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Aron-Dine on Strengthening Health Insurance Markets, Improving Coverage and Costs


In testimony today before the Senate Finance Committee, CBPP Senior Fellow and Senior Counselor Aviva Aron-Dine stressed that policymakers can and should strengthen health insurance markets in the near term and continue expanding coverage and making health care better and more affordable over the longer term.

After reviewing the progress in expanding coverage and access to care under the Affordable Care Act (ACA) — the baseline against which future policy changes should be measured — she discussed some of the challenges facing the individual market and how to address them, noting the striking overlap across the recommendations that governors, regulators, House members, and experts of both parties have offered in recent weeks to strengthen the individual market.

Many of the recommendations would be straightforward to implement: while some would require additional resources, most would not. Among the more common suggestions, which she endorsed, are:

  • Providing an explicit appropriation for cost-sharing reduction (CSR) payments. As policymakers, regulators, and experts have explained, guaranteeing that CSR payments will continue is not a give-away to insurance companies; it is a critical protection for consumers, who will otherwise experience unnecessary rate increases and insurer withdrawals. Congress can and should resolve this issue for good, by providing an explicit, permanent appropriation for CSRs. Not only would such a measure not require a budgetary offset, it would actually protect the federal budget from tens of billions in extra premium tax credit costs that would result if insurers set prices year after year without knowing whether CSR payments will be made (or if the Administration discontinues these payments outright). A temporary appropriation for CSRs would be far less beneficial, while an appropriation limited to one year would send a damaging message to insurers already planning for 2019, putting them on notice to prepare for the same federal policy uncertainty they experienced this year.
  • Maintaining or increasing outreach and enrollment assistance. Going into the 2016 open enrollment season, only about half of uninsured Americans were aware of the financial assistance available to help pay for individual market coverage, even though an estimated 84 percent of the marketplace-eligible uninsured have incomes qualifying them for financial help. The Administration’s recent decision to cut consumer outreach by 90 percent, and cut enrollment assistance through the Navigator Program by about 40 percent, will increase the number of people who go uninsured and forgo needed care or incur unaffordable medical bills. But it will also damage the marketplace risk pool, increasing average costs — and therefore premiums — since healthier consumers are the ones least likely to enroll without outreach. Notably, the cost of maintaining both outreach and enrollment assistance is low (the Administration’s funding cuts total less than $150 million), and both programs are financed largely out of marketplace user fees, not general appropriations.
  • Enforcing the law, including the individual mandate. Outside experts from both parties have urged the Administration to enforce and administer the ACA as long as it remains the law of the land. This includes enforcing the ACA’s individual mandate, which discourages healthier individuals from going uninsured and shifting the costs of their unexpected emergency care onto others. While some have questioned the effectiveness of the ACA’s mandate, surveys and experiments show that it has a significant impact in motivating younger, healthier people to enroll in coverage. The Congressional Budget Office has estimated that repealing the mandate would shrink the individual market risk pool by about a quarter and increase individual market premiums by about 20 percent, and rate requests from major insurers are consistent with that (with insurers in Maryland and Pennsylvania, for example, requesting additional rate increases of about 15 percent for 2018 to account for the possibility that the mandate might not be fully enforced).
  • Reestablishing a federal reinsurance program. Reestablishing a federal reinsurance program (along the lines of the now-expired ACA reinsurance program) could benefit consumers in two ways. First, the subsidy provided by reinsurance flows through to unsubsidized marketplace consumers in the form of lower premiums. Second, by assuming some of the risk associated with high-cost claims, reinsurance diminishes insurers’ incentive to avoid covering high-cost individuals (such as by exiting the geographic areas where they reside), while also reducing uncertainty and thereby making it more attractive for insurers (especially smaller insurers) to participate in the marketplaces. Significantly reducing premiums through a reinsurance program would require meaningful federal resources (although the net cost of reinsurance is well below the gross cost, because a reinsurance program that lowers premiums also lowers federal premium tax credit costs). But addressing the risk associated with unusually high-cost claims could be done at much lower cost. (For example, a funded reinsurance program subsidizing claims above $1 million, along the lines of the budget neutral high-cost claims pool the Department of Health and Human Services established administratively as part of the risk adjustment program, would likely cost well under $1 billion per year.)
  • Streamlining the process for 1332 waivers that improve market stability. In the absence of a federal reinsurance program, several states have already followed Alaska’s example and are seeking or developing waivers under Section 1332 of the ACA to obtain federal matching funds for their own reinsurance programs. The 1332 application process could be simplified to facilitate these and similar waivers that are consistent with the 1332 guardrails: they maintain or increase the number of people with health coverage, maintain or improve coverage affordability and comprehensiveness, and do not increase the federal deficit. In contrast, weakening these guardrails would harm individual market consumers by opening the door to changes that would increase the number of uninsured, place consumers on the hook for higher premiums or out-of-pocket costs, or allow plans to exclude key services that are especially crucial to people with pre-existing conditions.

Finally, Aron-Dine recommends some objectives for health policy after these immediate issues are resolved, cautioning that “new legislation should build on the progress made over the last several years in expanding coverage and access to care, not reverse it.”

Click here to read the full testimony.