Inside Health Policy: Sessions, Cassidy Plan: New RA, Auto-Enrollment Tweaks Would Improve Risk Pool

Health care reform legislation crafted by Rep. Pete Sessions (R-TX) and Sen. Bill Cassidy (R-LA) proposes to switch insurance companies over to a system akin to the Medicare Advantage risk adjustment program and allow states to decide whether to establish opt-out enrollment as a way to improve the health insurance risk pool.

The bill, which the lawmakers dub the “World's Greatest Healthcare Plan,” would undo the Affordable Care Act's essential health benefits and individual and employer mandates, and let states decide whether to continue ACA exchange coverage or move to a health savings account-driven market, each with its own tax credit structure.

The bill attempts to meet more conservative Republican rhetoric in the middle by avoiding complete repeal of the ACA, while introducing GOP-backed ideas for handing health care power to consumers and states and moving away from the employer-sponsored insurance tax exclusion. Sessions and Cassidy said Monday (May 23) that they intend to pitch their ideas to the House's health reform task force, which plans to come out with its own white paper in June. Sessions added that the new bill could be combined with other exchange, Medicaid and Medicare reforms to become more comprehensive.

Sessions introduced the House version of the bill May 19; a Senate version is yet to come. The lawmakers believe their proposal would be nearly budget-neutral. They will shop it to both legislative chambers, the presidential frontrunners and stakeholder groups before the next Congress and a new White House come in.

Insurers would switch to a risk adjustment program that operates like that of Medicare Advantage, according to John Goodman of the Texas-based Goodman Institute, which helped create the bill.

“Plans no longer will be able to dump their sick enrollees on other plans,” Goodman said Monday (May 25). Offering a hypothetical example of a cancer patient who leaves Blue Cross Blue Shield for another company, he continued, “They will pay their silver-level, they will pay the silver premium in their new plan, but then Blue Cross is going to have to add to that premium so that the new plan gets an actuarially fair compensation.”

A former CMS official noted that plans currently cannot “dump” customers on other companies, so they aren't sure what problem Goodman is trying to fix.

The second paragraph of the legislation's risk adjustment section directs the HHS secretary, the National Association of Insurance Commissioners and others to “develop a mechanism to permit the adjustment of risk among health insurance coverage offered in the individual market throughout the 50 States and [D.C.] Such mechanism shall be designed to effect the same type of risk adjustment of payments among Medicare Advantage organizations … The Secretary shall request the [NAIC] to develop a permanent model for adjustment of risk among health insurance issuers with respect to health insurance coverage offered in the individual market, with the intention that such a model would substitute for the mechanism developed under paragraph (2).”

The risk adjustment methodology would be required to be updated at least once every two years.

To truly mirror Medicare Advantage's risk adjustment, Congress would need to appropriate a pool of money like the Medicare trust fund from which to pay issuers. The Republican-controlled House is unlikely to do so. Without that source of funds, insurers are left to balance out in the market, which means moving money among the companies themselves.

Goodman also believes that risk adjustment would have a greater impact on the makeup of the risk pool than the proposed tax credit system.

“The main effect on the risk pool is not from the credit,” Goodman said, when asked how he expects introducing a flat tax credit system might change the mix of enrollees and their risk profile. “The main effect on the risk pool is what happens when people go from plan to plan … when somebody moves from one plan to another, there's gotta be compensation if that's a high-cost patient.”

Sessions and Cassidy want to create a $2,500 flat tax credit system into which anyone who currently receives income-linked, percentage-based tax credits would “grandfather” upon leaving their exchange coverage. Dependents could also receive a $1,500 per child benefit, but the credits could not exceed $8,000 for a family of four.

According to a frequently asked questions sheet on the plan, individuals may “become eligible for the health tax credit by opting out of ObamaCare and acquiring creditable insurance as defined by law; remain in an ObamaCare exchange plan; choose not to obtain health care insurance altogether, and not be subjected to penalties under ObamaCare nor be eligible for the tax credit.”

The tax credit can also be given to an employer and put toward a health savings account. People can receive their tax credit upon filing their tax return, and would be able to use their tax credit immediately, without waiting for the next tax year.

The bill's proponents say greater subsidy portability would help Americans move away from the employer-based insurance system that accounts for the vast majority of covered lives.

People would have access to tax credits regardless of whether their state chooses auto-enrollment. Residents in states that choose to keep a state-based exchange could receive the ACA's income-based tax credits through that exchange, Cassidy's press secretary Jillian Rogers said. They would not be able to receive an ACA tax credit and the $2,500 subsidy at the same time.

Critics of the $2,500 flat credit say it would adversely affect lower-income or older people who would normally receive more money for their premium under the ACA, and favor higher-income or younger people who might get a smaller subsidy.

Robb Walton, Cassidy's senior health adviser, couches it as a positive for the “young invincibles.”

“One of the things that we're doing is, obviously, we believe making insurance much more affordable so it's much more accessible to young, healthy individuals,” Walton said. “More access to those type of plans, cheaper plans, better plans and more tailored to the individual will bring more young, healthy into the risk pool.”

Goodman said people could benefit from a selective, narrower network that picks a few efficient, low-cost hospitals and saves money on the plan. Those funds could be turned into take-home pay, he said, adding that he expects “almost all employers will go for the tax credit.”

The plan's backers also say pushing more responsibility to the states to decide how to run their own markets would help improve the risk pool.

“Giving states the option to say you're in a basic kind of high-deductible with an HSA health plan unless you choose affirmatively to opt out, that's a choice that we give the states to do if they want to,” Walton said. “We think that that could have a significant effect on bringing more younger people who are unengaged from the health care system otherwise into the risk pool, which … hopefully will shore up the risk pools much better than they are today.”

During a press conference Monday, Cassidy also pointed to Medicare as a successful model for automatic enrollment and believes most states would choose to go that route because their residents would be “much more likely to be enrolled under our plan than under Obamacare.”

“You don't have to be coercive,” Cassidy said. “We allow state legislatures to opt for a provision that everyone is enrolled unless you choose otherwise. … We can look at Medicare. We can see that automatic enrollment is more likely to improve enrollment. So this idea that you are in unless you're out supplants the need, replaces the need for coercion on the part of the federal government and if a state elects it, we anticipate you'd have close to universal coverage.”

The lawmakers did not address how people who are automatically enrolled in these plans would be informed of the expectation to pay for their cost of coverage after their subsidy -- which would apply immediately instead of after hitting a deductible -- runs out. National experience with the ACA has already shown the difficulties of educating people on their responsibility to actively enroll and the effects of handling problems that arise when they do not take action. -- Rachel S. Karas (rkaras@iwpnews.com)