By Jim Morgan, PA healthcare expert, John Nicolaou, PA healthcare expert and Kyla Hoskins, PA healthcare expert
Note: this is Part 3 in our post-election series, Navigating Uncertainty: Part 1 and Part 2.
On March 6, 2017, the Trump administration released the American Health Care Act (AHCA)—the much anticipated answer to the Affordable Care Act (ACA). Responses to the legislation have been swift and demonstrate the significant hurdles this reconciliation bill will need to overcome to become law, such as the Congressional Budget Office’s (CBO) estimate that 14 million Americans could lose coverage in 2018.
We believe the AHCA will require further adjustment before becoming law. However, the proposal provides insights and creates issues, which we believe Health Plans should respond to quickly.
This first phase does not completely repeal the ACA
In fact, it leaves in place almost everything except the insurance affordability provisions, individual and employer mandates, taxes and Medicaid reform. This is mainly due to the limitations of the budget reconciliation process, which allow the Senate to pass the legislation with a simple majority, but also limits the changes that can be made to those with budgetary impact. We believe the AHCA will require further adjustment before becoming law. However, it means that critical components of any replacement to the ACA, such as future coverage options, cost containment and payment reforms, are not addressed in this first phase.
Changes in the market will occur quickly
The AHCA is only a partial solution, yet when the individual and employer mandates are repealed retrospectively, they will be replaced with the ability to charge an additional premium of 30% to cover pre-existing conditions if the individual had a lapse in coverage. But this provision does not fully come into effect until 2019. There is little analysis on whether this 30% additional premium can make up for the gap created by those who chose not to carry coverage. Additionally, there is not a clear mechanism to help Qualified Health Plans (QHP) offset the shift in their risk pools in the interim. Therefore, it is likely that many payers will choose not to offer these plans for 2018, or will be faced with the challenge of raising premiums for next year—potentially at the same time that any replacement legislation is being introduced. Either way, health plans face a reputational and financial risk from this approach.
Payers have the freedom to work with State Insurance Departments
This freedom allows payers to strengthen covered benefits and reduce the unnecessary cost impact on consumers. With the changes to how the tax credit for qualified exchange enrollees is calculated—a fixed amount that is not tied to income or where an enrollee lives—many Americans will likely be unable to afford coverage. Also, if the Administration’s three-phased approach to repeal and replace isn’t fully recognized, payers and State Insurance Departments can, and should, explore cost and affordability reforms at a local level.
The uncertainty of the bill’s passage will create uneasiness
and confusion among consumers and there is currently no
authoritative voice in the market. So what should payers do?
Improve consumer engagement
Although not a complete program, the proposal reinforces the administration’s commitment to individual choice and free market principles. This will further accelerate the need for payers to improve consumer engagement. Payers should continue to move forward with these plans and ensure they seize the opportunity to become a trusted advisor to members and prospects on the future state of the industry. Even where the future is uncertain, an honest assessment of that uncertainty can create trust. This is a great opportunity for the industry to make up some of the reputation loss that was inadvertently created by the difficulties in the exchange marketplace.
Provide guidance on the choice of coverage
Health insurance is a convoluted market, and one that consumers often do not want to think about. The AHCA enables individual choice over coverage, but increases the risks brought about by those choices, especially if a significant condition is discovered while out of coverage. Health plans will benefit from providing guidance on these risk choices, both to increase coverage enrollment and to offset future reputation risks when pre-existing conditions are discovered.
Ensure communication is clear and honest
While health insurance is complex, it is highly personal. There is a strong need for payers to strengthen those personal, individual relationships with honest and clear communication. By helping consumers to understand the options and ideas that are being discussed in Washington, they will take on the role of a trusted advisor. More importantly, payers should put these options and ideas into context so the consumer can recognize how they may impact their specific situation.
This bill gives us a first glimpse into the internal thinking around healthcare in the new administration. But without the promised “phase 2,” as well as the free-market enabled cost controls that were a critical part of President Trump’s pre-election plan are notably absent, this is not the bill he foreshadowed when he talked about “insurance for everyone.”
This is clearly the start of a long journey towards the next stage in healthcare reform, and payers should not ignore the reputational impacts this proposal could have on them.