Continuous Health Coverage May Not Lower Premiums Under GOP Bill

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By Sara Hansard

The Republican health-care bill could result in higher premiums even for people who keep continuous coverage, a representative of an actuaries group said May 5.

Under the American Health Care Act (AHCA), passed by the House May 4, individual market applicants who let their coverage lapse 63 consecutive days could be charged higher rates. Healthy people in the individual market may be able to get lower premiums by going outside the exchange marketplaces, Cori Uccello said. Uccello, senior health fellow of the American Academy of Actuaries, told an Alliance for Health Reform briefing, “Who you have left in this continuously covered [exchange] pool is just the not-healthy people,” and premiums would rise for them.

Health-care industry stakeholders are focusing on what they believe are the implications of Republicans’ efforts to roll back the Affordable Care Act, which now is moving to the Senate for action. Most health-care industry groups have concerns about changes that would be made to Obamacare, including protections for people with pre-existing conditions.

Mandate Must Be Enforced

The continuous coverage requirement would replace the Affordable Care Act’s individual mandate, which required most people to buy health insurance or pay a penalty. The mandate needs to be enforced to get more healthy people into the individual market exchanges, Uccello said. Exchange plans have lost money because the enrollees have been sicker than expected.

That mandate “was already fairly weak, because the financial penalty was low, many people are exempt from the penalty and enforcement itself is weak, but further weakening it would make it less effective and would lead to higher premiums,” Uccello said.

“Strengthening it could improve the risk profile and put downward pressure on premiums,” she said.

In his first day in office Jan. 20, President Donald Trump issued an executive order instructing executive agency heads to “waive, defer, grant exemptions from, or delay the implementation of any provision or requirement” of the ACA “that would impose a fiscal burden on any State or a cost, fee, tax, penalty, or regulatory burden on individuals, families, healthcare providers, health insurers, patients, recipients of healthcare services, purchasers of health insurance, or makers of medical devices, products, or medications.”

On Feb. 15, the Internal Revenue Service said, that consistent with the Jan. 20 executive order, it would continue processing tax returns in instances where taxpayers didn’t indicate their coverage status. The IRS had previously put in place system changes that would reject tax returns if taxpayers didn’t provide information on their health coverage, the agency said.

The ACA prohibits individual market insurers from denying coverage or charging more to people with pre-existing medical problems. However, the AHCA would allow states to impose health status rating for people without continuous coverage if the state also sets up a high-risk pool to cover people with high medical needs.

Insurers Likely to Lobby for Waivers

“It’s pretty likely that the insurance industry in most states would go to the capitol and lobby for these waivers” under which the higher rates could be charged, Karen Pollitz, senior fellow at the Kaiser Family Foundation, said at the May 5 event.

It’s difficult to offer affordable premiums in markets where buying coverage is more voluntary because healthy people stay out of the market, Pollitz said.

The AHCA’s continuous coverage requirement is similar to requirements under the Health Insurance Portability and Accountability Act (HIPAA), which requires insurers to continue coverage for people who leave employer-sponsored plans. However, rates for coverage under HIPAA are very high, Pollitz said.

States Working on Waivers

States are working with the Trump administration on applying for waivers of ACA requirements, Brian Webb, assistant director for health policy and legislation of the National Association of Insurance Commissioners, said. Some states, such as California, are requiring carriers to file two sets of rates in case cost-sharing subsidy reductions for low-income enrollees are not funded, he said.

Most health-care industry stakeholders have called for funding of the subsidies, which cover out-of-pocket costs—such as deductibles, copays and coinsurance—for people with incomes between 100 percent and 250 percent of the poverty level. The subsidies are expected to be worth $7 billion in 2017 and $10 billion in 2018.

Funding the subsidies has been up in the air after a federal district court ruled in favor of the House of Representatives that the Obama administration illegally made the payments without a congressional appropriation.

More Insurers to Break Even in 2017

More insurance companies are expected to break even in the exchange markets in 2017 than in 2016, Deep Banerjee, director of S&P Global, said.

But due to the uncertainty about funding of the cost-sharing reduction subsidies, insurers will likely set 2018 prices higher, especially for silver tier plans for which the subsidies are eligible, he said. Under the ACA, health plans have different metal levels based on their coverage, with silver being the most common.

Alternatively, plans could get more selective about participating in the exchanges, Banerjee said. “If there is a greater amount of uncertainty they could decide to pull out of certain counties or certain states,” he said.

Some states, such as Tennessee and Iowa, are struggling to keep insurers in the marketplaces for 2018. Aetna Inc. recently announced it is leaving the market in Virginia, and Molina Healthcare Inc. and Anthem Inc.—two companies that have been active in the exchanges—have indicated they are considering pulled back.

The Republicans’ bill also would change the ACA’s premium subsidies and allow insurers to charge more for older enrollees compared with young people. This “will lead to a net decline in the number of insured in this market,” S&P Global said in a report released May 5.

“We expect the drop in insured to be greater in the older age group, because our analysis indicates that the proposed age-based tax credit will not be adequate to offset the impact of higher premium rates,” the S&P report said.

“Some of the decline in the older population could be offset by gains in the younger population since premiums could decline for the young. But the net impact will be fewer enrollees in the individual market,” it said.

To contact the reporter on this story: Sara Hansard in Washington at shansard@bna.com

To contact the editor responsible for this story: Brian Broderick at bbroderick@bna.com

Copyright © 2017 The Bureau of National Affairs, Inc. All Rights Reserved.

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