What the Senate Health Care Bill Means For Private Insurance

I've just spent a fulfilling afternoon reading through the Better Care Reconciliation Act of 2017, better known as the health care bill that was released to the public last Thursday by U.S. Senate Majority Leader Mitch McConnell (R - Kentucky). Many pixels have been spilled analyzing this legislation (numbered H.R. 1628), particularly the effects it would have on federal premium subsidies, coverage provided through the health insurance exchanges, taxes, and the Medicaid program. I want to focus on how the bill might affect the coverage IIABNY members sell, which in general is group health coverage sold outside the exchanges.

The 142-page text is devoted largely to Medicaid; most of the provisions that affect non-exchange private coverage are only in the last 10 pages or so.

Section 103 ends the small business tax credit program starting in 2020. That program gives two-year tax credits to employers with 25 or fewer full-time equivalent employees, average annual wages of $50,000 (in 2014 dollars; this is indexed for inflation), and that pay at least 50 percent of the premium. The credit can be as high as 50 percent (35 percent for non-profits) of the aggregate amount of the employer's premium contributions, though the percentage declines the closer the employer gets to 25 employees. I haven't seen any data as to how successful this program has been in encouraging small businesses to buy coverage (employers this size are exempt from the employer mandate.) All things being equal, I think it's reasonable to expect at least some employers may forego coverage without this incentive, though some of them might have dropped it after the two-year credit period expired anyway.

Section 204 changes the extent to which insurers can vary health insurance premium rates. Currently, the law prohibits varying premium rates except for:

• Family status versus individual status
• Geographic rating area
• Age, with a limit on the variance of 3 to 1 for older adults
• Tobacco use

The Senate bill would increase that age variance to 5 to 1, so insurers could charge older individuals up to five times what they charge younger ones. New York is a community-rating state for small groups, so this change will likely affect only individual policies sold through New York State of Health and large groups.

Section 205 addresses the medical loss ratio requirement. Current law requires insurers to rebate premiums to enrollees if health care costs for a given year make up less than 85 percent of premiums for large groups and 80 percent for individual and small group plans. This bill would phase out that requirement for plan years starting in 2019. In its place, each state would determine its own medical loss ratio requirement. New York law already requires 82 percent for individuals and small groups and 85 percent for large groups.

Section 206 permits states to escape some of the insurance requirements put in place by the Affordable Care Act. The ACA has always had a provision allowing states (starting with the 2017 plan year) to apply for waivers from ACA requirements, such as the exchanges, the establishment of qualified health plans (including essential health benefits), reduced cost-sharing, premium subsidies, and the employer and individual mandates. It allows the Department of Health and Human Services to grant requested waivers if the state plan:

• Will cover at least the essential health benefits
• Will provide coverage and cost-sharing protections against excessive out-of-pocket spending that are at least as good as those the ACA requires
• Will cover at least a comparable number of its residents as the ACA does
• Will not increase the federal deficit

The Senate bill would significantly modify that. It would require DHS to grant the waiver as long as the state plan does not increase the federal deficit. The other conditions would be eliminated. That means that individual states could get waivers from coverage requirements and scope, thus lowering premiums but providing less comprehensive coverage. Also, the current law requires a state that wants to request a waiver to enact a law. The Senate bill would enable a state to request a waiver by submitting a certification signed by the governor and the state's insurance regulator. The state legislatures would not have to be involved.

The proposed legislation would make a number of other significant changes, such as repealing the employer and individual mandates, capping Medicaid expenditures, prohibiting premium subsidies from paying for plans that cover abortions, and defunding Planned Parenthood for one year. It also repeals all the taxes earmarked to fund expanded coverage under the Affordable Care Act. I'll leave it to others to debate the merits of those proposals. The changes I've described here, if enacted, would have significant effects on IIABNY members and their clients. Forthcoming events on Capitol Hill may change your business in a big way. Stay tuned.  

Comments

[Rajiv Gupta]

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[invest market]

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