wrote, Senate Majority Leader Mitch McConnell (R-KY) wants to grant Sens. Susan Collins (R-ME) and Lamar Alexander (R-TN) a separate vote on bailing out Obamacare. He apparently will attempt to do so despite the fact that:

  1. Other Republican senators never agreed to give Collins a vote. McConnell spoke only for himself in his colloquy with Collins last December.
  2. Collins demonstrably moved the goalposts on the size of her bailout. McConnell agreed to support $5 billion in reinsurance funds in December, while now she has demanded more than six times as much, or more than $30 billion.
  3. McConnell literally shut down the federal government rather than grant Sen. Rand Paul (R-KY) a vote on his amendment to an appropriations bill just last month—and Paul’s colleagues publicly trashed his attempts to obtain a vote as a “stunt” and “utterly pointless.”

To most individuals outside Washington, Republicans moving to bail out Obamacare, and attempting to pass 2,200-plus page bills in mere hours, signifies a degree of insanity. Unfortunately, however, Congress seems to engage in these types of activities (at least) every year, raising the specter of the trite saying that defines insanity as doing the same thing over and over while expecting different results.

This week’s spectacle should raise one obvious question: How many more of these sorry affairs will it take before conservatives summon the will to end it, once and for all?

This post was originally published at The Federalist.

Mitch McConnell’s Amendment Dilemma

Mitch McConnell has a problem entirely of his own making. The Senate majority leader promised a vote on Obamacare “stability” legislation to Sen. Susan Collins (R-ME). Collins wants a vote on the package as a Senate floor amendment to the omnibus appropriations legislation (that is, if and when congressional leaders emerge from their smoke-filled rooms and actually release an omnibus package for Congress to vote on).

Except that not six weeks ago, McConnell literally let the federal government shut down rather than grant his fellow Kentuckian Sen. Rand Paul a floor vote on his amendment to appropriations legislation.

It’s a fun choice McConnell gets to make—and he’s running out of time to do it.

Shutdown Showdown

Lest anyone forget what transpired a few short weeks ago, Paul asked for a clean vote on his amendment to budget and spending legislation, to preserve strict spending caps enacted as part of the Budget Control Act. (When it passed in 2011, McConnell said the Budget Control Act spending caps would slow down the “big government freight train”—a freight train that he now apparently wants to put into hyperdrive.)

McConnell and the Senate leadership refused to give Paul an up-or-down vote on his amendment. As Senate Republican Whip John Cornyn (R-TX) put it, “Why reward bad behavior?” Because under Senate rules Paul could speak for an extended period of time, and because Senate leadership did not allow enough time for a full floor debate on the legislation—apparently thinking it appropriate for the Senate to consider and pass in mere hours a 652-page bill allocating trillions of dollars—the federal government briefly shut down.

Susan Collins’ Precious Bailout

Enter Collins, who along with Sen. Lamar Alexander (R-TN) has been pushing for a bailout of Obamacare insurers for months now. Collins claims she has a commitment from McConnell to support an insurer “stability” package. Alexander said he would demand a vote, asking for senators “to be accountable” for their positions on the issue, because he thinks bailing out Obamacare will lower premiums for 2019 (it won’t).

However, as I noted just last week, Collins has moved the goalposts on the bailout package significantly. Whereas she initially requested “only” $5 billion in reinsurance funds, according to her December colloquy with McConnell, the new bill she and Alexander introduced this week contains more than $30 billion in spending on reinsurance—a sixfold increase. Because Collins has demonstrably walked away from her side of whatever bargain McConnell made with her, Senate leadership should have no qualms about doing the same.

Different Treatment?

However, the McConnell office appears inclined to give Collins her way, with multiple reports saying that McConnell was “open” to such an amendment vote to the appropriations bill. Compare that to the reactions Paul received from his colleagues last month, when he wanted an amendment vote to an appropriations bill. Congressmen called it an “utterly pointless” “stunt” that “doesn’t make any d-mn sense.” One unnamed Senate Republican aide called it “the stupidest thing to happen to Congress in three weeks….This is even stupider than the kid who didn’t recognize Justin Timberlake at the Super Bowl.”

Conservatives should watch with intense interest how the Senate floor debate plays out. If McConnell moves heaven and earth to get Collins a vote on her precious bailout, after moving heaven and earth to deny Paul a vote on retaining spending caps that McConnell himself used to support, they should neither quickly forgive, nor easily forget, the double standards created by Senate leadership.

This post was originally published at The Federalist.

Legislative Bulletin: Updated Summary of Obamacare “Stability” Legislation

On Monday, Sen. Lamar Alexander (R-TN) and others introduced their latest version of an Obamacare “stability” bill. In general, the bill would appropriate more than $60 billion in funds to insurance companies, propping up and entrenching Obamacare rather than repealing it.

Also on Monday, the Congressional Budget Office released its analysis of the updated legislation. In CBO’s estimate, the bill would increase the deficit by $19.1 billion, while marginally increasing the number of insured Americans (by fewer than 500,000 per year).


Stability Fund
: Provides $500 million in funding for fiscal year 2018, and $10 billion in funding for each of fiscal years 2019, 2020, and 2021, for invisible high-risk pools and reinsurance payments. The $500 million this year would provide administrative assistance to states to establish such programs, with the $10 billion in each of the following three years maintaining them.

Grants the secretary of Health and Human Services (HHS), in consultation with the National Association of Insurance Commissioners, the authority to allocate the funds to states—which some conservatives may be concerned gives federal bureaucrats authority to spend $30.5 billion wherever they choose.

Includes a provision requiring a federal fallback for 2019 (and only 2019) in states that choose not to establish their own reinsurance or invisible high-risk program. Moreover, these federal fallback dollars must be used “for market stabilization payments to issuers.” Some conservatives may be concerned that this provision—which, like the rest of the $30 billion in “stability funds,” did not appear in the original Alexander-Murray legislation—undermines state flexibility, by effectively forcing states to bail out insurers, whether they want to or not.

Cost-Sharing Reduction Payments: The bill appropriates roughly $30-35 billion in cost-sharing reduction (CSR) payments to insurers, which subsidizes their provision of discounts on deductibles and co-payments to certain low-income individuals enrolled on insurance exchanges.

Last October, President Trump announced he would halt the payments to insurers, concluding the administration did not have authority to do so under the Constitution. As a result, the bill includes an explicit appropriation, totaling roughly $3-4 billion for the final quarter of 2017, and $9-10 billion for each of years 2019, 2020, and 2021, based on CBO spending estimates. This language represents a change from the original Alexander-Murray bill, which appropriated payments for 2018 and 2019 only.

For 2018, the bill appropriates CSRs only for 1) states choosing the Basic Health plan option (which gives states a percentage of Obamacare subsidies as a block grant to cover low-income individuals) and 2) insurers for which HHS determines, in conjunction with state insurance commissioners, that the insurer assumed the payment of CSRs when setting rates for the 2018 plan year. This language represents a change from the original Alexander-Murray bill, which set up a complicated system of rebates that would have allowed insurers potentially to pocket billions of dollars by retaining “extra” CSR payments for 2018.

Some conservatives may be concerned that, because insurers understood for well over a year that a new administration could terminate these payments in 2017, the agreement would effectively subsidize their flawed assumptions. Some conservatives may be concerned that action to continue the flow of payments would solidify the principle that Obamacare, and therefore insurers, are “too big to fail,” which could only encourage further risky behavior by insurers in the future.

Hyde Amendment: With respect to the issue of taxpayer dollars subsidizing federal insurance plans covering abortion, the bill does not apply the Hyde Amendment protections retrospectively to the 2017 CSR payments, or to the (current) 2018 plan year. With respect to 2019 through 2021, the bill prohibits federal funding of abortions, except in the case of rape, incest, or to save the life of the mother. However, the bill does allow states to use state-only dollars to fund other abortions, as many state Medicaid managed care plans do currently.

According to the pro-abortion Guttmacher Institute, with respect to coverage of abortions in state Medicaid plans:

  • 32 states and the District of Columbia follow the federal Hyde Amendment standard, funding abortion only in the cases of rape, incest, or to save the life of the mother;
  • One state provides abortion only in the case of life endangerment; and
  • 17 states provide coverage for most abortions—five voluntarily, and 12 by court order.

State Waiver Processes: The bill would streamline the process for approving state innovation waivers, authorized by Section 1332 of Obamacare. Those waivers allow states to receive their state’s exchange funding as a block grant, and exempt themselves from the individual mandate, employer mandate, and some (but not all) of Obamacare’s insurance regulations.

Specifically, the bill would:

  • Extend the waivers’ duration, from five years to six, with unlimited renewals possible;
  • Prohibit HHS from terminating waivers during their duration (including any renewal periods), unless “the state materially failed to comply with the terms and conditions of the waiver”;
  • Require HHS to release guidance to states within 60 days of enactment regarding waivers, including model language for waivers—a change from the 30 days included in the original Alexander-Murray bill;
  • Shorten the time for HHS to consider waivers from 180 days to 120—a change from 90 days in the original Alexander-Murray bill;
  • Allow a 45-day review for 1) waivers currently pending; 2) waivers for areas “the Secretary determines are at risk for excessive premium increases or having no health plans offered in the applicable health insurance market for the current or following plan year”; 3) waivers that are “the same or substantially similar” to waivers previously approved for another state; and 4) waivers related to invisible high-risk pools or reinsurance, as discussed above. These waivers would initially apply for no more than three years, with an extension possible for a full six-year term;
  • Allow governors to apply for waivers based on their certification of authority, rather than requiring states to pass a law authorizing state actions under the waiver—a move that some conservatives may be concerned could allow state chief executives to act unilaterally, including by exiting a successful waiver on a governor’s order.

State Waiver Substance: On the substance of innovation waivers, the bill would rescind regulatory guidance the Obama administration issued in December 2015. Among other actions, that guidance prevented states from using savings from an Obamacare/exchange waiver to offset higher costs to Medicaid, and vice versa.

While supporting the concept of greater flexibility for states, some conservatives may note that, as this guidance was not enacted pursuant to notice-and-comment, the Trump administration can revoke it at any time—indeed, should have revoked it last year. Additionally, the bill amends, but does not repeal, the “guardrails” for state innovation waivers. Under current law, Section 1332 waivers must:

  • “Provide coverage that is at least as comprehensive as” Obamacare coverage;
  • “Provide coverage and cost-sharing protections against excessive out-of-pocket spending that are at least as affordable” as Obamacare coverage;
  • “Provide coverage to at least a comparable number of [a state’s] residents” as under Obamacare; and
  • “Not increase the federal deficit.”

Some conservatives have previously criticized these provisions as insufficiently flexible to allow for conservative health reforms like Health Savings Accounts and other consumer-driven options.

The bill allows states to provide coverage “of comparable affordability, including for low-income individuals, individuals with serious health needs, and other vulnerable populations” rather than the current language in the second bullet above. It also clarifies that deficit and budget neutrality will operate over the lifetime of the waiver, and that state innovation waivers under Obamacare “shall not be construed to affect any waiver processes or standards” under the Medicare or Medicaid statutes for purposes of determining the Obamacare waiver’s deficit neutrality.

The bill also makes adjustments to the “pass-through” language allowing states to receive their exchange funding via a block grant. For instance, the bill adds language allowing states to receive any funding for the Basic Health Program—a program states can establish for households with incomes of between 138-200 percent of the federal poverty level—via the block grant.

Some conservatives may view the “comparable affordability” change as a distinction without a difference, as it still explicitly links affordability to Obamacare’s rich benefit package. Some conservatives may therefore view the purported “concessions” on the December 2015 guidance, and on “comparable affordability” as inconsequential in nature, and insignificant given the significant concessions to liberals included elsewhere in the proposed legislative package.

Catastrophic Plans: The bill would allow all individuals to purchase “catastrophic” health plans, beginning in 2019. The legislation would also require insurers to keep those plans in a single risk pool with other Obamacare plans—a change from current law.

Catastrophic plans—currently only available to individuals under 30, individuals without an “affordable” health plan in their area, or individuals subject to a hardship exemption from the individual mandate—provide no coverage below Obamacare’s limit on out-of-pocket spending, but for “coverage of at least three primary care visits.” Catastrophic plans are also currently subject to Obamacare’s essential health benefits requirements.

Outreach Funding: The bill requires HHS to obligate $105.8 million in exchange user fees to states for “enrollment and outreach activities” for the 2019 and 2020 plan years—a change from the original legislation, which focused on the 2018 and 2019 plan years. Currently, the federal exchange (healthcare.gov) assesses a user fee of 3.5 percent of premiums on insurers, who ultimately pass these fees on to consumers.

In a rule released in December 2016, the outgoing Obama administration admitted that the exchange is “gaining economies of scale from functions with fixed costs,” in part because maintaining the exchange costs less per year than creating one did in 2013-14. However, the Obama administration rejected any attempt to lower those fees, instead deciding to spend them on outreach efforts. The agreement would re-direct portions of the fees to states for enrollment outreach.

Some conservatives may be concerned that this provision would create a new entitlement for states to outreach dollars. Moreover, some conservatives may object to this re-direction of funds that ultimately come from consumers towards more government spending. Some conservatives may support taking steps to reduce the user fees—thus lowering premiums, the purported intention of this “stabilization” measure—rather than re-directing them toward more government spending, as the agreement proposes.

The bill also requires a series of biweekly reports from HHS on metrics like call center volume, website visits, etc., during the 2019 and 2020 open enrollment periods, followed by after-action reports regarding outreach and advertising. Some conservatives may view these myriad requirements first as micro-management of the executive, and second as buying into the liberal narrative that the Trump administration is “sabotaging” Obamacare, by requiring minute oversight of the executive’s implementation of the law.

Cross-State Purchasing: Requires HHS to issue regulations (in consultation with the National Association of Insurance Commissioners) within one year regarding health care choice compacts under Obamacare. Such compacts would allow individuals to purchase coverage across state lines.

However, because states can already establish health care compacts amongst themselves, and because Obamacare’s regulatory mandates would still apply to any such coverage purchased through said compacts, some conservatives may view such language as insufficient and not adding to consumers’ affordable coverage options.

Consumer Notification: Requires states that allow the sale of short-term, limited duration health coverage to disclose to consumers that such plans differ from “Obamacare-approved” qualified health plans. Note that this provision does not codify the administration’s proposed regulations regarding short-term health coverage; a future Democratic administration could (and likely will) easily re-write such regulations again to eliminate the sale of short-term plans, as the Obama administration did in 2016.

CBO Analysis of the Legislation

As noted above, CBO believes the legislation would increase the deficit by $19.1 billion, while increasing the number of insured Americans marginally. In general, while CBO believed that changes to Obamacare’s state waivers program would increase the number of states applying for waivers, they would not have a net budgetary impact.

However, the bill does include one particular change to Obamacare Section 1332 waivers allowing existing waiver recipients to request recalculation of their funding formula. According to CBO, only Minnesota qualifies under the statutory definition, and could receive $359 million in additional funding between 2018 and 2022. Some conservatives may be concerned that this provision represents a legislative earmark that by definition can only affect one state.

With respect to the invisible high-risk pools and reinsurance, CBO believes the provisions would raise spending by a net of $26.5 billion, offset by higher revenues of $7 billion. The budget office estimated that the entire country would be covered by the federal fallback option in 2019, because “it would be difficult for other states [that do not have waivers currently] to establish a state-based program in time to affect premiums.”

For 2020 and 2021, CBO believes that 60 and 80 percent of the country, respectively, would be covered by state waivers; “the remainder of the population in those years would be without a federally-funded reinsurance program or invisible high-risk pool.” The $7 billion in offsetting savings referenced in CBO’s score comes from lower premiums, and thus lower spending on federal premium subsidies. In 2019, CBO believes “about 60 percent of the federal cost for the default federal reinsurance program would be offset by other sources of savings.”

CBO believes that, under the bill, premiums would be 10 percent lower in 2019, and 20 percent lower in 2020 and 2021, compared to current law. Some conservatives may note that lower premiums relative to current law does not equate to lower premiums relative to 2018 levels. Particularly because CBO expects elimination of the individual mandate tax will raise premiums by 10 percent in 2019, many conservatives may doubt that premiums will go down in absolute terms, notwithstanding the sizable spending on insurer subsidies under the bill.

CBO noted that premium changes would largely affect unsubsidized individuals—i.e., families with incomes more than four times the federal poverty level ($100,400 for a family of four in 2018)—a small portion of whom would sign up for coverage as a result of the reductions. However, “in states that did not apply for a waiver, premiums would be the same under current law as under the legislation starting in 2020.”

Moreover, even in states with a reinsurance waiver, CBO believes that insurers will “tend to set premiums conservatively to hedge against uncertainty” regarding the reinsurance programs—meaning that CBO “expect[s] that total premiums would not be reduced by the entire amount of available federal funding.”

As noted in prior posts, CBO is required by law to assume full funding of entitlement spending, including cost-sharing reductions. Therefore, the official score of the bill included no net budget impact for the CSR appropriation. However, Alexander received a supplemental letter from CBO indicating that, compared to a scenario where the federal government did not make CSR payments, appropriating funds for CSRs would result in a notional deficit reduction of $29 billion.

The notional deficit reduction arises because, in the absence of CSR payments, insurers would “load” the cost of reducing cost-sharing on to health insurance premiums—thus raising premium subsidies for those who qualify for them. CBO believes these higher subsidies would entice more families with incomes between two and four times the federal poverty definition ($50,200-$100,400 for a family of four in 2018) to sign up for coverage. Compared to a “no-CSR” baseline, appropriating funds for CSRs, as the bill would do, would reduce spending on premium subsidies, but it would also increase the number of uninsured by 500,000-1,000,000, as some families receiving lower subsidies would drop coverage.

Lastly, the expanded sale of catastrophic plans, coupled with provisions including those plans in a single risk pool, would slightly improve the health of the overall population purchasing Obamacare coverage. While individuals cannot receive federal premium subsidies for catastrophic coverage, enticing more healthy individuals to sign up for coverage will improve the exchanges’ overall risk pool slightly, lowering federal spending on those who do qualify for exchange subsidies by $849 million.

This post was originally published at The Federalist.

“Stability” Bill Likely Will Not Lower Premiums in 2019

In the debate over an Obamacare “stability” bill, advocates of such a measure contend that it will lower premiums, throwing around studies and numbers to make their case. Sen. Lamar Alexander (R-TN) released a handout earlier this week claiming that Oliver Wyman forecast a 40 percent reduction in premiums from a “stability” package, and that the Congressional Budget Office (CBO) gave preliminary estimates of a 10 percent premium reduction in 2019, and a 20 percent reduction in 2020 and 2021.

However, all these numbers avoid — wittingly or otherwise — answering the critical question: Premium reduction compared to what? Barack Obama ran into this problem when trying to sell Obamacare. In 2008, he said repeatedly that his health care plan would “cut” people’s premiums — and then, after signing the bill into law, tried to argue that when he had said “cut,” he really meant “slow the rate of increase.”

But would a “stability” bill actually prevent those premium increases for 2019, particularly for unsubsidized enrollees? (Federal subsidies insulate individuals with incomes under 400 percent of the poverty level — $100,400 for a family of four — from much of the effects of premium hikes.) Would premiums remain flat, or even decline, next year compared to 2018 rates? Based on the studies released to date, most indications suggest otherwise — which should give conservatives pause before embracing a measure that would further entrench Obamacare, making repeal that much less likely.

Factors Affecting Premiums For 2019

Over and above annual increases in medical costs, multiple unique factors will impact premiums for the coming year:

Cost-Sharing Reductions: President Trump’s October decision to stop Obamacare’s cost-sharing reduction (CSR) payments to insurers had a large theoretical impact — but in most states, little practical effect on unsubsidized enrollees. Estimates released prior to the President’s decision suggested that insurers would need to raise premiums for 2018 by roughly 20 percent to account for loss of the CSR payments.

An analysis of states’ decisions regarding CSRs shows that only six states applied the CSR charges to all health insurance plan rates—thereby forcing unsubsidized enrollees to pay higher premiums. Because comparatively few unsubsidized enrollees paid higher premiums due to the CSR decision, the inverse scenario applies: Few unsubsidized enrollees will receive any premium reduction from appropriating CSRs.

Individual Mandate Repeal: As I noted last fall, eliminating Obamacare’s individual mandate tax, while retaining its costly regulations, will put upward pressure on premiums — the only question is how much. Without getting taxed for not purchasing Obamacare-compliant insurance, some healthy individuals will drop coverage, raising average premiums for the remainder.

In its most recent estimate last November, the CBO stated that eliminating the tax would raise exchange premiums “by about 10 percent in most years of the decade.” The administration likewise believes that eliminating the mandate penalty will raise premiums by a similar amount. Its proposed rule on short-term health plans estimated an average monthly premium of $649 with the individual mandate penalty, and $714 without—an increase of $65 per month, or exactly 10 percent.

The administration’s proposed rule on short-term health insurance admitted that exchange premiums would rise as a result of healthy individuals choosing short-term coverage over exchange plans, but by very modest amounts. In the administration’s estimates, premiums would rise by only $2-4 per month for exchange coverage — far less than the $65 monthly estimated premium increase due to elimination of the mandate tax, as noted above. However, the administration’s estimates only assume that 100,000-200,000 individuals enroll in short-term coverage.

By contrast, the liberal Urban Institute estimated much higher take-up of short-term plans by healthy individuals, and therefore much greater premium increases for the sicker individuals who would remain in Obamacare-compliant coverage. According to Urban, 4.3 million individuals would enroll in short-term coverage — more than 20 times the administration’s highest estimate. Because of these healthy individuals migrating to short-term coverage, the Urban researchers assume much larger premium increases for Obamacare-compliant plans, averaging 18.3 percent in the 45 states (plus the District of Columbia) that currently allow the sale of short-term coverage.

The proposed regulatory action on short-term plans — which the administration hopes insurers will start selling by this fall — could have minimal impact on premiums, or lead to sizable premium increases. In general, however, the more that short-term plans succeed in attracting many (healthy) customers, the higher premiums will climb for the (sicker) individuals who maintain exchange coverage.

Premium Tax Suspension: In the January continuing resolution, Congress suspended Obamacare’s health insurance tax — currently in effect for 2018 — for 2019. An August 2017 study, paid for by health insurer UnitedHealthGroup and conducted by Oliver Wyman, found that the insurer tax would raise premiums by about 2.7 percent. Removing the tax next year would lower 2019 premiums by roughly the same amount.

Premium Estimates — Comparing 2018 And 2019

Given the above factors, will premiums go down in 2019 compared to their current 2018 levels? Based on the analyses conducted to date, most indicators suggest they will not.

Oliver Wyman: As I noted on Wednesday, the 40 percent headline figure in the Oliver Wyman study relies on an assumption that Oliver Wyman itself finds dubious. That premium reduction assumes that states apply for and receive a waiver to create their own reinsurance pool on top of the federal reinsurance funds. However, Oliver Wyman concedes that “states that have not already begun working on a waiver will be challenged to get [one] filed and approved under the current regulatory regime in time to impact 2019 premiums.”

The report continues: “In those states that are not able to obtain [a waiver]…we estimate that premium [sic] would decline by more than 20 percent across all metal levels. Those estimates include an average 10 percent reduction due to the funding of CSRs, with the remaining reduction coming from the reinsurance program.”

However, most individuals will NOT receive a 10 percent premium reduction in 2019 if Congress funds CSRs — because, as noted above, most unsubsidized individuals are not paying higher premiums in 2018 due to the non-funding of CSRs. Moreover, while Oliver Wyman said its modeling “reflects elimination of the mandate penalty,” it does not consider the impact of regulatory action on short-term plans or AHPs.

Therefore, the study conducted by Oliver Wyman — which frequently does work for the insurance industry — suggests that, at best, the “stability” package would reduce premiums in 2019 compared to current law for the average enrollee by 10 percent. However, would it actually reduce premiums compared to 2018 levels for the average enrollee? Only if one assumes that 1) health costs do not rise significantly and 2) few individuals enroll in short-term plans or AHPs. If either scenario occurs, a slight premium decrease could turn into a premium increase — and if both scenarios occur, a sizable increase at that.

Congressional Budget Office: Neither Alexander nor the CBO have released their full analysis of a “stability” package. However, according to Alexander’s characterization of the CBO score, the budget office assumes a more modest premium impact than Oliver Wyman — a 10 percent reduction in 2019, followed by a 20 percent premium reduction in 2020 and 2021. Like Oliver Wyman, the CBO likely believes that tight deadlines would make it difficult for the funds provided by the “stability” bill to lower premiums in time for the 2019 plan year. Unlike Oliver Wyman, however, the CBO does not take into account whether and how funding CSRs would lower premiums — because, as I have written previously, federal budget law requires the CBO to assume full funding for CSRs (and all other entitlements) when conducting its analyses.

As noted above, the CBO believes that eliminating the mandate penalty would raise premiums by roughly 10 percent. Put another way, then, in CBO’s estimation, the entire “stability” package would only cancel out the effect of eliminating the mandate penalty on premiums in 2019. If health costs rise — as they do every year — then premiums will rise in 2019. And if the short-term plans succeed in attracting many customers away from the exchanges, then premiums for Obamacare-compliant plans could rise substantially — by double digits — even after the “stability” package.

Conservatives have many good reasons to oppose this “stability” measure — budgetary gimmicks, potential federal funding of abortion coverage, Congress’ total lack of oversight for the bad decisions made by insurers and insurance commissioners, to name just a few. But the fact that the measure looks unlikely to achieve its central goal of lowering premiums seems the most damning indictment of the proposal — failing to solve its intended problem, while causing so many others.

This post was originally published at The Federalist.

Susan Collins Moves the Goalposts on an Obamacare Bailout

The 19th century showman P.T. Barnum famously claimed that, “There’s a sucker born every minute.” Apparently, Republican Sens. Susan Collins and Lamar Alexander think that Barnum’s dictum applies to their Senate colleagues. Both have undertaken a “bait-and-switch” game, constantly upping the ante on their request for an Obamacare “stability” bill — and raising questions about their credibility and integrity as legislators in the process.

Flash back to last December, when Congress considered provisions repealing the individual mandate as part of the tax reform bill. At that time, Collins engaged in a colloquy with Senate Majority Leader Mitch McConnell, who said he would support legislation funding Obamacare’s cost-sharing reductions, as well as Collins’ own reinsurance proposal.

I thank the majority leader for his response. Second, it is critical that we provide States with the support they need to create State-based high-risk pools for their individual health insurance markets. In September, I introduced the bipartisan Lower Premiums Through Reinsurance Act of 2017, a bill that would allow States to protect people with preexisting conditions while lowering premiums through the use of these high-risk pools….

I believe that passage of legislation to create and provide $5 billion in funding for high-risk pools annually over 2 years, together with the Bipartisan Health Care Stabilization Act, is critical for helping to offset the impact on individual market premiums in 2019 and 2020 due to repeal of the individual mandate. [Emphasis mine.]

Collins viewed McConnell’s commitment as so iron-clad that she put a transcript of the colloquy up on her website. Unfortunately, however, Collins didn’t find her side of the bargain as an iron-clad commitment.

One week after that exchange on the Senate floor, Alexander wrote an op-ed on a potential “stability” package. That op-ed claimed that Collins’ reinsurance bill included “$10 billion for invisible high-risk pools or reinsurance funds.” However, the text of the Collins bill itself would appropriate “$2,250,000,000 for each of fiscal years 2018 and 2019” — that is, $4.5 billion and not $10 billion. I noted that discrepancy at the time, writing that, “Alexander seems to be engaged in a bidding war with himself about the greatest amount of taxpayers’ money he can shovel insurers’ way.”

It turns out I was (slightly) mistaken. Alexander wasn’t in a bidding war with himself over giving the greatest amount of taxpayer funds to insurers — he is in a bidding war with Collins. Just this week, both Collins and Alexander issued press releases touting a (flawed and overhyped) premium study by Oliver Wyman. The press releases claimed that “Oliver Wyman released an analysis today showing that the passage of a proposal based on … the Collins-Nelson Lower Premiums through Reinsurance Act will lower premiums … by more than 40 percent.” [Emphasis mine.]

But the release went on to note that, “Oliver Wyman based its analysis on a proposal that would fund [cost-sharing reductions] … and provide $10 billion annually for invisible risk pool/reinsurance funding in 2019, 2020, and 2021.” Not $2.25 billion for fiscal years 2018 and 2019, as the actual Collins-Nelson bill would provide — but more than four times as much annually, for a 50 percent longer duration.

Not even Common Core math can explain the gaping chasm between the funding amounts in the two bills. Does Alexander really want to make a straight-faced claim that an estimate assuming $30 billion in funding is “based on” a bill providing only $5 billion in funding? And if so, then why should a Senator who fails a math test even a first-grader could comprehend chair the committee with jurisdiction over federal educational policy?

Collins and Alexander went to all this trouble because they want to have their cake and eat it too. Collins expects McConnell to abide by his commitment from December — she reportedly cursed out a senior White House aide when the “stability” package failed to pass late last year. But she has no place criticizing McConnell or others for not keeping their word when she has proved unable to keep hers, by upping the ante on her asks for a “stability” bill — and putting out misleading press releases to hide the fact that she ever asked for “only” $5 billion in taxpayer funds.

Collins has no place attacking the White House, or anyone else, for “reneging on the deal.” She reneged on the deal herself — by not sticking to her original commitments, and then putting out misleading press releases to cover her tracks. The White House, and McConnell, should never have made an agreement on a “stability” bill with Collins in the first place. But if they did, the unscrupulous way in which she has handled herself since then should have nullified it.

This post was originally published at The Federalist.

“Stability” Bill Supporters’ Flawed Premium Study

One week after a flawed premium study tried to make the case that premiums would nearly double over the next three years, another study claims that a “stability” bill in Congress would lower premiums by “more than 40 percent.” Or so claimed Republican Sens. Susan Collins and Lamar Alexander.

As with many things Alexander claims, however, there’s more to this story than meets the eye. In reality, the study itself admits that most of the supposed premium “reduction” for 2019 likely will not materialize — and most if not all of the remainder would be offset by the effects of repealing the individual mandate while keeping Obamacare’s onerous regulatory regime.

However, in the very next paragraph, Oliver Wyman called its own assumptions unrealistic, conceding that most states will not have time to enact their own reinsurance proposals for 2019:

In our modeling, we are presuming that states will take advantage of these pass-through savings in 2019. In reality, states that have not already begun working on a waiver will be challenged to get a 1332 waiver filed and approved under the current regulatory regime in time to impact 2019 premiums.

Oliver Wyman went on to point out that applying for such waivers currently requires states to pass their own laws, undergo a 30-day public comment period at the state level, and then navigate a federal approval process that can last nearly eight months. While Collins and Alexander might argue in reply that one potential element of “stability” legislation could speed the waiver approval process, it remains far from certain that all states 1) even have an interest in this type of reinsurance proposal, 2) have the authority they need to establish such a program, and 3) could get federal approval in time to affect the plan year that starts with open enrollment on November 1 — under eight months from now.

If states don’t request a 1332 reinsurance waiver to supplement the federal insurance dollars, or can’t get one approved in time for the 2019 plan year, a likely scenario for many states — what does Oliver Wyman think would happen? “We estimate that premium [sic] would decline by more than 20 percent” — 10 percent from funding of cost-sharing reductions, and 10 percent coming from reinsurance.

But keep in mind that President Trump cancelled the cost-sharing reductions just last October, and Congress repealed Obamacare’s individual mandate, while keeping its costly regulations — a combination of decisions which, all else equal, will raise premiums. In other words, even after dumping tens of billions into bailouts for insurers, premiums could well end up right about where they were last year — and, after taking medical inflation into account, even increase.

Why would Oliver Wyman, let alone Collins and Alexander, put out such shoddy work? Politico got at the issue Tuesday morning: “Oliver Wyman often does analysis for insurers.” Which might explain why the actuaries there put out a headline premium number that by their own admission relies on unrealistic and fanciful assumptions. The analysts seem to have searched for the largest possible premium reduction number they could find, and then made up assumptions to match.

It also explains the statement by Collins and Alexander. If Oliver Wyman takes money from health insurers on a regular basis, as Politico noted, so too does Alexander. So much so that Alexander — who called reinsurance the “Great Obamacare Heist” not eighteen months ago, and pledged to get taxpayers’ billions back from health insurers — now instead wants to shovel more of your hard-earned dollars to insurers’ corporate welfare payments.

This post was originally published at The Federalist.

Aetna Gun Control Donation Epitomizes Crony Capitalism

Just when conservatives couldn’t find enough reasons to oppose an Obamacare “stability” package — or the law itself — the health insurance industry generated another. Aetna’s CEO Mark Bertolini announced Tuesday the company would donate $200,000 to support the March for Our Lives gun control rally scheduled for later this month.

Which raises an obvious question: If a company like Aetna can afford to make a six-figure contribution to a liberal gun control effort, why exactly did health insurers spend some of Tuesday asking for taxpayers to provide a multi-billion dollar “stability” package for the Exchanges?

And when it comes to taxpayer largesse, Aetna has already received plenty. According to page 56 of its most recent quarterly financial filing, last year Aetna’s revenue from government business outstripped its private-sector commercial enterprises: Even as private sector revenues dropped the past two years, government business rose by over $4.5 billion, due at least in part to the additional revenues generated by Obamacare’s Medicaid expansion.

As with other health insurers, Aetna has rapidly become an extension of the state itself — a regulated utility that focuses largely on extracting more business from government. Rather than focusing on new innovations and selling product to the private sector, it instead hires more lobbyists to seek rents (e.g., a “stability” package) from government. And in exchange for such governmental payments, it promotes liberal causes that will win the company plaudits from the statists who regulate it.

Other health insurance organizations have taken much the same tack. Several years ago, the House Ways and Means Committee exposed how AARP received numerous exemptions for its lucrative Medigap plans in Obamacare. Not coincidentally, the organization had previously used its “Divided We Fail” campaign to funnel money to such liberal organizations as the NAACP, the Human Rights Campaign, the Congressional Black Caucus Foundation, and the National Council of La Raza.

(Yes, I recognize that, technically speaking, AARP is not a health insurer. Whereas health insurers might have to place money at risk, AARP faces no such barrier, and can instead reap pure profit by licensing its name and brand.)

On Twitter Thursday evening, I asked Aetna CEO Mark Bertolini if he considers abortion a public health issue — the company’s stated reason for contributing to the March for Our Lives. If Aetna purportedly cares so much about gun violence, it should similarly care about violence against the unborn. But I won’t hold my breath waiting for Aetna to contribute to the March for Life, or any other pro-life cause.

Mind you, a private company can make contributions to whichever organizations it likes or does not like. Unfortunately, however, Aetna and many other insurers aren’t acting like private companies. In constantly begging for taxpayer dollars, they’re acting like wards of the state.

That dynamic provides conservatives with the perfect reason to oppose an Obamacare “stability” package — and support the law’s full repeal. Weaning health insurers off the gusher of taxpayer dollars Obamacare created would represent a move away from the current statist status quo. And who knows? It might — just might — get some health care companies to look beyond government as the solution to all their problems.

This post was originally published at The Federalist.

The Binary Choice Paul Ryan Doesn’t Want to Face

This time last year, House Speaker Paul Ryan (R-WI) spoke to all who would listen about the health care legislation that Republican leadership crafted: “This is the closest we will ever get to repealing and replacing Obamacare. It really comes down to a binary choice.” Now, however, Ryan faces a binary choice himself — one that he and his leadership colleagues seem intent on deflecting.

Ryan can support an Obamacare bailout, or he can support the pro-life movement. He cannot support both.

The deafening silence emanating from Republican leaders on the life issue speaks volumes to both their knowledge of the problem, and their intent of how to handle it. Ryan desperately wants to bail out Obamacare, going so far as to promote a ridiculous budgetary gimmick that should make Ryan, in his former role as Budget Committee Chairman, laugh out loud in its absurdity.

If Republican leaders considered the life issue a red line they cannot, and will not, cross, to pass an Obamacare bailout, they would have said so months ago. By and large, they have not done so, instead issuing only mealy-mouthed statements that “we have been working on it.”

Such statements constitute, in plain English, a cop-out. When the issue presents a binary choice, as here, Congress has little to “work on”—the Hyde amendment either appears in the bill, or it doesn’t. A cynic might argue that the “we have been working on it” statement means that Republican leaders consider the life issue a political problem to game their way around, rather than a moral principle that they must uphold first, last, and always.

But executive action cannot trump the statute itself. Senate Majority Leader Mitch McConnell (R-KY) said the week Obamacare passed that the law “forces taxpayers to pay for abortions,” and only another law will change that dynamic.

As Congressman Jim Sensenbrenner observed in March 2010:

This bill expands abortion funding to the greatest extent in history. I have heard that the president is contemplating an executive order to try to limit this. Members should not be fooled. Executive orders cannot override the clear intent of a statute. … If an executive order moves the abortion funding in this bill away from where it is now, it will be struck down as unconstitutional because executive orders cannot constitutionally do that.

Republican leaders may also embrace the political tactic of a “headpat vote.” This gambit would bring to the floor two separate bills — one containing the Obamacare “stability” funding, and a separate, stand-alone bill codifying pro-life protections for that funding. While that concept might sound reasonable at first blush, the pro-life community would find the outcome unacceptable — the Obamacare funding would remain on a “must-pass” bill headed straight to the president’s desk, while the pro-life restrictions would die in the Senate by failing to get the 60 votes needed to break a filibuster.

This procedural gimmick would represent the worst of the Washington “swamp,” allowing Republican politicians to echo John Kerry in 2004 by taking both sides of an issue: “I actually voted for the $87 billion before I voted against it.” Moreover, it would demonstrate that, when the chips are down, Republican leaders view the life issue and community as something to be bargained away, or appeased through meaningless political tokenism, rather than as a moral imperative and matter of first principles.

In the end, the pro-life community has witnessed enough political double-talk, most notably by Democrats attempting to claim Obamacare does not fund abortion coverage, to see through any procedural gimmicks Republican leaders might propose. The question of whether Republicans support taxpayer funding of abortion coverage in Obamacare really does come down to a binary choice. Here’s hoping that Republicans choose the side of life.

This post was originally published at The Federalist.