Tax Reform and Health Reform Merge

November 16, 2017

Tax Bill: Today the House of Representatives passed a tax reform bill.   The Senate is now proceeding full steam ahead on it; most likely voting on it after the Thanksgiving break. The bill will have implications for health policy both directly and indirectly if it passes.

Direct Effects: The Senate version of the tax reform bill ends the individual mandate, effective the 2019 benefit year.  The CBO estimated that ending the mandate  would reduce the number of insured by 4 million in 2019 and increase premiums in the individual market by 10%. The tax bill also ends deductions for certain medical expenses, which is expected to increase Medicaid costs.  

Indirect Effects: There is also the potential for indirect effects. The tax bill increases the deficit to such an extent that certain automatic cuts to spending will kick in  (the requirement is often referred to as PAYGO). While there are exceptions to the cuts for low-income programs like Medicaid or ACA subsidies; Medicare would be in line for approximately a 4% cut (or $25 billion) in 2018. Additionally, the ACA risk adjustment program would likely need to be sequestered to an even greater extent (albeit to date this has meant a delay in when issuers receive payments). The effects of automatic cuts could be negated if Congress waives the (PAYGO) requirements. If the tax bill passes, look for the issue of PAYGO/Medicare cuts to be a hot topic to immediately follow.

Open Enrollment:  Open Enrolment for the individual market just passed week 2. How are things looking?  On the one hand, enrollment is it up this year in absolute terms relative to last year. Plan selections in the healthcare.gov states (i.e., state Exchanges the Federal government operates) is already at 1.5 million which is about a 50% increase compared to where plan selections were last year. This is not just existing enrollees selecting plans earlier, as new enrollment is up 40%. However, for the Healthcare.gov states, the Open Enrollment period is half as long this year as it was last year. The two-week mark represents a third of the way through Open Enrollment. Compared to last year’s one-third mark, enrollment is down 25%. Despite early good numbers, a late enrollment surge is likely necessary to match last year’s totals.

On the more anecdotal side, Health Sherpa (an online broker) currently calculates that nearly 20% of its ACA enrollees pay $0 a month in premiums (due to the higher subsidy amounts). They also found (to date) that enrollment in Silver is down and enrollment in Bronze and Gold plans are up. You can read more here.

Risk Corridors: CMS released its final risk corridor report this week.  Over the three year period, CMS paid only $484 million of the estimated $12.7 billion risk corridor payment amounts. Ongoing lawsuits will determine if the remaining amounts can be collected by issuers.

MA Payment Notice: The proposed MA Payment Notice was released today. Some of the highlights include changes to STAR methodology transparency, changes to artificial limits, flexibility of uniformity requirements and removing the quality improvement project, among others. You can read the proposed regulation here.