The administration’s individual-insurance market moves are the latest initiatives that seek to financially undermine the “medical-industrial complex,” which opposed repealing the ACA, one analyst says.

Oct. 16—Both hospitals and insurers are expected to see financial effects from the Trump administration’s latest initiatives in relation to the Affordable Care Act’s (ACA) insurance marketplaces.

Among the range of actions that the Trump administration took recently regarding the individual health insurance markets, the only immediate effect was the decision to end cost-sharing reduction payments, which subsidize out-of-pocket costs for ACA marketplace enrollees who earn up to 250 percent of the federal poverty level. A federal judge previously ruled that such administratively provided CSR funding was illegal and needed to be appropriated by Congress.

The end of CSR payments will likely leave insurers to figure out how to cover the cost of the missing payments for the remaining three months of 2017. For 2018, insurers are expected to add the cost of covering the CSR payments to their Silver plan premiums, according to industry watchers.

The resulting rise in Silver plan premiums both on- and off-exchange—they are required to be identically priced—will likely cause many non-subsidized Silver plan enrollees to switch to Gold plans, and premiums for those will likely drop, according to projections by the Congressional Budget Office.

Hospitals could benefit from a decrease in marketplace enrollees with Bronze and Silver plans—which have higher out-of-pocket costs—because they have complained that  patients with such plans haven’t been able to cover any of their out-of-pocket costs, said John McCarthy, founding partner of Speire Healthcare Strategies and former director of the Washington, D.C., and Ohio Medicaid programs.

“Theoretically the Gold plan lowers that, so it would be better for a hospital,” McCarthy said.

“The real impact will probably be on insurers saying, ‘You know what, I just don’t want to fool with this anymore,’ and that has increasingly become the sentiment among insurers,” said Emily Evans, managing director for health policy at investment adviser Hedgeye, in reference to participation in the marketplaces.

McCarthy noted some states had insurers submit rates based on the assumption that CSRs would not be provided.

“So theoretically for states that said, ‘Use bill rates assuming they wouldn’t be in there,’ they would be OK,” McCarthy said.

Little impact on insurer participation in 2018 is expected, but Evans expects debate on continued participation to sharpen heading into 2019—assuming Congress does not appropriate the CSR payments by then.

Insurer and hospital advocates responded to the administration’s decision to end CSR payments by ramping up pressure on Congress to appropriate the funding.

“It is critically important that the Congress act with dispatch to ensure the federal funds remain available to pay for the cost sharing for those working American families," said Chip Kahn, president and CEO of the Federation of American Hospitals.

“We support and strongly encourage the development of a bipartisan legislative solution to stabilize the individual insurance marketplace,” said Mary Grealy, president of the Healthcare Leadership Council, a coalition of hospitals, insurers, and other entities. “A solution that provides assurance of continued cost-sharing reduction payments in conjunction with greater regulatory flexibility for states in carrying out the Affordable Care Act would serve the nation, and the health of our fellow citizens, well.”

“We call on Congress to immediately shore up the ACA marketplace and to work in bipartisan fashion, with hospitals and other stakeholders, toward long-term and sustainable ways to give all people access to affordable, comprehensive care,” said Bruce Siegel, MD, president and CEO, America’s Essential Hospitals.

The leaders of the Senate Health, Education, Labor and Pensions Committee have restarted stalled bipartisan negotiations on a CSR funding package, but those discussions have snagged over partisan differences regarding the amount of state insurance regulatory flexibility to allow.

Despite the industry’s urging, it is not clear that Congress will clear any CSR legislation.

“I am assuming they won’t act because I don’t see any real consensus there,” Evans said.

Executive Order

President Donald Trump also issued an Oct. 12 executive order that contained numerous provisions affecting both insurers and hospitals. Unlike the CSR decision, the impacts of the executive order will be delayed until the issuance of implementing rules and other actions by federal agencies.

The order directed the issuance of rules facilitating the use of association health plans (AHPs), short-term, limited-duration insurance (STLDI), and health reimbursement arrangements (HRAs).

Some industry advisers have noted that the order limits AHPs to business plans, and small businesses already can pool together to buy insurance through professional employer organizations. Millions already get their insurance this way, and the new policy is not expected to add many to the total.

The second provision targeted the Obama administration’s mid-2016 regulatory move to limit STLDI policies from 364 days to three months. Given that such plans existed for most of the existence of the ACA marketplaces, their return is not expected to have a large effect.

The HRA change could spur the issuance of rules to allow companies with more than 50 employees to help fund their workers’ purchase of individual-market insurance plans. The Obama administration had established the 50-employee limit to prevent a shift of employees from employer-sponsored insurance to the individual market.

Other Items

Beyond the individual-insurance market, the executive order also sought to limit “excessive consolidation.”

“That is a note to [Attorney General] Jeff Sessions at the Department of Justice,” Evans said, referring to the potential for stepped-up antitrust enforcement.

Hospital deals have continued at an aggressive pace in recent years, totaling 102 in 2015 and 90 in 2016, according to Irving Levin Associates.

The order also urged steps to “improve access to and the quality of information that Americans need to make informed healthcare decisions, including data about healthcare prices and outcomes, while minimizing reporting burdens on affected plans, providers, or payers.”

“If hiding prices is part of your business model, you might want to also rethink that,” Evans said.

Concerns among insurers and hospitals about the effects of some of Trump’s recent administrative actions not only may fall on deaf ears but may be missing the point entirely.

The president “wants to stick it to a lot of businesses that blocked his path for ACA repeal and denied him a legislative win that was something he has promised along with Congress,” Evans said, referring to entities that have been derided as part of the “medical-industrial complex.”

The opposition of hospitals, in particular, to the ACA repeal may have made them targets for more cuts. For example, a proposed change to the 340B program would cut $8 billion in hospital revenue, while several proposed rule changes would discourage the use of outpatient hospital departments for high-revenue Medicare procedures.

“Anything that hobbles the system and makes it politically less powerful—and also saves money—seems to be of interest,” Evans said.

McCarthy was doubtful that recent cuts aimed at hospitals were driven by politics.

“From the perspective of having been a Medicaid director, it’s where the money’s at, so that’s why they’re looking at those,” McCarthy said. “I’m sure other areas will be looked at soon also.”

Rich Daly is a senior writer/editor in HFMA’s Washington, D.C., office. Follow Rich on Twitter: @rdalyhealthcare

Publication Date: Monday, October 16, 2017