Stay ahead of developments in federal and state health care law, regulation and transactions with timely, expert news and analysis.
By Sara Hansard
July 29 — Many employer-based health insurance plans covering approximately 170 million people “will change or disappear” due to Affordable Care Act requirements, a scholar with a conservative think tank told a congressional committee July 28.
“The most obvious way that it happens is very similar to what happened in the individual market,” where plans covering as many as 9 million people were canceled in 2013 because they didn't meet ACA requirements, said Stan Veuger, resident scholar with the American Enterprise Institute, at a hearing held by the House Energy and Commerce Health Subcommittee. The hearing focused on plan cancellations and insurance company “bailouts” under the ACA.
Employers of many fully insured plans that have changed since the ACA was passed in 2010 will be forced to purchase plans subject to new requirements for benefits and premiums, Veuger said. Such plans cover 45 million to 50 million people in the small group and large group markets, he said. “Very few plans are shielded from the rules and regulations” of the law, he said.
Even large firms that self-insure are likely to see changes to their plans due to new taxes, such as the reinsurance fee and the “Cadillac” tax imposed by the ACA, Veuger said. He supported passage of the Employee Health Care Protection Act (H.R. 3522), sponsored by Rep. Bill Cassidy (R-La.), which is scheduled to be marked up by the Energy and Commerce Committee July 30. The bill would allow health insurers to keep operating group plans that were in effect in 2013 during 2014.
The risk corridors program established by the ACA for 2014 through 2016 was also discussed at the hearing, titled Protecting Americans from Illegal Bailouts and Plan Cancellations Under the President's Health Care Law.
Edmund Haislmaier, senior research fellow with the Heritage Foundation, testified that the risk corridor program may not be needed. The program has drawn fire from Republican lawmakers, who say it may require government expenditures of $1 billion in 2014. The program is designed to protect insurers from the risk of loss due to uncertainties in predicting claim costs and pricing premiums for the new ACA marketplace plans.
But Haislmaier said the insurance products sold in the ACA marketplaces are similar to those sold in the individual market before the main provisions of the law took effect in 2014. “The transfer of funds that is going on in the reinsurance program is more than adequate to cover even some very egregious over- or under-estimation of premiums,” he said.
Some $10 billion in reinsurance funding scheduled for 2014 amounts to 15 percent of the estimated $63 billion in ACA individual market premiums, Haislmaier said. “It really isn't necessary to have the risk corridor program.”
Health Subcommittee Chairman Joe Pitts (R-Pa.) said that if the program operated in a budget-neutral manner, “taxpayers would have little to be worried about.” However, he said the administration has “paid lip-service” to operating the program without taxpayer subsidies. Instead, he said, the Obama administration has indicated that the government will remit payments under the program even if receipts from insurers don't cover them, “opening the door to what would essentially be a taxpayer-funded bailout of health insurers.”
Jack Hoadley, a research professor at Georgetown University's Health Policy Institute, testified that the risk corridor program was designed to keep premiums affordable and to reduce the risk faced by plans as they learn how to price their plans accurately. The risk mitigation measures of the ACA have been used in the Medicare Part D prescription drug program, he said.
“In contrast to the idea that risk corridors are bailing out plans, the experience of Part D suggests they actually protect the taxpayers,” Hoadley said. In each of the program's first seven years, plans made net payments to the government as a result of greater profits than expected, he said. In 2012, the most recent year for which data are available, plans paid $1.1 billion to the government, and three-fourths of Part D plan sponsors made payments, he said.
Also on July 28, House Oversight and Government Reform Committee Chairman Darrell Issa (R-Calif.) released a committee staff report titled “ObamaCare's Taxpayer Bailout of Health Insurers and the White House's Involvement to Increase Bailout Size.”
The report includes e-mail correspondence showing that Valerie Jarrett, a senior adviser to President Barack Obama, intervened in response to an appeal from Chet Burrell, president and chief executive officer of CareFirst BlueCross Blue Shield. After the administration signaled its intent in March to implement the risk corridor program in a budget-neutral manner, Burrell wrote Jarrett that insurers would likely require risk corridor payments on a net basis and that budget neutrality would lead them to increase rates as much as 20 percent or more, the report said.
To contact the reporter on this story: Sara Hansard in Washington at firstname.lastname@example.org
To contact the editor responsible for this story: Janey Cohen at email@example.com
Information about the House Energy and Commerce Committee Health Subcommittee hearing is at http://energycommerce.house.gov/hearing/protecting-americans-illegal-bailouts-and-plan-cancellations-under-president%E2%80%99s-health-care. “ObamaCare's Taxpayer Bailout of Health Insurers and the White House's Involvement to Increase Bailout Size” is at http://oversight.house.gov/wp-content/uploads/2014/07/WH-Involvement-in-ObamaCare-Taxpayer-Bailout-with-Appendix.pdf.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to firstname.lastname@example.org.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to email@example.com.
Put me on standing order
Notify me when new releases are available (no standing order will be created)