WASHINGTON (CN) – Senate Majority Leader Mitch McConnell has a predicament. Still short on votes to pass the Senate health care bill, he’s warned his Republican colleagues they might have to work with Democrats to stabilize insurance markets if they fail to deliver on their long-standing promise to repeal and replace Obamacare.
Complicating McConnell’s efforts further, a recent report let some of the air out of the GOP rallying cry that the marketplaces are in a death spiral.
According to a July 10 study by the Kaiser Family Foundation: “Early results from 2017 suggest the individual market is stabilizing and insurers in this market are regaining profitability.”
“Insurer financial results show no sign of a market collapse,” the Kaiser study found.
Worse still for McConnell, 71 percent of Americans want Congress to work in a bipartisan fashion to improve – not repeal and replace – the Affordable Care Act, according to the Kaiser Family Foundation’s most recent poll.
Whether McConnell can hammer the bill through is a looming question – he can only afford to lose two Republican votes. With Senate Republicans set to unveil the latest version of their health care bill Thursday morning, it is far from clear whether the latest tweaks can secure the 50 votes the leader needs to pass it.
The health care bill process has been conducted exclusively with Republican input, and largely behind closed doors. Democrats have signaled a willingness to work with Republicans, but only if they drop efforts to repeal and replace the ACA and instead try to improve the portions that aren’t working well.
A January report by the independent Urban Institute breathes life into that idea. It identified nine parts of the Affordable Care Act that Congress could tweak – several of which directly address stabilizing the marketplaces and reducing premiums – both of which have underpinned Republican battle cries to repeal and replace the law.
The report argues that replacing a law as central to the health care market as the Affordable Care Act will be difficult, both politically and practically, and that fixing the law would be a better approach.
“Given the possibility of insurance market chaos during the period between repeal and effective replacement and the unavoidable challenges of implementing a new set of reforms, policymakers should ask whether correcting the flaws in the ACA might sufficiently address critics’ major concerns,” the report states.
One of the authors of that report, Linda Blumberg, said the Affordable Care Act had some pre-existing weaknesses built into it, but she does not believe the law is on the verge of collapse.
“I don’t believe that the marketplaces are in a death spiral,” she said in a phone interview.
Blumberg, a senior fellow in the institute’s Health Policy Center, pointed to several Trump administration policies that have created uncertainty for insurers.
Under the new president’s leadership, Congress has not committed to paying cost sharing subsidies, which is having “an enormously destabilizing effect,” Blumberg said.
Those subsidies were written into the ACA, and require insurers to provide assistance to help people with incomes below 250 percent of the federal poverty level lower their deductibles, copayments and out-of-pocket expenses.
Whether or not the government pays insurers for these subsidies, they are still required to provide that assistance.
As part of her ongoing research at the Urban Institute, Blumberg and her colleagues regularly speak to insurers to better understand the issues facing them.
“The single most often mentioned reason for their thoughts of spiking premiums substantially or pulling out of these marketplaces is the uncertainty surrounding whether or not they’re going to get paid for the benefits they have to pay out,” Blumberg said.
Committing to paying those subsidies would have an instant stabilizing effect.
“The first important thing that needs to be corrected immediately is that the cost sharing reductions that are owed and would be owed in the future to insurers participating in the marketplaces need to be paid,” Blumberg said.
The Trump administration also pulled back funding for outreach and enrollment to bring more people into the markets, shortened the enrollment period for this year and signaled it won’t enforce the individual mandate penalties.
Those factors impact the risk pools by discouraging healthier people from signing up for health insurance, which drives up the average costs for those left in the pool.
“All of these things speak to insurers in very large letters than their risk pool is potentially getting significantly worse than it was,” Blumberg said. “And when they expect their risk pool to get significantly worse, they’re either going to pull out or they’re going to charge much higher premiums.”
While the Affordable Care Act engendered competition among insurers in metropolitan areas, it did not work so well in rural areas with lower population densities, where Blumberg said it was difficult to attract insurers.
That left many counties with few, and often only a single provider, creating what is essentially a monopoly and driving up prices in those areas.
Concentrated ownership of health care providers in a particular area can create or compound the problem, because they can charge insurers higher prices. Minus competition, health insurers have no impetus to bargain with those providers for lower prices.
“All they [providers] have to do is say ‘listen, we’re the only game in town. You either take the prices that we’re charging you, which are exorbitant, or we’re not going to play with you.’ And then you’ve got no providers,” Blumberg said.
Republicans have decried the lack of insurers in many counties across the country and the high premiums that engenders. But here too the Urban Institute offers a fix: cap what providers in these areas can charge for payment rates using the Medicare advantage program as a model.
Blumberg said she would recommend Medicare rates, plus some reasonable percentage, which would encourage new insurers to enter these markets.
Neither monopoly providers nor insurers would necessarily be happy with capped rates, but they would likely prefer that to a public option, which Blumberg said is among the only other ways to address this problem.
“I’m quite positive that insurers will feel much more favorably toward capping the payment rates at some fixed level than they would competing with a government insurer,” Blumberg said.
That accounts for the lion’s share of what’s driving high premiums in those areas, but Blumberg said reinsurance programs can alleviate high costs in places like Alaska, where costs were high because of small markets, a small number of people enrolled in the market or seemingly healthy people who ended up being high-cost patients.
The reinsurance program will subsidize the cost of claims from individuals with high-cost conditions, thereby removing them from the risk pool, which will help drive down premium costs.
Reinsurance was temporarily written into the ACA, but only for three years. That provision expired in 2016.
Extending that program and allowing permanent subsidies could encourage insurers to stay or reenter markets, Blumberg said.
Reinsurance is a permanent feature of the Medicare program, and both the House and Senate health care bills include a reinsurance provision. Although Blumberg said she’s glad this component is in the bills, she said they are still insufficient.
“From my perspective they’re far less replacements for the Affordable Care Act, and really an undoing of the Affordable Care Act,” she said. “Because they’re really taking us back to coverage levels that approximate what we would have had had the Affordable Care Act never been put in place.”
Some conservative health care watchers, however, are adamant that the ACA must be repealed and replaced in order to fix the health care system. Improving the existing law won’t do the trick, according to Jean Morrow, a health care research assistant at the Heritage Foundation who sees the Affordable Care Act as the root of a problem too deep for a few tweaks to repair.
“What the Affordable Care Act did is it federalized control of state health insurance markets. And this is something the states used to regulate on their own before.” Morrow said in a phone interview.
“The states are closer to the people, they understand their constituents’ needs more, so in order to get healthcare back on track we have to repeal and replace Obamacare and get states back in the regulatory seat of their markets,” she added.
Ultimately, that is what Morrow said will reduce costs and place patients back in the center of their health care.
Several Republican senators, including Rand Paul of Kentucky, agree with that position. This will make McConnell’s job all the more tricky. If he adds provisions that will satisfy Paul and other conservatives who support a full repeal and replacement of the bill, he’ll lose the moderates.
It remains unclear whether the new version of the Senate bill will satisfy the more conservative wing of the party.
Regardless, Morrow said the Senate bill still needs some work.
One way to improve it would be to allow states to get waivers so they can test different ways to incentivize people to maintain continuous health insurance coverage, she said. A recent addition to the current bill would lock people who go without health insurance for a portion of a given year out of the market for six months.
It is unclear if that proposal will be included in the latest version of the bill but Morrow said states would be good places to experiment with other ways of achieving the same goal.
“We need to maximize every opportunity to undo the damage of Obamacare and that starts with this bill,” Morrow said. “But again, health care reform is an ongoing process that involves multiple actors and ultimately we’d like to see a reality where we have a patient-centered, market-based health care system.”