A Full Service Employee Benefit and Compliance Solution for Employers

By: Dorothy Cociu, RHU, REBC, GBA, RPA, LPRT, OCAHU V.P. Communications

Published by The Orange County Association of Health Underwriters (OCAHU) and posted with permission of OCAHU

Americans went from the state of shock and disbelief, with the nation divided between Clinton supporters saddened, Republicans generally relieved, and Trump supporters ecstatic, to a state of wait and see. Fortunately, the stock markets are responding well after the election, so many Americans are open to see just what may come of our new President and the new administration. Many, many questions remain, and we’ll all learn together what the new world according to Trump will mean to all of us.

Now that the election is behind us, those of us in the health insurance business are wondering what’s next? The reports come in daily, and change just about as often. So what can we expect in the new Trump Era? We’ll put the Crystal Ball away for now and focus on what we know, what we think we know, and what we hope to expect in 2017 and beyond. The first focus will, of course, be the first 100 days… After that, we should know the direction we are headed with relative clarity. It’s fairly certain that something will have to be done to address the adverse selection issues and enhance plan design to encourage a larger population of younger, healthy Americans to become insured, possibly with higher deductibles or catastrophic coverage availability; more than allowed under the ACA.

The Trump Administration and Republican party have made it clear that their intent is to repeal and replace the Affordable Care Act. But how and when? What does that mean to all of us?

I want to start by looking back at the past two months. Back in November, news reports focused on how repealing ACA would likely prove to be more difficult than the law’s initial implementation. NAHU’s Newswire quoted several stories, including the Los Angeles Times, Huffington Post, Politico, AP and Kaiser Health News on this subject. LA Times reporter Levey (11/21) stated that there was much chaos after ACA was implemented in 2013, reporting that 4 million people had lost coverage that did not meet ACA requirements, and state exchanges were still under construction. The LA Times reported that this “tumultuous episode could be dwarfed by what President-Elect Donald Trump’s administration and its congressional allies unleash beginning of next year.” The Times reported that they intend to repeal the ACA and implement “changes that are significantly more far-reaching and could disrupt insurance coverage for many more Americans than did the original law.” Other news organizations reported similar gloom and doom for our industry. Most notably, the collapse of the individual marketplace was predicted. Politico (11/21, Cancryn, Demko) reported that Republicans have been warning for years that the ACA would result in such, yet, “repealing the law without a replacement is likely to spook health insurers, who might bolt from the markets prematurely to avoid losses as some people stop paying their premiums, while others rush to have expensive medical procedures before losing coverage.” The Associated Press (11/21, Fram) reported that Republicans must choose between speed and deliberation. One risk Republicans face is the fact that “while they’re laboring on a replacement, nervous insurance companies began pulling out of markets and raising premiums.” (My question is, didn’t premiums start to rise long before the election? I seem to recall several news reports of rising premiums for 2017 in the weeks and months prior to the election. I’m just sayin’….)

As December approached, things started to look a bit more positive. House Speaker Paul Ryan, during a CBS 60 Minutes interview, said that once President-Elect Trump takes office, “the first bill we’re going to be working on is our Obamacare legislation.” When asked if the 20 million people who gained access to healthcare coverage because of the ACA would lose it, Ryan was firm on his response, “No, we want to make sure we have a good transition period, so that people can get better coverage at a better price.” It was unclear how long such a transition would take.

On December 5th, the AP reported that a federal appeals court agreed to delay hearing a suit filed by House Republicans against the Obama Administration, alleging it is illegally funding subsidies for the ACA because Congress did not appropriate the money. The parties have until Feb. 21 to make their arguments.

So, that’s a bit of the recent history in the news on this subject. Let’s now dive into what we know and expect… The first 100 days of the Trump Administration will set the stage on healthcare policy. So what do we know or expect? I recently asked Janet Trautwein, CEO of the National Association of Health Underwriters, a well-known and respected health insurance expert in Washington, DC, for her thoughts on the subject. In light of the highly unexpected Trump presidential victory, in general, I asked Janet, what do you think their Administration will be able to accomplish in the first 100 days related to healthcare reform? There are many questions, as well as concerns. What will they work on first? What is their priority? Will the Paul Ryan influence on budgets be the deciding factor in the outcome of the Trump Administration’s healthcare policy? Budget reconciliation will likely be a top priority.

“I think we will see Congress repeal parts of the ACA through budget reconciliation, but most of the market reform provisions will require bipartisan legislative action and can’t be accomplished using the budget procedure.” Janet went on stating “This means we will be taking some of the items away that support those market reforms, such as the individual mandate for example, so we will be working to be sure that any market instability due to increased adverse selection is mitigated in other ways.”

There is much talk about the federal and state marketplaces, and what will happen with them. Is there a chance they will remain open and solvent? I asked Janet Trautwein this, and asked her to address the individual market in the post-ACA world.

“I think some of the state marketplaces will continue to exist for an extended period of time, and the federal marketplace will still continue at least as long as the tax credits continue, which could be as long as through 2018” stated Janet. “It will be difficult for Republicans to pull the 8 Democratic votes they would need in the Senate to discontinue the Marketplaces, so we may be operating under a scaled down version after tax credits are eliminated for an extended period of time.”
So what is the fate of the individual market? That “really depends on what is done about adverse selection”, said Janet. Adverse selection was of course one of the key factors that critics of the ACA used as a reason the law would fail, and many think that was indeed the case. Our fears of young, healthy adults choosing to continue to remain uninsured, rather than pay high premiums, seemed to indeed result, and older and sicker individuals ran quickly to apply for coverage, leaving the markets unstable. “I think there is an intention to keep some form of guaranteed issue although perhaps not make it as broad as it is now with annual enrollment periods,” Janet predicted. “Republicans intend to use some modified form of high risk pools – although these might look very different than they have in the past and would primarily be for people who had not maintained continuous coverage. We could also see some reinsurance pools in some states instead of high risk pools and various other efforts to mitigate risk.” Of course many industry experts felt that the penalties for not enrolling were far too low to incentivize the better risks to indeed enroll in coverage.

So what type of timeline are we looking at? “It will take a while for the current schedule of benefits and modified community rating to change given this will take bipartisan legislative action that will be difficult to obtain initially,”
continued Janet. “And without an individual mandate, we may see some people putting off enrolling in coverage. When this is combined with a roll back of the Medicaid expansion, we may have a period of time where the number of uninsured is higher before things stabilize.”

Here in California, many are asking about our state exchange, Covered California. Although politics will prevail, there is much discussion on the subject of the state of the state marketplace. I discussed this with Julianne Broyles (Juli) of California Advocates, Sacramento, California, where she and Mike Belote, Esq., work jointly as lobbyists and legislative analysist for the California Association of Health Underwriters.
“At this point,” stated Juli, “there is not a lot to report on Covered California action. For 2017, the state marketplace is set and nothing will change that as it would be too disruptive to the consumer. We also have to keep in mind that Covered California is also authorized by state statute. So it will take state statutory changes to change the mission of Covered California on going-forward basis.”

So what do we expect may happen? “At the Covered California Board meeting in November 2016,” Juli reported, “the board members took the sensible action of collecting comments from various experts and a futurist. However, all they could do is speculate on what the future of health insurance might be in California.” So, we wait in anticipation of the 2017 actions.
“The new California legislative session is just starting”, Juli continued. “The new members are being sworn in December 5. The remainder of December is given to the legislators to hire staff and organize their district and Capitol offices. They will also be preparing legislative ideas for the 2017 legislative year. New bills can be introduced up until February 17, 2017. It is likely, given the early adoption of the ACA here, that the Legislature will protect and maintain as much of the state marketplace as possible. But CAHU will not have a reliable picture of what that looks like until CAHU has reviewed all the new proposed legislation after the bill introduction deadline.” We all hope that more will be known after the first quarter of 2017.

Back on the national regulatory front, I again questioned Janet Trautwein how things may play out. “Some of those other ways will include regulatory actions by the administration to modify existing regulations or to take action on other things we may have requested in the past but were unsuccessful in getting the current administration to do.”

It has been reported that President-Elect Trump is in favor of keeping some of the current provisions of the ACA, particularly that Trump will likely keep the Age 26 dependents and pre-existing conditions provisions of ACA, but eliminate or greatly change the remaining pieces of ACA. What do you think the likely plan will be to dismantle the ACA, I asked Janet, and can you comment on the hurdles they will encounter in attempting to do so?

“The first step will be the repeal of budget related provisions through the budget reconciliation process, followed by some additional legislative efforts on non-controversial provisions of the law that could be amended on an interim basis to provide stability. Some of the most important changes to be made will take a while, and some of the things Republicans want to do will be met with a good bit of opposition from Democrats. So, this is a multi-year effort to make real changes. In the meantime, we will be working under a modified ACA, rather than a fully-repealed ACA.”

So what does all this mean for those heavily impacted currently by the ACA? What about large employers, who provide healthcare coverage to their employees, which we all know, provide a very high percentage of the heath insurance offered nationwide, are now mandated with pay or play rules and difficult reporting requirements?

Many large employer groups are asking about the Applicable Large Employer (ALE) mandate, and if that piece of the ACA will remain in place or be eliminated long-term. I asked Ms. Trautwein her thoughts on this subject. Will
the penalties prevail?

“The penalty for the mandate will be the one of the first things to go as it can be done through budget reconciliation,” Janet stated.“ But that doesn’t take away any of the other items, so technically, at least on a temporary basis, the mandate remains but without the penalty for non-compliance. However, some of the items that flow from the mandate carry other penalties, so it will be very important to watch to see exactly how broad any appeal is to determine what areas still require compliance.” So if the penalty is eliminated, how can anyone enforce the ALE requirements? Will the employer reporting continue, or will it be eliminated?

“There is bipartisan support for changing reporting,” commented Janet, “ but it is unlikely to be eliminated entirely for a while. However, it is possible that reporting could be swept into a reconciliation bill – we just don’t know at this point.” So, if your large employer clients are asking, as mine are, I guess we’ll have to wait and see. So, pull out that crystal ball again… At least to take a peek at it from time to time.

Personally, my hope is that efforts will be made to make prescription drug pricing reform and provider transparency a priority. How long can consumers and insurers accept the huge increases in drug prices, including Hepatitus C drugs, the recent escalation in necessary routine medications like Epi-pens and other out of control drug costs? Recently one of our PBM companies used by our self-insured groups was audited, resulting in tens of thousands of dollars per employer of over-charges by the PBM’s to our self-funded clients. Yes, they will soon be receiving refunds, but if this sort of thing isn’t protected with checks and balances, the cost of prescription drugs will continue to escalate. And although Hep-C drugs are literally a wonder-drug to those with the illness, the surcharges placed on the insured groups and individuals to cover this risk is out of control. Are the patents on new drugs too long? Once those expire, of course, generic drugs save us all money. Yes, we need more R&D to find new, innovative and effective drugs, but we also need new ways to keep the costs in check. I would hope that this issue is addressed in Washington in the coming months and years.

On the transparency issue, I really hope that someone in Congress will take this on as a project. NAHU has of course supported transparency for some time. We all shop online for our holiday gifts, our vacations, our vehicles… We compare prices and make good decisions. So why can’t we compare the cost of surgeries and hospital stays the same way? Why shouldn’t Americans be allowed to compare the cost of their upcoming medical services among the three or four providers in our area offering such services? I would hope that under the administration of a business-man like Donald Trump, someone will see the value in letting the market prevail, and letting competition help solve some of these issues of rising costs. No crystal ball there… Just my personal opinion, for whatever it’s worth.

We know that NAHU and CAHU will be working toward satisfactory outcomes for our members. We will continue to rely on our federal and state experts, including Janet and Juli, for helpful information. “We are working with the incoming administration and Congress go ensure that the transition relative to health care is as stable as possible,” Janet stated. “Change always causes some disruption but we will be working hard to ensure that our members and their clients are as protected as possible during the coming years.”

We will, of course, continue to report to our members as things progress in both Washington and Sacramento. Look to your local NAHU chapter’s legislative team to keep all of us informed!