By John Konczyk and Pamela Nasr, PA healthcare experts
Note: this is Part 2 in our post-election series Navigating Uncertainty
The recent appointment of Tom Price as Secretary of Health and Human Services confirms President-elect Donald Trump’s intent to repeal and replace the Affordable Care Act (ACA). Price was one of the first lawmakers to draft a full replacement for the 2010 healthcare law.
America’s Health Insurance Plans (AHIP), the leading lobby group for the insurance industry, recently acknowledged that “significant changes” are coming to the Affordable Care Act. This puts health insurers and regulators in a state of continued uncertainty surrounding the future of the insurance market.
In this perspective, we provide a high level comparison of President-elect Trump’s 7 Point Healthcare Reform plan and Mr. Price’s replacement plan, the Empowering Patients First Act, to create a view into where the payer market may be heading in 2017 and beyond. It is important to note that reform on the policy front is still in flux as the transition plan evolves.
In summary, we think:
- Though a complete ACA repeal is highly concerning to health insurers and regulators, slow efforts put forth by GOP leaders to shore up the individual insurance market are likely to move forward in some form during 2017 with an implementation timeframe to be determined.
- Discussions on Capitol Hill are migrating from the binary choice of repealing or keeping the ACA to finding common ground that stabilizes the market and ensures continuity of coverage.
- Insurers might find expansion and growth opportunities in Mr. Price’s goal of reducing burdensome government regulations.
- Regulatory changes to persuade insurers to continue offering plans in 2018 and 2019 are being considered.
- With the subsequent appointment of Seema Verma as the Centers for Medicare and Medicaid Services administrator, payers should monitor state-level Medicaid changes and block funding proposals closely.
Summary Comparison – Trump 7 Point Healthcare Reform vs. Empowering Patients First Act
|Trump 7-point healthcare reform plan ||Price Empowering Patients First Act |
|Complete repeal of ACA ||Repeal of the ACA, including government-run insurance markets in every state, the mandates on individuals and businesses, and federal, income-based tax credits – offer fixed, age-adjusted tax credits |
|Modify existing law that inhibits the sale of health insurance plans across state lines ||Authorize cross-state insurance sales, permitting consumers to shop for insurance across state lines |
|Allow individuals to fully deduct health insurance premium payments from tax returns under the current tax system ||Establish a cap on employer tax deduction at the family and individual levels |
|Allow individuals to establish tax-free Health Savings Accounts (HSAs) ||Expand health savings accounts (HSAs) to include recipients of federal healthcare programs |
|Require price transparency from providers and hospital organizations, thus giving individuals the power to “shop” for the best prices ||Increase price transparency by allowing states to create a State Transparency Plan Portal to provide information on health coverage options and providers |
|Push Medicaid control to the state level ||Provide federal subsidies for state high-risk pools |
|Remove barriers to entry into free markets for drug providers that offer less expensive, safe products ||Not currently addressed |
Key Findings for the Payer Market
Changes in Medicare and Medicaid could usher in a new era in state flexibility in healthcare – Under Mr. Price’s provision, both Medicaid and Medicare would cease to be entitlements that provide coverage to anyone who qualifies. Medicaid would be converted into block grants to states, which would give states more flexibility on spending. Medicare would switch from being a “defined benefit” to a “defined contribution” with the government extending financial help to seniors or disabled citizens to purchase private insurance policies. To compare, while the ACA federalized the insurance market, the Empowering Patients First Act is meant to decentralize it by bringing back the authority to the states.
New market potential exists for those payers that can move swiftly – With the prospects of lighter regulatory oversight, the ability to sell coverage across state lines and a free-market approach, there exists an early mover benefit for payers that are nimble, able to respond to customers quickly and make decisive moves.
Whether individual, small group or employer-sponsored, the future of health plans remains consumer-driven – Mr. Price’s provision furthers President-elect Trump’s platform of an open market approach built around price transparency, consumer empowerment, and an aggressive expansion of HSAs to include those who are covered by federal healthcare programs.
Elimination of state line mandates could drive “unbalanced” competition within the industry – Under Mr. Price’s provision, insurance companies large and small could market their individual plans to consumers in any state as long as they are licensed in their home states and adhere to home-state regulations. Accordingly, insurers based and operating in lower cost markets could gain a competitive advantage if they are able to sell and operate in states with more regulation and higher operating costs. More importantly, in order to sell policies in different states, insurers would have to build a strong network and understand customer needs within each state, in order to make new markets financially viable.
Alternatives to the ACA will require some form of “individual mandate” or continuous coverage – Policy experts doubt that the market can function with rules requiring insurers to take all enrollees if the individual mandate is abolished. Instead, in a recent paper released by AHIP, insurers urged Republicans to create strong, effective incentives to buy insurance. Such incentives could include late enrollment penalties and waiting periods.
Even though Trump’s election and his subsequent administrative appointments continued the level of uncertainty in the industry, many of the broader population, demographic and cost trends that have driven recent industry transformation are likely to persist, irrespective of any short-term change in regulations. A focus on these broader trends will allow a smooth navigation of uncertainty for those nimble industry players.
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