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

Last issue, we took a preliminary look into the health insurance marketplace under the Trump Administration, prior to his inauguration. First, I want to thank the many members who have called, emailed or approached me to say thank you for the articles, particularly for the Jan/Feb issue in which I attempted to dive into what we might see under the new administration in Washington. I had a lot of requests to do a part 2, or an update as things progress, so by request, here we go…

We’re only entering the second month of the Trump presidency, and we are still in a state of not knowing where we are all going from here.

A few things are getting clearer, however. The Republican chorus of Repeal and Replace has now turned into Repeal and Replace – sort of… With three separate republican plans in the works, including HR 277, American Health Care Reform Act of 2017 (AHCRA), which is the House Republican (184 pages of text) plan, A Better Way from Paul Ryan, and a simple outline of ideas from the Trump Administration known as the Trump Plan, there is a lot of talk, but not a lot of action and results as of month two. Of course the Democrats continue to press on with the idea of preserving the ACA, and are pressuring Republicans not to repeal it.

We are clearer, however, on what most Americans want to keep… The small business tax credit (although, realistically, it hasn’t helped many small businesses due to the low income limits), individual subsidies, over-age (up to age 26) health coverage, guaranteed issue, no lifetime maximums on benefits, preventive care at 100%, no pre-existing conditions exclusions… The hard part is that many of the most important provisions that people want to keep are those that cost the most…. (guaranteed, issue, no lifetime maximums, no pre-ex exclusions, with open enrollment provisions).. and the things that scare the crap out of the insurance carriers. And why not? It’s their money, after all, that is paying for the cost of all of these wonderful provisions. Yes, many Americans did enroll in health coverage under the ACA, but the law was anything but “affordable.” Premiums can’t seem to keep up with the cost, so we continue to see outrageous premium increases. So the biggest question is, how to we give the consumers of American what they want, and how do we pay for it? That, ladies and gentlemen, is the million dollar question.

The Affordable Care Act has grown to over 60,000 pages of regulations, and recently, President Trump indicated that for all new regulations, two would be eliminated, and many are assuming that the ACA provisions will be a large part of that. As all this happens, it is starting to look more like a partial repeal process will likely be more likely than a full repeal, removing the elements they can, and replacing with better provisions to make it more affordable or make it more do-able by insurance companies, who we need to stay in the market to make it more competitive.

NAHU has spent an uncountable number of hours and resources working for our industry in Washington, trying to educate the new administration and Congress on key provisions that could help in the repeal and replace environment. Janet Trautwein testified before the Senate Committee on Health, Education, Labor and Pensions on February 1, 2017, in a hearing on increasing market stability and options for repeal and replace of the ACA. The individual market is in turmoil, and the employer-sponsored group health plan market, which is by far the most stable, is under scrutiny and in danger of being disrupted by tax credit replacement.

Janet Trautwein, CEO of NAHU, summed up the issues best in her February 1st testimony…. “The problems the individual market is experiencing are the result of coverage being offered on a no-questions-asked basis without adequate mechanisms to ensure that the pool of the insured individuals is made up of both healthy and unhealthy individuals on a continual basis. The structure and the process related to the current system encourage individuals to wait until they are sick to obtain coverage. In fact, much of the problem in the market today stems from the fact that people are signing up for coverage during open-or special-enrollment periods, obtaining the care they believe they need, and then dropping coverage. This means that the overall pool of covered individuals is sicker than average. We call this ‘adverse selection’.”

Janet provided suggestions for preventing adverse selection, including “an individual responsibility provision requiring people to continually be covered by health insurance.” This individual responsibility requirement should “ensure that people were continuously covered and able to obtain preventive and other care they needed on a timely basis. Unfortunately, while well-intended, the requirement did not provide an adequate incentive to maintain coverage continuously and has not been effective in preventing the adverse selection we see today.”

NAHU is recommending certain steps toward market correction, to stabilize the markets. These steps include immediate, as well as longer term (over the next few years) steps, taken in the proper order to ensure proper corrective actions. The early steps could be taken as part of the budget reconciliation process, and NAHU recommended a specific order of the steps, to ensure market stabilization.

Budget reconciliation steps include allowing those already receiving premium tax credits to continue to receive them until January, 2020 (to keep people covered and prevent additional adverse selection), retaining the small business tax credit, repealing the medical loss ratio requirement, repealing the Cadillac Tax and Health Insurance Tax to provide relief for all fully insured health plans, and to NOT repeal the reinsurance program as scheduled in 2017.

Some of the areas where NAHU feels the new Administration could target regulatory changes include limiting special enrollment periods to those clearly defined in the ACA and require submission of documented proof by the 15th of the month prior to coverage effective dates; reducing the 90-day grace period for individuals receiving tax credits to the same 30-day grace period for other covered individuals; restoration of HIPAA Certificates of Coverage to facilitate proof of dates of coverage, documentation of continuity of coverage and loss of coverage for special enrollment periods; allow continuation of “grandmothered” policies beyond the scheduled expiration date of 2017; allow for a more robust form on composite rating in fully insured plans to allow ease of administration for small employers that provide coverage for their employees; remove the requirement for standardized benefit plans to be offered in the Marketplaces; simplify the structure and burden of IRC 6055 and 6056 employer reporting, and removing limitations on keeping grandfathered plans to allow greater changes based on annual allowable change vs. lifetime change.

(For a complete list of the actions NAHU recommended, please review Janet’s full testimony on the NAHU website.)

Now, let’s talk about the group market. Let’s face it; this is where the majority of the commission income health agents receive , so it’s important to all of us. But more importantly, it’s the strong-hold of the American health insurance market….. It’s what employees working for organizations rely on to help them deal with medical expenses. Employees have become reliant on their group health plans, and without them, many would be uninsured, as they simply can’t afford or will not make the effort to purchase health insurance on their own. It’s a valuable recruiting tool for employers, and of course a needed tax write-off for many, but on the more human side, most employers WANT to provide a group health plan to their employees.

While in town for the OCAHU Business Development Summit (BDS), filling in for Janet Trautwein, who had to cancel her keynote appearance due to the illness of her mother (who passed away, sadly, on the morning of our BSD, and we all send Janet our most sincere condolences and our thoughts are with her and her family at this time), I met with Chris Hartmann, NAHU V.P. of Government Affairs in Washington, DC. I wanted to focus more on topics that weren’t going to be covered as thoroughly in his keynote address.

We talked about the state of the group market, and its stability and importance to preserve, given that republicans are looking primarily at tax credits, rather than the preservation of the current employer-sponsored group market, as a solution for repeal and replacing of Obamacare.
“The employer-based system is the bedrock of our health insurance system,” stated Chris. “It’s the one thing that has been working, while the individual [market] has been wild. I know things have more stable here in California than the rest of the country. Other parts of the country we see one carrier per county, premiums expanding at exponential rates. …The employer-based system is that stability. It needs to be reinforced , not undermined”.

I think it’s important to remind us all that when the republicans are talking tax credits, they are talking about giving a tax credit back to individuals, and expecting them to go out then and purchase their own health insurance plans, which we all know as agents, just doesn’t happen. “ Speaker Ryan has ideas that health care should be individuals- go get a health insurance policy and we’ll provide a tax credit…” Chris said while we discussed this topic. My response to Chris was that our members (agents) are concerned with replacing things with tax credits because we all know that employers don’t work that way. If they see a savings a lot of employers won’t give it back… Individuals don’t go out and buy the insurance. Particularly those we really need in the health insurance pools, the young, healthy individuals. “No, they won’t,” Chris responded. “ We already have an adverse selection problem on the individual side. We don’t see that in the group market because people are already in the default position of taking health Insurance from their employers. You get those young people, those 25 year olds whose bosses are offering them health insurance, and they’ll take it. But if you throw them out into the market on their own, they are not going to purchase it… Probably not. As much as you advise them, and I’m sure their parents advise them, a lot of them just don’t see the benefit.” He continued, “The whole problem with this idea is you will not get people into the market. Particularly if you combine this with the individual mandate. … I think capping the employer system is more likely.” And this is something we need to be focusing the discussion on with our legislators. We NEED the employer-based health care system. It works. It has always worked. It keeps people in the risk pools, it keeps them covered by insurance plans. So as the saying goes, if it’s not broke, don’t fix it! We all know Washington has a lot more important parts of the market to fix than messing around with what is working well. The group market works very well!

“The group market was somewhat of an Accident in history,” Chris said, “but it’s the part of the market that is working… undermining the one section of the market that is working and saying we’re going to dump people into the individual market [that isn’t working]… it makes no sense. Why would you take someone out of stable market and dump them into a system to a system that isn’t working ([the individual market])?”

We also talked about the large group market, and the proposals that seem to want to protect the right for larger employers to self-insure, as well as the protection of ERISA. “I think in the self-insurance universe, I think that market will continue to be protected, because opening up ERISA is terribly complicated,” responded Chris. “There are all kinds of unintended consequences…, and for that reason, I think opening ERISA is dangerous for a lot of people, and there are a lot of unintended consequences. Second, there are only a small universe of people in Washington who understand the self-insurance market. They never wanted to bite off something as overwhelming as the self-insured market.”

Focusing on the more important things, like repealing the tax and penalties, seem to be the better choice for reform, for example, the Cadillac Tax. “I think The Cadillac Tax is misnamed,” Chris remarked. “It’s more like a Ford Focus. It’s eventually going to suck up everything and everybody. It was really designed like many other taxes of the ACA. It was designed to bring in revenue. I don’t think it will necessarily have the effect that people think it will have.” But revenue generation is important, as the Republicans seem to just now be figuring out…

“The revenue it’s [Cadillac Tax] supposed to bring in… The idea is that the 40% tax is too much for employers to pay, so they will reduce health care benefits. In theory I think the way the government looks at is that we’ll all get salary increases. We’re going to be paying more income taxes, and therefore it’s a revenue generator. I’ve talked to business owners, unions, etc. and they all laugh at that idea. If you cut back on my health care, we’ll all get raises. While we got a 2 year delay, we can’t stop there. We have to get complete repeal of it…”

We continued our discussion, and Chris commented further on this topic. “After the election I would have thought all the ACA taxes would have been repealed, but now that they are actually in power, Republicans are taking a look at this and they are wondering what are we going to do for some of these revenue generators, and they are thinking those weren’t such a bad idea…”
“The Cadillac tax may be kept in place as a bargaining chip to cap the employer exclusion. Which is a bigger danger on the employer-based system. Capping the employer exclusion is a huge change to the employer-based system. Really upsetting things in the most stable market out there, you are now bringing instability to it.”

This is a topic our members need to be aware of, as well as our employer clients. We need to be aware of the current environment in Washington, and what things like capping the employer exclusion would do. NAHU is very concerned about Congress members thinking that health insurance should be an individual responsibility, and are concerned about the ability to use pre-tax dollars to pay for health care… We don’t want or need caps on the employer exclusion of health insurance. It would disrupt the employer-based health system. So please keep these things in mind as you hear more about what they are negotiating on in Washington. If you talk to your legislators, continue to educate them on the importance of the employer-based system, and remind them that is and has always worked well! And it’s where the majority of Americans get their health insurance coverage from!

To summarize briefly the three proposals on the table as of now, the Republican American Health Care Reform Act includes a standard deduction for health insurance, a heavy emphasis on FSAs, HSAs, Medicare transparency, using high risk pools , association plans, and medical liability reform. A Better Way from Paul Ryan wants to protect those with pre-existing conditions, protect and preserve Medicare, remove all ACA taxes, remove employer penalties for not providing coverage, remove all individual mandates, return more control to the states, protect and preserve employer-sponsored insurance and self-insurance (although that conflicts with the tax credit part), focus on medical liability reform, expand consumer-directed healthcare options, protect the no pre-existing conditions limitations, coverage to age 26, no rescinding of coverage and continuation, provide for provisions to bring younger people into the system and prohibit sudden cancellations, but again, focuses more on flat tax credit scenario. Speaker Ryan does state that he wants to protect the job-based market, so it would be interesting to hear how… The Trump plan is vague to say the least, but promises to broaden access, make health care more affordable, eliminate the individual mandate, allow sales across state lines, allow individuals to fully deduct premiums, require price transparency, and overhaul the drug industry to offer safe, reliable and cheaper products. All rely heavily on tax credits.

So I think the things that we might want to focus on are helping to fight the fight in a way that will be the most effective. NAHU is doing a great job with working with Washington on the individual market. Let them do that, and help them by responding to Operation Shouts and other boots on the ground methods. But personally, I think we should spend a little more time protecting the group market, and letting our legislators understand that they should not take away the only part of the current system that is working… Employer-sponsored health plans… Moving people out of that system and into a broken system of the individual market will not work, and we need to help them to understand that! ##

Reference Sources: Statement for the US Senate Committee on Health, Education, Labor and Pensions, February 1, 2017, Hearing on Increasing Market Stability and Options for Repeal and Replace of the Affordable Care Act, Submitted by Janet Stokes Trautwein, CEO, National Association of Health Underwriters; A Better Way, Our Vision for a Confident America, A Better Way to Fix Health Care, Paul Ryan; A Better Way, Frequently Asked Questions, Paul Ryan; HR 277, American Health Care Reform Act of 2017 (AHCRA)