Liberals’ Situational Ethics on Constitutional Violations

A president requests billions of dollars to fulfill his main campaign promise. Congress turns him down, but the president finds a way to go around them and get his money anyway.

Donald Trump and his border emergency? Sure. But this description also applies to Barack Obama’s treatment of Obamacare. Examined from this context, the health care history raises questions about whether liberals’ outrage over Trump’s emergency declaration stems from his extralegal actions—or their underlying opposition to his border policies.

The Obama administration knew full well it lacked a lawful appropriation for the insurer payments. In 2013, it requested billions of dollars from Congress for such spending. But Congress refused to appropriate the money. Republicans, who by then controlled the House of Representatives, had no interest in giving dollars to prop up Obamacare, and even Democratic appropriators seemingly had other priorities to fund rather than insurer payments.

Facing a refusal from Congress to appropriate the cost-sharing subsidies, the Obama administration went ahead and spent the funds anyway. Administration officials concocted a theory that even though an express appropriation for the payments did not exist in law, the health care law implied an appropriation of funds. They paid the cost-sharing subsidies to insurers in conjunction with Obamacare’s premium subsidies, even though the two programs are authorized in different sections of the law, and should operate via two different cabinet departments.

Granted, the Obama administration used much more surreptitious means to accomplish its unconstitutional ends. Unlike Trump, who announced his emergency declaration to much fanfare, his predecessor did not draw attention to his extralegal maneuvering. It took House Republicans seven months to authorize a suit objecting to Obama’s actions. But the only two federal courts to rule on the matter found that the law did not include an appropriation for the cost-sharing payments, meaning that Obama violated the Constitution’s appropriations clause by spending funds without authorization.

In two separate legal briefs, the then-House minority leader claimed Obamacare did appropriate funds for the cost-sharing payments to insurers—a claim that federal courts rejected. But her briefs went even further, claiming that Congress had no standing to object to the executive’s encroachment on its spending power.

Pelosi’s briefs in the Obamacare case present numerous objections to Congress’ suit against the executive. She claimed that “allowing suit in this case undermines, rather than advances, [the House’s institutional] interests,” and would “subject Congress to judicial second-guessing” and allow for “legislative obstruction.” She argued that the House of Representatives had no standing to pursue claims against the executive on its own, without the Senate’s concurrence. And she pointed out that “Congress has numerous tools at its disposal to resolve routine disputes,” for instance “corrective legislation that…prohibits the disputed executive action.”

Pelosi claimed last week that Republicans’ decision to endorse Trump’s emergency declaration will set a precedent they will come to regret. She knows of which she speaks. While researching the issue in recent months, I found that Pelosi’s briefs from the Obamacare case mysteriously disappeared from her website (although thankfully are still archived online.) Quite possibly, Pelosi’s staff decided to remove the briefs from her website upon retaking the majority, because they recognize the inconvenient precedent they set—and which Pelosi will now have to explain away in both the legal and political realms.

Call this a hunch, but I doubt that…the Democratic lawmakers would content themselves with the remedies they have laid forth in their brief about Obamacare’s cost-sharing subsidies. Faced with a President spending billions of dollars on a deportation force never appropriated by Congress, would Nancy Pelosi merely content herself with conducting hearings and ‘appeal[ing] to the public,’ as her brief argues in the Obamacare context? Hardly.

That November 2016 article proved prescient in highlighting the dangers of situational ethics—politicians putting immediate policy wins ahead of larger constitutional principles. More than two years later, Pelosi may soon reap the whirlwind, when Trump’s Justice Department uses her Obamacare briefs to argue that the House of Representatives has no standing to challenge his emergency declaration.

Congressional Republicans should learn from Pelosi’s example, stand fast to their principles, and call Trump’s action for what it is: A usurpation of Congress’ power of the purse, a breach of the separation of powers, and a violation of the principles of limited government that conservatives hold dear.

This post was originally published at The Federalist.

Is Donald Trump “Sabotaging” Obamacare?

Is Donald Trump “sabotaging” Obamacare? And are he and his administration violating the law to do so?

Democrats intend to make this issue a prime focus of their political messaging ahead of the November elections. And several developments over the month of August — a Government Accountability Office (GAO) report, a New York Times op-ed by two legal scholars, and a lawsuit filed by several cities — all include specific points and charges related to that theme.

1. The GAO Report

The most recent data point comes from the GAO, which at the behest of several congressional Democrats analyzed the administration’s outreach efforts during the most recent open enrollment period last fall. Those efforts culminated in a report GAO released Thursday.

The report made a persuasive case that the administration’s decision to reduce and re-prioritize funding for enrollment navigators utilized flawed data and methods. While the Department of Health and Human Services (HHS) based navigators’ 2018 funding on their effectiveness in enrolling individuals in coverage in prior years, GAO noted that HHS lacked solid data on navigators’ enrollment on which to base 2018 funding, and that enrollment was but one of navigators’ stated goals in prior years. HHS agreed with GAO’s recommendation that it should provide clearer goals and performance metrics for navigators to meet.

GAO also recommended that the administration reinstitute an overall enrollment target, as one way to determine the adequate distribution of resources during open enrollment. However, a cynic might note that Obamacare advocates, including the Democratic lawmakers who requested the report, may want the Trump administration to publicize an enrollment target primarily so they can attack HHS if the department does not achieve its goals.

Even though reporters and liberals like Andy Slavitt cried foul last year when HHS announced planned maintenance time for healthcare.gov in advance, actual downtime for the site dropped precipitously in 2018 compared to 2017. Which could lead one to ask who is sabotaging whom.

2. The New York Times Article

In The New York Times piece, law professors Nicholas Bagley and Abbe Gluck provide an overview of the lawsuit filed against the Trump Administration (about which more below). As someone who has cited Bagley’s work in the past, I find the article unpersuasive, even disappointing.

Take for instance some of the article’s specific allegations:

Here’s one: “To make it harder for people to enroll in Obamacare plans, for example, the administration shortened the open enrollment period on the health care exchanges from three months to six weeks.”

This charge would have evaporated entirely had Bagley specified which Administration first proposed shortening the open enrollment period to six weeks. The Obama Administration did just that.

This rule also establishes dates for the individual market annual open enrollment period for future benefit years. For 2017 and 2018, we will maintain the same open enrollment period we adopted for 2016—that is, November 1 of the year preceding the benefit year through January 31 of the benefit year, and for 2019 and later benefit years, we are establishing an open enrollment period of November 1 through December 15 of the year preceding the benefit year.

The Trump administration merely took the shorter open enrollment period that the Obama team proposed for 2019 and accelerated it by one year. If shortening the enrollment period would make it so much “harder for people to enroll in Obamacare plans,” as Bagley and Gluck claim, then why did the Obama Administration propose this change?

Another allegation: “To sow chaos in the insurance markets, Mr. Trump toyed for nine months with the idea of eliminating a crucial funding stream for Obamacare known as cost-sharing payments. After he cut off those funds, he boasted that Obamacare was ‘being dismantled.’”

This charge seems particularly specious — because Bagley himself has admitted that Obamacare lacks a constitutional appropriation for the cost-sharing reduction payments to insurers. Bagley previously mentioned that he took no small amount of grief from the left for conceding that President Obama had exceeded his constitutional authority. For him to turn around and now claim that Trump violated his constitutional authority by ending unconstitutional payments represents a disingenuous argument.

Here and elsewhere, Bagley might argue that Trump’s rhetoric — talk of Obamacare “being dismantled,” for instance — suggests corrupt intent. I will gladly stipulate that presidential claims Obamacare is “dead” are both inaccurate and unhelpful. But regardless of what the President says, if the President does what Bagley himself thinks necessary to comport with the Constitution, how on earth can Bagley criticize him for violating his oath of office?

A third allegation:

This month, the Trump administration dealt what may be its biggest blow yet to the insurance markets. In a new rule, it announced that insurers will have more latitude to sell ‘short-term’ health plans that are exempt from the Affordable Care Act’s rules. These plans … had previously been limited to three months.

Under Mr. Trump’s new rule, however, such plans can last for 364 days and can be renewed for up to three years. … In effect, these rules are creating a cheap form of ‘junk’ coverage that does not have to meet the higher standards of Obamacare. This sort of splintering of the insurance markets is not allowed under the Affordable Care Act as Congress drafted it.

This claim also fails on multiple levels. First, if Congress wanted to prohibit “short-term” health plans as part of Obamacare, it could have done so. Congress chose first to allow these plans to continue to exist, and second to exempt these plans from all of Obamacare’s regulatory regime. If Bagley and Gluck have an objection to the splintering of insurance markets, then they should take it up with Congress.

Second, the so-called “new rule” Bagley and Gluck refer to only reverts back to a definition of short-term coverage that existed under the Obama Administration. This definition existed for nearly two decades, from when Congress passed the Health Insurance Portability and Accountability Act (HIPAA) through 2016. The Obama administration published a rule intended to eliminate much of the market for this type of coverage — but it did so only in the fall of that year, more than two years after Obamacare’s major coverage provisions took effect.

As with the shortening of the open enrollment period discussed above, if Bagley and Gluck want to scream “Sabotage!” regarding the Trump administration’s actions, they also must point the finger at Barack Obama for similar actions. That they did not suggests the partisan, and ultimately flawed, nature of their analysis.

3. The Lawsuit

The 128-page complaint filed by the city plaintiffs earlier this month makes some of the same points as the New York Times op-ed. It also continues the same pattern of blaming the Trump administration for actions previously taken by the Obama administration.

The lawsuit criticizes numerous elements of the administration’s April rule setting out the payment parameters for the 2019 Exchange year. For instance, it criticizes the removal of language requiring Exchanges to provide a direct notification to individuals before discontinuing their eligibility for subsidies, if individuals fail to reconcile the subsidies they received in prior years with the amount they qualified for based on their income. (Estimated subsidies, which are based on projected income for a year, can vary significantly from the actual subsidy levels one qualifies for, based on changes in income due to a promotion, change in life status, etc.)

As part of this charge, the lawsuit includes an important nugget: The relevant regulation “was amended in 2016 to specify that an Exchange may not deny [subsidies] under this provision ‘unless direct notification is first sent to the tax filer.’” As with the New York Times op-ed outlined above, those claiming “sabotage” are doing so because the Trump administration decided to revert to a prior regulatory definition used by the Obama administration for the first several years of Obamacare implementation.

The lawsuit similarly complains that the Trump administration is “making it harder to compare insurance plans” by eliminating support for “standardized options” from the Exchange. Here again, the complaint notes that “prior rules supported ‘standardized options,’” while mentioning only in a footnote that the rules implementing the “standardized options” took effect for the 2017 plan year. In other words, the Obama administration did not establish “standardized options” for the 2014, 2015, or 2016 plan years. Were they “sabotaging” Obamacare by failing to do so?

The suit continues with these types of claims, which collectively amount to legalistic whining that the Trump administration has not implemented Obamacare in a manner the (liberal) plaintiffs would support. It even includes this noteworthy assertion:

Maryland has been cleared by state legislators to petition CMS to ‘establish a reinsurance program that would create a pot of money for insurers to cover the most expensive claims,’ but a health economist ‘said he would be shocked if the Trump administration approved such a request, given its efforts to weaken Obamacare’: ‘It just seems very unlikely to me that Trump would approve this. … Maryland is easily saying we want to help prop up Obamacare, which the Trump administration doesn’t want to have anything to do with.’

Fact: The Trump administration just approved Maryland’s insurance waiver this week. So much for that “sabotage.”

A review of its “prayer for relief” — the plaintiffs’ request for actions the court should take — shows the ridiculously sweeping nature of the lawsuit’s claims. Among other things, the plaintiffs want the court to order the defendants to “comply with their constitutional obligation to take care to faithfully execute the ACA,” including by doing the following:

  • “Expand, rather than suppress, the number of individuals and families obtaining health insurance through ACA exchanges;
  • “Reduce, rather than increase, premiums for health insurance in the ACA exchanges;
  • “Promote, rather than diminish, the availability of comprehensive, reasonably-priced health insurance for individuals and families with preexisting conditions;
  • “Encourage, rather than discourage, individuals and families to obtain health insurance that provides the coverage that Congress, in the ACA, determined is necessary to protect American families against the physical and economic devastation that results from lesser insurance, with limits on coverage that leaves them unable to cover the costs of an accident or unexpected illness…
  • “Order Defendants to fully fund advertising under the ACA;
  • “Enjoin Defendants from producing and disseminating advertisements that aim to undermine the ACA;
  • “Order Defendants to fully fund Navigators under the ACA;
  • “Enjoin Defendants from incentivizing Navigators to advertise non-ACA compliant plans;
  • “Order Defendants to lengthen the open enrollment period;
  • “Order Defendants to resume participation in enrollment events and other outreach activities under the ACA…
  • “Order Defendants to process states’ waiver applications under the ACA so as to faithfully implement the Act.”

In other words, the lawsuit asks a court to micro-manage every possible element of implementation of a 2,700-page law — tell HHS what it must say, what it must do, how much it must spend, and on and on. It would create de facto entitlements, by stating that HHS could never reduce funding for advertising and outreach, or lower spending on navigators, or reject states’ waiver applications — potentially even if those applications violate the law itself. And it asks for impossible actions — because HHS cannot unilaterally “expand, rather than suppress” the number of people with coverage, just as it cannot unilaterally “reduce, rather than increase, premiums.”

Despite its questionable claims, and the highly questionable remedies it seeks, the lawsuit may yet accomplish some of its goals. The complaint spends much of its time alleging violations of the Administrative Procedure Act, claiming that HHS did not “meaningfully” or “adequately” consider comments from individuals who objected to the regulatory changes in question. While I have not examined the relevant regulatory dockets in any level of detail, the (pardon the pun) trumped-up nature of elements of the complaint makes me skeptical of such assertions. That said, the administration has suffered several setbacks in court over complaints regarding the regulatory process, so the lawsuit may force HHS to ensure it has its proverbial “i”s dotted and “t”s crossed before proceeding with further changes.

Words Versus Actions

On many levels, the “sabotage” allegations try to use the president’s own words (and tweets) against him. Other lawsuits have done likewise, with varying degrees of success. As I noted above, the president’s rhetoric often does not reflect the actual reality that Obamacare remains much more entrenched than conservatives like myself would like.

But for all their complaints about the administration’s “sabotage,” liberals have no one to blame but themselves for the current situation. Obamacare gave a tremendous amount of authority to the federal bureaucracy to implement its myriad edicts. They should not be surprised when someone who disagrees with them uses that vast power to accomplish what they view as malign ends. Perhaps next time they should think again before proceeding down a road that gives government such significant authority. They won’t, but they should.

This post was originally published at The Federalist.

The Absurdity of the Justice Department’s Obamacare Lawsuit Intervention

Last summer, I wrote about how President Trump had created the worst of all possible outcomes regarding one Obamacare program. In threatening to cancel cost-sharing reduction payments to insurers, but not actually doing so, the administration forced insurers into raising premiums, while not complying with the rule of law by cutting off the payments outright.

Eventually, the administration finally did cut off the payments in October, but for several months, the uncertainty represented a self-inflicted wound. So too a brief filed by the Department of Justice (DOJ) late last week regarding an Obamacare lawsuit several states brought in February, which asked the court to strike down both Obamacare’s individual mandate and the most important of its federally imposed insurance regulations.

It takes a very unique set of circumstances to arrive at this level of opposition. Herewith the policy, legal, and political implications of DOJ’s actions.

Let’s Talk Policy First

Strictly as a policy matter, I agree with the general tenor of the Justice Department’s proposals. Last April, I analyzed Obamacare’s four major federally imposed insurance regulations:

  1. Guaranteed issue—accepting all applicants, regardless of health status;
  2. Community rating—charging all applicants the same premiums, regardless of health status;
  3. Essential health benefits—requiring plans to cover certain types of services; and
  4. Actuarial value—requiring plans to cover a certain percentage of each service.

I concluded that these four regulations represented a binary choice for policymakers: Either Congress should repeal them all, and allow insurers to price individuals’ health risk accordingly, or leave them all in place. Picking and choosing would likely result in unintended consequences.

The Justice Department’s brief asks the federal court to strike down the first two federal regulations, but not the last two. This outcome could have some unintended consequences, as a New York Times analysis notes.

But repealing the guaranteed issue and community rating regulations would remove the prime driver of premium increases under Obamacare. Those two regulations led rates for individual coverage to more than double from 2013 to 2017, necessitating the requirement for individuals to purchase, and employers to offer, health coverage, the subsidies to make coverage more “affordable,” and the tax increases and Medicare reductions used to fund them.

I noted last April that Republicans have a choice: They can either keep the status quo on pre-existing conditions or they can fulfill their promise to repeal Obamacare. They cannot do both. The DOJ brief acknowledges this dilemma, and that the regulations represent the heart of the Obamacare scheme.

Legal Question 1: Constitutionality

Roberts held that, while the federal government did not have the power to compel individuals to purchase health coverage under the Constitution’s Commerce Clause, Congress did have the power to impose a tax penalty on the non-purchase of coverage, and upheld the individual mandate on that basis.

But late last year, Congress set the mandate penalty to zero, with the provision taking effect next January. Both the plaintiff states and DOJ argue that, because the mandate will not generate revenue for the federal government beyond 2019, it can no longer function as a tax, and should be struck down as unconstitutional.

Ironically, if Congress took an unconstitutional act in setting the mandate penalty to zero, few seem to have spent little time arguing as much prior to the tax bill’s enactment last December. I opposed Congress’ action at the time, because I thought Congress needed to repeal more of Obamacare—i.e., the regulations discussed above. But few raised any concerns that setting the mandate penalty to zero represented an unconstitutional act:

  • While one school of thought suggests presidents should not sign unconstitutional legislation, President Trump signed the tax bill into law.
  • Likewise, President Trump did not issue a signing statement about the tax bill, seemingly indicating that the Trump administration had no concerns about the bill, constitutional or otherwise.
  • While in 2009 the Senate took a separate vote on the constitutionality of Obamacare, no one raised such a point of order during the Senate’s debate on the tax bill.
  • I used to work for one of the plaintiffs in the states’ lawsuit, the Texas Public Policy Foundation. TPPF put out no statement challenging the constitutionality of Congress’ move in the tax bill.

Legal Question 2: Severability

As others have noted, a court decision striking down the individual mandate as unconstitutional would by itself have few practical ramifications, given that Congress already set the mandate penalty to zero, beginning in January. The major fight lies in severability—either striking down the entire law, as the states request, or striking down the two major federal insurance regulations, as the Justice Department suggested last week.

The DOJ brief and the states’ original complaint both cite Section 1501(a) of Obamacare in making their claims to strike down more than just the mandate. DOJ cited that section—which called the mandate “essential to creating effective health insurance markets”—13 times in a 21-page brief, while the states cited that section 18 times in a 33-page complaint.

But that claim fails, for several reasons. First, the list of findings in Section 1501(a)(2) of the law discusses the mandate’s “effects on the national economy and interstate commerce.” In other words, this section of findings attempted to defend the individual mandate as a constitutional exercise of Congress’ power under the Commerce Clause—an argument Roberts struck down in the NFIB v. Sebelius ruling six years ago.

Second, the plaintiffs and the Justice Department briefs focus more on what a Congress eight years ago said—i.e., their non-binding findings to defend the individual mandate under the Commerce Clause—than what the current Congress did when it set the mandate penalty to zero, but left the rest of Obamacare intact. The Justice Department tried to retain a fig leaf of consistency by taking the same position regarding severability that the Obama administration did before the Supreme Court in 2012: that if the mandate falls, the guaranteed issue and community rating provisions (and only those provisions) should as well.

However, the Justice Department’s brief all but ignores Congress’s intervention last year. In a letter to Speaker of the House Paul Ryan (R-WI) regarding the lawsuit, Attorney General Jeff Sessions noted that “We presume that Congress legislates with knowledge of the [Supreme] Court’s findings.” A corollary to that maxim should find that the administration takes decisions with knowledge of Congress’ actions.

But rather than observing how this Congress zeroed out the mandate penalty while leaving the rest of Obamacare intact, DOJ claimed that the 2010 findings should control, because Congress did not repeal them. (Due to procedural concerns surrounding budget reconciliation, Senate Republicans arguably could not have repealed them in last year’s tax bill even if they wanted to.)

Third, as the brief by a series of Democratic state attorneys general—who received permission to intervene in the case—makes plain, Republican members of Congress said repeatedly during the tax bill debate last year that they were not changing any other part of the law. For instance, during the Senate Finance Committee markup of the tax bill, the committee’s chairman, Orrin Hatch (R-UT), said the following:

Let us be clear, repealing the [mandate] tax does not take anyone’s health insurance away. No one would lose access to coverage or subsidies that help them pay for coverage unless they chose not to enroll in health coverage once the penalty for doing so is no longer in effect. No one would be kicked off of Medicare. No one would lose insurance they are currently getting from insurance carriers. Nothing—nothing—in the modified mark impacts Obamacare policies like coverage for preexisting conditions or restrictions against lifetime limits on coverage….

The bill does nothing to alter Title 1 of Obamacare, which includes all of the insurance mandates and requirements related to preexisting conditions and essential health benefits.

As noted above, I want Congress to repeal more of Obamacare—all of it, in fact. But what I want to happen and what Congress did are two different things. When Congress explicitly set the mandate penalty to zero but left the rest of the law intact, I should not (and will not) go running to an activist judge trying to get him or her to ignore the will of Congress and strike all of it down regardless. That’s what liberals do.

Too Cute by Half Problem 1: Legal Outcomes

The brief the Democratic attorneys general filed suggested another possible outcome—one that would not please the plaintiffs in the lawsuit. While the attorneys general attempted to defend the mandate’s constitutionality despite the impending loss of the tax penalty, they offered another solution should the court find the revised mandate unconstitutional:

Under long-standing principles of statutory construction, when a legislature purports to amend an existing statute in a way that would render the statute (or part of the statute) unconstitutional, the amendment is void, and the statute continues to operate as it did before the invalid amendment was enacted.

It remains to be seen whether the courts will find this argument credible. But if they do, a lawsuit seeking to strike down all of Obamacare could actually restore part of it, by getting the court to reinstate the tax penalties associated with the mandate.

This scenario could get worse. In 2015, the Senate parliamentarian offered guidance that Congress could set the mandate penalty to zero, but not repeal it outright, as part of a budget reconciliation bill. Republicans used this precedent to zero-out the mandate in last year’s tax bill. But a court ruling stating that Congress cannot constitutionally set the mandate penalty to zero, and must instead repeal it outright, means Senate Republicans would have to muster 60 votes to do so—an outcome meaning the mandate might never get repealed.

In June 2015, the Supreme Court issued a ruling in the case of King v. Burwell. In its opinion, the court ruled that individuals in states that did not establish their own exchanges (and used the federally run healthcare.gov instead) could qualify for health insurance subsidies. By codifying an ambiguity in the Obamacare statute in favor of the subsidies, the court’s ruling prevented the Trump administration from later taking executive action to block those subsidies.

In King v. Burwell, litigating over uncertainty in Obamacare ended up precluding a future administration from taking action to dismantle it. The same thing could happen with this newest lawsuit.

Too Cute by Half Problem 2: Legislative Action

Sooner or later, someone will recognize an easy solution exists that would solve both the problem of constitutionality and severability: Congress passing legislation to repeal the mandate outright, after the tax bill set the penalty to zero. But this scenario could lead to all sorts of inconsistent, yet politically convenient, outcomes:

  • Democrats attacking Republicans over last week’s DOJ brief might oppose repealing a (now-defanged) individual mandate, because it would remove what they view as a powerful political issue heading into November’s midterm elections;
  • Republicans afraid of Democrats’ political attacks might say they repealed a part of Obamacare (i.e., the individual mandate) outright to “protect” the rest of Obamacare (i.e., the federal regulations and other assorted components of the law) from being struck down by an activist judge; and
  • Some on the Right might oppose Congress taking action to repeal “just” the individual mandate, because they want the courts to strike down the entire law—even though such a job rightly lies within Congress’ purview.

As others have noted, these contortionistic, “Through the Looking Glass” scenarios speak volumes about the tortured basis for this lawsuit. The Trump administration should spend less time writing briefs that support legislating from the bench by unelected judges, and more time working with Congress to do its job and repeal the law itself.

This post was originally published at The Federalist.

What’s Going on with Premium Increases under Obamacare?

Multiple articles in recent weeks have outlined the ways Democrats intend to use Obamacare as a wedge issue in November’s midterm elections. While only a few states have released insurer filings—and regulators could make alterations to insurers’ proposals—the preliminary filings to date suggest above-average premium increases have been higher than the underlying trend in medical costs.

Democrats claim that such premium increases come from the Trump administration and Republican Congress’s “sabotage.” But do those charges have merit? On the three primary counts discussed in detail below, the effects of the policy changes varies significantly.

End of Cost-Sharing Reduction Payments

The administration’s decision meant most insurers increased premiums for 2018, to recoup their costs for discounting cost-sharing indirectly (i.e., via premiums) rather than through direct CSR payments. However, as I previously noted, most states devised strategies whereby few if any individuals would suffer harm from those premium increases. Low-income individuals who qualify for premium subsidies would receive larger subsidies to offset their higher costs, and more affluent individuals who do not qualify for subsidies could purchase coverage away from state exchanges, where insurers offer policies unaffected by the loss of CSR payments.

These state-based strategies mean that the “sabotage” charges have little to no merit, for several reasons. First, the premium increases relating to the lack of direct CSR payments already took effect in most states for 2018; this increase represents a one-time change that will not recur in 2019.

Second, more states have announced that, for 2019, they will switch to the “hold harmless” strategy described above, ensuring that few if any individuals will incur higher premiums from these changes. Admittedly, taxpayers will pay more in subsidies, but most consumers should see no direct effects. This “sabotage” argument was disingenuous when Democrats first raised it last year, and it’s even more disingenuous now.

Eliminating the Individual Mandate Penalty

Repealing the mandate will raise premiums for 2019, although questions remain over the magnitude. The Congressional Budget Office (CBO) last month officially reduced its estimate of the mandate’s “strength” in compelling people to purchase coverage by about one-third. However, another recent study suggests that, CBO’s changes notwithstanding, the mandate had a significant impact on getting people to buy insurance—suggesting that many healthy people could drop coverage once the mandate penalty disappears.

To insurers, the mandate repeal represents an unknown factor shaping the market in 2019. In the short term at least, whether or not people will drop coverage in 2019 due to the mandate’s repeal matters less than what insurers—and, just as important, insurance regulators—think people will do in response. If insurers think many people will drop, then premiums could rise significantly; however, if insurers already thought the mandate weak or ineffective, then its repeal by definition would have a more limited impact.

New Coverage Options

The Trump administration’s moves to expand access to association health plans and short-term insurance coverage, while still pending, also represent a factor for insurers to consider. In this case, insurers fear that more affordable coverage that does not meet all of Obamacare’s requirements will prove attractive to young and healthy individuals, raising the average costs of the older and sicker individuals who remain in Obamacare-compliant plans.

If association plans and short-term coverage do not entice many enrollees—or if most of those enrollees had not purchased coverage to begin with—then the market changes will not affect exchange premiums that much. By contrast, if the changes entice millions of individuals to give up exchange coverage for a non-compliant but more affordable plan, then premiums for those remaining on the exchanges could rise significantly.

Estimates of the effects of these regulatory changes vary. For instance, the administration’s proposed rule on short-term plans said it would divert enrollment from exchanges into short-term plans by only about 100,000-200,000 individuals. However, CBO and some other estimates suggest higher impacts from the administration’s changes, and a potentially greater impact on premiums (because short-term and association plans would siphon more healthy individuals away from the exchanges).

But the final effect may depend on the specifics of the changes themselves. If the final rule on short-term plans does not allow for automatic renewability of the plans, they may have limited appeal to individuals, thus minimizing the effects on the exchange market.

However, those same proponents seem less interested in advertising the same study’s premium impact. The Urban researchers believe short-term plans will draw roughly 2.6 million individuals away from exchange coverage, raising premiums for those who remain by as much as 18.3 percent.

Why Prop Up Obamacare?

The selective use of data regarding short-term plans illustrates Republicans’ problem: On one hand, they want to create other, non-Obamacare-compliant, options for individuals to purchase more affordable coverage. On the other hand, if those options succeed, they will raise premiums for individuals who remain on the exchanges.

But some might argue that fixating on exchange premiums for 2019 misses the point, because Republicans should focus on developing alternatives to Obamacare. The exchanges will remain, and still offer comprehensive coverage—along with income-based premium subsidies for that—to individuals with costly medical conditions. But rather than trying to bolster the exchanges by using bailouts and “stability” packages to throw more taxpayer money at them, Republicans could emphasize the new alternatives to Obamacare-compliant plans.

Of course, if that stance presents too much difficulty for Republicans, they have another option: They could repeal the root cause of the premium increases—Obamacare’s myriad new federal insurance requirements. Of course, in Washington, following through on pledges made for the last four election cycles seems like a radical concept, but to most Americans, delivering on such a long-standing promise represents simple common sense.

This post was originally published at The Federalist.

Does the Heritage Health Plan Include Taxpayer Funding of Abortion?

When lawmakers write legislation, little details matter—a lot. In the case of a health plan that the Heritage Foundation and former Sen. Rick Santorum (R-PA) are reportedly preparing to release in the coming days, a few words indicate the plan has not considered critically important details—like how Senate procedure intertwines with abortion policy—necessary to any substantive policy endeavor.

A few short words in a summary of the Heritage plan leave the real possibility that the plan, if enacted as described, could lead to taxpayer funding of abortion coverage. Either Heritage and Santorum—both known opponents of abortion—have undertaken dramatic changes in their pro-life positions over the past few months, or they have failed to think through the full import of the policies they will release very shortly.

However, multiple individuals participating in the Heritage meetings told me that the concepts and policies Spiro’s document discusses align with Heritage discussions. Spiro may have created that document based on verbal descriptions given to him of the Heritage plan (just as the New York Times’ list of questions Robert Mueller wants to ask President Trump likely came via Trump’s attorneys and not Mueller). But regardless of who created it, people in the Heritage group told me it accurately outlined the policy proposals under discussion.

What Cost-Sharing Reductions Do

The summary describes many policies, but one in particular stands out: Under “Short-term stabilization/premium relief,” the plan “Adopts the [Lamar] Alexander and [Susan] Collins appropriation for CSRs [cost-sharing reductions] and state reinsurance/high risk pool programs for 2019 and 2020.”

On one level, this development should not come as a surprise. Party leaders often incorporate recalcitrant members’ pet projects (or, in the old days, earmarks) into a bill to obtain their votes: “See, we included the language that you wanted—you have to vote for our bill now!” Given that Collins as of last week had not even heard about the Heritage-led effort, one might think she would need some incentive to support the measure, which attaching her “stability” language might provide.

About the Hyde Amendment and Byrd Rule

The reference to CSRs takes on more importance because of the way Congress would consider Heritage’s plan. As with the Graham-Cassidy bill and other “repeal-and-replace” bills considered last year, the Senate would enact them using expedited budget reconciliation procedures.

Those procedures theoretically allow all 51 Senate Republicans to circumvent a Democratic filibuster and pass a reconciliation bill on a party-line vote. However, as I outlined last year, the reconciliation process comes with procedural restrictions (i.e., the “Byrd rule”) to prevent senators from attaching “extraneous” and non-budgetary matter to a bill that cannot be filibustered.

“Hyde amendment” restrictions—which prevent federal funding of abortion coverage, except in the cases of rape, incest, or to save the life of the mother—represent a textbook example of the “Byrd rule,” because they have a fiscal impact “merely incidental” to the policy changes proposed. Former Senate Parliamentarian Bob Dove said as much about abortion restrictions Congress considered in 1995:

The Congressional Budget Office determined that it was going to save money. But it was my view that the provision was not there in order to save money. It was there to implement social policy. Therefore I ruled that it was not in order and it was stricken.

After pushing for a vote for months, Collins suddenly backed off and didn’t force the issue on the Senate floor. She knew she didn’t have the votes—everyone knew she didn’t have the votes—because Democrats wouldn’t support a measure that restricted taxpayer funding of abortion coverage. Exactly nothing has changed that dynamic since Congress considered the issue in March.

Why We Can’t Fund CSRs

Republicans recognize the problems the abortion funding issue creates, and the Graham-Cassidy bill attempted to solve them by providing subsidies via a block grant to states. Graham-Cassidy funneled the block grant through the State Children’s Health Insurance Program (SCHIP), largely because the SCHIP statute includes the following language: “Funds provided to a state under this title shall only be used to carry out the purposes of this title, and any health insurance coverage provided with such funds may include coverage of abortion only if necessary to save the life of the mother or if the pregnancy is the result of an act of rape or incest.”

Because SCHIP already contains full Hyde protections on taxpayer funding of abortion, Graham-Cassidy ran the block grant program through SCHIP. Put another way, Graham-Cassidy borrowed existing Hyde amendment protections because any new protections would get in a budget reconciliation bill. It did the same thing for a “stability” fund for reinsurance or other mechanisms intended to lower premiums by subsidizing insurers, also referred to in Spiro’s document.

Creating a pot of money elsewhere in law—for instance, through the SCHIP statute, which does contain Hyde protections—and using that money to compensate insurers for reducing cost-sharing would prove just as unrealistic. The CSR payments reimburse insurers for discrete, specific discounts provided to discrete, specific low-income individuals.

If the subsidy pool gave money to all insurers equally, regardless of the number of low-income enrollees they reduced cost-sharing for, then insurers would have a ready-built incentive to avoid attracting poor people, because enrolling low-income individuals would saddle them with an unfunded (or only partially funded) mandate. If the subsidy pool gave money to insurers based on their specific obligations under the Obamacare cost-sharing reduction requirements, then the parliamentarian would likely view this language as an attempt to circumvent the Byrd rule restrictions and strike it down.

Not Ready for Prime Time

Four participants in the Heritage meetings told me the group has discussed appropriating funds for CSR payments to insurers as part of the plan. Not a single individual said the Senate’s “Byrd rule” restrictions—which make enacting pro-life protections for such CSR payments all-but-impossible—came up when discussing an appropriation for cost-sharing payments to insurers.

That silence signals one or more potential problems: A lack of regard for pro-life policy; an ignorance of Senate procedure, and its potential ramifications on the policies being considered; or a willingness to fudge details—allowing people to believe what they want to believe. Regardless, it speaks to the unformed nature of the proposal, despite meetings that have continued since the last time “repeal-and-replace” collapsed” nearly eight months ago.

Earlier this month, Santorum claimed in an interview that while the original “Graham-Cassidy was a rush…this time we have the opportunity to get the policy better.” But any serious attempt to “get the policy better” wouldn’t have major lingering questions about tens of billions of dollars in “stability” funding, and whether such funds would subsidize abortion coverage, mere days before its public release. In this case, eight months of deliberations may not lead to a deliberative and coherent policy product.

This post was originally published at The Federalist.

Is CBO Working with Budget Committee Staff to Hide an Illegal Obamacare Bailout?

It appears my recent article, which raised questions about whether the Congressional Budget Office (CBO) illegally manipulated the budget baseline to ease the passage of an Obamacare “stability” bill, hit a nerve. To borrow a current metaphor, if there were any more collusion between the House Budget Committee and CBO on this issue, Rod Rosenstein would need to appoint a special counsel to investigate.

Consider a series of questions asked by Rep. Diane Black (R-TN) at House Budget’s April 12 hearing on the new Budget and Economic Outlook. Black asked CBO Director Keith Hall about the agency’s treatment of the law’s cost-sharing reduction payments (CSRs), which President Trump cancelled in October.

  1. Black asked about this issue, and only this issue. After completing her exchange with Hall on CSRs, she yielded back more than half of the five minutes allotted to her for questions—an unusual occurrence. Think about it: How often have you seen members of Congress take two minutes to give a five-minute speech?
  2. Black began the exchange by asking Hall a very friendly, and some would argue leading, question: “Is CBO doing this [i.e., changing the budgetary baseline] in full compliance with” the law?
  3. In response, Hall looked down at his notes no fewer than seven times in a roughly 45-second response. Particularly during the seventh and final instance, Hall quite clearly appears to be reading from his briefing materials. Members of Congress often read questions at hearings, but in nearly 15 years of working on and around Capitol Hill, I can recall precious few times where witnesses read answers.

Based on these circumstances, it seems reasonable to conclude that the exchange was scripted well in advance. If that’s the case, it appears Black, and whomever wrote her questions, worked with CBO to choreograph an exchange designed to rebut one of my allegations, namely, that CBO violated the Gramm-Rudman-Hollings Act in making this budgetary change.

Mind you, the change does violate the law, Hall’s claims notwithstanding. CBO can claim that the budget baseline funds CSRs indirectly—via “higher premiums and larger premium tax credit subsidies”—only by assuming that Congress does not fund CSRs directly.

Later in the April 12 hearing, Rep. Gary Palmer (R-AL) also queried Hall on the circumstances behind this questionable change.

Palmer asked Hall: “Why did you change that [i.e., raise the baseline]?…You would have had to have gotten instruction to” make the alteration. Hall didn’t directly answer the question: He claimed CBO had the authority to make the change, but never said where his instruction came from.

But the budget committees already gave CBO instructions—which CBO suddenly chose to ignore. In an October estimate of Obamacare “stability” legislation, the budget office specifically said that “after consultation with the Budget Committees, CBO has not changed its baseline” to reflect the Trump administration’s cancellation of the CSR payments. Last week’s updated CBO document, which altered the budgetary baseline, said nothing about consultation with the budget committees—a break from the October precedent, and a direct violation of Hall’s promise in his January 30 testimony.

What changed? Did the CBO director just wake up one morning and decide to make a scoring change affecting $200 billion in taxpayer dollars? Or did someone pressure the CBO director to make that change—and if so, who?

If the House Budget Committee staff knows—and I’d bet they do—they certainly don’t want to say. At first my repeated e-mails to committee staff disappeared into dead air. Once I noted this radio silence on Twitter, I got a response, but not a substantive reply. The House Budget Committee’s communications director said my queries were within CBO’s purview, and sent me to them.

However, given the opaque and questionable way this budgetary change transpired, both CBO and House Budget have very clear reasons not to answer the question:

  • If House Budget admits that CBO did reach out to them about this scoring change, that places the fingerprints of House leadership on a heavy-handed attempt to strong-arm CBO and alter scoring rules in a way that favors an Obamacare bailout—the issue I first wrote about back in January.
  • If House Budget admits that CBO did not reach out to them about this scoring change, that means CBO “went rogue,” and increased spending on Obamacare subsidies by $194 billion without guidance or direction from the elected members of Congress who govern it. It also raises questions of whether Hall materially misled the Budget Committee (a felony offense) during his January 30 testimony.

Answering my question involves someone assuming responsibility for this mysterious occurrence. Because no one wants to assume responsibility for the chicanery behind this budget gimmick, apparently people think, or hope, that ignoring questions will make them go away. (I haven’t yet reached out to CBO for a comment, but anyone want to lay odds that their spokesman says, “I’m sorry, but we can’t disclose our communications with members of Congress”?) News flash: They’re not.

If CBO and House Budget are completely blameless, and everything about this budget change occurred in an above-board manner, they seem to have a funny way of going about proving their innocence—sidestepping questions. Not two months ago, Hall testified before the House Budget Committee about the ways CBO will improve transparency surrounding the budget process. If he wants to follow through on his promise, then Hall (to say nothing of House Budget) should start by disclosing exactly who ordered CBO to make this change—the sooner, the better.

This post was originally published at The Federalist.

Is the CBO Director Breaking the Law to Help Paul Ryan Bail Out Obamacare?

Why would an ostensibly nonpartisan Congressional Budget Office (CBO) director violate the law and the word he gave to Congress only a few short weeks ago? Maybe because Paul Ryan asked him to.

In late January, I wrote about how the House speaker wanted CBO to violate budget rules to make it easier for Congress to pass an Obamacare bailout. At the time, House leadership aides dismissed my theories as unfounded and inaccurate speculation. Yet buried on page 103 of Monday’s report on the budget and economic outlook, CBO did exactly what I reported on earlier this year—it changed the rules, and violated the law, to make it easier for Congress to pass an Obamacare bailout.

The Making of a Budget Gimmick

Because of the interactions between the (higher) premiums and federal premium subsidies (which went up in turn), the federal government will likely spend more on subsidies this year without making CSR payments than with them.

Therein lay the basis of the budgetary gimmick Ryan and congressional leaders wanted CBO to help them accomplish. House staffers wanted CBO to adjust its baseline and assume the higher levels of spending under the “no-CSR” scenario. By turning around and appropriating funds for CSRs, thereby lowering this higher baseline, Congress could generate budgetary “savings”—which Republicans could spend on more corporate welfare for insurers, in the form of reinsurance payments.

The Problem? It’s Illegal

As I previously noted, the House’s scheme, and CBO’s actions on Monday to perpetrate that scheme, violate the law. Section 257(b)(1) of the Gramm-Rudman-Hollings Act (available here) requires budget scorekeeping agencies to assume that “funding for entitlement authority is…adequate to make all payments required by those laws.”

Following my January post, Rep. Dave Brat (R-VA) asked CBO Director Keith Hall about this issue at a House Budget Committee hearing. Hall noted that CBO had been treating the cost-sharing reductions “as an entitlement, so it’s”—that is, the full funding of CSRs in the baseline—“remained there, unless we get direction to do something different. We’re assuming essentially that the money will be found somewhere, because it’s an entitlement.”

In a separate exchange with Rep. Jan Schakowsky (D-IL) at the same hearing, Hall went even further: He said, “We’ve treated the cost-sharing reductions actually as an entitlement, at least so far until we get other direction from the Budget Committee.”

Then Comes the Flip-Flop

Yet Monday’s document on the budget outlook did exactly what Hall said mere weeks ago that CBO would not. A paragraph deep in the section on “Technical Changes in Outlays” included this nugget:

Technical revisions caused estimates of spending for subsidies for coverage purchased through the marketplaces established under the ACA and related spending to be $44 billion higher, on net, over the 2018–2027 period than in CBO’s June baseline. A significant factor contributing to the increase is that the current baseline projections reflect that the entitlement for subsidies for cost-sharing reductions (CSRs) is being funded through higher premiums and larger premium tax credit subsidies rather than through a direct appropriation.

In the span of a few weeks, then, Hall and CBO went from “We’re assuming essentially that the money [i.e., the CSR appropriation] will be found somewhere” to the exact opposite assumption. Yet the report mentions no directive from the budget committees asking CBO to change its scorekeeping methodology, likely because the committees did not give such a directive.

In analyzing the status of the Medicare trust fund, which CBO projects will become exhausted in fiscal year 2026, Footnote A of Table C-1 notes how the baseline “shows a zero [balance] rather than a cumulative negative balance in the trust fund after the exhaustion date”—because that’s what Gramm-Rudman-Hollings requires:

CBO may try to make the semantic argument, implied in the passage quoted above, that it continues to assume full funding of CSRs, albeit through indirect means (i.e., higher spending on premium subsidies) rather than “a direct appropriation.” But that violates what Hall himself said back in late January, when he laid out CBO’s position, and said it would not change absent an explicit directive—even though the budget report nowhere indicates that CBO received such direction.

It also violates sheer common sense that the budget office should assume “funding for entitlement authority is…adequate to make all payments” by assuming that the administration does not make all payments, namely the direct CSR payments to insurers.

Coming Up: An Embarrassing Spectacle

During his testimony before the House and Senate Budget Committees this week, Hall may make a spectacle of himself—and not in a good way. He will have to explain why he unilaterally changed the budgetary baseline in a way that explicitly violated his January testimony. He will also have to justify why CBO believes Gramm-Rudman-Hollings’ direction to assume full funding for “all payments” allows CBO to assume that Congress will not make direct CSR payments to insurers.

Conservatives should fight to expose this absurd and costly budget gimmick, and demand answers from Hall as to what—or, more specifically, whom—prompted his U-turn. If Hall wants to transform himself into the puppet of House leadership, and break his word to Congress in the process, he should at least be transparent about it.

This post was originally published at The Federalist.

More Liberal Scaremongering on Premiums

It didn’t get much notice at the time, given its release just prior to the massive, 2,232-page omnibus appropriations measure, but the Urban Institute issued a study designed largely, if not solely, for Democrats to engage in political scaremongering prior to the midterm elections this fall. Like other studies before it, the Urban paper omitted inconvenient truths that have made this year’s premium increases less drastic for consumers than they appear at first blush.

In fact, the Urban Institute authors ignored their own prior research while doing so, an explanation one can only chalk up to raw politics—i.e., the desire to show the greatest possible premium increases in political ads this fall, even though few (if any) individuals will pay them.

But nowhere in the recent Urban study did the researchers explicitly state the major implication of this selective loading of premiums. In most states, individuals who do not qualify for subsidies can avoid the “CSR surcharge” (i.e., the premium costs associated with the withdrawal of CSR funding) by either buying a non-silver plan, or buying a silver plan off the exchange.

As I previously noted, only in six states must unsubsidized individuals pay the costs associated with the withdrawal of CSRs. In the remaining 44 states and the District of Columbia, unsubsidized individuals can choose other plans to avoid the surcharge—and all fully informed, rational consumers would do so.

Given this unusual dynamic, the increase in silver, on-exchange premiums between 2017 and 2018 does reflect an increase in federal spending. Obamacare links premium subsidies to the cost of the second-lowest silver plan on the exchanges, meaning that federal spending on subsidies rose from the “CSR surcharge.” But it does not reflect what people paid out-of-pocket. In most cases, unsubsidized individuals could avoid the surcharge, and most presumably did just that.

The Urban Institute researchers know that most unsubsidized individuals can (and did) avoid the “CSR surcharge”—because they encouraged states to come up with this strategy in the first place. Their January 2016 paper about the withdrawal of CSR payments noted that, if those payments disappeared, unsubsidized individuals would be “strongly disincentivized” to purchase coverage from the exchanges, and would instead “enroll in silver plan coverage” outside the exchanges, where “plan premiums…would be significantly lower.”

Linda Blumberg, one of the authors of the prior study, also co-authored the paper released last month. She did not forget her prior work. In fact, she cited the January 2016 study in footnote six of the March 2018 paper. So why did the March 2018 work nowhere mention that most unsubsidized individuals could, and likely did, obtain cheaper coverage by buying other types of plans?

The obvious answer comes in the lead paragraph of a Politico story about the study: “Premiums for the most popular Obamacare plans skyrocketed by nearly a third this year…” Neither the study nor the Politico story mentioned that in most states, only subsidized individuals—for whom the federal government pays most of their premiums—purchased these plans, and that unsubsidized individuals could avoid these “skyrocketing” premiums by purchasing other coverage.

In other words, the Urban Institute “study” amounted to a political hit piece on Republicans. By coming up with the largest possible premium increases, even though few (if any) individuals actually paid these increases out-of-pocket, the Urban Institute gave Democrats fodder to use in campaign attack ads this fall. Given the lack of attention and consideration the Urban researchers paid to their own prior work, that seems the prime objective for the paper.

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.

“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.