Health Insurance Exec: Change Subsidies to Attract Young Adults

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By Sara Hansard

Changing Obamacare subsidies to attract more young people would help make exchange products more affordable, a health insurance industry executive told doctors March 1.

“How can maybe we recalibrate some of the way the subsidies are directed so that younger people find the products more attractive?” Matt Eyles, executive vice president for policy and regulatory affairs at America’s Health Insurance Plans (AHIP), said at an American Medical Association (AMA) conference. The individual markets have a disproportionately high number of older enrollees who have higher medical claims, which results in higher premiums.

Draft legislation to repeal the Affordable Care Act from congressional Republicans has been criticized because it provides greater subsidies for young people but isn’t based on income, which means less help for low-income people to buy coverage. Tax credits under the draft would result in “a lot less resources” than the ACA tax credits provide, “and that’s going to be a problem,” James Capretta, a resident fellow with the conservative American Enterprise Institute think tank, told the AMA.

A paper released March 1 by the liberal-leaning Urban Institute said tax credits under legislation proposed by Department of Health and Human Services Secretary Tom Price when he was a member of the House would cover premiums for the most popular exchange plans for 18- to 20-year-olds, but wouldn’t cover many costs for people ages 21 through 64.

Payment Assurances Needed

Health insurers are now pricing products for the 2018 individual market, which covers about 20 million of about 320 million people in the U.S. Insurers need assurances that cost-sharing reduction payments and premium subsidies will continue, and that 2016 reinsurance payments will be made, Eyles said.

A federal district court ruled that the cost-sharing payments were unlawful because Congress never appropriated the money for them, but the court suspended its order preventing the HHS from giving insurers the money while President Donald Trump’s administration decides what it wants to do about the payments. The ACA’s reinsurance payments, which protect insurers from very high claims, totaled $7.7 billion for 2015, but some congressional Republicans argued former President Barack Obama’s administration violated the ACA by not sending $3.5 billion to the U.S. Treasury from the reinsurance fund.

In addition, the Consolidated Appropriations Act of 2016 suspended the ACA’s annual health insurance providers fee for 2017. But if the suspension ends, health insurers would have to pay $14.3 billion in 2018, which by itself would result in a 3 percent increase in premiums, in addition to increases resulting from expected medical claims costs, Eyles said. Health insurers have called for abolishing the fee, which they say increases premiums.

Pre-Existing Condition Protections

Health insurers support ACA provisions requiring people with medical conditions to be covered without charging them more, Eyles said. But if the law’s individual mandate is repealed, as Republicans have called for, other ways to bring people into the risk pool are needed, such as continuous coverage incentives under which insurers could charge higher premiums to people who had a break in coverage, he said.

The HHS proposed a market stabilization rule that would push more regulatory power back to states, Eyles said. “Most of our members would like to see most insurance regulation generally returned to the states,” which have traditionally regulated insurance companies, he said. The ACA has led to more federal regulation, which has added costs for insurers, he said.

Insurers also want more benefit design flexibility so they can design products to give people value “up front,” Eyles said. Insurers argue that exchange plans often require high cost-sharing payments for deductibles and copayments, and providing some initial benefits could attract young people who otherwise wouldn’t receive any coverage reimbursements.

Hospital Representative Pessimistic

The head of a group that represents for-profit hospitals was pessimistic about Republican efforts to repeal and replace the ACA. Tying the insurance subsidies to age rather than income is aimed at stabilizing the individual market rather than covering more people, said Charles Kahn III, president and chief executive officer of the Federation of American Hospitals. About 20 million people have gained coverage under the ACA.

“We’re going to see a lot more uninsurance because the priority here is to get it done and get out of town, not thinking about how we can ensure that low-income Americans in certain categories have access to coverage,” Kahn said.

That would put financial stress on physicians and hospitals, who will face more uninsured patients, Kahn said. Under the ACA, hospital disproportionate share funding as well as Medicare funding was reduced because more people were covered under the law.

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

To contact the editor responsible for this story: Kendra Casey Plank at kcasey@bna.com

For More Information

Information on the American Medical Association's National Advocacy Conference is at https://www.ama-assn.org/national-advocacy-conference. Draft legislation to replace the Affordable Care Act is at http://src.bna.com/mt8. The March 1 Urban Institute paper is at http://src.bna.com/mEp. A Feb. 29, 2016, letter from Sen. Ben Sasse (R-Neb.) to former HHS Secretary Sylvia Mathews Burwell on the reinsurance payments is at http://src.bna.com/kQw. Information on the ACA health insurance providers fee is at https://www.irs.gov/businesses/corporations/affordable-care-act-provision-9010. The HHS market stabilization proposed rule is at https://www.federalregister.gov/documents/2017/02/17/2017-03027/patient-protection-and-affordable-care-act-market-stabilization.

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