Thursday, October 12, should now be known as “Healthcare Destabilization Day.” On the same day President Trump declared that Cost Sharing Subsidies (CSS) to insurance companies would no longer be funded, he also signed an Executive Order to expand the use of Health Reimbursement Arrangements (HRAs). We all now know that healthcare is complicated, but this combination is one for the record books.
Destabilization #1 — The CSS are a mathematical manipulation created in the original Affordable Care Act (ACA). The easiest explanation is that insurance companies are required to provide a richer plan design (lower deductibles, out-of-pocket maximums, etc.) to individuals below certain income thresholds. Rather than increasing premiums to account for the richer plan designs, the insurance companies charge an amount for a less valuable plan and then file with the federal government for the premium to value shortfall. Car analogy: I pay for a Ford Focus but the dealer has to give me a Cadillac Escalade, and then the government pays the dealer the difference.
The insurance company deadline for filing their individual market rates for 2018 has passed. If the CSS are not funded, then the insurance companies will simply spread the additional cost over all of their customers; however, the window may have closed for being able to do this for 2018.
I believe the CSS approach was a math crime from the beginning, but the proposed elimination after the rate filing deadline is a significant blow to the already unstable individual health insurance market.
Destabilization #2 — The executive order includes a proposed expansion of Health Reimbursement Arrangements (HRAs) that would allow an employer to put tax-free money in an account for employees who could then use the money to buy health insurance in the individual market. Effectively, it allows the employer to get off offering a group health insurance plan and to simply provide funds to their workers. This idea was included in legislation signed by President Obama in January for companies with fewer than 50 full-time employees. Senator Rand Paul was so supportive of the concept that he attended President Trump’s signing of the executive order. Now who would have ever thought President Obama, President Trump, and Rand Paul would agree on anything related to healthcare?
The concept sounds very liberating. Give people money and get out of the way. Here’s the problem. Health insurance funding and underwriting is much less about the size of the group and much more about the quality and predictability of the risk pool to be insured. The government has consistently missed that it is about the quality of the risk pool and not simply the size of the risk pool. An employer can’t afford to allow some people to exit their risk group while others remain. The concept destabilizes the risk pool. Therefore, an employer would need to decide whether to remain fully in the health risk game or to fully exit the game.
I believe the end result is that you would see many employers decide to no longer offer a health benefit plan and to simply fund the HRA allowing their employees to buy any health insurance plan they wanted. The problem with the competing government decisions signed on the exact same day is that the employer is throwing their employees into the exact individual health insurance market that President Trump is destabilizing with the elimination of the CSS. In other words, one decision is intended to poison the pond by removing funding while the other decision is intended to throw millions more Americans into the same pond that just got poisoned.
A conspiracy theorist might conclude the President Obama, President Trump, and future-President Sanders all conspired in the math crime of the century to destabilize all health insurance funding so that future Health & Human Services Secretary Vladimir Putin could implement a single payer healthcare system that permanently unites the United States and Russia.
