Skip to main content
Subscribe
  • Sign Up Free
  • Login
  • Subscribe
  • News
    • Current News
    • Providers
    • Insurance
    • Government
    • Finance
    • Technology
    • Safety & Quality
    • Digital Health
    • Transformation
    • ESG
    • People
    • Regional News
    • Digital Edition (Web Version)
    • Patients
    • Operations
    • Care Delivery
    • Payment
    • Midwest
    • Northeast
    • South
    • West
  • Blogs
    • AI
    • Deals
    • Layoff Tracker
    • HIMSS 2023
  • Opinion
    • Breaking Bias
    • Commentaries
    • Letters
    • From the Editor
  • Events & Awards
    • Awards
    • Conferences
    • Galas
    • Virtual Briefings
    • Webinars
    • Nominate/Eligibility
    • 100 Most Influential People
    • 50 Most Influential Clinical Executives
    • 40 Under 40
    • Best Places to Work in Healthcare
    • Excellence in Governance
    • Health Care Hall of Fame
    • Healthcare Marketing Impact Awards
    • Top Innovators
    • Diversity in Healthcare
      • - Luminaries
      • - Top 25 Diversity Leaders
      • - Leaders to Watch
    • Women in Healthcare
      • - Luminaries
      • - Top 25 Women Leaders
      • - Women to Watch
    • Digital Health Transformation Summit
    • ESG: The Implementation Imperative Summit
    • Leadership Symposium
    • Social Determinants of Health Symposium
    • Women Leaders in Healthcare Conference
    • Best Places to Work Awards Gala
    • Health Care Hall of Fame Gala
    • Top 25 Diversity Leaders Gala
    • Top 25 Women Leaders Gala
    • - Hospital of the Future
    • - Value Based Care
    • - Hospital at Home
    • - Workplace of the Future
    • - AI and Digital Health
    • - Future of Staffing
    • - Hospital of the Future (Fall)
  • Multimedia
    • Podcast - Beyond the Byline
    • Sponsored Podcast - Healthcare Insider
    • Sponsored Video Series - One on One
    • Sponsored Video Series - Checking In with Dan Peres
  • Data & Insights
    • Data & Insights Home
    • Hospital Financials
    • Staffing & Compensation
    • Quality & Safety
    • Mergers & Acquisitions
    • Data Archive
    • Resource Guide: By the Numbers
    • Surveys
    • Data Points
  • Newsletters
  • MORE+
    • Contact Us
    • Advertise
    • Media Kit
    • Jobs
    • People on the Move
    • Reprints & Licensing
MENU
Breadcrumb
  1. Home
  2. Government
December 29, 2017 11:00 PM

2018 Outlook on Politics and Policy: Insurers will come out ahead

Susannah Luthi
Virgil Dickson
  • Tweet
  • Share
  • Share
  • Email
  • More
    Reprints Print
    THE TAKEAWAY

    Among the sharpest GOP battle cries in 2017 on Capitol Hill was "No bailouts for insurance companies." Yet the policy landscape is shaping up to do just that.

    Despite a year of policy delays, glitches and uncertainty, insurers may be the ones to come out ahead of other segments of the industry in 2018. Uncertainty and policy confusion will no doubt continue this year since House and Senate Republicans are already on different pages when it comes to healthcare reform.

    Now that the GOP's $1.5 trillion tax overhaul is done, House Speaker Paul Ryan (R-Wis.) is setting his sights on entitlement reform as a way to rein in costs. This could mean trimming welfare, Social Security and Medicaid, but he has signaled Medicare provider cuts are also on the table.

    In the Senate, Majority Leader Mitch McConnell (R-Ky.) and members of the GOP leadership consortium—Sens. John Thune of South Dakota and John Cornyn of Texas—say they want to go the bipartisan route and look at individual market stabilization measures proposed by Sens. Lamar Alexander (R-Tenn.) and Patty Murray (D-Wash.)

    But then GOP Sens. Bill Cassidy of Louisiana and Lindsey Graham of South Carolina want to revive their proposal to block-grant federal money for Medicaid and the Affordable Care Act exchanges. This idea was killed last summer during the Senate's failed attempts to repeal the ACA.

    Medicaid, which Republicans wanted to convert to a capped per-person payment structure, could get new attention.

    "It makes a lot of sense," Thune said.

    Meanwhile, President Donald Trump could use executive branch power to continue striking major blows to the ACA's individual market risk pool.

    So 2018 is shaping up to be another sink-or-swim year in healthcare: Adapt to the new rules—or lack of rules—or try to write them yourself.

    Who's going to do well in this environment? Whether you look at Centene Corp. in the individual market or the likes of UnitedHealthcare, CVS Health and Aetna competing for greater market share, including the Medicare Advantage space, the payer community is poised to fare well in the new Wild West of policy. This despite the fact that last year's tax overhaul effectively killed the individual mandate by eliminating the penalty for people who fail to obtain coverage.

    For other stakeholders—hospitals and providers who have watched helplessly as key programs lapsed without Congress mobilizing to fund them, or the Trump administration pivoting on value-based payment initiatives—the future isn't necessarily so bright.

    As we tumble into 2018, Congress still has a long must-pass, way-beyond-deadline healthcare agenda. But from what's known, here's an early look at Modern Healthcare's projected winners and losers in 2018.

    Winners: Carriers, carriers and carriers

    Insurers need certainty. But underwriters of the beleaguered individual market survived months of Trump administration threats to cut off cost-sharing reduction payments and adjusted their premiums accordingly. In fact, they ultimately beat the government at its own game.

    The administration will end up shelling out much higher premium tax credits for subsidized enrollees in the individual market because most states instructed insurers to add the cost of CSRs to their benchmark silver plans. Subsidies are calculated based on the cost of these plans.

    Some insurers may come out ahead under the ACA's risk-adjustment program. CMS data show that the government owes insurers $12.3 billion in risk-corridor payments to cover losses they incurred on the ACA exchanges from 2014 to 2016. The tab for 2016 alone is nearly $4 billion, according to a Modern Healthcare analysis of the data.

    The program was set up to offset insurer losses during the first three years of the insurance exchanges. It was intended to discourage insurers from raising premiums because of uncertainty over who would sign up for coverage.

    In 2014, however, a law was enacted making any risk-corridor payments revenue-neutral, which affected how much the CMS could pay out. In turn, insurers have filed 36 different lawsuits against the government to recoup the money. Most of the cases until now have been dismissed as judges gave the executive branch the benefit of the doubt and said that maybe more payments would come.

    Now that's no longer the case. In addition, said Mike Adelberg, principal at Faegre Baker Daniels and a former CMS official, the guidance that exists on risk corridors may be interpreted in carriers' favor since the full set regulatory and operational instruction doesn't fully support the argument that the payments in totality be budget-neutral. Moreover, Adelberg said, the Trump administration has been largely silent on the subject. So insurers have good reason to expect the money they were promised when they joined the ACA exchanges.

    Of course, nothing is certain in Washington these days. As Congress proved last year, even mandatory appropriations are hard to come by.

    Nonetheless, the facts that insurers have proven their ability to adapt and the overall uncertainty that dominated 2017 has waned give Hema Singh of Standard & Poor's reason to believe that insurers have a stable financial outlook.

    This isn't to say the individual market itself is what it was designed to be. The dream of a single risk pool in which the healthy people underwrite the sick is largely over, at least for now, healthcare experts and analysts say.

    Timothy Jost said President Trump's executive orders to expand short-duration plans and association health plans, as they take effect, will likely draw healthy, young people out of the market and the trend will carry nationwide.

    "There are states like California where things are doing relatively well," said Jost, emeritus health law professor at the Washington and Lee University School of Law. But as states receive regulatory permission to change the rules and siphon healthy people off into short-term plans, the risk pools will split and the individual market could begin to look more like a higher-end Medicaid program with heavily subsidized private plans mostly serving lower-income people and people with pre-existing conditions who don't have employer-sponsored coverage.

    So ultimately, if Congress doesn't fund CSRs, the shakeout could end with the individual market looking like a second tier of Medicaid, subsidized with generous premium tax credits that will cost more than anticipated by the ACA.

    A caveat to this prediction: Centene, with origins in Medicaid managed care, has figured out how to make the exchanges work by harnessing its Medicaid networks. But the company has come under scrutiny in Washington state where patient advocates found the carrier's provider networks were less than adequate. Determining what a provider network should look like could be the next battlefront.

    Off the exchanges, insurers like Aetna and UnitedHealthcare are gunning to package short-term, limited-duration plans and so-called self-insured plans for the small-group market that essentially siphons off good risk with young and healthy employees. Researchers with Georgetown's Center on Insurance Reforms noted this trend over the summer. In states where these self-insured plans took off, the small groups saw double-digit premium spikes.

    Add to that impending delays to the ACA's health insurance tax and Cadillac tax and big insurers look bullish.

    Unfinished business

    Lawmakers return to the nation's capital with a lot of work left over from 2017.

    • Children's Health Insurance Program: The short-term budget patch approved in late December added $2.9 billion to CHIP, funding it through March.• Medicare extenders: The enhanced low-volume adjustment and the Medicare dependent hospital program were lost in the shuffle in the weeks leading up to the short-term spending deal.• Affordable Care Act taxes: There have been some bipartisan conversations about delaying the Cadillac tax, the employer mandate, the health insurance tax and the medical-device tax, but both sides are still talking about compromises to pay for them. • Individual market stabilization: The government is paying out more in premium tax credits now that cost-sharing reduction payments are gone. There's a rift within the GOP on how to handle CSRs.• Opioid epidemic: Leading senators on both sides want to give President Trump's public health emergency declaration heft with funding, but so far they haven't agreed to a number.• Drug pricing: Health committees in both the House and Senate have started to look at drug pricing and HHS Secretary-designate Alex Azar addressed the issue at length in his first Senate confirmation hearing.
    Losers: Potentially everyone else

    Let's start with providers. State regulators scrambled last summer and fall to reshape their insurance markets while they tried to guess what the Trump administration would do with CSR payments. An unintended consequence was a spike in access to free bronze plans for low-income consumers. Consultancy Avalere found that 98% of counties with exchanges operated by HealthCare.gov would have free bronze plans in 2018 for low-income consumers age 50 earning 150% or less of poverty-level income.

    This doesn't affect carriers, said Sean Mullin of Leavitt Partners, but the impact on physicians and hospitals could be sizable since these plans carry high deductibles.

    On the regulatory front, doctors face more administrative work through the continued rollout of the Medicare Access and CHIP Reauthorization Act. Importantly, physicians taking part in the Merit-based Incentive Payment System will have to submit a full year of quality performance data, rather than the 90 days required in 2017. Clinicians will also be held accountable if they aren't saving money under the program.

    Under MIPS, providers can be rewarded or penalized based on their performance. The CMS can impose deep cuts on doctors since MACRA allows the agency to judge providers on cost improvement. In fact, cost-cutting accounts for 30% of a provider's MIPS score by the third year of MACRA. The law allowed the CMS to waive the cost measure for two years, but by the third year it has to kick in at the 30% rate, creating a steep cliff.

    The CMS said it was considering waiving the policy for the second year in a row last fall. Providers had worried there were not enough cost measures. Ultimately, the agency decided cost-cutting will account for 10% of a provider's MIPS score in the second performance year. The agency said that will make the cost performance category more gradually in the third year.

    The moves show that "CMS is definitely moving to a value-based payment that is moving away from the old volume-driven system," said Dr. Michael Munger, president of the American Academy of Family Physicians.

    Hospitals, particularly rural and critical access ones, also have reason for concern in 2018. Rural hospitals have been closing at an accelerated rate since the ACA came into effect, according to Maggie Elehwany of the National Rural Health Association. This is largely due to implementation of the law after states fought Medicaid expansion and won, she said. More than 70% of rural residents opt for high-deductible bronze plans on the exchanges and, if they are sick enough to meet the high deductible, have often moved on to urban centers where their deductible kicks in, leaving rural hospitals riddled with bad debt. In 2017, a Chartis Center for Rural Health analysis found 44% of rural hospitals operate at a loss, up from 41% in 2016.

    And Congress hasn't proved to be a reliable partner when it comes to funding key federal programs that hospitals rely on.

    The low-volume hospital adjustment and Medicare-dependent hospital program—two of the so-called Medicare extenders that have to be appropriated by Congress—expired last September and the can has once again been kicked down the road into January.

    Lawmakers turned the popular, traditionally bipartisan Children's Health Insurance Program into a fiercely partisan squabble, jeopardizing coverage of millions of kids.

    The 340B drug discount program—beloved by many hospitals but loathed by others—is also facing heightened scrutiny and demands of program transparency. With the pharmaceutical industry backing reforms, hospital lobbyists are on the watch for a drastic change to the program they use to fund care for vulnerable patients.

    Cuts to disproportionate-share hospital Medicaid reimbursements—mandated by the ACA but so far delayed—have also taken effect despite heavy lobbying.

    Congress shows no sign of changing its ways.

    Wild card: The states

    GOP congressional leaders and the Trump administration spent much of 2017 promising state regulators greater autonomy in shaping their individual healthcare systems. It remains to be seen how they'll flex their muscles should those promises come to fruition.

    Congress' delay in authorizing CHIP has panicked many states, for one thing. While CMS Administrator Seema Verma vowed to grant sweeping Medicaid waivers to make conservative reforms, few have been approved to date. States have also had to troubleshoot other decisions by the administration, including the shortened ACA open-enrollment period and now the fallout from the upcoming guidance on association health plans that could potentially reshape insurance.

    "It's almost like, what shoe drops next?" said Trish Riley of the National Academy of State Policy. "Whatever action the administration takes can impact the individual market in the states."

    States are also on the front lines of fighting the opioid epidemic, so far with little federal funding help. Congress is still debating an appropriation that was supposed to be included in an end-of-year spending package. The fact that states have been kept in so much uncertainty may hurt the chances of support for the Graham-Cassidy block-grant proposal, which would essentially make all state healthcare funding a mandatory appropriation Congress would have to authorize every few years. Given the highly partisan nature of the policy, this is a big gamble. Cassidy often pointed to CHIP as the assurance the block grants would always get appropriated. That argument doesn't stand up so well now.

    Additionally, states are in political limbo themselves with 36 governors up for election in 2018, and how they will handle health policy remains to be seen, Riley added.

    What to watch: Big Pharma policy

    The opioid abuse epidemic has heightened political will to look at pharmaceutical companies and their role in the crisis as well as their profits from the proposed solutions. Additional GOP attempts to cut Medicaid might also drive at least some drug pricing reform measures.

    "Pharma always wins," said Jeff Myers, CEO of Medicaid Health Plans of America. But policymakers may have to start addressing pricing as "states are getting eaten alive."

    Myers pointed to recent state-led efforts to bring transparency to drug pricing and suggested that Congress may be forced to act.

    Letter
    to the
    Editor

    Send us a letter

    Have an opinion about this story? Click here to submit a Letter to the Editor, and we may publish it in print.

    Recommended for You
    congress prescription drugs
    PBMs, Big Pharma face off in House hearing
    Biden COVID copy_i_i.jpg
    Biden administration asks employers to help more workers who lose Medicaid
    Most Popular
    1
    Centene to lay off 2,000 workers
    2
    How health systems are battling price-gouging allegations
    3
    Senate advances bill to temporarily aid hospitals, health centers
    4
    Elevance, Blue Cross Louisiana halt $2.5B proposed deal
    5
    Tower Health to sell urgent care centers, close others
    Sponsored Content
    Modern Healthcare Alert: Sign up for this breaking news email to be kept in the loop as urgent healthcare business news unfolds.
    Get Newsletters

    Sign up for enewsletters and alerts to receive breaking news and in-depth coverage of healthcare events and trends, as they happen, right to your inbox.

    Subscribe Today
    MH Magazine Cover

    MH magazine offers content that sheds light on healthcare leaders’ complex choices and touch points—from strategy, governance, leadership development and finance to operations, clinical care, and marketing.

    Subscribe
    Connect with Us
    • LinkedIn
    • Twitter
    • Facebook
    • RSS

    Our Mission

    Modern Healthcare empowers industry leaders to succeed by providing unbiased reporting of the news, insights, analysis and data.

    Contact Us

    (877) 812-1581

    Email us

     

    Resources
    • Contact Us
    • Help Center
    • Advertise with Us
    • Ad Choices
    • Sitemap
    Editorial Dept
    • Submission Guidelines
    • Code of Ethics
    • Awards
    • About Us
    Legal
    • Terms and Conditions
    • Privacy Policy
    • Privacy Request
    Modern Healthcare
    Copyright © 1996-2023. Crain Communications, Inc. All Rights Reserved.
    • News
      • Current News
      • Providers
      • Insurance
      • Government
      • Finance
      • Technology
      • Safety & Quality
      • Digital Health
      • Transformation
        • Patients
        • Operations
        • Care Delivery
        • Payment
      • ESG
      • People
      • Regional News
        • Midwest
        • Northeast
        • South
        • West
      • Digital Edition (Web Version)
    • Blogs
      • AI
      • Deals
      • Layoff Tracker
      • HIMSS 2023
    • Opinion
      • Breaking Bias
      • Commentaries
      • Letters
      • From the Editor
    • Events & Awards
      • Awards
        • Nominate/Eligibility
        • 100 Most Influential People
        • 50 Most Influential Clinical Executives
        • 40 Under 40
        • Best Places to Work in Healthcare
        • Excellence in Governance
        • Health Care Hall of Fame
        • Healthcare Marketing Impact Awards
        • Top Innovators
        • Diversity in Healthcare
          • - Luminaries
          • - Top 25 Diversity Leaders
          • - Leaders to Watch
        • Women in Healthcare
          • - Luminaries
          • - Top 25 Women Leaders
          • - Women to Watch
      • Conferences
        • Digital Health Transformation Summit
        • ESG: The Implementation Imperative Summit
        • Leadership Symposium
        • Social Determinants of Health Symposium
        • Women Leaders in Healthcare Conference
      • Galas
        • Best Places to Work Awards Gala
        • Health Care Hall of Fame Gala
        • Top 25 Diversity Leaders Gala
        • Top 25 Women Leaders Gala
      • Virtual Briefings
        • - Hospital of the Future
        • - Value Based Care
        • - Hospital at Home
        • - Workplace of the Future
        • - AI and Digital Health
        • - Future of Staffing
        • - Hospital of the Future (Fall)
      • Webinars
    • Multimedia
      • Podcast - Beyond the Byline
      • Sponsored Podcast - Healthcare Insider
      • Sponsored Video Series - One on One
      • Sponsored Video Series - Checking In with Dan Peres
    • Data & Insights
      • Data & Insights Home
      • Hospital Financials
      • Staffing & Compensation
      • Quality & Safety
      • Mergers & Acquisitions
      • Data Archive
      • Resource Guide: By the Numbers
      • Surveys
      • Data Points
    • Newsletters
    • MORE+
      • Contact Us
      • Advertise
      • Media Kit
      • Jobs
      • People on the Move
      • Reprints & Licensing