euclid managers legislative review


Legislative Update for Congress and Illinois

What a difference a decade makes! The Obama administration in 2009 was pursuing health reform which eventually led to enactment of the Affordable Care Act! These past 10 years have resulted in dramatic changes to both individual and group insurance.

The election of President Trump appeared to be another time of great change for health coverage. But, Republican efforts to “repeal and replace” were stymied. This issue of Legislative Review explores legislative and regulatory efforts – and predictions – at both the federal and state levels.

Congressional Predictions

The 2018 mid-term election resulted in a split government when Republicans lost control of the House. The current make up in Congress shows:
• 235 Democrats and 197 Republicans with 3 vacancies in the House
• 53 Republicans and 47 Democrats in the Senate.

The House can pass legislation with 217 votes. Therefore, if Democrats stay united, they can easily pass bills.

The Senate operates by different rules. In order to move legislation in the Senate 60 votes are needed. While the mid-term election gave Republicans a greater majority in the Senate; they do not have 60 votes. As a result, Senate Republicans need at least seven (7) Democrats to pass a bill.  And, that’s assuming all the Senate Republicans are in agreement and vote together!

This means that Congress isn’t going to get things done – especially big things!! Gridlock will be the norm. The fact that 2020 is a presidential election only makes gridlock even more likely since neither side wants to provide a significant legislative victory that the other side can use to their advantage.

Doing something about the cost of prescription drugs may be the one issue that may find common ground.  The Trump administration put forth their “American Patients First” plan last year. One measure arising from this initiative was introduction of a prescription drug rebating rule. The rule restricts or eliminates rebates to PBMs (Pharmacy Benefit Managers) in Medicare Part D and Medicaid MCOs (Managed Care Organizations).

Congress has also ramped up efforts to address drug costs. Senator Bill Cassidy (R) introduced three (3) bills with Democratic co-sponsors in April 2019 to address drug costs by getting generics to market faster. The bills attempt to address:
• Anticompetitive behavior by brand-name drug makers
• End the “pay-for-delay” efforts by drug makers to delay generic manufacturers.

A number of other legislative proposals are familiar. These include:
• Delay or repeal the HIT tax which is the tax on health insurance
• Repeal of the “Cadillac tax” — the 40% tax on health plan premiums that exceed predetermined threshold amounts.

The Cadillac tax has been delayed several times. It is currently delayed until 2022.  Both the HIT and Cadillac tax repeal efforts have had bipartisan support.

Rules to Watch

The Courts recently dealt a blow to the Trump administration effort to expand association health plans. The Court found that the Department of Labor (DOL) “unreasonably” expanded the definition of “employers” in the association expansion rule. The Court questioned how owners without employees could be considered as both “employers” and “employees.”  It also questioned the idea that geographic proximity would be sufficient for common employer interest.  As such, DOL must review the rule to determine whether the expansion of association plans can go forth without the invalidated provisions.

The administration also proposed an expansion of Health Reimbursement Arrangements (HRAs) in October 2018. The rule would allow employers to offer an HRA that can be used to purchase individual health coverage. Employers wishing to do so would be precluded from also offering a traditional group plan.  This new rule was in addition to the QSEHRA provision which was limited to small employers. Given the numbers of comments on the proposed rule, changes are expected when the final rule is published. The final rule is expected this spring or summer.

Grandma received another reprieve from the Centers for Medicare and Medicaid Services (CMS). In a March 2019 notice CMS extended grandmothered plans sold in the individual and group markets for another year. Grandmothered plans are those plans that don’t meet all of the mandates and requirements in the ACA including premium rating rules. Prior guidance required such plans to come into compliance by January 1, 2020.  The new guidance applies to policy years beginning on or before October 1, 2020. Plans will have to come into full compliance with the ACA by January 1, 2021.

Given that grandmothered policies have been extended multiple times, this guidance was welcome and expected.

It’s important to note that states can choose to allow renewal of grandmothered plans for individual only, small group only, or both markets. States can also choose to terminate the plans earlier than the CMS guidance allows. Also, insurance carriers can decide whether they wish to extend grandmothered plans or cease to offer them.

Illinois has followed CMS guidance on grandmothered plans in prior years. Whether the new administration will do so is not yet certain.

Illionois General Assembly Predictions

Illinois has Democrats in firm control of all of the levers of government. As such, Democrats can move legislative initiatives quickly, if they wish to do so. The state of Illinois’ finances are a powerful brake on many initiatives.  The state simply doesn’t have the money to do “grand”

Governor Pritzker did speak about health care during his election campaign. He proposed a public option plan with the caveat that a full actuarial analysis would be required before enacting a plan. Pritzker dubbed his vision as “Illinois Cares” which would allow Illinois residents to buy-into Medicaid.

To date, the Governor has been more focused on pushing for a graduated income tax and the constitutional amendment that would be necessary to enact the graduated tax.

There are a few healthcare related proposals that may gain ground as the legislature moves toward the end of May deadline. There are efforts to change Illinois insurance rating from a “file and use” rating to require rate approval before use.

Proponents contend that requiring rate approval protects consumers from rapidly rising rates that are unwarranted.

Opponents note that rate approval also makes it harder for insurers to respond to changing conditions, including making it harder to reduce rates when warranted.

There is also a bill under consideration that would add an assessment of one percent (1%) on all health insurance claims. The money collected by the assessment would be used to fund Medicaid.

House Bill 2042 was introduced by Representative Grant Wehrli (R) of Naperville. His bill would expand the duration of short-term plans from 181 days to 366
days. The bill is stuck in the Rules Committee with little likelihood that it will become law.

Market Realities

A recent CMS report on risk adjustment looked at a number of issues including consolidation in the insurance market. The report found the following:
• In all markets (small and large group and individual) the 3 largest insurers had at least 80% of the market in at least 37 states
• The large group market was even more concentrated with the 3 largest insurers with 80% of the market in 43 states in 2016
• 3 or fewer insurers held at least 80% of marketplace plans in 46 of 49 states
• More recent data shows some increase in marketplace competition for 2019 with average number of companies per state increasing to 4

Letter from Karen Knippen

“Time flies when you’re having fun” as well as when you’re reeling from change. Who can believe that ACA was chugging along in Congress a decade ago?

Proposals regarding health care and financing of health care continue to bubble up at Congressional and State legislatures. And, we’ll hear a lot about health care and Medicare-for-All as the presidential primary season progresses.

While proposals and rhetoric abound, those of us in the industry take pride in helping our clients deal with the concerns and needs that they have today.

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.