As the saying goes, “Nothing is so constant as change”. We are likely going to face major changes in the health insurance industry once again. If the President Elect’s campaign promises are to be met, then the ACA (Affordable Care Act) aka Obamacare will be repealed in a “special session” of Congress on the day of the inauguration.
For the moment, we will ignore the fact that Congress is actually in session in January and therefore no special session is necessary. However since the promise was to repeal the legislation and the Republican party voted 60 times to repeal it, one might expect that it is the intention to do so. But we all know that campaign promises and reality are often far from the same. Further, there is still the possibility of a filibuster since Republicans do not have 60 votes.
Mr. Trump left his meeting with our current President pledging to consider some of his requests, only to have his staff double down on the “pledge to repeal” later in the day.
A repeal will allow insurers to write the “Swiss cheese” policies that were in effect before the ACA. It will eliminate the 85% loss ratio that requires insurers to pay out 85 cents of every dollar in direct claims.
As you can imagine, I am reading voraciously to understand how this might change so I can continue to serve my clients’ best interests. For now, I think it would be helpful to share some Q&A received from our California Association of Health Underwriters (CAHU-NAHU).
This organization represents professional health insurance agents. Since we are on the front lines with clients, we are acutely aware of how laws actually effect the public. This connection means that NAHU is in many ways a client advocacy group as well.
Even if changes are made at the federal level, do we think California will continue down the ACA model framework? What might that look like? Everyone should keep in mind that California has its own statutory framework – distinct and apart from the federal law. California law will stand, even if the federal laws are changed, replaced, or repealed, unless the federal statute also dictates a dismantling of California law. It is expected that California keeps Covered California. However, it may look and run much differently than it does today.
If exchanges go away and are replaced with an advanceable and refundable tax credit, will California shut down CoveredCA or continue as the source to access Medicaid/subsidies/cost sharing reductions? At this point, it seems unlikely that Covered California would shut down anytime in the near term. They are fully funded for the current fiscal year. With the makeup of CA Legislature and a same party Democrat Governor, it is very possible they will search to find new funding/tax dollars to keep as much of Covered California programs operational and intact as possible.
Note: I am not exactly sure how that would work if in fact there is an immediate repeal, since the individuals’ subsidies are all from federal tax dollars and my understanding is that those are all included in the ACA. So we may continue to have better access in CA, but no subsidies. Further, isn’t an “advanceable and refundable tax credit” the same thing-government subsidy? I thought the subsidy cost was the big objection.
Are high risk pools back on tap if we go back to individual underwriting and the individual mandate goes away? Does the employer mandate and reporting go away? Unknown. Certainly they are likely being discussed at the federal level with NAHU and transition team.
Note: Mr. Trump has said that he wishes to save no pre-existing conditions and guaranteed issue of policies, but would eliminate the mandate. Insurers agreed to “guaranteed issue” because of the mandate. Otherwise, they would be exposed to more adverse selection. Wouldn’t we all just wait until we were sick to by insurance if we had guaranteed issue and no pre-ex?
I am unclear how buying insurance across state lines will help since insurance is now rated by zip code and regulated by states. It seems that would create a whole new bureaucracy.
CAHU-NAHU has been working hard to fix some items of the ACA, such as the 3:1 age ratios that resulted in higher premiums for young people.
It will continue its work to attempt to fix the law rather than repeal, but frankly I am not sure how that will play with Mr. Trump, his team, his handlers and his supporters. There was never any discussion of fixing on the campaign trail, it was the call to “Repeal!” that rallied the voters. But perhaps if they change a few things and call it Trump-Care it will be acceptable. But, will there be a royalty fee for the name?