The new administration promised to focus on healthcare. From the ACA to Medicare for All, big questions remain on what aspects will be impacted and if the President can muster the votes to make sweeping changes. Here is how we see the future shaping up.
With the Democrats securing the Presidency as well as a majority in the Senate, albeit by a thread, my crystal ball has become a bit less cloudy. We’ve already seen the administration open up the individual marketplace for a Special Enrollment Period. I am sure there will be more changes ahead. Whether they will be quickly implemented with the swipe of a pen on an Executive Order or take months (years?) through legislative wrangling remains to be seen. Here’s a recap of what I sense may be coming.
The Senate Stalemate
Before gazing into the future, I need to root my predictions in the rules of the Senate. If you have watched any political news over the past two months, you probably know more about filibusters and reconciliation than you ever wanted to know. To quickly summarize, in most cases the Senate only requires a simple majority (50 votes) to pass a bill. However, there are several procedural steps along the way that require a super majority (60 votes) to end debate on a bill so that it can actually be sent to the floor for a vote. Senators may hold up bills during the procedural steps, never allowing a bill to make it to the floor (called “filibustering”) for a vote. There are some bills that can bypass these “super majority” procedural steps, one of which is budget reconciliation. The catch? Anything included in a reconciliation bill must be related to certain tax, spending and debt limit legislation. This is the tact that is being used currently to try to pass the next economic relief bill. Soon we will be hearing more from the Senate Parliamentarian, whose job it is to determine if any provisions of an economic reconciliation bill do not pass muster as a tax change, spending change, or debt limitation.
Filling the Medicaid Coverage Gap
Under the ACA, two provisions were included to ensure all those earning less than 400% of the FPL would have access to affordable coverage – through individual premium subsidies and Medicaid expansion. These two provisions worked hand in hand. The states would expand their Medicaid eligibility provisions to include all those making less than 138% of the FPL, while premium subsidies would help those making between 138% and 400% of the FPL to afford coverage.
Unfortunately, a 2012 ruling by the Supreme Court that the Federal government could not require states to loosen their Medicaid eligibility parameters created what we, today, call the Medicaid coverage gap. Since subsidies were “hard coded” in the ACA regulations to assist those earning 138% of the FPL (up to 400% of the FPL), those making less than 138% of the FPL receive no subsidies. Over 2 million adults are caught in this black hole of healthcare.
For some perspective, there are currently 12 states that have not opted into Medicaid expansion, with another two finally opting in during 2021. The typical household income level in 2021 for a family of three without access to either Medicaid or subsidies is between $9,341 and $29,974.
There is a contingent in government that believes these lagging states could be enticed to implement Medicaid expansion through incentives such as reimbursing the state 100% for the cost of these enrollees (this is currently set at 90%). These states have not been swayed in ten years; I don’t see that happening now even with a sweetener. A more realistic “fix” would be to change the ACA regulations to provide Federal ACA subsidies to those not eligible for their state’s Medicaid coverage, up to 400% of the FPL. Since it would have an effect on the budget, it could be done through the reconciliation process, although in future administrations it could be stripped out again.
Biden has noted that he would like to provide a Public Option to all Americans as a choice, with automatic coverage for those who are within the Medicaid coverage gap. I don’t see this coming to fruition since it would most likely be too sweeping a change to be dealt with under budget reconciliation and Republicans continue to have no appetite for fixing provisions of the ACA that have proven ineffective.
Affordable Care Act Subsidies
I expect to see changes to subsidies, since these could be slipped into a budget reconciliation bill. A quick way to provide a higher subsidy for all Americans who already qualify would be to change the subsidy target plan from Silver to Gold. The cost differential would be about $100 per month in Washington state, $90 in Oregon, $160 in Idaho, $180 in Utah, and $240 in Alaska per person.
A bit more tricky is restoring cost-sharing subsidies to insurers. Cost-sharing subsidies were designed to reduce the portion of a claim that certain insureds would need to pay (such as through lower deductibles and out of pocket maximums). A qualified low-income insured would not need to pay higher premiums for these better benefits; the Federal government promised to reimburse insurance carriers for the differential. These cost-sharing subsidy provisions are only allowed on Silver plans. When the Federal government retracted subsidies, insurers needed to increase the cost of all Silver plans they offered on the marketplace. If the Biden administration reinstates these payments to insurers, the premiums for Silver plans will be reduced.
But remember from my prior paragraph – premium subsidies are based on the cost of Silver plans; therefore, restoring cost-sharing subsidies will have the negative effect of lowering subsidy amounts. It would seem most prudent for the Biden administration to change the subsidy target plan from Silver to Gold while at the same time reinstating the cost-sharing subsidies to insurers.
To increase the number of Americans covered under the umbrella of Federal subsidies, Congress could simply increase the household income maximum to be higher than the current 400% FPL level. However, I give this change less chance of survival because on average, as of 2019, 58.5% of Americans were already under the current subsidy threshold.
The ACA’s Family Glitch
Upwards of six million families throughout the US do not qualify for a Federal subsidy toward individual health coverage, even though their household income falls within the subsidy parameters. The culprit is the definition of “affordability” under ACA law. If a person’s employer-sponsored medical plan is affordable (based on the employee rate for self-only coverage on the lowest-cost plan), not only is the employee barred from receiving individual plan subsidies, but so are all their household members who are eligible for that employer-provided plan. That’s regardless of whether or not the plan is affordable for the spouse and/or the children.
Fixing this family glitch has been a goal of the Democrats since the beginning of the Affordable Care Act; therefore, it would make sense for this change to be on the Biden administration’s radar. Plus, he may be able to rewrite the IRS regulation that created this family glitch in the first place. One way to correct this issue would be to base affordability on a per person basis: the spouse would qualify for subsidies if the cost of their own coverage (on the lowest cost plan available to them through any employer-sponsored plan – whether theirs, their spouse’s or their parent’s) were deemed unaffordable.
One idea that has been expressed by those on the left is to allow every individual to choose whichever plan they feel is best for their circumstances. Under this scenario, even if an employee were offered an affordable plan through their employer, the employee could waive the employer’s coverage, purchase an individual plan in the marketplace and still receive subsidies. This may require a revision to the current ACA regulations, which would most likely be a nonstarter in the Senate.
Medicare for Some
Biden has been upfront with his desire to lower the Medicare-eligibility age from 65 to 60. He ran on a platform not to offer Medicare for All, but rather, offer Medicare for Some. Personally, I am for this change, since anyone currently wanting to take early retirement must navigate the individual medical insurance marketplace (and its high premiums) during the “gap years” between retirement and their 65th birthday. As an added benefit, it would bring a swath of younger members into the Medicare pool.
But can Biden do this with the stroke of a pen? If not, then his administration would need to look to the Senate to lower the age through reconciliation or an actual amendment to Medicare regulations. There are other questions that would need to be answered as well. While it would be assumed that the new Medicare-eligible Americans would pay for Part B coverage (physician expenses), would they be required to pay for Medicare A (hospital expenses). Would Medicare Advantage and/or Medicare Supplement coverage be available to fill in coverage gaps? Would Medicare Part D (prescription expenses) be offered, and if so, if initially waived would the premium penalties apply from age 60 rather than age 65? Would they plan to lower the age threshold again in the future?
Other Healthcare Change Chatter
The biggie – a public option – in my opinion is off the table. It’s scale would likely surpass the bounds of reconciliation and it is not likely that the Republicans would let this through the wall of the filibuster. Plus there is already a groundswell against this from hospitals and doctor organizations, which both have lobbies with fairly deep pockets.
The Medicare trust fund shortfall continues to be a thorn in the side of anyone who advocates for continuing this program. A simple fix would be to increase the current tax of 2.9% (split equally between employee and employer). Of course, a tax increase is never met with enthusiasm; however, if it were altered in such a way as to increase in proportion to salary (for example, set a 2% up to the first $100,000 of salary, then 3% for the next $100,000, then 4% thereafter) it could be seen as more palatable to the majority of Americans.
Short Term Medical plan changes that Trump signed could be eliminated or rewritten. Association Health Plan changes under Trump could meet the same fate (although they have already been hampered by the courts). In Washington State, since the Insurance Commissioner’s office has control over these areas, I do not expect we will see much of a change here, as our state rules are more strict than the Federal rules.
Other lesser-talked about areas that might be tapped for changes include adding protections under ACA to provide abortion access covered by all healthcare plans, adding more mandated Essential Benefits, reigning in prescription drug increases, and limiting the launch price for new drugs. We could also see required negotiations between drug makers/manufacturers and Medicare (similar to the Veteran’s Administration) or limiting drug increases to inflation in order for them to participate in Medicare. One drug initiative that I find intriguing is the possibility of creating US-manufactured essential generic drugs with reasonable pricing to combat the pharmaceutical industry’s high inflationary tactics on life-saving medications.
As for employer reporting requirements, unfortunately, those look like they are here to stay. I predict that these will continue into the future as long as large employers are required to either Play (provide coverage) or Pay (pay a penalty to the Federal government).
The Bottom Line
It will of course remain to be seen what the Biden administration and Congress each decides to pursue this next year with regard to healthcare. Undoubtedly the main goal will be to provide healthcare access and premium assistance to as many Americans as possible. According to the Kaiser Family Foundation, the non-elderly uninsured rate in the United States dipped drastically from 2013 (16.6%) to 2016 (10.0%) due in large part to the implementation of the ACA. Unfortunately, the uninsured rate has been on the rise since then. With COVID, it is estimated that 29% of Americans lost employer-provided health coverage, and of those, about half remain uninsured. It will be interesting to revisit this topic next February to see how close I was to my crystal ball predictions.
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I love numbers. I'm a math geek. I read benefits industry articles and periodicals for relaxation (but, honestly, I'm still a fun gal). I also like to share what I've learned and you'll find it all here.