Health Insurers: Subsidies, Penalties Would Stabilize Markets

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By Sara Hansard

Providing subsidies for low-income Obamacare enrollees and enforcing the law’s penalties for not buying health coverage top health insurers’ lists for regulatory reform.

Committed funding for cost-sharing reductions to cover out-of-pocket costs and continued enforcement of the Affordable Care Act’s individual mandate are necessary to stabilize the individual and small group markets, America’s Health Insurance Plans and the Blue Cross Blue Shield Association said in July 12 comment letters requested by the Department of Health and Human Services on reducing the ACA’s regulatory burdens.

Guaranteed funding of cost-sharing reduction (CSR) subsidies to cover out-of-pocket costs for ACA enrollees with incomes between 100 percent and 250 percent of the federal poverty level has been a top priority for health insurers, and the funding is included for 2018 and 2019 in the Senate’s draft Better Care Reconciliation Act (BCRA, H.R. 1628). The ACA exchange markets face difficulties as health insurers file requests for sharp premium increases for the second year in a row and some counties face no exchange participation.

Remove `Consumer Freedom Option’

As health insurers called for measures to stabilize the individual and small group markets, they also sent a letter to Senate Majority Leader Mitch McConnell (R-Ky.) and Democratic Leader Charles Schumer (D-N.Y.) urging that an amendment to BCRA designed to appeal to conservatives be removed. Sen. Ted Cruz’s (R-Texas) “Consumer Freedom Option” allowing insurers to sell plans that don’t comply with the ACA as long as they sold at least one compliant plan “is simply unworkable,” AHIP and BCBSA said July 14.

Cruz’s plan would allow health plans to refuse offering coverage to people with medical problems, charge different rates based on age and gender and not provide comprehensive health benefits, the AHIP-BCBSA letter said. “This would allow the new plans to `cherry pick’ only healthy people from the existing market making coverage unaffordable for the millions of people who need or want comprehensive coverage, including, for example, coverage for prescription drugs and mental health services,” the letter said.

Creating a single risk pool in which premiums would be determined based on consumers in the noncompliant as well as the compliant markets wouldn’t make Cruz’s plan workable, nor would dedicating funding for high-risk individuals, the insurers said. The Consumer Freedom Option “creates two systems of insurance for healthy and sick people,” they said.

AHIP and BCBSA represent most health insurers in the U.S. Among their members are major national health insurers such as Humana Inc., Cigna Corp., Anthem Inc., Centene Corp., and major state Blue Cross and Blue Shield plans such as Blue Shield of California.

Subsidies for Low-Income

In its comments to the HHS, the American Hospital Association (AHA) also called for funding the CSRs, which are expected to cost $7 billion to $10 billion annually, as well as enforcing the individual mandate. The AHA, which has about 5,000 member hospitals, and the BCBSA called for reinstating the ACA’s reinsurance program, which operated from 2014 through 2016. For the 2016 benefit year 496 issuers are receiving an estimated $4 billion in reinsurance payments to cover higher-risk enrollees, according to the Centers for Medicare & Medicaid Services.

Both the BCRA as well as the House-passed American Health Care Act (H.R. 1628) include extra funding for market stability, much of which could be used for reinsurance to shore up the individual and small group markets. In addition, Alaska was the first state to receive approval from the HHS July 7 to receive $322.7 million from 2018 through 2022 to cover people with high medical claims.

The AHA also called for retaining “important patient protections,” and it said that “certain approaches to reduce the cost of coverage also significantly reduce the value of a health plan. In many instances, such changes could render coverage meaningless when consumers need it most—when they are seeking care.”

High-Deductible Plans, Drug Costs

High-deductible health plans “may appeal to consumers initially because of lower premiums,” but “patients often find that they cannot afford the care they need when they are still within the deductible range,” the AHA said. The Senate draft bill would allow for individuals to use money from health savings accounts to pay for premiums of tax-advantaged high-deductible plans beginning in 2018, and it would increase contribution caps for HSAs.

Like the AHA, the Pharmaceutical Research and Manufacturers of America (PhRMA) said that when the HHS considers ways to make coverage more affordable, “it is crucial that it look beyond just the premium and instead consider the overall costs that consumers will face.”

One aspect of patient out-of-pocket costs “that are onerous for some patients are prescription drug costs for patients in the deductible or paying coinsurance,” PhRMA said. Typically those costs are based on the list price of the drug and don’t factor in negotiated discounts, it said.

In contrast, negotiated discounts are factored in when cost sharing is calculated for care received at in-network hospitals or physicians’ offices, PhRMA said. Insurers should be encouraged to share a portion of prescription drug rebates with patients in qualified health plans “in a way that does not have the effect of divulging carefully negotiated discussions between pharmaceutical manufacturers and pharmacy benefit managers,” it said.

Many people also took the comment opportunity to call for keeping the ACA. Among the nearly 1,000 comments filed was one from an unnamed person in Oregon, who wrote, “I want a single payer healthcare system to lower costs and the continuation of Medicaid and Planned Parenthood,” which would be defunded under the Senate bill. “I do NOT want trumpcare.”

To contact the reporter on this story: Sara Hansard in Washington at

To contact the editor responsible for this story: Kendra Casey Plank at

For More Information

AHIP's comment letter is at BCBSA's comment letter is at HHS request for comment is at on the Better Care Reconciliation Act (H.R. 1628) is at Health's Premium Increases and Fewer Insurers Participating Expected in Exchange Market in 2018 is at's July 14 letter to Senate leaders on the Consumer Freedom Option is at AHA's comment letter is at CMS's Summary Report on Transitional Reinsurance Payments and Permanent Risk Adjustment Transfers for the 2016 Benefit Year is at's reinsurance approval is at's letter is at are available at

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