Senators Cassidy (R-LA) and Collins (R-ME) released a potential healthcare replacement plan this afternoon. Several other Republican Senators have signed on as co-sponsors. There are enough to form a plausible minimal blocking coalition for Repeal and Delay. Now let’s see if this bill is any good and worth Democratic votes. I’ll be reading through sections and publishing as I go.
Here is the PDF text. It is only 73 pages so not that bad to read through.
Title 1 Individual Market reform
Section 100 definitions — the big things to keep in mind are 100-2 budget neutrality. What is the baseline of the counterfactual budget against which actual expenditures are to be measured with. Budget neutrality is defined as what PPACA would have spent. As we saw with the Arkansas 1115 waiver, choosing the baseline allows for massive policy leverage. CHIP is also in play here. I am not sure where.
PPACA is defined as PPACA as of the day before this law goes into effect. It seems to be attempting a smooth hand-off.
Qualified Resident — resident of a state on the 1st of the month who is either a US Citizen or authorized immigrant. How does this account for movement between the states? Not a big deal but still a problem.
ROTH HEALTH SAVINGS ACCOUNT; ROTH HSA.—The terms ‘‘Roth health savings account’’ and ‘‘Roth HSA’’ mean a Roth HSA established under
section 530A of the Internal Revenue Code of 1986. I don’t have enough knowledge to comment intelligently on this. I need to do more research.
Section 101 — this is the knocking out PPACA regulations except for the popular stuff
101-A is a general repeal of Title 1 of PPACA (the insurance reforms) EXCEPT in the major case of 102-a-1 and the popular benefits in 101-b-1. The following stays on throughout any options: Under 26 on parent/guardian ESI, Lifetime and annual caps, pre-exisiting conditions (as modified later on), preventative care without cost sharing, mental health parity, and inclusion of Black Lung benefits (this is a smart little piece of work (I’m betting this is a hook to get Manchin on board as well as Capito-Moore watching out for her state).
Finally Section 101-B-2-5 preserves section 1332 innovation waivers for states. Healthcare.gov is still live and available for others to use.
It gets rid of a lot of the insurer side regulations (MLR etc) but the consumer side regulations are not getting whacked. Section 1557 of PPACA is also preserved so I am reading that as saying there can be no gender discrimination in rates.
Section 102 is the Health Insurance by State section. Let’s see what is in each of these boxes before a state has to make a choice. Wonkery below the fold
102-A each state has to make an election as to what they want to do. States can change their mind with written notification.
102-A-1-A Continuation of PPACA as written on the day this bill is signed into law. Limitation is funding. A state can’t receive more APTC and CSR funding than they would be eligible for if they choose the alternative state run system. I think this is a rule to minimize the incentive and ability of PPACA continuation states to play Silver Gap games
102-A-2 — A state based alternative that waives most coverage requirements and rules. This is a super 1332 waiver approach. The Feds will kick in a bunch of money to be distributed via eligible individual HSAs.
102-A-3 — Nothing; the state that elects Nothing goes back to the 3/22/2010 status quo
Okay, this is a small change from previous Cassidy bills. The default assumption now is a state will choose 102-A-2 if it does not make a choice. The 2015 bill had nothing as a default. This is a sign that this bill is actually grappling with problems.
102-B Medicaid Expansion. If I am reading this right, Medicaid expansion is still a separate decision. However states that did not expand Medicaid and choose the State HSA option can put Medicaid expansion eligible individuals into the HSA and auto-enroll pool.
Section 103 State Alternative Option plumbing
103-a-1 wipes out the individual and employer mandate (I think employer mandate will go poof in any bill as it has not worked and pisses every one with influence off).
103-A-2 eliminates all other Title 1 requirements of PPACA except for those mentioned in 101
103-A-3 HSA deposit system. Money is important. If there is money, then the plan can work reasonably well. If it is massively underfunded, it is junk insurance.
HSA money is usable for both premium and cost sharing payments. Does this mean only federal HSA contribution or federal plus personal contribution? If the first, it is a convoluted pass through to subsidize people. If the second, it effectively expands the employer sponsored insurance tax advantage to the individual market in a very regressive way.
103-A-4 and 103-C establishes a 2% add-in block grant to the state for population health measures. This is probably a block grant so who knows how it will actually be used.
The rest of 103-B is mechanics. Nothing too interesting.
103-C is the population health fund. It is 2% added onto to the state from all deposited amounts into the qualified HSA’s. The states must use it under guidance of H&SS for public health measures. This can be very broad from education to de-leading to abstinence only education to tai chi classes. It is a mandatory appropriation.
103-D is a state reporting and technical requirement to figure out a way to calculate Usual and Customary rates. This makes a lot of sense. My bet is most states outsource this to a couple of consulting firms and public data repositories.
Section 104 Computation of Deposit Amounts
104-A-1-A and 104-A-1-B direct the Secretary of HHS to come up with an HSA allocation system that is tied to geography and income status. I would presume people who live in high cost areas will see more subsidy than people who live in low cost areas. I would also presume that people who make less money will receive a larger subsidy than their next door neighbor who makes three times as much.
104-A-3 allows states to make currently enrolled ACA beneficiaries whole at their own election. Funds will come out of the general HSA allocation. This could set up a nasty set of fights where the governor gets blamed.
104-B is the calculation of the state pool of money. This is the nut.
104-B-1-b is for states that expanded Medicaid under PPACA but went the state option route. Here the total HSA pool is all Federal Medicaid expansion money plus all Federal PPACA money with a 5% discount. The critical question is who is counted as a subsidy contributing individual for the pool calculation?
AMOUNT BASED ON PPACA PROJECTED
FEDERAL EXPENDITURES.—The amount specified in this subparagraph for a State for a year
is 95 percent of the Secretary’s estimate of the total payments that would have been made (as-
suming the existence of a State established Exchange in the State) under section 36B of the
Internal Revenue Code of 1986 and under section 1402 of PPACA with respect to all quali-
fied residents in the State in the year
This is fuzzy as hell and relies on HHS discretion. Is everyone who is qualified gaining a subsidy contribution even if they did not sign up for either Medicaid or an On-Exchange policy? If so, this is really interesting for states with low up-take and no Medicaid expansion. Or is the calculation based on currently signed up people. Than this would be good if a state has been able to do massive and effective outreach to the eligible population. Are there woodworkers?
104-B-2 is similar to the above but it brings in a projected Medicaid eligible poplulation. It only applies to people who make more than 100% FPL. My same question as to how the subsidy base is calculated remains.
104-C-2 tells HHS to create actuarial value tables for subsidy adjustment purposes based on age. There is no age banding but older people will get more than younger people all else being equal.
104-D phases subsidies down by 1% per $1,000 in income above $90,000 for single, or $150,000 for married filing jointly. This advantages upper middle class with few kids, disadvantages upper middle class with lots of kids.
Section 105 State options for accessibility
States can use their own exchanges. States can choose to use Healthcare.gov,
105-C Auto-enrollment — this is key. States can elect to auto-enroll uninsured individuals into policies that are entirely paid for by the individuals’ entitled HSA allocation if an individual does not affirmatively opt-out. This is one of two major policy planks that replaces the PPACA individual mandate as a risk pool curation measure. We know that opt-in has a lot of resistance while opt-out will capture a much broader pool of people. This is a good idea as it will sweep up quite a few people who are currently eligible for either Medicaid or Exchange subsidy but are not actively enrolled. The coverage won’t be as high in actuarial value but it will be hit by a meteor coverage.
105-D-1 allows for state funded reinsurance and risk corridors. 105-D-2 seems to point risk adjustment towards the Medicare Advantage individual widget model instead of the PPACA comparative risk profile model. This makes the projection for the actuaries easier as they only need to figure out their own population risk and not the reported population risk of all other carriers.
105-E Preventing Benefit design races to the bottom — this is sneaky. It could be really smart.
Insurers have a natural incentive to want to avoid known high costs (even with risk adjustment/reinsurance). This provision attempts to change that incentive. In period 1, a person chooses Insurer A. If in Period 2, that person switches insurers, Insurer A pays 75% of the costs of the switcher for the first three months while receiving 75% of Insurer B’s premium for that individual. After three months Insurer B gets all of the risk and the revenue. This is really fucking sneaky. I like this.
21:33 Section 106
This allows states to set their own open enrollment periods and qualifying life event triggering special enrollment periods. States can allow wait periods and a few other things to control for adverse selection.
More open enrollment stuff. An initial open enrollment will be underwriting free. I am slightly surprised that this bill is mandating an annual open enrollment as there has been some conservative wonk talk about multi-year contracts. This bill is doing a lot of lifting on market stability and that is something that would maintain the pool.
107-2 Default Insurance coverage requirements. This is the default baseline insurance. It will be a HDHP with a skinny network and a generic formulary for prescriptions. It is not good coverage. It is coverage that is adequate for hit by a meteor events but not for people with actual chronic conditions. If this was coverage that I was offered at zero out of pocket premium when I was 25, it would be a good deal.
107-D-1 Continuous coverage mandate
CRITICAL HERE.. This is the other risk pool maintenance mechanism in addition to auto-enrollment. People have to hold creditable coverage for no more than a 63 day gap in the past eighteen months after the second open enrollment period. If continuous coverage is not maintained, insurers can underwrite against pre-existing conditions for the same time period as the gap in coverage. The underwriting goes on for no more than eighteen months. Anyone who buys up from the default option and has a gap in coverage will also pay a 1% per month of gap late enrollment fee( up to 10% of premium). This is similar to Medicare.
Section 108 Medicaid and HSA
HSA balances will not count as assets for Medicaid determination except for long term care.
Subtitle B Price Transparency
National out of network ER billing guidelines. And these are actually strong regulations. Physician services are capped at 70% of Usual and Customary. This is still very high compared in-network prices but people will only sell one kidney instead of both to finance an out of network visit. More importantly, facility and technical charges are restricted to no more than 110% Medicare fee schedule. This is huge. It moves the agreement zone to near Medicare rates instead of multiples of commercial rates. Drugs and biologicals move to the lower amount of twice the cost of the drug or the cost plus $250. This piece will be very popular.
This applies to all policies in the country. It is a universal benefit. And this will be very popular.
Okay, the coffee shop I am at is closing, so I’ll work on this some more later.
Closing thoughts — there will be lower AV coverage but mechanically, this could work fairly well. The big question so far is what exactly is the population that determines the funding pool for the states that go the alternative route. After that question is answered, the question of whether the Democrats should seek an ideological victory at some policy cost or a political victory with massive policy and human suffering costs has to be debated.
Title 2 HSA Tax provisions
I’m far weaker on tax law than I am on health policy. So please stand with me as I wade through this stuff.
Section 201 — adds the concept of a Roth HSA to the tax code
Sets a contribution limit of $5,000 per year conditional on self-only individual market coverage. If less than a full year of coverage, proportional reduction in maximum by the number of months not in self-only individual market coverage. Family is a multiple of $5000 and the number of people on the family market policy. People over 55 get an extra $1,000 per year. These amounts are inflation indexed to CPI-Medical (this means the max limits will increase faster than general inflation most of the time)
Roth IRA’s and I presume Roth HSA’s are funded with post tax dollars. Growth and distributions are tax free. For people who are in low marginal tax rates in the current period but have a good reason to believe that they’ll be in high marginal income tax brackets when they get older and have statistically likely high medical expenses, this is a really good deal. A healthy as a horse 24 year old making $22,000 a year while working as an apprentice elevator repairer will massively benefit from this provision if they can put a couple grand a year into the Roth HSA. I don’t know the likelihood of that. Now individuals with future projected lower income tax rates aren’t as well off. A 59 year old middle manager who is counting down the weeks until retirement and a 30% income drop will not benefit as much from this provision.
It can only be used for creditable coverage, cost-sharing expenses, long term care insurance. These restrictions go out the door if an individual is collecting uninsurance where the Roth HSA could be used for non-creditable coverage.
The following chunk on P.62 — I have no idea what it means — can someone who knows tax law help here?
LIMIT ON CONTRIBUTIONS TO DEDUCTIBLE
2 HEALTH SAVINGS ACCOUNTS.—Section 223 of such Code
3 is amended by adding at the end the following new sub-
5 ‘‘(i) LIMITED CONTRIBUTIONS AFTER 2016.—
6 ‘‘(1) IN GENERAL.—No contribution may be ac-
7 cepted by a health savings account after the date of
8 the enactment of this subsection.
Section 202 Direct Primary Care
Direct primary care where an individual or family pays a Primary Care Provider (PCP) a monthly membership fee for on-demand service is now Roth HSA eligible. I’m fairly indifferent to DPC for most people. It is a nice add-on benefit for most reasonably healthy people. It is great for people with chronic conditions that require intensive management. 202-B treats DCP as a nice add-on but not as creditable coverage. This is important. Wrapping a catastrophic policy around DCP works for most people. DCP provides no protection against hit by a meteor events much less hit by cancer diagnoses.
Subtitle B Section 211 PPACA credits
PPACA credits are limited to what states that opt-out of PPACA but into the alternative method.
The effective date for this bill is 1/1/18 (211-C). That is too soon. Assuming the law is introduced tomorrow and signed next week, there is not enough time for any plumbing of the state alternative models as there is too much rule making that would need to occur. Insurers would not get their final specifications to build until September for a November open enrollment. This has to be pushed back to 1/1/19. By the way, every state will have a strong incentive to Silver Gap the living bejesus out of their market in the last year of PPACA only.
Okay, that is 2800 words on Cassidy-Collins — what do I think of it on first blush?
The bill actually grapples with trade-offs. As a starting point of discussion for replace, this bill is worthwhile as it mostly focuses on further decentralizing the US health finance system to the states in the individual market and very little else. It does not do anything too controversial on non-germane subjects. It can be seen as a technical corrections bill with a conservative slant to the ACA. Democrats would demand and get several technical corrections to the ACA (Family glitch, dropping SHOP, risk adjustment, adding 105-E etc). Legacy Medicaid is not being touched in this bill. States that have not expanded Medicaid would have strong incentives to do so even if the coverage is not as good as it would be under a straight up expansion. The big issue will be the Mississippi vs. Massachusetts problem. Massachusetts residents will have far better coverage than Mississippi and women in Massachusetts will have all of their health care needs included in essential health benefits while women in Mississippi won’t. A critical question will be what is the counterfactual? The counterfactual is critical in evaluating the quality of the outcomes of this bill.
The second point is if this is what Senator Collins wants, she probably could have gotten most of it in 2009.
I really need clarification from legislative text reading experts on who exactly is counted in determining the HSA subsidy pool. If it is everyone currently eligible, enrolled and not enrolled, that is a very different AV story than if the pool of for HSA subsidies is only determined by the currently enrolled. This is a key detail. I just don’t know how to read that paragraph with any certainty.