Sticking Points on the Path to Healthcare Reform
By Susan Rider, Benefits & Human Capital Consultant
Before, during, and even after - Fourth of July fireworks have been in full force. Meanwhile, the legislative ”fireworks” appear to be far from over when it comes to the much-discussed healthcare reform bill.
We do know the half-time score - it’s 0-0. The House had drafted a replacement bill, submitting it to the Senate. The Senate did not approve that House bill, and in a deluge of discussions leading up to the holiday, legislators were hard at work coming up with their own bill. Not unexpectedly, as they returned to the task post holiday, there appears to be little substantive progress to report. As Tevya of Fiddler on the Roof lamented about his life, it isn’t easy, this scratching out of a pleasant tune of a healthcare bill.
First, reconciliation legislation must only involve budget-related changes and cannot include policies that have no fiscal impact, that have “merely incidental” fiscal impacts, or that increase the deficit if the committee did not follow its reconciliation instructions.
Reconciliation bills cannot change Social Security spending or dedicated revenue, which are considered “off-budget.” And finally, provisions in a reconciliation bill cannot increase the deficit in any fiscal year after the window of the reconciliation bill (usually ten years in the future) unless the costs outside the budget window are offset by other savings in the bill.
The Byrd Rule provides a "surgical" point of order that strikes any provisions in violation without blocking the entire bill. However, the Byrd Rule can also be waived by 60 votes. Even though this point of order only exists in the Senate, it de facto governs the House too since it can be applied to any conference report.
It’s a juggling act, to say the least. For example, one facet of the “Obamacare” ACA that no one seems to like is the individual mandate. Yet, removing the mandate would undoubtedly result in many fewer people signing up for insurance, in turn removing the revenue needed for the sustainability of the individual marketplace. (There is discussion in the house bill to bring a penalty if someone is uninsured for 63 days or more, that would not fully replace missing revenue.) Removing or reducing the employer mandate to $0 penalty would have a similar effect, with fewer employers opting to participate, again reducing revenue required to meet Byrd and reduced incentives for carriers to stay in the game.
Both the house and senate bill maintain the ACA tax structure for 2018-2019. The house bill offers an age-banded credit beginning in 2020 for household income levels below $115K per year while the senate bill is reducing the poverty level calculation down from 400% to 350%.
A big “elephant-in-the-room” is the medical loss ratio (MLR); under Obamacare, insurance carriers are obligated to use at least 85% of the premiums they collect towards paying claims. Being forced to include broker compensation in MLR is one of the forces sapping insurers’ profits, causing them to exit the marketplace en masse. Absent broker assistance, consumers (in addition to facing a dramatically curtailed number of choices, will be forced to deal directly with carriers without healthcare.gov guidance. (Far from being hypothetical, this very situation is quite real – in 2018, many Indiana counties will have NO marketplace option.)
Will carriers come back? As we assess the sticking points on the path to healthcare reform, we at Gregory & Appel are taking the positive view, remaining steadfast consumer advocates while urging clients to actively communicate with their legislators to discuss 2018 options.