The Senate’s effort to pass the Better Care Reconciliation Act — or even some form of the 2015 repeal-only Obamacare Repeal Reconciliation Act — appears to have collapsed. But the fight to repeal and replace Obamacare is not over. As President Trump told Senate Republicans last week, “Inaction is not an option.” Senate Majority Leader Mitch McConnell, R-Ky., has promised a vote on some form of Obamacare repeal this week.
Nevertheless, the chances of a legislative roll-back of Obamacare seem slim in the near term. If President Trump is serious about ending his predecessor’s health law, he will have to take matters into his own hands.
To that end, there are a variety of ways the executive branch can undo some of Obamacare’s most destructive provisions.
The president laid the groundwork with his January 20 executive order instructing his administration to reduce Obamacare’s economic burdens by all available means. The Centers for Medicare and Medicaid Services just closed its public-comment period on precisely this issue. The Trump administration can start by tightening restrictions on special enrollment.
Obamacare established an open-enrollment period toward the end of each year, when consumers were expected to shop for coverage that would take effect the following year. The law also provided for special enrollment, whereby people could buy insurance outside open enrollment if they experienced a qualifying life event that might disrupt their coverage, like a divorce or job loss. The Obama administration rarely, if ever, checked to see if people seeking special enrollment had actually experienced the life event they claimed. Consequently, people routinely waited until they got sick to purchase coverage and then asserted that they were eligible for special enrollment.
This abuse of special enrollment is among the reasons why the exchanges are disproportionately comprised of sick individuals. They’re more costly to cover, so insurers have steadily raised premiums. In response, relatively healthy — or responsible — consumers have increasingly left the exchanges, or not signed up at all. This is particularly true of the young invincibles. The higher premiums they’ve faced just haven’t been worth it. That’s made the exchange pools even sicker — and costlier.
This escalating phenomenon is called an insurance “death spiral.”
Strictly enforcing special-enrollment rules could make it far harder for consumers to game the system. That would lead to lower overall premiums.
To further reduce premiums, health policy wonk Chris Jacobs has suggested that the administration slash Obamacare’s 3.5 percent user fee on exchange insurers. Insurers just pass that surcharge along to consumers in the form of higher premiums.
The fee was designed to finance the operations of the federal HealthCare.gov exchange. But the cost of maintaining the exchanges has almost certainly fallen over the last four years, even as premiums — and therefore user fees — have soared.
Cutting this surcharge so that it covers only the actual cost of running the exchanges could lower costs for insurers and, in turn, reduce premiums for consumers.
Obamacare’s medical-loss ratio rules are yet another area where the Trump administration could take action. Under these rules, insurers in the small-group and individual markets must spend at least 80 percent of the premiums they collect on “activities that improve healthcare quality.” That number rises to 85 percent for large-group plans.
These rules were intended to force insurers to cut administrative spending and prevent them from pocketing excessive profits. After all, if consumers were going to be required to purchase insurance, as Obamacare’s individual mandate dictates, then it was only fair for the government to try to ensure that consumers got good value for their premium dollars.
Nevermind that the year Obamacare became law, the insurance industry’s profit margin was just 3.3 percent.
Insurers who have been unable to cut administrative costs enough to comply with these minimum loss ratios have had to either leave the market or raise premiums. Neither outcome is favorable to patients.
The Trump administration has the authority to determine what count as “activities that improve healthcare.” They could broaden the definition to include things like fraud-prevention initiatives, wellness programs, and prescription-drug adherence efforts. In so doing, they’d give insurers relief from the loss ratios — and drive down premiums.
The Trump administration should also take aim at Obamacare’s essential health benefits mandates, which require all insurance plans to cover certain treatments and services. These mandates have inflated premiums by making low-cost, bare-bones policies illegal.
Exactly how each state complies with the essential health benefits is determined by a state-specific “benchmark” plan. Secretary of Health and Human Services Dr. Tom Price could give states more flexibility in choosing their benchmark insurance policy. This, in effect, would free insurers to offer a far wider array of plans.
Dr. Price could take similar steps with Obamacare’s actuarial value requirements, which dictate the share of a patient’s out-of-pocket costs that a plan must cover. For example, under Obamacare, a “silver” exchange plan must cover an average of 70 percent of the costs of all essential health benefits.
To accommodate plans that miss that mark only slightly, HHS permits a “de minimis variation” of two percentage points. In other words, a plan that covered an average of only 68 percent of essential health benefits could still qualify as a silver exchange plan.
Dr. Price could expand the de minimis variation to give insurers more leeway in their plan design — and to give patients more coverage choices.
The path forward for health reform in Congress is not yet clear. But the work of repealing and replacing Obamacare needn’t be left only to Congress. President Trump has no shortage of opportunities to roll back major components of this destructive health law through executive action.