Tag Archives: National Bureau of Economic Research

Tomi Lahren Is What’s Wrong with Obamacare

Over the weekend, as commentators Chelsea Handler and Tomi Lahren engaged in a political debate, a comment by the latter unwittingly pointed to one of the singular problems of Obamacare. When Handler asked what health plan she belonged to, Lahren responded, “Luckily I am 24 so I am still on my parents’…” Cue sarcastic laughter from the crowd.

The liberal audience in Pasadena mocked Lahren for her hypocrisy—attacking Obamacare while benefiting from it by staying on her parents’ health insurance—but they weren’t wrong in their criticism. While Lahren rightly pointed out that Obamacare “fails the very people that it’s intended to help,” if she wants to know the root cause of that failure, she should look in the mirror.

The Slacker Mandate Is Aptly Named

One report on the incident claimed that “extending insurance to older ‘dependents’ is not typically targeted by conservatives who criticize Obamacare.” In reality, though, conservatives have targeted this mandate—for instance, the paper released in 2012, while I worked for the Senate Republican staff of the Joint Economic Committee. It noted that mandates such as the under-26 provision raise premiums by a minimum of several hundred dollars per year, and that proposals to provide health insurance to 20-something “dependents” like Mark Zuckerberg (then 28) would create definite costs to achieve questionable benefits.

Since then, the case against this particular mandate has only increased. A National Bureau of Economic Research paper released last year found a significant economic impact: “We find evidence that employees who were most affected by the mandate, namely employees at large firms, saw wage reductions of approximately $1,200 per year. These reductions appear to be concentrated among workers whose employers offer employer-sponsored health insurance; however, they do not seem to be only borne by parents of eligible children or parents more generally.”

As the Wall Street Journal noted last year, the paper made clear that “no alleged government benefit is free and people should be allowed to make the trade-offs for themselves.” Apparently, however, alleged “conservative” Lahren believes otherwise.

The Tomi Lahren Case Study

Lahren’s comments provide a perfect case study against the under-26 mandate, in two respects. First, the “dependent” mandate has few statutory limits—whether income, lack of access to employer coverage, or both. That a pundit like Lahren can hold lucrative media contracts while remaining on her parents’ health coverage speaks to the absurdity of Obamacare’s definition of “dependent.”

Second, it proves Lahren’s criticism of Obamacare that the law “fails the very people it’s intended to help.” Because Lahren refuses to buy her own insurance plan, she raises premiums 1) for her parents’ co-workers, who have to pay for Lahren’s health costs as part of their coverage and 2) on insurance exchanges, where individuals are older and costlier than average precisely because many young adults remain on their parents’ policies.

With upper-middle-class households largely obtaining coverage through employers, and households of more modest means going through exchanges instead, the under-26 mandate represents a sizable transfer of wealth from the working class—who pay higher premiums—to the affluent—who gain the benefit of “free” coverage for their children. So Lahren is correct that Obamacare “fails the very people it’s intended to help”—because of people like her, who grab government “benefits” irrespective of the other individuals those “benefits” harm.

The end of the 2012 Joint Economic Committee paper noted that “a welfare state administered by the private sector, yet mandated by government, remains a welfare state at its core.” If Lahren wants to help the people Obamacare hurts, or even if she just wants to adhere to the conservative political beliefs she purports to follow, then perhaps she should use the coming weeks to explore her own health insurance options, rather than remaining part of the Obamacare welfare state she claims to abhor yet perpetuates.

This post was originally published at The Federalist.

How to Repeal Obamacare

A PDF version of this document is available here.

For years, the American people have suffered from the ill effects of Obamacare’s federal intrusions into the health care system. Millions of Americans received cancellation notices telling them that the plans they had, and liked, would disappear—a direct violation of President Obama’s repeated promises.[1] Insurance premiums have skyrocketed, rising nearly 50 percent in 2014, followed by another increase of over 20 percent this year.[2] Insurance options have disappeared, with Americans in approximately one-third of all U.S. counties having the “choice” of only one insurer in 2017.[3]

But as the 115th Congress begins, the new Republican majority, and President-elect Donald Trump, have pledged to bring the American people desperately needed relief, by fulfilling their long-stated promise to repeal Obamacare. Congressional leaders have stated their intention to bring forward legislation that repeals key portions of Obamacare using budget reconciliation procedures. Such legislation would likely resemble the reconciliation bill that the prior 114th Congress passed, but President Obama vetoed on January 8, 2016.

That legislation, H.R. 3762 of the last Congress, repealed funding for Obamacare’s new entitlements—Medicaid expansion to the able-bodied, and coverage subsidies for individuals of low and moderate incomes purchasing coverage on insurance Exchanges—effective January 1, 2018, approximately two years after enactment. It repealed all of the law’s tax increases—including the tax penalties associated with the individual and employer mandates—beginning January 1, 2016, effectively coinciding with the date of enactment. The bill also included other important provisions, restricting federal Medicaid payments to certain providers.[4]

Critics have argued that, having voted for this legislation once under President Obama, Members of Congress should not pass this bill again, sending it to President Trump’s desk for immediate signature.[5] These critics argue that Congress cannot repeal Obamacare’s costly insurance regulations under the special budget reconciliation procedures, which require all provisions in reconciliation legislation to have a significant budgetary impact. The critics fear that passing such legislation would effectively nullify Obamacare’s individual and employer mandates immediately, and its subsidies eventually, while keeping in place its costly insurance regulations that have significantly raised premiums. They believe that these steps would exacerbate adverse selection—a scenario whereby only sick individuals purchase health insurance coverage—de-stabilize insurance markets, and lead more insurers to drop out of insurance Exchanges altogether.

Those concerns, while legitimate, are misplaced on several fronts. First, Congress has not yet litigated whether or not some or all of the major Obamacare insurance regulations are budgetary in nature, and can be considered as part of reconciliation legislation. Second, Congress can and should take steps to modify last year’s reconciliation bill in ways that will stabilize insurance markets in the near-term, and create a transition to alternative legislation Congress constructs. Third, the incoming Trump Administration has significant regulatory powers within its purview, which can minimize the adverse selection effects critics fear from repeal legislation, and modify the federal mandates that have driven up premiums in recent years.

While not perfect, and less ideal than starting from scratch, last year’s reconciliation legislation represents a solid base from which to construct a legislative and regulatory framework for repealing Obamacare. It also represents the fastest approach for Congress to deliver on the promise it has made to its constituents for over six years: Unwinding an unaffordable and unworkable health care law.

What Congress Should Do

Last year’s reconciliation measure provides a good starting point for Congress when drafting repeal legislation to consider this year. However, Congress should attempt both to expand and revise the measure. These efforts would both mitigate against any adverse selection concerns, and stabilize insurance markets while Congress considers alternative legislation.

Expand Reconciliation to Insurance Regulations:               Critics have claimed that Obamacare’s major insurance regulations “were not altered in H.R. 3762; they could not be altered in a reconciliation bill taken up in 2017, either,” due to procedural restrictions inherent in the budget reconciliation process.[6] Such a definitive assertion is at best premature. Observers have noted that “Congress chose not to litigate” the issue of whether and what restrictions are budgetary in nature, and therefore eligible for repeal in reconciliation legislation, when considering H.R. 3762 in the fall of 2015.[7]

However, Congress can, and should, choose to litigate those issues with the Senate parliamentarian now. Rulings by the Senate parliamentarian will guide lawmakers as they determine which provisions of repeal legislation meet budget reconciliation guidelines, and can therefore be approved using a simple, 51-vote majority without being subject to the 60-vote threshold used for other legislation subject to a filibuster.

The Congressional Budget Office, think-tanks, and other actuarial organizations have produced estimates showing the significant costs of many of Obamacare’s insurance mandates—including requirements related to pre-existing conditions; essential health benefits; community rating requirements; actuarial value; medical loss ratios; preventive care coverage requirements; and other major mandates. The Obama Administration itself has produced cost estimates for several of the law’s mandates—and argued twice before the Supreme Court that its regulatory mandates are critical to the law’s structure.[8]

Congress can and should expand the scope of last year’s reconciliation bill to include the major insurance regulations. Doing so would be consistent with both the existing scoring estimates and past practice under budget reconciliation. Moreover, expanding the scope of repeal to include the largest insurance mandates would mitigate against adverse selection effects that might result if Congress repealed the individual mandate while leaving the major insurance regulations in place.

Freeze Enrollment in Entitlements:            Consistent with the transition period provided for in the 2015 reconciliation legislation, any repeal measure should also include steps to freeze enrollment in the law’s new entitlements. Such actions would be particularly pertinent to Obamacare’s massive expansion of Medicaid—the source of most of the law’s spending, and the vast majority of its coverage expansions.[9]

Research indicates that past states that froze enrollment in Medicaid allowed the vast majority of enrollees to transition off of the program, and into work, within a short period of time.[10] Moreover, another study published by the National Bureau of Economic Research concluded that Tennessee’s decision to roll back its unsustainable Medicaid expansion in 2005 led to “large increases in [the] labor supply” and increases in employment, as individuals dis-enrolled from Medicaid looked for—and obtained—employment, and employer-sponsored health insurance.[11] Freezing enrollment would hold existing beneficiaries harmless, while beginning to transition away from Obamacare’s unsustainable levels of spending—and encouraging economic activity and job growth.

Beginning this year, states that expanded Medicaid under Obamacare will also face added fiscal burdens, as they must finance a portion (in 2017, 5 percent) of the cost of coverage for the first time. Even Democratic state legislators in “blue states” like Oregon and New Mexico have raised concerns about what the cost of this massive expansion of Medicaid to the able-bodied will do to other important state programs targeting “the most vulnerable of our citizens.”[12] For all these reasons, Congress should insert language into the reconciliation freezing enrollment upon enactment—or perhaps shortly after enactment, to allow expansion states time to submit amendments to their existing state plans reflecting this legislative change.

Congress should also explore freezing enrollment in the law’s program of Exchange subsidies. In the spring of 2015, as the Supreme Court considered the case of King v. Burwell—which affected subsidies provided to individuals in states using the federal insurance Exchange, healthcare.gov—multiple Members of Congress introduced legislation that would have frozen enrollment. These bills would have allowed individuals who qualified for subsidies prior to the Court’s ruling to continue to receive them for a transitional period of time, but made other individuals ineligible for such subsidies.[13]

Though the Supreme Court ultimately upheld the subsidies in King v. Burwell, ruling that the words “an Exchange established by the State” also referred to an Exchange run by the federal government, Congress could utilize a similar regime in the reconciliation bill with respect to insurance subsidies—that is, freezing eligibility and enrollment effective the date of the bill’s enactment.[14] However, Congress should only act to freeze eligibility for insurance subsidies if it believes doing so would not cause existing insurance market risk pools to deteriorate during the transition period.

Appropriate Cost-Sharing Subsidies:            Any repeal measure should include a temporary, time-limited appropriation for cost-sharing subsidies currently in dispute. Those subsidies reimburse insurers for the expense of cost-sharing reductions—lower deductibles and co-payments—provided to certain low-income enrollees under Obamacare. In the case of House v. Burwell, the House of Representatives has argued that the text of Obamacare nowhere provides an explicit appropriation for the cost-sharing subsidies, and that the Obama Administration violated the Constitution by funding this spending without an express appropriation.

On May 12, 2016, United States District Court Judge Rosemary Collyer agreed with the House’s position, imposing an injunction (stayed pending appeal) prohibiting the Administration from appropriating funds for the cost-sharing subsidies.[15] The Court of Appeals for the District of Columbia is currently considering the Obama Administration’s appeal of Judge Collyer’s ruling, with further actions on hold until the new Administration takes office.

Some insurers argue that, should the incoming Trump Administration withdraw the cost-sharing subsidies, they have the right to terminate their plans from the Exchanges immediately. The arguments that insurers can withdraw from the markets in 2017 lack merit.[16] Furthermore, analysts have warned for months that an incoming Administration could withdraw the cost-sharing subsidies unilaterally upon taking office.[17] Insurers saw fit to ignore those warnings, and signed up to offer 2017 coverage knowing full well that the cost-sharing subsidies could disappear on short notice, through either court rulings or regulatory action by a new Administration.

However, to provide certainty, Congress should appropriate funds for the cost-sharing subsidies as part of the repeal bill—but only for the length of the transition period provided for in that measure. The Trump Administration should encourage Congress to appropriate funds for the transition period. Once Congress does so, the Trump Administration’s Justice Department can move to dismiss the Obama Administration’s appeal of the case against the House of Representatives, conceding the point that the executive never had authority to appropriate funds for cost-sharing subsidies absent express direction by Congress.

Utilize the Congressional Review Act:            The election outcome notwithstanding, President Obama’s outgoing Administration continues to use the regulatory process to attempt to “box in” his successor. On December 22, 2016, the Administration published a Notice of Benefit and Payment Parameters for the 2018 plan year.[18] In doing so, the Administration specifically waived provisions of the Congressional Review Act, which generally requires a 60-day delayed effective date for major rules. The Department of Health and Human Services (HHS) claimed that such a delay was impracticable for good cause reasons.[19] The 2018 Notice of Benefit and Payment Parameters will therefore take effect 30 days following its display, on January 17, 2017—during President Obama’s last week in office. As a result, President Trump will be unable simply to revoke this regulation unilaterally upon taking office.

However, the Congressional Review Act does provide a vehicle for Congress, in concert with a President Trump, to take action revoking the newest Obamacare regulation. Specifically, the Act provides that a resolution of disapproval, passed by both houses of Congress, will have the effect of nullifying the rule or administrative action proposed.[20] Of particular import, the Congressional Review Act provides for expedited consideration of resolutions of disapproval in the Senate; those limits on debate preclude filibusters, meaning that resolutions of disapproval require a simple, 51-vote majority to pass, rather than the usual 60 votes for legislation subject to a filibuster.

Congress should explore using the Congressional Review Act to pass a resolution of disapproval nullifying the Obama Administration’s last-minute 2018 Notice of Benefit and Payment Parameters. Regardless of whether or not Congress strikes down this last-minute rule, the Trump Administration should act expeditiously—including through use of the “good cause” exemption the Obama Administration cited to rush through its own regulations last month—to provide needed relief to consumers.

What the Administration Should Do

The Trump Administration can also play its part in bringing about the promise of repeal, by acting in concert with Congress to undo the effects of Obamacare’s major insurance mandates. Consistent with the actions Congress should take listed above, the incoming Administration should immediately use flexibility to provide relief from Obamacare’s regulatory regime. Whether through a new 2018 Notice of Benefit and Payment Parameters, a series of interim final regulations, or both, these regulations would provide a vehicle for incorporating many of the changes needed to undo Obamacare’s harmful effects, including those listed below.

While the Administration cannot unilaterally change the law—such actions lie solely within the purview of Congress—it can and should take steps to soften the impact of existing mandates, and provide maximum flexibility wherever possible. These steps would stabilize insurance markets during the period following repeal, and provide for an orderly transition to an alternative regime.

Limit Open Enrollment:      Obamacare gives the Secretary of HHS the authority to “require an Exchange to provide for…annual open enrollment periods, as determined by the Secretary for calendar years after the initial enrollment period.”[21] The law requires insurers to accept all applicants without regard to pre-existing conditions or health status—in industry parlance, guaranteed issue—but only within certain limits. Specifically, health insurers may “restrict enrollment in coverage described in such subsection [i.e., guaranteed issue coverage] to open or special enrollment periods.”[22] In other words, the requirement that insurers accept all applicants only applies during open enrollment periods—and the HHS Secretary has the sole power to determine when, and for how long, those open enrollment periods run.

The existing Code of Federal Regulations states that for the 2018 benefit year, open enrollment for individual health insurance will run from November 1, 2017 through January 31, 2018—the exact same three-month period as the 2016 and 2017 open enrollment periods.[23] The incoming Administration can—and should—issue new regulations limiting those open enrollment periods to a much narrower window, to prevent individuals from “gaming the system” and enrolling only after they incur costly medical conditions.

At minimum, it appears eminently reasonable for the new Administration to shorten the open enrollment window down to 30 days—a significant reduction from 2016 and 2017, which saw open enrollment last for one-quarter of the year. If logistical obstacles can be overcome—i.e., could Exchanges process applicants in a shorter period?—the Administration could restrict the open enrollment period even further, to a period of perhaps a couple of weeks. Other observers have suggested tying open enrollment to a period surrounding an individual’s birth date, thus preventing a surge of applicants at one particular point in the year.

Narrowing the length of open enrollment periods, coupled with restrictions on special enrollment periods outlined below, will provide a more controlled and contained environment for insurers to issue policies. Limiting enrollment periods will mitigate against an insurance market that requires carriers to issue policies without imposing financial penalties on individuals who fail to purchase insurance—indeed, will mitigate against the adverse selection insurers suffer from currently, even with the individual mandate in full effect. Because Obamacare gives the Secretary of HHS extremely broad authority to define “open enrollment periods”—other than stating these must occur annually, the statute includes few prescriptions on administrative authority—the Trump Administration should use this authority to maximum effect.

Restrict Special Enrollment Periods:            Insurers have raised numerous complaints about individuals using special periods outside open enrollment to obtain coverage, incur large medical claims, and then drop that coverage upon regaining health. Early in 2016, Blue Cross Blue Shield calculated that special enrollment period customers were 55 percent more costly than those enrolling during the usual annual enrollment period. Likewise, Aetna found that one-quarter of its entire enrollment came from these “special” enrollment periods, and that said enrollees remained on the rolls for an average of fewer than four months—an indication that many only enrolled in the first place to obtain coverage for a specific medical condition or ailment.[24]

Even as insurers demonstrate that individuals have abused special enrollment periods to incur costly medical bills and subsequently cancel coverage, the Obama Administration actually exacerbated the problem its last-minute 2018 Notice of Benefit and Payment Parameters. That rule expanded the number of special enrollment periods, codifying an additional five exemptions allowing eligible individuals to qualify for coverage outside of open enrollment periods.[25]

That said, the Obama Administration has taken some steps to restrict abuse of special enrollment periods. In June 2016, it implemented a process announced in February 2016, which requires documentation from applicants seeking special enrollment periods for the most common conditions—a move, loss of coverage, marriage, birth, or adoption.[26] The Centers for Medicare and Medicaid Services (CMS) claims this documentation requirement reduced the number of special enrollment period applicants by 20 percent.[27] However, a separate effort to require verification of special enrollment period eligibility prior to enrollment will not begin until this coming June, with results only coming in spring 2018.[28]

With respect to special enrollments, the incoming Administration should 1) eliminate all special enrollment periods, other than those required under existing law; and/or 2) accelerate the process of pre-enrollment verification for all special enrollment periods.[29]

Use Exchange User Fees to Lower Premiums:     In its Notice of Benefit Parameters, the Obama Administration has annually imposed a 3.5 percent surcharge, dubbed an “Exchange user fee,” on issuers offering coverage using healthcare.gov, the federally-run Exchange, which those insurers then pass on to consumers. The 2018 version of the document, released December 22, specifically suggested that the 3.5 percent fee paid by insurers (and ultimately by consumers) now exceeds the costs associated with running the federal Exchange:

We have received feedback suggesting that the FFEs [federally-facilitated Exchanges] would be able to increase enrollment by allocating more funds to outreach and education, a benefit to both consumers and issuers. We sought comment on how much funding to devote to outreach and education, and on whether HHS should expressly designate a portion or amount of the FFE user fee to be allocated directly to outreach and enrollment activities, recognizing the need for HHS to continue to adequately fund other critical Exchange operations, such as the call center, healthcare.gov, and eligibility and enrollment activities.[30]

Some commenters regarding the Exchange user fee proposal specifically requested that the Exchange “user fee rate should decrease over time.” HHS rejected this approach for 2018. It did note that “we do anticipate gaining economies of scale from functions with fixed costs, and if so, may consider reducing the FFE user fee based on increased enrollment and premiums in the future.”[31]

Upon taking office, the Trump Administration should act immediately to ensure that the Exchange user fee funds essential Exchange operations only. With the Exchanges now in their fourth year of operation, HHS will not need to spend as much on technological infrastructure as the Department did while standing up the Exchange—and should not, as the Obama Administration suggested, spend the difference on new “slush funds” designed to promote enrollment outreach.

Because the Exchange user fee is based on a percentage of premium, this year’s 20 percent spike in premiums for Obamacare plans has significantly increased funding for the federal Exchange as it is.[32] Moreover, the vast majority of Exchange participants—84 percent, per the most recent enrollee data—receive federal subsidies for their health insurance premiums.[33] Because those federal subsidies directly relate to premium costs, federal taxpayers—and not enrollees themselves—are in many cases paying for any additional, and unnecessary, spending undertaken by the federal Exchange.

To save taxpayers, and to lower premiums for all consumers, the Trump Administration should take immediate steps to reduce the Exchange user fee to the minimum necessary to support Exchange operations—and instruct insurers to rebate the difference to consumers in the form of lower premiums.

Revise Medical Loss Ratio:  Obamacare requires insurers to spend a minimum percentage of premiums on medical claims—a medical loss ratio (MLR).[34] Insurers in the individual market face an 80 percent MLR, while employer plans have an 85 percent requirement. Plans that do not meet the minimum MLR thresholds must return the difference to beneficiaries in the form of rebates.

During Obamacare’s first several years, the MLR requirements have not proven a concern to insurers—largely because they significantly under-estimated premiums for 2014, 2015, and 2016. In fact, the average MLR for individual market plans skyrocketed from 62.3% in 2011 to 93.3% in 2015.[35] Because enrollees proved sicker than anticipated, insurers have paid out a high percentage of premiums in medical claims—indeed, in some cases, have paid out more in claims than they received in premium payments from enrollees (i.e., an MLR over 100%).

However, should the Trump Administration desire to provide additional flexibility for insurers, it could take a more expansive view of “activities that improve health care quality,” considered equivalent to medical claims paid under the MLR formula.[36] Obamacare required the National Association of Insurance Commissioners (NAIC) to, by December 31, 2010, “establish uniform definitions of the activities” under the MLR, including the definition of activities to improve health care quality.[37] However, the statute makes those definitions “subject to the certification of the Secretary,” and while then-HHS Secretary Kathleen Sebelius accepted the NAIC recommendations, the new Administration is not necessarily obliged to do so.

The interim final rule regarding the medical loss ratio requirement provides a roadmap for a Trump Administration to provide regulatory flexibility regarding the MLR, including the definition of “activities that improve health care quality.”[38] The new Administration could also provide relief regarding agents’ and brokers’ fees and commissions—an issue HHS acknowledged in the rule, but did little to ameliorate—and taxes and fees paid by insurers due to regulatory and other requirements.

Reform State Innovation Waivers:            Section 1332 of Obamacare provides for “state innovation waivers,” which can take effect beginning on or after January 1, 2017. The waivers allow states to obtain exemptions from most of the law’s major insurance requirements, as well as the employer and individual mandates, to provide an alternative system of health insurance for its residents. However, the statute requires that any waiver must:

  1. “Provide coverage that is at least as comprehensive as the coverage” defined under the law, as certified by the Medicare actuary;
  2. “Provide coverage and cost-sharing protections against excessive out-of-pocket spending that are at least as affordable” as the law;
  3. “Provide coverage to at least a comparable number of its residents;” and
  4. “Not increase the federal deficit.”[39]

The Obama Administration released a final rule regarding the process for applying for a Section 1332 waiver in early 2012.[40] However, it did not release information regarding the substance of the waivers themselves until late 2015—and then did so only through informal guidance, not a formal regulation subject to notice-and-comment.[41]

The December 2015 guidance exceeded the requirements of the statute in several ways. First, it said the Administration would not consider potential combined savings from a Section 1332 state innovation waiver when submitted in conjunction with a Medicaid Section 1115 reform waiver. In other words, when meeting the deficit neutrality requirement of Section 1332, Medicaid savings could not be used to offset higher costs associated with Exchange reforms, or vice versa.[42]

The guidance also said the Obama Administration would impose additional tests with respect to coverage and affordability—not just examining the impact on state populations as a whole, but effects on discrete groups of individuals.[43] For instance, the guidance noted that “waivers that reduce the number of people with insurance coverage that provides both an actuarial value equal to or greater than 60 percent and an out-of-pocket maximum that complies with Section 1302(c)(1) of [Obamacare] would fail” the affordability requirement.[44] These new mandates effectively prohibit states from using waiver programs to expand access to more affordable catastrophic coverage for individuals.

Due to the four statutory requirements listed above, the Section 1332 waiver program suffers from inherent shortcomings.[45] But because the added restrictions proposed in December 2015 came through informal regulatory guidance, the Trump Administration can and should immediately withdraw that guidance upon taking office. It should also work immediately to establish a more flexible rubric for states wishing to utilize Section 1332 waivers—with respect to both the application process itself and more flexible insurance design that can expand access and affordability for a state’s residents.

Withdraw Contraception Mandate:            Among the “early benefits” of the law taking effect six months after its enactment was a mandate for preventive care. Specifically, the law requires first-dollar coverage (i.e., without cost-sharing) of several preventive services, including women’s preventive health screenings.[46]

On December 20, 2016, the Health Resources and Services Administration (HRSA) released the most recent women’s preventive services guidelines. These guidelines, as before, required that “the full range of female-controlled U.S. Food and Drug Administration approved contraceptive methods, effective family planning practices, and sterilization procedures be available as part of contraceptive care.”[47]

The Trump Administration should upon taking office withdraw the HRSA benefit mandates—including the requirement to provide contraception coverage. While these particular mandates may have a slight impact on premiums, removing them would reduce premiums nonetheless. More importantly, they would restore the rights of conscience to those individuals and organizations who have been forced to violate their deeply-held religious beliefs to cover contraception and other procedures they object to.[48]

Modify Essential Health Benefits and Actuarial Value:        Among Obamacare’s many new mandated insurance benefits, two in particular stand out. First, the law provides for a series of “essential health benefits”—ten categories of health services that all qualified plans must cover.[49] While the essential health benefits address the breadth of health insurance coverage, actuarial value—or the percentage of annual health expenses paid by an insurance policy on average—addresses the depth of that coverage. The law categorizes individual health plans in four “tiers” based on actuarial value: Bronze plans with an average actuarial value of 60 percent; silver plans, 70 percent; gold plans, 80 percent; and platinum plans, 90 percent.[50]

Both directly and indirectly, the essential health benefits and actuarial value requirements raise premiums—by forcing individuals to buy richer coverage, and then by inducing additional demand for health care through that richer coverage. The Administration’s own rule regarding essential health benefits admitted that the law’s requirements include provisions not previously covered by most forms of health insurance, including “rehabilitative and habilitative services and devices.”[51] Likewise, a study in the journal Health Affairs concluded that the actuarial value requirements would raise premiums, as most pre-Obamacare individual market policies did not meet the new mandated benefit thresholds.[52]

However, the final rules regarding essential health benefits and plan actuarial value provide opportunities to expand benefit flexibility.[53] For instance, the new Administration could provide states with more options for declaring benchmark plans that meet the essential health benefit requirements under the statute. The new Administration could also expand the de minimis variation standards for actuarial value measures required by the law.[54] Allowing for additional variation and flexibility could have a significant impact in reducing premiums, as the Congressional Budget Office concluded in 2009 that the essential benefits and actuarial value standards would collectively raise premiums by 27 to 30 percent, all else equal.[55]

Enhanced Flexibility for Businesses:             On September 13, 2013, the Treasury Department issued Notice 2013-54, which stated that an arrangement whereby an employer reimburses some or all of an employee’s expenses for the purchase of individual health insurance—whether through a Health Reimbursement Arrangement (HRA) or some other means—would be considered a group health plan.[56] As a result, businesses using HRAs need to meet all of Obamacare’s regulatory reforms, such as prohibiting annual limits on the dollar value of essential health benefits.[57] Group health plans failing to meet those requirements trigger a penalty of $100 per day, per individual.[58]

This provision sparked widespread uproar when it first went into effect in July 2015, as the Obama Administration threatened fines of $36,500 per employee for employers who helped fund their employees’ health coverage.[59] Members of Congress introduced standalone legislation exempting small businesses from this requirement.[60] This provision was eventually incorporated into the 21st Century Cures Act, which President Obama himself signed into law on December 13, 2016.[61] As a result, small businesses with under 50 employees can now provide contributions to their workers’ individual health insurance premiums without triggering Obamacare’s regulatory regime.

Expanding upon the precedent of a law President Obama himself signed, the Trump Administration should withdraw Notice 2013-54, build on Congress’ actions, and allow businesses of all sizes the ability to reimburse employees’ premium costs without triggering massive fines. Actions in this vein would have salutary benefits in two respects: They would remove more businesses from Obamacare’s onerous regulatory requirements, while encouraging the use of defined contribution health insurance for employees.

Next Steps and the Pathway Forward

Following more than six years of frustration for the American people, the promise of repealing Obamacare is finally within reach. While passing legislation that unwinds Obamacare in an orderly, stable manner will require policy-makers to act with care, Congress and the new Trump Administration can use last year’s reconciliation legislation as the basis for action. Specifically, Congress should:

  • Seek to expand the scope of last year’s reconciliation legislation to encompass Obamacare’s major insurance regulations, consistent with budgetary scores and past practice and precedents within the Senate;
  • Add a provision to last year’s reconciliation legislation freezing enrollment in Medicaid expansion, effective either upon enactment or shortly thereafter;
  • Explore adding a provision to last year’s reconciliation legislation freezing enrollment in Exchange subsidies, provided doing so will not de-stabilize insurance markets;
  • Appropriate funds for the cost-sharing subsidies in reconciliation legislation, but only for the defined length of the Obamacare transition period; and
  • Explore use of the Congressional Review Act to pass a resolution of disapproval nullifying the Obama Administration’s last-minute Notice of Benefit and Payment Parameters for 2018.

Likewise, the Trump Administration can take several regulatory steps to enhance flexibility and provide certainty during the transition period:

  • Limit annual open enrollment to the shortest period feasible, and in no case longer than one month;
  • Restrict the use of special enrollment periods, by withdrawing all those added by the Obama Administration and not included in statute, and/or requiring pre-enrollment verification for all special enrollment periods;
  • Provide that, for states using the federal Exchange, any portion of the 3.5 percent Exchange user fee not used to cover annual operating costs be refunded to enrollees, thus lowering their premiums;
  • Revise the medical loss ratio requirements to provide more flexibility for insurers;
  • Immediately withdraw the December 2015 guidance regarding Section 1332 state innovation waivers, and provide maximum flexibility within the existing statutory requirements for states seeking to mitigate the harmful effects of Obamacare’s insurance mandates;
  • Withdraw the contraception mandate that raises premiums and hinders freedom of conscience;
  • Modify essential health benefits and actuarial value requirements to provide maximum flexibility within the statutory framework;
  • Expand upon Congress’ efforts allowing small businesses to reimburse their employees’ health insurance premiums without facing massive fines, by withdrawing the September 2013 IRS notice and extending flexibility to as many employers as possible; and
  • Drop the Obama Administration’s appeal of House v. Burwell once Congress provides a temporary, time-limited appropriation for cost-sharing subsidies as part of the repeal reconciliation bill.

Collectively, this menu of actions would help to unwind most of Obamacare’s harmful effects, provide for an orderly transition, and pave the way for Congress to consider and pass alternative legislation designed to lower health care costs. The promise of Obamacare repeal is within reach; it’s time for Congress and the new Administration to seize it.



[1] “Policy Notifications and Current Status, by State,” Associated Press December 26, 2013, http://finance.yahoo.com/news/policy-notifications-current-status-state-204701399.html; Angie Drobnic Holan, “Lie of the Year: ‘If You Like Your Health Care Plan, You Can Keep It,’” Politifact December 12, 2013, http://www.politifact.com/truth-o-meter/article/2013/dec/12/lie-year-if-you-like-your-health-care-plan-keep-it/.

[2] Drew Gonshorowski, “How Will You Fare in the Obamacare Exchanges?” Heritage Foundation Issue Brief No. 4068, October 16, 2013, http://www.heritage.org/research/reports/2013/10/enrollment-in-obamacare-exchanges-how-will-your-health-insurance-fare; Department of Health and Human Services, “Health Plan Choice and Premiums in the 2017 Health Insurance Marketplace,” ASPE Research Brief, October 24, 2016, https://aspe.hhs.gov/sites/default/files/pdf/212721/2017MarketplaceLandscapeBrief.pdf.

[3] Cynthia Cox and Ashley Semanskee, “Preliminary Data on Insurer Exits and Entrants in 2017 Affordable Care Act Marketplaces,” Kaiser Family Foundation, August 28, 2016, http://kff.org/health-reform/issue-brief/preliminary-data-on-insurer-exits-and-entrants-in-2017-affordable-care-act-marketplaces/.

[4] Section 206 of H.R. 3762 had the effect of preventing Medicaid plans from providing reimbursements to certain providers, including Planned Parenthood.

[5] Joe Antos and Jim Capretta, “The Problems with ‘Repeal and Delay,’” Health Affairs January 3, 2017, http://healthaffairs.org/blog/2017/01/03/the-problems-with-repeal-and-delay/.

[6] Ibid.

[7] Paul Winfree and Brian Blase, “How to Repeal Obamacare: A Roadmap for the GOP,” Politico November 11, 2016, http://www.politico.com/agenda/story/2016/11/repeal-obamacare-roadmap-republicans-000230.

[8] Ibid.

[9] Congressional Budget Office, baseline estimates for federal subsidies for health insurance, March 2016, https://www.cbo.gov/sites/default/files/recurringdata/51298-2016-03-healthinsurance.pdf, Table 3, p. 5; Edmund Haislmaier and Drew Gonshorowski, “2015 Health Insurance Enrollment: Net Increase of 4.8 Million, Trends Slowing,” Heritage Foundation Issue Brief No. 4620, October 31, 2016, http://thf-reports.s3.amazonaws.com/2016/IB4620.pdf.

[10] Jonathan Ingram, Nic Horton, and Josh Archambault, “Welfare to Work: How States Can Unwind Obamacare Expansion and Restore the Working Class,” Forbes December 3, 2014, http://www.forbes.com/sites/theapothecary/2014/12/03/welfare-to-work-how-states-can-unwind-obamacare-expansion-and-restore-the-working-class/#455cad6923ec.

[11] Craig Garthwaite, Tal Gross, and Matthew Notowidigdo, “Public Health Insurance, Labor Supply, and Employment Lock,” National Bureau of Economic Research Working Paper 19220, July 2013, http://www.nber.org/papers/w19220.

[12] Christina Cassidy, “Medicaid Enrollment Surges, Stirs Worry about State Budgets,” Associated Press July 19, 2015, http://www.bigstory.ap.org/article/c158e3b3ad50458b8d6f8f9228d02948/medicaid-enrollment-surges-stirs-worry-about-state-budgets.

[13] See for instance Section 4 of Winding Down Obamacare Act, S. 673 (114th Congress), by Sen. Ben Sasse (R-NE), and Section 4(b) of Preserving Freedom and Choice in Health Care Act, S. 2016 (114th Congress), by Sen. Ron Johnson (R-WI).

[14] King v. Burwell, 576 U.S. __ (2015).

[15] United States District Court for the District of Columbia, Civil Action No. 14-1967, House v. Burwell, ruling by Judge Rosemary Collyer, May 12, 2016, https://ecf.dcd.uscourts.gov/cgi-bin/show_public_doc?2014cv1967-73.

[16] The contract between CMS and insurers on the federal Exchange notes that insurers developed their products based on the assumption that cost-sharing reductions “will be available to qualifying enrollees,” and can withdraw if they are not. However, under the statute, enrollees will always qualify for the cost-sharing reductions—that is not in dispute. The House v. Burwell case instead involves whether or not insurers will receive federal reimbursements for providing the cost-sharing reductions to enrollees. This clause was poorly drafted by insurers’ counsel, and therefore has no applicability to House v. Burwell; insurers have no ability to withdraw from Exchanges in 2017, even if the Trump Administration stops reimbursing insurers. See https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/Plan-Year-2017-QHP-Issuer-Agreement.pdf, V.b, “Termination,” p. 6.

[17] Chris Jacobs, “What if the Next President Cuts Off Obamacare Subsidies for Insurers?” Wall Street Journal May 5, 2016, http://blogs.wsj.com/washwire/2016/05/05/what-if-the-next-president-cuts-off-obamacare-subsidies/.

[18] Department of Health and Human Services, interim final rule regarding “2018 Notice of Benefit and Payment Parameters,” Federal Register December 22, 2016, https://www.gpo.gov/fdsys/pkg/FR-2016-12-22/pdf/2016-30433.pdf.

[19] Ibid., pp. 94159-60.

[20] 5 U.S.C. 802. For more information, see Maeve Carey, Alissa Dolan, and Christopher Davis, “The Congressional Review Act: Frequently Asked Questions,” Congressional Research Service Report R43992, November 17, 2016, https://fas.org/sgp/crs/misc/R43992.pdf.

[21] 42 U.S.C. 13031(c)(6)(B), as codified by Section 1311(c)(6)(B) of Patient Protection and Affordable Care Act, P.L. 111-148.

[22] Section 2702(b)(1) of the Public Health Service Act, 42 U.S.C. 300gg-1(b)(1), as modified by Section 1201(2)(A) of PPACA.

[23] 45 C.F.R. 155.410(e)(2).

[24] Paul Demko, “Gaming Obamacare,” Politico January 12, 2016, http://www.politico.com/story/2016/01/gaming-obamacare-insurance-health-care-217598.

[25] 2018 Notice of Benefit and Payment Parameters, pp. 94127-31.

[26] Centers for Medicare and Medicaid Services, “Fact Sheet: Special Enrollment Confirmation Process,” February 24, 2016, https://www.cms.gov/Newsroom/MediaReleaseDatabase/Fact-sheets/2016-Fact-sheets-items/2016-02-24.html.

[27] Centers for Medicare and Medicaid Services, “Pre-Enrollment Verification for Special Enrollment Periods,” https://www.cms.gov/cciio/resources/fact-sheets-and-faqs/downloads/pre-enrollment-sep-fact-sheet-final.pdf.

[28] Ibid.

[29] 42 U.S.C. 13031(c)(6)(C), as codified by Section 1311(c)(6)(C) of PPACA, requires the Secretary to establish special enrollment periods for individual coverage as specified by the Health Insurance Portability and Accountability Act of 1996 (HIPAA) for group coverage, codified at 26 U.S.C. 9801.

[30] 2018 Notice of Benefit and Payment Parameters, p. 94138.

[31] Ibid., p. 94138.

[32] HHS published an average 2017 premium increase for healthcare.gov states of 25 percent, and a median increase of 16 percent. See HHS, “Health Plan Choice and Premiums in 2017,” Table 2, p. 6.

[33] Centers for Medicare and Medicaid Services, “First Half of 2016 Enrollment Snapshot,” October 19, 2016, https://www.cms.gov/Newsroom/MediaReleaseDatabase/Fact-sheets/2016-Fact-sheets-items/2016-10-19.html.

[34] Section 2718 of the Public Health Service Act, 42 U.S.C. 300gg-18, as revised by PPACA Sections 1001(1) and 10101(f).

[35] Centers for Medicare and Medicaid Services, “The 80/20 Rule Increases Value for Consumers for Fifth Year in a Row,” November 18, 2016, https://www.cms.gov/CCIIO/Resources/Forms-Reports-and-Other-Resources/Downloads/Medical-Loss-Ratio-Annual-Report-2016-11-18-FINAL.pdf.

[36] Section 2718(a)(3) of the Public Health Service Act, 42 U.S.C. 300gg18(a)(3), as revised by PPACA Sections 1001(1) and 10101(f).

[37] Section 2718(c) of the Public Health Service Act, 42 U.S.C. 300gg-18(c), as revised by PPACA Sections 1001(1) and 10101(f).

[38] Department of Health and Human Services, interim final rule regarding “Implementing Medical Loss Ratio Requirements under the Patient Protection and Affordable Care Act,” Federal Register December 1, 2010, https://www.gpo.gov/fdsys/pkg/FR-2010-12-01/pdf/2010-29596.pdf.

[39] 42 U.S.C. 18052(b)(1)(A), as codified by Section 1332(b)(1)(A) of PPACA.

[40] Departments of Treasury and Health and Human Services, final rule regarding “Application, Review, and Reporting Process for Waivers for State Innovation,” Federal Register February 27, 2012, https://www.gpo.gov/fdsys/pkg/FR-2012-02-27/pdf/2012-4395.pdf.

[41] Departments of Treasury and Health and Human Services, guidance regarding “Waivers for State Innovation,” Federal Register December 16, 2015, https://www.gpo.gov/fdsys/pkg/FR-2015-12-16/pdf/2015-31563.pdf.

[42] Ibid., p. 78134.

[43] Ibid., p. 78132.

[44] Ibid., p. 78132.

[45] Chris Jacobs, “What’s Blocking Consensus on Health Care?” Wall Street Journal July 17, 2015, http://blogs.wsj.com/washwire/2015/07/17/whats-blocking-consensus-on-health-care/.

[46] Section 2713 of the Public Health Service Act, 42 U.S.C. 300gg-13, as revised by PPACA Section 1001(1).

[47] Health Resources and Services Administration, “Women’s Preventive Services Guidelines,” December 20, 2016, https://www.hrsa.gov/womensguidelines2016/index.html.

[48] United States Conference of Catholic Bishops, “The HHS Mandate for Contraception/Sterilization Coverage: An Attack on Rights of Conscience,” January 20, 2012, http://www.usccb.org/issues-and-action/religious-liberty/conscience-protection/upload/preventiveqanda2012-2.pdf.

[49] 42 U.S.C. 18022, as codified by Section 1302 of PPACA.

[50] 42 U.S.C. 18022(d), as codified by Section 1302(d) of PPACA.

[51] Department of Health and Human Services, final rule on “Standards Related to Essential Health Benefits, Actuarial Value, and Accreditation,” Federal Register February 25, 2013, https://www.gpo.gov/fdsys/pkg/FR-2013-02-25/pdf/2013-04084.pdf, pp. 12860-61.

[52] Jon Gabel, et al., “More Than Half of Individual Health Plans Offer Coverage That Falls Short of What Can Be Sold through Exchanges as of 2014,” Health Affairs May 2012, http://content.healthaffairs.org/content/early/2012/05/22/hlthaff.2011.1082.abstract.

[53] HHS, final rule on “Essential Health Benefits and Actuarial Value.”

[54] 42 U.S.C. 18022(d)(3), as codified by Section 1302(d)(3) of PPACA.

[55] Congressional Budget Office, letter to Sen. Evan Bayh regarding health insurance premiums, November 30, 2009, https://www.cbo.gov/sites/default/files/111th-congress-2009-2010/reports/11-30-premiums.pdf, pp. 9-10.

[56] Internal Revenue Service, Notice 2013-54, September 13, 2016, https://www.irs.gov/pub/irs-drop/n-13-54.pdf.

[57] Section 1563(f) of PPACA added Section 9815 to the Internal Revenue Code, which incorporated most of the regulatory requirements of the law to group health plans.

[58] 26 U.S.C. 4980D(b)(1).

[59] Grace-Marie Turner, “Small Businesses Threatened with $36,500 IRS Fines for Helping Employees with Health Costs,” Forbes June 30, 2016, http://www.forbes.com/sites/gracemarieturner/2015/06/30/small-businesses-threatened-with-36500-irs-fines-for-helping-employees-with-health-costs/#53750b3d4a0e.

[60] The Small Business Healthcare Relief Act, introduced by Reps. Charles Boustany (R-LA) and Mike Thompson (D-CA), H.R. 2911 of the 114th Congress; a companion measure was introduced by Sens. Chuck Grassley (R-IA) and Heidi Heitkamp (D-ND) as S. 1697 of the 114th Congress.

[61] Section 18001 of 21st Century Cures Act, P.L. 114-255.

Is Having Medicaid Better than Being Uninsured?

One of the big items in the news this morning was a study published by the National Bureau of Economic Research that was released overnight regarding the impact of Medicaid coverage.  The study examined 10,000 Oregon residents who were selected for a Medicaid expansion by lottery, and compared their outcomes to those who “lost” the lottery and remained uninsured.

Some news reports have claimed that the study proves “Medicaid does make a difference after all,” due to the prime conclusions that Medicaid beneficiaries had higher medical utilization, lower out-of-pocket costs, and better self-reported health.  However, the results are FAR more nuanced than that.  Among the key points to consider:

  • The study was funded by both the Administration – specifically HHS’ Office of Planning and Evaluation and CMS – and liberal think-tanks like the Robert Wood Johnson Foundation, all of which have interests in promoting the benefits of Obamacare’s Medicaid expansion.
  • The study notes “there is no discernible impact of insurance on emergency room or inpatient hospital use” from new Medicaid coverageIf accurate, this finding would undermine one of the arguments for Obamacare – that expanding coverage through Medicaid will reduce unnecessary emergency room visits.
  • The authors note that “we do not believe our…estimates are capturing an initial, highly transitory surge of ‘pent up demand’ for health care among the uninsured.”  This is a somewhat surprising development, which raises questions why the uninsured did not feel the need to obtain health services immediately upon enrolling in Medicaid.
  • While the authors found a decrease in financial pressures among new Medicaid beneficiaries, they did not find a statistically significant reduction in the most extreme examples of financial strain (e.g., bankruptcies, liens, etc.).  While this development could be based on a “pipeline” effect (bankruptcies can take years to develop, and the study examined only one year of available data), the authors note their conclusion contrasts with the findings of another study released this year.
  • The study notes that “we do not detect any statistically significant improvement in survival probability” from obtaining Medicaid coverage.  This development could be due to the relatively young and healthy nature of the expansion population, but it still suggests that, when it comes to the ultimate arbiter of health, Medicaid’s impact is far from definitively proven.
  • Although the authors note an increase in self-reported health status for the new Medicaid beneficiaries, they repeatedly note that the “measures could reflect a more general sense of well-being rather than actual improvements in objective health.”

The bottom line conclusions of this study:  When enrolled in a program Medicaid charging no more than a $20 monthly premium that provides health care “with no consumer cost sharing,” beneficiaries obtain more care, undergo less financial strain, and feel better about their own health as a result.  These findings are all logical conclusions, but don’t necessarily make a definitive case for Medicaid’s health care benefits.

The most interesting limitation about this Oregon study is that, while it quantifies the amount of additional health care new Medicaid beneficiaries received, it doesn’t examine the quality of care received, nor the outcomes for Medicaid patients.  Scott Gottlieb’s March article in the Wall Street Journal cited several studies indicating that when it comes to such episodes as cardiac procedures and lung transplants, Medicaid patients have worse outcomes than uninsured patients, even after controlling for socioeconomic and other factors.  Studies of that nature arguably provide a better comparison of Medicaid’s bottom-line impact on the health of patients, as opposed to arriving at the logical (and slightly obvious) conclusion that providing taxpayer-funded coverage without cost-sharing relieves beneficiaries’ financial stress.

So is having Medicaid better than remaining uninsured?  To quote the Magic 8-Ball, the answer here is still “Ask Again Later…”