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The Health Care Reform landscape is constantly changing. Keenan’s Health Care Reform Insights will keep you up to date on the latest developments. We will post news items and articles you will find of interest. Check back often for updates.

Health Care Reform Insights

6/15/2017 - CBO, CMS and the Case of the Battling AHCA Estimates

A couple of weeks ago, the Congressional Budget Office (CBO) issued its cost estimate for the American Health Care Act (AHCA) that was passed by the U.S. House of Representatives to repeal and replace parts of the Affordable Care Act (ACA). The numbers were not pretty. The CBO projected that 14 million more people would be uninsured under the AHCA than under the ACA in 2018 and the number would increase to 23 million more people being uninsured by 2026.

It also estimated that premiums in the individual market would increase by an average of 20% in 2018 and 5% in 2019. But starting in 2020, average premiums would vary depending on whether a State was granted a waiver to redefine essential health benefits or limit community rating. The CBO estimated that States not requesting waivers would see premiums in the individual market decrease under the AHCA by 4% in 2026. States adopting moderate market regulatory changes, such as redefining essential health benefits, could see premiums decrease by as much as 20% in 2026 due to policies covering fewer benefits.

The CBO warned that States implementing waivers to redefine essential health benefits and limit community rating risk destabilizing their individual insurance markets. Over time, the CBO explained, “less healthy individuals (including those with preexisting or newly acquired medical conditions) would be unable to purchase comprehensive coverage with premiums close to those under current law and might not be able to purchase coverage at all.”

Not surprisingly, many Republicans pushed back on the CBO estimate and questioned the validity. This week, the Office of the Actuary within the Centers for Medicare & Medicaid Services (CMS) gave them something to work with by issuing its own estimate. Although the numbers are still not pretty, they are a bit rosier than the CBO’s estimate. For 2018, CMS projects the number of uninsured under the AHCA would be 4 million more than under the ACA with the number increasing to 13 million more people being uninsured by 2026. That’s a difference of 10 million people from the CBO estimate.

CMS estimates average gross premiums (i.e., before application of the refundable premium tax credit) will be approximately 16% lower in 2020 under the AHCA than under the ACA. However, the average net premiums (i.e., the amount an individual would pay) would be approximately 10% lower.

The picture is less rosy for 2026. CMS estimates average gross premiums would be approximately 13% lower in 2026 under the AHCA than under the ACA but the average net premiums would be 5% higher. The increase in average net premiums is due to increased costs not being sufficiently offset by refundable tax credits or other subsidies. In addition, CMS estimates cost-sharing amounts would be a whopping 61% higher in 2026 under the AHCA than under the ACA.

While CBO and CMS reach different conclusions about the number of uninsured and future premium costs, they agree on one key point – States implementing waivers to redefine essential health benefits and limit community rating risk destabilizing their individual insurance markets.

Why did CBO and CMS reach different conclusions? Well, they’re estimates based on assumptions and the assumptions are really just well-educated guesses. Both CBO and CMS caution there are a whole lot of unknowns and that it is difficult to predict how States, employers, individuals and insurers will act in response to future legislation.

So what are we to make of these estimates? Both reports seem to make a few things clear – if the AHCA becomes law, the number of uninsured will increase by several million people, there will be people who end up paying higher premiums or more in out-of-pocket costs and some who might not be able to buy coverage at all.

6/6/2017 - IRS Provides Penalty Refresher

The Internal Revenue Service (IRS) website includes a page devoted to reminding employers of the penalties under the Affordable Care Act’s Employer Mandate and how they are calculated. In addition to basic information about the penalties, the webpage includes key definitions, an overview of transition relief and detailed examples of penalty calculations. It’s a good refresher that employers may want to bookmark for future reference.

5/31/2017 - Public Opinion on Repeal & Replace

The Kaiser Family Foundation just released the results of its latest Kaiser Health Tracking Poll. The poll shows that 55 percent of Americans have an unfavorable view of the American Health Care Act (AHCA) that was recently passed by the U.S. House Representatives. Only 31 percent view the AHCA favorably. By comparison, 49 percent have favorable views of the Affordable Care Act (ACA).

74 percent of those polled believe the ACA will be repealed and replaced. However, 45 percent believe health care costs will be worse if the AHCA becomes law while 34 percent think their ability to obtain health insurance and the quality of care they receive will also be worse. Given these concerns, it’s not surprising that only 8 percent think the Senate should pass the AHCA without making changes to the bill passed by the House. In fact, most would like the Senate to make major changes or not pass the bill at all.

With repeal and replace slowly trudging forward, it’s clear the public believes the adage, “If you break it, you own it.” Poll results show 63 percent believe that any problems with the ACA going forward are the responsibility of President Trump and Congressional Republicans.

5/26/2017 - CBO Estimates on AHCA

On May 4, 2017, the U.S. House of Representatives narrowly passed the American Health Care Act (AHCA) to repeal and replace parts of the Affordable Care Act (ACA). To the dismay of many, the vote took place before the Congressional Budget Office (CBO) issued its cost estimate. Now almost three weeks later, the CBO has released its estimate. The key takeaways include:

  • For the period 2017 – 2026, the AHCA would reduce the federal deficit by $119 billion.
  • In 2018, 14 million more people would be uninsured under the AHCA than under the ACA. The number increases to 23 more million people being uninsured by 2026.
  • Premiums in the individual market would increase in 2018 and 2019.
  • Premiums would be lower on average in states waiving certain ACA requirements but would be unaffordable for many poorer, older individuals. CBO estimates that a 64-year-old earning just above the poverty line would see premiums increase nine-fold.
  • Individual insurance markets for one-sixth of the population risk destabilization under last minute amendments to the AHCA.
  • The largest savings under the AHCA come from cuts in Medicaid.
  • $664 billion in taxes and fees used to finance the ACA would be repealed.

5/17/2017 - Anthem & Cigna Scrap Merger

Anthem has announced it is terminating the merger agreement with Cigna. The deal has been fraught with issues since its announcement in July 2015 and was blocked in February 2017 by a federal court in an antitrust case brought by the U.S. Department of Justice. Anthem appealed the decision, which was upheld. Rather than taking the case to the U.S. Supreme Court, Anthem has decided to withdraw from the merger.

Now the carriers will battle over the break-up fee and damages. Cigna wants the $1.85 billion break-up fee stipulated in the agreement and $13 billion in damages. It accuses Anthem of failing to take reasonable steps to obtain regulatory approval for the merger. Anthem is fighting back and says Cigna is not entitled to the break-up fee because it took steps to sabotage the deal. Not only does Anthem insist it does not owe the fee but that it is entitled to damages. Rather than continuing to litigate, it is likely the carriers will negotiate and reach some sort of agreement on the fee and damages.