Bipartisan moves to steady insurance market face same old conflicts over regulation

Fledgling efforts in the Senate and U.S. House of Representatives to develop bipartisan legislation to stabilize the individual insurance market could founder over clashing views on deregulating health plans.

Democrats and a growing number of Republicans are eager to steady the struggling individual market covering nearly 20 million Americans to prevent an exodus of insurers and healthy customers. But the new bipartisan effort to craft solutions is almost certain to run into some of the same polarizing issues that tanked the GOP-only drive to repeal and replace the Affordable Care Act last month.

The central ideological divide is over how to bring down premiums for younger and healthier people without driving up costs for those who are older or who have pre-existing medical conditions.

Republicans and Democrats involved in these initiatives generally agree that certain measures are needed to curb premium increases and keep insurers and healthier customers from fleeing in 2018. They say Congress should at least temporarily fund payments to insurers for cost-sharing reductions for lower-income exchange plan members, and establish a new reinsurance program to protect insurers from the cost of signing up sicker people. Democrats seek long-term CSR funding while Republicans are talking about extending it for just a year or two.

There's possible consensus on other provisions such as repealing the Affordable Care Act's employer mandate and its 2.3% excise tax on medical device sales.

But Senate HELP Committee chairman Lamar Alexander (R-Tenn.), who has scheduled committee hearings early next month on how to stabilize the market, wants to go further. He has proposed expanding state innovation waivers to allow states to waive ACA insurance requirements such as minimum essential health benefits. A bipartisan group of 40 House lawmakers, calling themselves the Bipartisan Problem Solvers Caucus, has offered a similar proposal.

The GOP goal is to allow insurers to lure more healthy people into the market by offering lower-priced plans. "Any solution… should also include greater flexibility for states in approving health insurance policies," Alexander said.

Alexander also wants to let everyone buy very high-deductible catastrophic plans, erasing the ACA's age cap of 30. That could conceivably win support from some Senate Democrats who offered a bill in 2014 to let insurers sell cheaper "copper" plans, with a lower actuarial value than bronze plans. It raises big concerns, however, among insurance leaders and experts who say consumers can't afford the deductibles and cost sharing under current plans.

Alexander also might try to revive a bill he introduced with his Tennessee GOP Senate colleague Bob Corker earlier this year to help consumers in counties where no exchange plans are being offered. The bill would let them use ACA premium tax credits buy plans sold outside the exchanges, including plans that do not comply with ACA coverage rules.

But it's far from clear that congressional Democrats would go along with these GOP proposals, which ACA supporters and many insurance experts argue would weaken the law's coverage and affordability safeguards for people with pre-existing medical conditions.

"Why is there any sense that Democrats have to give up anything to get a deal?" said Tom Daschle, the former Democratic Senate Majority Leader who's now a healthcare lobbyist at Baker Donelson. "It's in both parties' interest to stabilize the marketplace. We've made a lot of headway with protections and benefits. To get back into a race to the bottom would be a real setback."

Major insurance groups last month came out in opposition to a Senate GOP proposal to allow carriers to sell plans that don't comply with ACA benefit and coverage rules. They are similarly leery about the new Senate and House deregulatory proposals. They'd prefer a bill focusing on funding the cost-sharing reduction payments and creating a new reinsurance program, and they want the Trump administration will publicly commit to enforcing the ACA's individual mandate.

"If you give flexibility to the states, you either get coverage gaps or fragmentation of the risk pool," said Chet Burrell, CEO of CareFirst, a Blue Cross and Blue Shield plan in Maryland. "It might be the basis of a political deal but it's not helpful to solve the problem."

Yet without significant deregulatory provisions, it's unlikely that either Senate or House Republicans would support a stabilization package.

Republicans will be pushing for a number of key provisions, including more state flexibility; letting insurers charge older consumers premiums that are five times higher than younger consumers, rather than three times more as allowed by the ACA; and easing federal requirements that insurers spend at least 80% of premium revenue on medical costs, said Christopher Condeluci, a healthcare lobbyist who formerly served as a Senate Republican staffer.

"The goal from the outset for Republicans has been maximum flexibility," said G. William Hoagland, senior vice president of the Bipartisan Policy Center and a former senior Senate GOP staffer. "But if they go with the extreme approach of giving states money and letting them decide, they will never get agreement on the Democratic side."

A brewing flash point is Section 1332 of the ACA, which lets HHS grant states waivers to establish their own, customized coverage systems. That section of the law, as interpreted by the Obama administration, requires states to maintain the same level of coverage and affordability as provided under the ACA's framework, with four so-called guardrails to ensure that.

The Bipartisan Problem Solvers Caucus seeks changes in Section 1332 to make it easier for states to win approval for setting up their own systems and to give them more leeway. House lawmakers also want to make it easier for states to enter into compacts that allow insurers to sell health plans across state lines in participating states.

ACA supporters and insurers say they're potentially open to making 1332 waivers easier to get and more attractive to states, but only within limits. "My sense is there's a willingness to expand state flexibility on 1332 waivers, it's got a lot of potential," said Daschle, who issued joint recommendations on that issue with former Republican House Speaker Newt Gingrich in late 2015.

Hoagland said the key is how to interpret the 1332 guardrails and give states greater flexibility without increasing federal spending. One possibility is letting states apply for broad waivers that let them use the ACA's federal coverage subsidies to combine their exchange and Medicaid markets, creating a more streamlined, cost-effective system for both enrollees and health plans.

"You have to balance out (the state flexibility) with making sure you're covering the people who need to be covered, and that dollars aren't being wasted by states in ways that would undercut their ability to serve their people," he said.

Despite the looming policy clashes, some observers see a narrow window for a compromise deal on a market stabilization bill, especially since some Democrats in the past have signaled openness to letting insurers sell cheaper, skinnier plans.

"I think the Democrats in the end probably do swallow some things they don't like to get things they do like," CareFirst's Burrell said. "I would put the chances of some deal at 50-50."

The odds would rise if President Donald Trump carried out his threat to unilaterally end cost-sharing reduction payments to insurers or halt enforcement of the ACA's individual mandate, either of which could trigger a market meltdown.

Then, political observers say, panicked senators of both parties might overcome their policy differences and agree to pass a stabilization package restoring the CSR payments. They could attach it to attach it to a must-pass bill such as legislation raising the federal debt ceiling or reauthorizing funding for the Children's Health Insurance Program.

"It would focus the attention of members when they come back from the August recess," Hoagland said. "They'd say, 'Oh my gosh, can't we do something?'

But no one is betting their life savings on that happening, particularly because more conservative House Republicans may balk at doing anything to rescue Obamacare.

"It might get 60 votes in the Senate," Condeluci said. "But I don't know if that passes the House."

An​ edited​ version​ of​ this​ story​ can​ also​ be​ found​ in​ Modern​ Healthcare's​ Aug.​ 7​ print​ edition.