Discover the differences between level-funded and self-funded employee health insurance
By Julie Rovner
With Republican efforts to “repeal and replace” the Affordable Care Act stalled, tentative bipartisan initiatives are in the works to shore up the fragile individual insurance market that serves roughly 17 million Americans.
The Senate Health, Education, Labor and Pensions Committee launches hearings the week Congress returns in September on “stabilizing premiums in the individual insurance market” that will feature state governors and insurance commissioners. A bipartisan group in the House is also working to come up with compromise proposals.
Both before and after implementation of the federal health law, this market—serving people who don’t get coverage through work or the government—has proved problematic. Before the law, many people with preexisting health conditions could not get insurance at any price. Now, consumers in the individual market often face higher out-of-pocket costs and fewer choices of health care providers and insurers than in past years. More than 12 million people buy that insurance through the ACA’s marketplaces, while another 5 million buy it outside of the exchanges.
Policymakers generally agree on what immediate efforts to stabilize the market might include. At the top of most lists is ensuring federal payment of subsidies to insurers to pay the out-of-pocket expenses—such as deductibles and copayments—to protect customers with the lowest incomes. Insurers also want the federal government to continue enforcing the requirement that most Americans either have insurance or pay a tax penalty, and continuing efforts to get uninsured people to sign up for coverage during the upcoming open enrollment period, from Nov. 1 to Dec. 15. Those efforts are essential, insurers say, to help keep healthy customers in their risk pools to defray the costs of beneficiaries with medical needs.
But what about ideas that go beyond the oft-repeated ones? Here are five proposals that are more controversial but generating buzz.
Getting slightly younger people into Medicare, the federal program for the disabled and Americans 65 and older, is a longtime goal of Democrats. It dates at least to the Clinton administration and was nearly included in the Affordable Care Act in 2010. A Medicare buy-in is not exactly the same as a “public option,” which many Democrats, including former President Barack Obama, have embraced. A true public option would offer government coverage to those of any age.
Lowering the age for Medicare eligibility (whether by allowing people to purchase coverage early or letting them join on the same terms as those aged 65) is controversial. Some Democrats support it as a first step toward a single-payer, Medicare-for-All system. Most Republicans oppose it on those same grounds — as a step toward government-run health care.
But proponents argue it would help the current individual market by excluding the oldest people, thereby lowering the average age of the risk pool. Since older patients, on average, cost more to insure, the change could lower premiums for everyone left in the ACA market. That’s the stated goal of a Medicare buy-in bill introduced earlier this month by Sen. Debbie Stabenow (D-Mich.) and seven other Democratic senators. That bill would allow Obamacare market customers ages 55-64 to purchase Medicare coverage instead, but would also let them use ACA tax credits if they are eligible for those. The cost of such policies, however, has not been worked out.
“The way we’ve structured it actually both helps Medicare by having younger people in that pool, and it helps private insurance by taking higher-cost individuals out of their pool,” Stabenow told The Detroit News.
Conservative health analysts don’t buy that, though. “This is just a way of saying we’re going to take these people out of the exchanges and put them where there are bigger subsidies,” said Joseph Antos at the conservative-leaning American Enterprise Institute (AEI).
An alternative to letting people buy in to Medicare is letting them buy in to Medicaid, the joint federal-state program for those with low incomes.
Medicaid buy-ins already exist — for example, in 2005 Congress passed the Family Opportunity Act, which allows families earning up to three times the poverty level to purchase Medicaid coverage for their disabled children who aren’t otherwise eligible. Medicaid has typically provided richer benefits for those with disabilities than private health insurance.
Earlier this year, Gov. Brian Sandoval (R-Nev.) vetoed a bill that would have allowed Nevada residents to buy Medicaid coverage through the state’s insurance exchange.
Now Sen. Brian Schatz (D-Hawaii) is pushing a federal Medicaid buy-in plan, which he described to Vox.com last week. It would give states the option to allow people with incomes over current Medicaid eligibility thresholds to pay a premium to join the program. Like the Medicare buy-in bill, it would allow those who qualify for federal tax credits to use them to pay the premiums.
The proposal would also raise the amounts Medicaid pays to doctors, hospitals and other health care providers to the same level as it pays for Medicare patients. Traditionally, low Medicaid payment rates have kept many doctors, particularly specialists, from taking Medicaid.
As with the Medicare expansion, the idea of a further Medicaid expansion does not sit well with conservative policy analysts. “It’s completely unworkable,” Avik Roy of the Foundation for Research on Equal Opportunity, told Vox. He predicted it would raise Medicaid spending by $2 trillion over 10 years.
Allowing young adults up to age 26 to stay on their parents’ health plans is unquestionably one of the most popular ACA provisions. Democrats have touted it proudly while Republicans have dared not touch it in almost any of their overhaul proposals.
Yet what has been a boon to 3 million young adults (and a relief to their parents) has come at a cost to the individual marketplace itself, where only an estimated 28 percent of those buying coverage in state exchanges were ages 18-34 in 2016. That is well below the 40 percent most analysts said was necessary to keep the market stable.
“Frankly, it was really stupid,” to keep those young people out of the individual market, said Antos of AEI. The result has been a lack of people in the risk pool who are “young, healthy and whose parents will pay their premiums.”
But rolling back that piece of the law might be nearly impossible, said Antos, because “this is a middle-class giveaway.”
One clear shortcoming of the individual marketplace is a lack of insurer competition, particularly in rural areas. While there appear to be no counties left with no company offering coverage for the coming year, the percentage of counties with only one insurer seems certain to rise from 2017’s 33 percent.
In an effort to more strongly encourage private companies to step up and offer coverage, several analysts have suggested tying access to participation in other government programs to a willingness to offer individual ACA policies as well.
For example, some have suggested insurers be required to provide policies in the marketplaces as a condition of being able to offer coverage to federal workers. Others have suggested that private insurers who offer profitable Medicare Advantage plans could also be required to offer individual exchange coverage, although the same rural areas with a lack of private individual market insurers also tend to lack Medicare Advantage coverage.
A little-noticed provision in one of the versions of the Senate GOP health bill that failed to pass in July would have allowed people to use money from tax-preferred health savings accounts (HSAs) to pay their insurance premiums. A little-noticed proposal from a group of ideologically diverse health care experts included a similar idea.
HSAs are linked to high-deductible insurance plans, and consumers use the money in the account to pay their out-of-pocket expenses. The money put into the account and the earnings are not taxable.
With a few exceptions, people with HSAs have not been allowed to use those funds to pay monthly premiums. But the change would be one way to provide relief to people who buy their own insurance, earn too much to get federal premium subsidies and cannot deduct premiums from their taxes because they are not technically self-employed. Such people, though likely small in number, have been disproportionately hurt by rising premiums in the individual market since the ACA took full effect.
Still, the change would involve some trade-offs.
Roy Ramthun, who helped design HSAs as a Senate staffer in the early 2000s and helped implement them while at the Treasury Department during the George W. Bush administration, said that, generally, “Republicans have preferred to subsidize insurance premiums through tax deductions and credits and leave the HSA for out-of-pocket expenses.” Allowing premiums to be paid from HSA funds, he said, “could eat up the entire balance of the account and leave nothing for out-of-pocket expenses.” There are limits to how much money can be put into an HSA. For 2017, the maximum is $3,400 for an individual and $6,750 for a family.
Kaiser Health News, a nonprofit health newsroom whose stories appear in news outlets nationwide, is an editorially independent part of the Kaiser Family Foundation.
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