Tuesday, a group of analysts including those at the Heritage Foundation released their outline for a way to pass health-care-related legislation in Congress. Readers can find the actual health plan here; a summary and analysis follow below.
What Does the Health Plan Include?
The plan includes parameters for a state-based block grant that would combine funds from Obamacare’s insurance subsidies and its Medicaid expansion into one pot of money. The plan would funnel the block grant funds through the State Children’s Health Insurance Program (SCHIP), using that program’s pro-life protections. In general, states using the block grant would:
- Spend at least half of the funds subsidizing private health coverage;
- Spend at least half of the funds subsidizing low-income individuals (which can overlap with the first pot of funds);
- Spend an unspecified percentage of their funds subsidizing high-risk patients with high health costs;
- Allow anyone who qualifies for SCHIP or Medicaid to take the value of their benefits and use those funds to subsidize private coverage; and
- Not face federal requirements regarding 1) essential health benefits; 2) the single risk pool; 3) medical loss ratios; and 4) the 3:1 age ratio (i.e., insurers can charge older customers only three times as much as younger customers).
The plan also includes new incentives for health savings accounts (HSAs), doubling the maximum contribution limit, and allowing more plans to qualify based on their actuarial value (the average percentage of annual health expenses that a health plan pays).
Is That It?
Pretty much. For instance, the plan remains silent on whether to support an Obamacare “stability” (read: bailout) bill intended to 1) keep insurance markets intact during the transition to the block grant, and 2) attract the votes of moderate Republicans like Alaska Sen. Lisa Murkowski and Maine Sen. Susan Collins.
As recently as three weeks ago, former Sen. Rick Santorum was telling groups that the proposal would include the Collins “stability” language. However, as I previously noted, doing so would likely lead to taxpayer funding of abortion coverage, because there are few if any ways to attach pro-life protections to Obamacare’s cost-sharing reduction payments to insurers under the special budget reconciliation procedures the Senate would use to consider “repeal-and-replace” legislation.
What Parts of Obamacare Would the Plan Retain?
In short, most of them.
Spending: The plan says the block grant “would be based upon spending, as of a fixed date, on [Obamacare] subsidies (both tax credits and [cost-sharing reduction] payments) and Medicaid expansion.” This wording makes clear that the plan intends to retain all of the Obamacare spending, and redirect those funds to the block grant.
Taxes and Medicare Reductions: By retaining all of Obamacare’s spending, the plan would retain all of Obamacare’s tax increases—either that, or it would increase the deficit. Likewise, the plan says nothing about undoing Obamacare’s Medicare reductions. By retaining Obamacare’s spending levels, the plan would maintain the gimmick of double-counting, whereby the law’s payment reductions are used both to “save Medicare” and fund Obamacare.
Insurance Regulations: The Congressional Research Service lists 22 separate new federal requirements imposed on health insurance plans under Obamacare. The plan would retain at least 14 of them:
- Guaranteed issue of coverage—Section 2702 of the Public Health Service Act;
- Non-discrimination based on health status—Section 2705 of the Public Health Service Act;
- Extension of dependent coverage—Section 2714 of the Public Health Service Act;
- Prohibition of discrimination based on salary—Section 2716 of the Public Health Service Act (only applies to employer plans);
- Waiting period limitation—Section 2708 of the Public Health Service Act (only applies to employer plans);
- Guaranteed renewability—Section 2703 of the Public Health Service Act;
- Prohibition on rescissions—Section 2712 of the Public Health Service Act;
- Rate review—Section 2794 of the Public Health Service Act;
- Coverage of preventive health services without cost sharing—Section 2713 of the Public Health Service Act;
- Coverage of pre-existing health conditions—Section 2703 of the Public Health Service Act;
- Summary of benefits and coverage—Section 2715 of the Public Health Service Act;
- Appeals process—Section 2719 of the Public Health Service Act;
- Patient protections—Section 2719A of the Public Health Service Act; and
- Non-discrimination regarding clinical trial participation—Section 2709 of the Public Health Service Act.
Are Parts of the Health Plan Unclear?
Yes. For instance, the plan says that “Obamacare requirements on essential health benefits” would not apply in states receiving block grant funds. However, Section 1302 of Obamacare—which codified the essential health benefits requirement—also included two other requirements, one capping annual cost-sharing (Section 1302(c)) and another imposing minimum actuarial value requirements (Section 1302(d)).
Because the plan also talks about linking HSA eligibility to actuarial value requirements, it is unclear whether the plan would retain the federal actuarial value standards (and for that matter, the limit on annual cost-sharing). If the plan’s authors intended to retain either or both of those requirements, then the 14 out of 22 Obamacare-related insurance requirements retained in the plan would rise.
Additionally, the plan on two occasions says that “insurers could offer discounts to people who are continuously covered.” House Republicans offered a similar proposal in their American Health Care Act last year, one that imposed penalties on individuals failing to maintain continuous coverage.
However, the plan includes no specific proposal on how insurers could go about offering such discounts, as the plan states that the 3:1 age rating requirement—and presumably only that requirement—would not apply for states receiving block grant funds. It is unclear whether or how insurers would have the flexibility under the plan to offer discounts for continuous coverage if all of Obamacare’s restrictions on premium rating, save that for age, remain.