euclid managers legislative review

VOL. XXIII, ISSUE 4 – APRIL 2018

Recent Trump Administration Actions

Despite concerted effort on the part of the Republican Congress the Affordable Care Act (ACA) remains the law of the land. Today, however, Congress is showing little appetite to rewrite this tenacious law. Recent rules issued by the Trump administration may add yet another chapter to the nation’s health care saga.

These new rules reflect the directions provided by a presidential executive order issued in October 2017. The order was aimed at increasing choice and affordability in health insurance. The order specifically called for the following:

  1. Expanding affordable coverage for small employers through expanding access to associa on health plans (AHPs).
  2. Increasing the allowable coverage period for short-term limited duration insurance to 12 months.
  3. Expanding the availability and use of health reimbursement arrangements (HRAs).

This issue of Legislative Review reviews the state of the ACA, insurance markets, and Trump administration proposals that may impact it.

State of the ACA

Despite rumors of its demise, the ACA remains the law of the land. Congress recently made more changes to the law which will have an impact that remains to be seen. Chief among these was the elimination of the monetary penalty for failure of individuals to have “minimum essential coverage.”

Note, Congress did not repeal the individual mandate despite many claims to that effect. Rather, Congress zeroed out the penalty effective for tax years 2019. For the year 2018 the tax penalty for failure to have coverage stands.

Congress has continued to consider measures intended to stabilize the insurance markets. Efforts have focused on the individual insurance market, amid growing concern that individuals who purchase coverage without the subsidy are increasingly being priced out of the market.

Subsidized individuals have largely been held harmless by the premium increases since subsidies increase as well. And, the decisions made by many states and insurers to address the loss of the federal cost sharing reduction payments have actually resulted in coverage being even more affordable for many in the subsidized individual market.

One proposal that is gaining ground is for a federal fund that would assist states in establishing a risk pool adjustment mechanism. A “virtual high risk pool” would act as a stop-loss for high cost claims thereby removing some of the risk in a guarantee issue individual market. Several states have already received federal waivers to implement these types of risk pools.

Carriers and the Markets

The Robert Wood Johnson Foundation published a report in March 2018 titled, “Insurers Remaining in Affordable Care Act Markets Prepare for Continued Uncertainty in 2018, 2019.” The RWJF conducted structured interviews with 10 insurance companies participating in the individual market. These carriers operated in 28 states and the District of Columbia.

Insurers have mixed views of the impact of the elimination of the individual mandate penalty. Not surprisingly they have adjusted their premium pricing to address the uncertainty concerning what absence of a penalty will do to enrollment. Carriers are also wary of administration ac ons to increase the availability of short-term health plans as well as the anticipated expansion of association health plans.

The individual mandate with a penalty for not having coverage was seen by some insurers as a linchpin in a guarantee issue insurance market. With removal of the penalty, however, some insurers are bettng on the richness of the subsidies keeping many enrollees in the subsidized marketplace. Still other insurers fear that the risk pool will be sicker with the absence of the penalty.

Insurers report that they have adjusted to the loss of federal funding of the CSRs (cost sharing reductions). CSRs had been discontinued by the Trump administration in a long running dispute whether these payments had been made legally.

In fact, insurers now fear reinstatement of federal funding since many were allowed to concentrate their premium hikes on silver plans where subsidies would soften the blow. The fear is largely due to concern that premiums would have to be adjusted significantly to reflect the federal funds causing confusion and disruption in the market.

Negotiating with providers continues to be a source of concern. Insurers that had been in the Medicaid market showed more optimism. They have been able to negotiate rates that are described as “Medicaid-Plus” – an advantage over traditional commercial insurers.

Short-Term Plans

The Obama administration had taken steps to limit short-term limited dura on insurance plans (STLDI) to no more than three (3) months. These plans were seen as providing less value than ACA-compliant plans. Also, since they were medically underwritten, they were viewed as under- mining the overall health of the individual risk pool.

The Trump administration’s rule allows STLDI plans to be valid for 12 months. The administration believes that short-term plans fill a gap in the market, especially for
an affordable option for insureds. There is also the expectation that allowing for longer term coverage will entice more insurers to offer the plans thereby providing consumers with more choices among insurers and plans.

The Trump administration believes that as many as 200,000 individuals who are currently insured through the individual market will switch to short-term plans. And, that’s precisely why individual market insurers are concerned since those who switch will represent a healthy cohort of the market.

Comments on the proposal were due in March. Commenters were asked to weigh in on whether the plans should be renewable, among other questions.
It is expected that the administration will act quickly in issuing final rules. The department proposed that policies could be available within 60 days of publication of the final rule.

Association Health Plans

The Trump administration recently proposed rules to expand the ability of employers to unite as “associations” to buy health insurance. While association health plans are not new to the health insurance market they have been constrained by both federal and state requirements.

One of the biggest changes proposed in the rule would allow employers to band together expressly for the purpose of purchasing coverage. Current law requires an association to be formed for other purposes than the purchase of insurance.

The rule would allow association health plans to be considered as large group plans even if individual employers covered through the plans were small employers. This would exempt the associations – and the small employers purchasing coverage through them from many of the ACA insurance provisions that are applicable to small group coverage.

Some of the provisions of the ACA that may be relaxed if the rule is finalized would be:

  • Loosening of the requirement to provide coverage for the 10 “essential benefits”
  • Loosening of the 80% medical loss ratio requirement
  • Defining the term “employer” to include sole proprietors.

Association plans would not be allowed to reject employers based on the health status of their employees. Individual employees also could not be charged different rates based on health status.

Association plans could cross state lines. For example, an association could offer coverage in a metropolitan area even if this meant coverage would be available in more than one state. For example, a Chicago metropolitan area association may include Indiana employers. Alternatively, an association could be formed for a specific industry type.

Importantly, the rule does not require that an insurer offer or participate in an association plan. States would continue to have broad regulatory authority over
the plans.

Some fear that associations would weaken the small group risk pool by siphoning off better risks. Another concern is that employers could participate in an association plan when the rates are competitive and then go back into the small group market when premiums rose thereby causing more churn in the small group market.

Letter from Karen Knippen

Spring is here! As I write this it still doesn’t feel like spring but the days are getting longer and the weather forecast is improving so I am certain spring has arrived.

Certainty is one of the aspects that we’ve been missing in the health insurance arena for this past year. We’ve watched Congress consider many proposals – good and bad. Now we’re seeing regulations that may – or may not – lower premiums and increase choice.

If you’re looking for certainty, look to Euclid Managers! We’ve got great carriers, great plans and some of the best staff members in the business. We’d certainly love to help you and your clients!

Sincerely yours,
Karen Knippen Signature
Karen Knippen, RHU, REBC Senior Vice President

EUCLID MANAGERS has been serving the independent agent since 1976 with a portfolio of group health, life, disability, dental and individual health. We proudly represent UnitedHealthcare of Illinois, Delta Dental of Illinois, MetLife and UnitedHealthOne Individual. We encourage your feedback and suggestions. Please call your EUCLID MANAGERS Marketing Representative or Marcy Graefen at (630) 238-2915 for more information.

The information contained in this publication is intended for the general information of our clients. It should not be construed as legal advice or legal opinion regarding any specific or factual situation.