Post AHCA, What's Next for Health Care Reform?

Amid talks of reviving the AHCA, instability looms in insurance markets

Patient in doctor's office waiting room
Dean Mitchell/Getty Images

When Donald Trump won the presidential election in November 2016, the future of the Affordable Care Act (aka Obamacare) was suddenly very uncertain.

The ACA had faced previous hurdles, including the 2012 Supreme Court case that found the law's individual mandate to be constitutional (but not the requirement that states expand Medicaid in order to retain existing Medicaid funding), and the 2015 Supreme Court case in which the ACA's premium subsidies were determined to be legal in every state.

And of course, there have been a string of legislative assaults on the law ever since it was enacted. None of those pieces of legislation had ever stood a real chance, however, thanks to then-President Obama's veto pen.

Things looked very different as of November 9, 2016. With a Republican majority in both chambers of Congress, and a Republican in the White House who had campaigned on a platform of repealing the ACA right out of the gates, there appeared to be little stopping the GOP from making good on seven years of promises to repeal the ACA.

But the ACA has become tightly woven into the structure of our health insurance system, and the number of people with health insurance has increased by roughly 20 million as a result of the ACA (mostly via Medicaid expansion and individual market coverage, although some are young adults who have gained coverage under their parents' health plans). Repealing and/or replacing the ACA has proven to be more challenging than it first appeared.

What's Happened So Far?

In January, before Trump took office, Congress passed S.Con.Res.3, a budget resolution that got the ball rolling on the process of repealing spending-related aspects of the ACA. The resolution directed congressional committees to draft a reconciliation bill that would be used to repeal or change parts of the ACA that directly impact the federal budget (reconciliation bills are filibuster-proof, so they only need a simple majority to pass; they're limited, however, to provisions that directly impact the budget).

Several pieces of non-reconciliation legislation related to the ACA were introduced in early 2017, but none of them have progressed to a vote. The reconciliation bill that resulted from January's Budget resolution—the American Health Care Act, or AHCA—was introduced in early March.

But after 18 days of rushed negotiations and last-minute changes, Trump and House Speaker Paul Ryan (R, Wisconsin) pulled the bill minutes before a scheduled House vote on March 24. Shortly afterward, Ryan gave a short press conference during which he said that the ACA was here to stay for the foreseeable future, and that Republicans were going to move on to other items on their agenda.

That sentiment was short-lived, however. By early the following week, Ryan noted that the AHCA was back on the table. The House Freedom Caucus, a conservative group of Republican Representatives, along with other lawmakers on the conservative end of the spectrum, had campaigned heavily on the idea of repealing the ACA, and did not want to give up so quickly.

Why Did the AHCA Fail the First Time Around?

Republicans have a majority in the House, but if more than 22 Republicans broke ranks with their party, the measure wouldn't pass.

During the March showdown over the AHCA, there were at least 33 Republicans who didn't support the legislation (Democrats were universally opposed).

But those 33 Republicans were not united in their viewpoints; they had very different reasons for opposing the AHCA. On the conservative end of the spectrum, Freedom Caucus members believed that the legislation didn't go far enough in repealing the ACA, which they would like to see fully eliminated (reconciliation legislation would not be able to fully repeal the ACA, but Freedom Caucus members wanted a bill at least as robust as H.R.3762, which was vetoed by President Obama in 2016).

And on the more moderate end of the spectrum, lawmakers worried about the CBO's projection that the uninsured population would grow by 24 million people over the next decade under the AHCA, and about the AHCA's changes to Medicaid expansion and federal Medicaid funding.

What's Happening With Round 2?

By early April, House Republicans, with strong involvement by Vice President Mike Pence, and HHS Secretary Tom Price, appeared to be on the verge of releasing their modified legislation, but were still in negotiations about the changes that would be included. 

The problem stemmed from the fact that Republican dissent in the first go-round came from moderates as well as people at the far right end of the political spectrum. Changes introduced to appease Freedom Caucus members are sure to alienate moderate Republicans, and vice versa.

Initially, Pence and Republican leaders were offering a proposal to include a waiver system that states would be able to use to modify the ACA's essential health benefit requirements and the ACA's ban on basing health insurance premiums on applicants' medical history. Freedom Caucus members want states to be able to define their own essential health benefits, in order to reduce the scope of what has to be covered by health insurance. They also want to eliminate the current practice of healthy and sick enrollees paying the same premiums.

Under the ACA, premiums can vary based on age (with a 3:1 ratio for older enrollees versus younger enrollees), tobacco use (by up to a 1.5:1 ratio), and zip code. But an applicant's medical history is not part of the equation. 

Prior to 2014, health insurance companies in most states could review applicants' medical history and use that information to determine premiums. They could also reject applications outright if the pre-existing conditions were serious enough. The modifications being proposed for the AHCA would not allow insurers to reject applicants based on medical history, but critics noted that if premiums could be drastically increased for sick applicants, it would essentially eviscerate the ACA's protections for people with pre-existing conditions. That's particularly true if a state were to also modify the ACA's essential health benefits requirements, as an applicant might find that their pre-existing conditions are technically "covered" but the plan doesn't provide benefits in the needed area of care.

To appease moderate Republicans, an alternate proposal has also been floated. It would let states receive waivers to modify essential health benefits and the ACA's premium age ratio (so older applicants would be charged up to five times as much as younger applicants, instead of three times), but it would not allow premiums to be based on applicants' medical history.

By April 5, the disparity between the two proposals had caused the talks to break down, at least temporarily. House Freedom Caucus members don't want to proceed without an assurance that states will be able to let insurers return to using medical underwriting to set premiums, as they believe that this is the key to lowering premiums for the majority of the population (ie, those who don't have pre-existing conditions).

And on the other end of the spectrum, moderate Republicans believe that a return to premiums based on medical history would essentially do away with the ACA's protections for people with pre-existing conditions, which is one of the law's most popular provisions.

Lawmakers have proposed using money that was allocated in the AHCA for states to stabilize their insurance markets, and instead putting it towards the recreation of high-risk pools. These high-risk pools would cover people with pre-existing conditions who are priced out of the private market if premiums become dependent on enrollees' health status. 35 states had high-risk pools prior to the ACA, and they were typically underfunded. A return to high-risk pools as a solution is controversial and would require far more funding than those pools received in the past.

Where Do We Go From Here?

Although Trump and Pence have hinted that a deal is coming soon, the negotiations appear to be far from over, and there have been no publicly-available amendments to the text of the AHCA. Negotiations could continue after the spring recess, but it may be that there simply isn't enough of a middle ground for both ends of the Republican delegation to agree on a path forward.

If legislation isn't passed to repeal or change the ACA, it will remain the law of the land. However, its future is very much dependent on actions that the Trump Administration can take.

Insurers have been noting for months that they need to see some market stabilization measures put in place in order to continue to offer coverage in 2018. Two Insurers—Humana, and Iowa's Wellmark—have already announced that they won't participate in the ACA-compliant individual market next year, and others could follow suit if they feel that there's too much uncertainty in terms of what happens next.

House v. Price: The Cost-Sharing Subsidy Lawsuit

The ACA's cost-sharing subsidies are currently the subject of a lawsuit (House v. Price, formerly House v. Burwell) filed by House Republicans in 2014. The lawmakers (which ironically included Tom Price, who represented Georgia's 6th District in the House prior to being nominated by Trump to lead HHS, where he is now the defendant in the case) argue that the cost-sharing subsidies are being illegally funded, as the money wasn't allocated by legislation. Their suit had merit, and a district court judge ruled in their favor in May 2016.

The Obama Administration appealed, which kept the cost-sharing subsidies flowing to insurers in the meantime. Then after Trump won the election, House Republicans asked for the case to be put on hold while they sorted out the future of the ACA. A status report is due in court on May 22.

If House Republicans drop the case, or if Congress decides to pass legislation to appropriate funding for cost-sharing subsidies, the House v. Price issue would disappear. On the other hand, if the Trump Administration were to drop the appeal that the Obama Administration launched, the individual market would experience widespread collapse (insurers have an escape hatch clause in their contracts with HealthCare.gov that allows them to exit the exchange if cost-sharing subsidies are eliminated).

Market Stabilization Efforts

In February 2017, HHS proposed a variety of rule changes aimed at stabilizing the individual market. But at the same time, Trump's day one executive order directing federal agencies to be lenient in their enforcement of the ACA has the opposite effect.

As an example, the IRS had planned to be more strict in terms of how they processed tax returns for 2016 with regards to the ACA's individual mandate. But following the executive order, they reversed course on that, and are processing returns the same way they did in prior years. Anything that serves to weaken the individual mandate ultimately weakens the stability of the insurance markets, as fewer healthy people enroll in coverage. 

What's Next?

At this point, the future of the ACA and the 2018 individual health insurance market are very much up in the air. Republicans lawmakers and the White House are working to revive the AHCA, but it's unclear whether they'll be able to do so. Even if the ACA remains intact, however, successful insurance markets require stable rules, adequate funding, and a well-balanced risk pool. We don't yet know how all of that will shake out over the next several months.

Sources:

Congress.gov, H.R.1628 — American Health Care Act of 2017. 115th Congress (2017-2018).

Congress.gov. S.Con.Res.3. 115th Congress (2017-2018)

Congressional Budget Office Cost Estimate, American Health Care Act, March 13, 2017. (plus amended projection on March 23, 2017)

Department of Health and Human Services, Patient Protection and Affordable Care Act, Market Stabilization, notice of proposed rulemaking. February 2017.

Garrett, Bowen; Gangopadhyaya, Anuj; Urban Institute, Who Gained Health Insurance Coverage Under the ACA and Where Do They Live? December 2016. 

 

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