Senate Republicans' bill to repeal and replace the Affordable Care Act is a windfall to insurers selling plans on the individual market, and may be enough to keep them from exiting the exchanges in 2018.
But Medicaid insurers warn the bill's caps on federal spending in that program would compel them to cut necessary care management services and reduce provider reimbursement rates.
"It's worse than we thought it would be," John Baackes, CEO of L.A. Care Health Plan, which insures Medicaid and ACA exchange members, said of the Senate bill. While he said he's glad the bill includes funding for subsidies on the individual market, he's more concerned about the much larger Medicaid program, which serves 75 million people.
"We will have less resources to provide coverage for these folks (on Medicaid), which means we'll have to reduce reimbursement for providers, and at that point we expect to see fallout from participating physicians," Baackes said.
In a nutshell, insurers will see less taxes and reduced regulations under the Senate's Better Care Reconciliation Act. For months, they've been pressing congressional Republicans for an inkling of how the individual insurance market will be regulated. Approximately 17 million people obtain coverage on and off the exchanges.
Insurers urged the Trump administration to enforce the individual mandate and fund the cost-sharing subsidies that help low-income people afford coverage. They called for the elimination of the loathed health insurer tax, which they said increased premiums for plan members.
The industry got much of what it wanted in the "discussion draft" of the Senate's bill, which Senate Majority Leader Mitch McConnell hopes to bring to a vote next week.
The repeal-and-replace bill gives insurers a big tax break. It eliminates the annual fee on health insurance companies, which amounts to $144.7 billion over the next 10 years. It also funds the cost-sharing subsidies through 2019, after which the subsidies would be cut off.
"We appreciate that the Senate has funded the vitally important CSR subsidies through 2019 and is providing some amount of market certainty," said Ceci Connolly, president and CEO of the Alliance of Community Health plans, which represents not-for-profit health plans and has been urging the administration to fund subsidies and incentive consumers to maintain continuous coverage.
But the bill would also eliminate the mandate that requires most Americans to enroll in insurance coverage or pay a financial penalty.
Health insurers have argued the mandate is necessary to increase enrollment in the market and balance out older, sicker enrollees with younger healthier members. The Congressional Budget Office estimated the House Republicans' American Health Care Act would lead to 23 million people losing coverage by 2026, mostly because of the individual mandate repeal.
But Dan Mendelson, president of consulting firm Avalere, questioned the importance of the mandate at all.
"It wasn't working so well to begin with," he said.
States will receive cost-sharing subsidies and funding to stabilize the individual market in 2018 and 2019, and that could be enough to lure insurers to the markets and encourage them to lower premiums, which would attract more enrollees, Mendelson said.
The bill gives insurers $50 billion in funding to stabilize the individual market in the short-term, and $62 billion to states to stabilize the market longer-term.
"It's possible you will see some plans trying to get into those bare counties if this bill passes," Mendelson said, referring to the 44 counties in Ohio, Missouri and Washington that currently lack a health insurer for 2018.
While the cost-sharing subsidies may lead to lower premiums, they will also lead plans to pay for less. Benchmark qualified health plans would only have to cover an average of 58% of medical costs, which is lower than the minimum required actuarial value under the ACA. That likely would increase out-of-pocket costs for consumers. Insurers would also be able to charge older people five times what they charge younger enrollees. The ACA allows insurers to charge older members just three times as much.
Consumers would receive premium tax credits based on their age and income to buy plans from the individual market, like under the ACA. But those credits are limited to those earning up to 350% of the federal poverty level, rather than the ACA's limit of 400%.
"At first blush, it would not only provide far skimpier health coverage than what's offered today, but millions of people would have no coverage at all," Peter Lee, executive director of California's insurance exchanges, Covered California, said in a statement.
The bill would also allow states to determine insurers' medical loss ratio requirements—how much of insurers' premium revenue must be spent on health care claims and quality improvement. The ACA required an MLR of 80%.
On the Medicaid front, the Senate bill has a tighter cap for federal Medicaid spending than the House's AHCA, capping federal payments to the states for most beneficiaries at the medical component of the Consumer Price Index starting in 2020. Growth of those payments would be limited to the much lower CPI rate starting in 2025. It would also phase out the ACA's enhanced federal payments for Medicaid expansion by 2023.
The reduced funding won't impact insurers' margins because "insurers will transfer headwinds to physician rates," Piper Jaffray analyst Sarah James said in research note. But insurers may reduce the services they offer to Medicaid members.
"The bill moves in a dangerous and harmful direction for poor, aged and disabled Americans and the health plans and providers that serve them—whether it is phasing out Medicaid coverage for millions of Americans, threatening the viability of the Medicaid system through underfunded per capita allotments, or failing to protect the integrity of actuarially-sound rate-setting practices that underpin Medicaid managed care," Meg Murray, CEO of the Association for Community Affiliated Plans, which represents safety net plans, said in a statement.
A spokeswoman for America's Health Insurance Plans, a lobbying group for large, national insurers, said the group is still analyzing the Senate bill. The Blue Cross Blue Shield Association did not have a comment.