CSR and the policy of inertia

Andrew Sprung at Xpostfactoid asks a common question about Cost Sharing Reduction (CSR) subsidies.  

the primary agenda for Democrats is obvious: appropriate funding for Cost Sharing Reduction payments and for some kind of reinsurance program to replace the program that expired in 2017….
To have any real hope of getting these measures passed in a Republican Congress, however, Democrats are going to have to face up to the question: What pound of flesh will they let Republicans extract as payment for these essential, common-sense fixes?

He envisions a negotiating environment where Democrats must concede significant waiver flexibility in return for Cost Sharing Reduction subsidies.  This model of leverage is wrong.  

Democrats have no reason to trade CSR funding for policies that they don’t prefer.  Inaction gives them an incredible policy victory.  Conservatives are the ones who need to make concessions to fully fund CSR.  

The Congressional Budget Office projects that most states will allow insurers over the long run to load the cost of their obligated but not reimbursed CSR obligations to only their Silver plans.  This will have an incredible change in the dynamics of the market.  

Total federal subsidies for health insurance in the nongroup market—in particular, the sum of the premium tax credits and the CSR payments—would increase for two reasons: The average amount of subsidy per person would be greater, and more people would receive subsidies in most years….

 

By CBO and JCT’s estimates, the number of people receiving subsidies for nongroup health insurance would increase under the policy in most years. In particular, because tax credits would increase and gross premiums for plans other than silver plans in the marketplaces would not change substantially, many people with income between 200 percent and 400 percent of the FPL would, compared with outcomes under the baseline, be able to pay lower net premiums for insurance that pays for the same share (or an even greater share) of covered benefits….reducing the number of uninsured people, on net, in most years.

Insurers are increasingly explicit that they are loading the full cost of the uncertainty onto only the Silver plans.  This is in states as ranging in size from  Idaho to California.  Bronze, Gold and Platinum plans will be priced on the basis of changes in medical costs, changes in enrollment and other normal insurance industry factors.  Silver plans will be priced on those basis and then there will be a significant second price increase on top of the baseline increase.  

The Center for Medicare and Medicaid Services (CMS) issued a guidance letter on August 10th to states contemplating loading CSR costs onto Silver plans only.  This letter states that for risk adjustment purposes, Silver load only plans will be treated as if they are Platinum plans.

For the risk adjustment transfer formula, we intend to propose considering the 87 percent and 94 percent silver plan variants (as well as the limited cost-sharing and zero cost-sharing variants) to have plan metal level actuarial values of 0.9 in order to account for the higher relative actuarial risk associated with these plans

From a mechanical point of view, this is good guidance and a reasonable solution to the problem of running risk adjustment where Silver plans cost more than Gold plans.  It is an incredible admission of a massive policy change regarding the sufficiency of the subsidy.  

Subsidies in the ACA are calculated by taking the difference from the second lowest premium Silver plan and an individual’s expected contribution.  The individual expected contribution is a function of their income.  Any premium that is not covered by the expected individual contribution for the benchmark Silver is covered by the federal premium subsidy.  

The ACA designated Silver plans as having 70% actuarial value (AV) with allowed minimal variation.  In 2018, this means Silver plans will range from 66% AV to 72% AV. In most competitive markets, the benchmark Silver plan will be close to 66% AV.  However in states that load the cost of CSR onto only Silver plans , the Silver plans will have an AV of 90% and this is what the subsidies will be calculated from.  

The ACA exchanges have had difficulty in signing people up who make more than 200% FPL because the cost of the post-subsidy premiums rise too quickly in comparison to perceived value.  Silver, if it is priced at 90% AV, will lead to incredibly lower prices for individuals making between 200% and 400% FPL.   Most people making just under 400% FPL will be able to buy Bronze plans for no out of pocket premius.  Gold plans with $1,500 deductibles will be significantly more affordable in this scenario than Silver plans with $3,000 deductibles are today to individuals and families earning more than 200% FPL.

Liberals will have achieved an incredible policy victory in the states that force insurers to load the cost of CSR onto only Silver plans.  In these states, the benchmark plans will be sufficient to buy 90% actuarial value coverage.  That is better than Medicare. That is an incredible improvement over the ACA as plans will become more affordable to many more people as premiums and deductibles will decrease and the risk pool will get healthier as the value proposition gets better.  

Since it is an incredible policy victory that will be cemented into place by inaction, giving it up for short term funding of a secondary set of subsidies would be counterproductive.  

 



Open Thread: Supervising “President” Man-Baby

Q: Action movie screenplay, or real-life “governing”?

Raised voices could be heard through the thick door to the Oval Office as John Kelly – then secretary of Homeland Security – offered some tough talk to President Donald Trump.

Kelly, a whip-cracking retired general who was sworn in as White House chief of staff on Monday, had demanded to speak to the president alone after Trump complained loudly that the U.S. was admitting travelers from countries he viewed as high risk.

Kelly first tried to explain to Trump that the admissions were standard – some people had legitimate reasons to visit the country – but the president insisted that it was making him look bad, according to an administration official familiar with the exchange about a month ago.

Kelly then demanded that other advisers leave the room so he could speak to the president frankly. Trump refused at first, but agreed when Kelly insisted.

It was an early indication that Kelly, a decorated retired Marine general who served three tours in Iraq, is not afraid to stand up to his commander-in-chief.

Tapped to bring order to a chaotic West Wing, Kelly began to make his mark immediately Monday, ousting newly appointed communications director Anthony Scaramucci and revising a dysfunctional command structure that has bred warring factions. From now on, said White House press secretary Sarah Huckabee Sanders, all senior staffers – including the president’s son-in-law Jared Kushner and chief strategist Steve Bannon – will report to Kelly instead of the president.

Sanders said Tuesday that Kelly had spent his first day on the job speaking with members of Congress, getting to know White House staffers and working to put new procedures in place.

“It definitely has the fingerprints of a new sheriff in town,” said Blain Rethmeier, who guided Kelly through the Senate confirmation process for the Homeland Security post. Rethmeier said that what stood out about Kelly during the time they worked together was the way Kelly commanded respect from everyone he encountered – and the way he respected others….

A: C’mon — fiction has to be minimally plausible.



Point & Mock Open Thread: “Palace Intrigue”


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Ancestral war cry: Confusion to our enemies!

The Trump-minions look pretty confused right now…

Lord of all the flies!

Meanwhile…



Timelines for plumbing

A friend of the blog asked me to look at Senator Cardin’s (D-MD) ACA improvement bill, SB 1511. It’s a perfectly fine bill. It wants a public option tied to Medicare opt-out. It wants to increase the value of CSR. It wants to increase the subsidy range to 600% of the Federal Poverty Line. It wants to do something with prescription drugs. It wants to do a lot. And it wants all of these changes to go live on January 1, 2018. That is five months from now.

The Congressional Budget Office (CBO) recently scored HR 1628, the Obamacare Repeal Reconciliation Act which would sunset all funding and spending of the ACA on 12/31/19. The political theory behind a two year phase out is that at some point the artificial crisis will force action on a replace bill that will be conservative leaning but have large bi-partisan majorities so everyone is responsible and no one is to blame. The crisis point is twenty nine months from now.

The Cardin bill is too late to implement even if we lived in a counterfactual universe where it was signed into law on Friday afternoon.

The hypothetical replacement bill, even if it was to be signed into law on Friday evening, might be too late to implement for January 1, 2020.

Plumbing is a challenge. Anything more complex than explicitly appropriating Cost Sharing Reduction subsidies and perhaps adding money to outreach efforts won’t have a positive effect for a 1/1/18 start date. The Cardin bill builds on current structures and current regulations in the counterfactual universe of Hillary Clinton being president but it wants to start up a new insurer and it wants to dramatically alter the composition of the on-Exchange market while changing the actuarial value of the plans sold. The insurers have spent a year or more building the 2018 product profile and have submitted their tentative offerings for approval. At this point, their plumbers can’t build brand new plans from scratch and have them reviewed and approved to go on sale on November 1st.

Any hypothetical replace bill would take down significant elements of the current regulatory structure. New rule-making from at least the Departments of Health and Human Services and the Treasury would be needed. That means the federal regulators would need to figure out what Congress intended, then they would need to create drafts, solicit comment, revise the regulations. That is not a fast process. Once final regulations are issued, insurers have to figure out what they need to do and then build.

Insurers and the federal government should have all of the changes in final testing by July 2019 for a November 1, 2019 launch date. Rule making would eat up a year and insurers would be scrambling for a year to build. They don’t need to be able to have their operational process be 100% effective on Day 1. As a lowly plumber on the launch date of the ACA Exchanges in 2013 I had jury-rigged a bastardized manual process for the piece that I was responsible for with the intent of getting the system fully automated by early January. Minimal initial operational capability needs time.

Anything that is a tweak and an adjust to the basic regulatory framework of the ACA has enough time to be implemented for the 2019 plan year. Major changes for January 1, 2020 would be a plausible challenge with significant probabilities of failures and painful issues if Congress had a bill signed this weekend.

This entire piece is premised on the absurd assumption that a law is signed on July 21, 2017. This is an extraordinarily generous assumption regarding plumbing. Anything that happens will be working with an even more compressed time frame than the one I sketched out here.



Could A London-Tower-Style Fire Happen Here?

Count on Megan McArglebargle to act as point-person for the Worst Glibertarian Hot Take. For those of us who aren’t being paid to prioritize money over humanity, here’s Justin Davidson, in NYMag, “Could the Grenfell Tower Disaster Happen in New York?”

There is no such thing as an accident when a high-rise building fails. If gas leaks, wires spark, or a wall crumbles, those are not acts of fate, but the preventable consequence of people not doing their jobs. Terminology matters; if it turned out that the fire that consumed Grenfell Tower in London, killing at least 30 people (and probably many more), had been set by a radicalized Muslim immigrant or an anti-Muslim white supremacist, those facts would shape the U.K.’s foreign and security policies. If it’s just an instance of faulty construction, politicians can wring their hands on television, appropriate some emergency funds, and then move on.

It’s too soon to be sure exactly what caused the Grenfell Tower to burn. A thick plume of accusations suggests a lot of possible culprits: a faulty refrigerator; the recently installed cladding of cheap aluminum panels with a flammable core; the gap between the wall and the rain screen, which could have created a chimney effect and sped flames and smoke up the building’s exterior; ineffectual fire alarms; a lack of sprinklers; the presence of just a single fire stair. Behind the technical factors is another layer of social issues. Residents have accused building management and authorities of ignoring their chillingly specific complaints, perhaps because of a generalized disinterest in the building’s poor and largely Muslim population, or because of the pressures of gentrification from the neighborhood all around…

New Yorkers might be tempted to react complacently to some items on this list. Aluminum panels are common, but the slightly less expensive version with the flammable polyethylene core is not legal here. All buildings higher than 50 feet must have automatic sprinklers and two fire stairs, not one. And yet to argue those points is to miss the larger awfulness of the situation. Whether the proximate causes turn out to be corruption, venality, racism, or some combination of all three, the underlying sin is contempt for the people who must live in conditions they cannot control…
Read more



Open Sessions Session Recap Thread: “… ‘Zectif PRIVIJJ!…”

Julia Ioffe — a Russian immigrant who has some experience in such areas — thinks that Sessions may be most fearful that, during his mid-2016 stint as Trump’s “political affairs expert”, he may have gone beyond skirting-the-ethical-line to outright-violation-of-Congressional-regulation when he opened his offices and his arms to every international dignitary willing to be seen in Trump’s company. While the two men are undoubtedly soulmates, right now Sessions needs Trump a lot more than Trump needs Sessions, if Jefferson Beauregard III is to keep his cushy job abusing the rights of uppity women, people of color who don’t know their place, young free-speech drug-defending absolutists, and all the other felons unjailed during That Black Man in the White House’s tenure. Should his Repub fellows get too agitated about Sessions’ flagrant rule-breaking, of course Trump will have no qualms whatsofekkingever throwing the Malevolent Leprechaun to the media wolves…


 



Double the intrigueingness

So potentially talking about Presidential obstruction of justice….

And potentially following the money….