On March 6, 2019, the Energy and Commerce Health Subcommittee of the U.S. House of Representatives held its second legislative hearing on bills related to the Affordable Care Act (ACA). The Subcommittee’s first legislative hearing focused on four pieces of legislation to reverse or limit recent ACA policy changes made by the Trump administration. During this hearing, lawmakers discussed three bills that would help strengthen the individual market through additional federal funding for reinsurance programs, navigators, and new state-based marketplaces.
Also on March 6, the Centers for Medicare and Medicaid Services (CMS) released its second request for information (RFI) in two weeks on the ACA. The first RFI solicited stakeholder input on challenges related to maintaining grandfathered group coverage under the ACA. This RFI asks for comment on ways to promote the sale of individual health insurance coverage across states lines, primarily through a “health care choice compact” under Section 1333 of the ACA. Comments on the RFI are due within 60 days.
New House Bills On The ACA
The House’s Subcommittee on Health of the Energy and Commerce Committee held a legislative hearing on March 6 to discuss new legislation on strengthening the individual market. The witnesses were Peter Lee of Covered California, Audrey Morse Gasteier of the Massachusetts Health Connector, and J.P. Wieske of the Council for Affordable Health Coverage (and former deputy insurance commissioner of Wisconsin). Written testimony and a video of the 2.5-hour hearing are available here.
The first bill, H.R. 1425, would provide $10 billion in annual funding for states to establish a reinsurance program or reduce costs for those enrolled in marketplace coverage (through, for instance, subsidies for those with incomes above 400 percent of the federal poverty level as California Gov. Gavin Newsom (D) recently proposed). States would have to apply for these funds but would be automatically approved unless CMS notified the state otherwise. If a state did not apply for these funds, CMS would operate a reinsurance program in that state.
Federal funding for reinsurance has been widely discussed in Congress since fall 2017 when a reinsurance proposal was included in bipartisan market stabilization legislation from Sens. Alexander (R-TN) and Murray (D-WA). Reinsurance was discussed again in spring 2018 when Sens. Alexander and Collins (R-ME) developed a new market stabilization package that would have included $10 billion in annual reinsurance funding. This bill was, however, shelved because it included an additional requirement that federal funds could not be used for plans that cover abortion services. (More on this debate, and additional background on reinsurance and the coverage of abortion, is available here.)
Similar issues were front-and-center during the March 6 hearing. Republican members of Congress emphasized their need to impose additional abortion-related restrictions on federal reinsurance funding. Other members urged additional flexibility for states. In highlighting his new bill, H.R. 1510, Ranking Member Dr. Michael Burgess noted the need for federal funding coupled with “structural reforms” to the ACA.
Although Republican members did not seem supportive of H.R. 1425, many had praised state-based reinsurance programs under Section 1332 during the Subcommittee’s first legislative hearing. Some suggested that federal funding for reinsurance is unnecessary because states have the option to establish a state-based reinsurance program under Section 1332; however, as Mr. Lee pointed out, not all states are able to contribute towards the cost of the reinsurance program as is typically needed under Section 1332.
The second bill, H.R. 1386, would devote $100 million of annual user fees towards the navigator program in federal marketplace states. The bill would also reverse some of the changes made to the navigator program by the Trump administration, such as rolling back the requirement that there be at least two navigators in each state and assessing navigator grantees based on their ability to reach individuals who are unaware of their coverage options through non-ACA plans, such as short-term plans. H.R. 1386 would reverse these changes in addition to providing funding for navigators.
Mr. Lee and Ms. Morse Gasteier each highlighted the importance of navigators to reaching underserved, low-income, and other vulnerable populations in a way that complements paid advertising and additional outreach through agents and brokers. Ms. Morse Gasteier noted that the 16 navigator organizations in Massachusetts—which range from community-based nonprofits to public health organizations to fishing industry organizations to community health centers—offer assistance in 21 languages, hold informational events, and help keep consumers enrolled. Mr. Lee emphasized that Covered California works with many agents but that navigators are critical to serving populations that are not always reached by agents, such as Spanish-speaking consumers.
Much attention was paid to data previously released by CMS regarding the number of consumers enrolled by navigators and other performance measures. It is worth emphasizing that CMS has faced criticism for inaccuracies in its performance measurement data and for using incomplete data. Further, facilitating enrollment is only one of the five duties that navigators are tasked with under Section 1311 of the ACA. In addition to enrollment, navigators must conduct public education, distribute fair and impartial information about marketplace options, and provide information in a culturally and linguistically appropriate manner. Many provide year-round support to consumers and conduct outreach and education activities on an ongoing basis.
The third bill, H.R. 1385, would provide states with $200 million in federal grant funding to establish state-based marketplaces. These funds could be used for up to two years, and marketplaces would have to be financially self-sustaining by 2024. States would not be required to establish a marketplace but the funding could encourage more to do so. This bill has bipartisan support.
Discussion focused on the amount of federal funds previously spent to help states set up their own marketplaces prior to 2014. Mr. Wieske advocated for privatization of the marketplaces while Mr. Lee and Ms. Morse Gasteier noted the importance of maintaining the integrity of strong state-administered systems to promote true competition and safeguard the use of federal and state taxpayer dollars.
Highlighting the benefits of state flexibility because of a state-based marketplace, Mr. Lee noted the release of a joint analysis from Covered California, the Massachusetts Health Connector, and the Washington Health Benefit Exchange comparing the experiences of these state-based marketplaces with that of the federal marketplace on metrics such as premiums and risk pools. Ms. Morse Gasteier similarly discussed the factors that make the Massachusetts Health Connector successful, much of which she and colleagues outlined in a previous Health Affairs blog.
New RFI On Health Care Compacts
On March 6, CMS released a new RFI to solicit feedback on ways to improve insurers’ ability to offer individual health insurance coverage across state lines, including through “health care choice compacts.” The RFI is being issued in response to President Trump’s executive order from October 2017. This executive order is perhaps best known for directing federal agencies to expand access to short-term plans, association health plans, and health reimbursement arrangements. However, it also states the policy of the Trump administration “to facilitate the purchase of insurance across state lines.” CMS points to that language and Section 1333 of the ACA in issuing the new RFI.
Section 1333 directs the Secretary of the Department of Health and Human Services, in consultation with the National Association of Insurance Commissioners (NAIC) to issue regulations to create health care choice compacts between states. States could enter into agreements with one another to permit insurers to offer individual market qualified health plans (QHPs) in each other’s states. The Secretary must approve any compact agreements.
Insurers that offer a QHP in another state would continue to comply with the original state’s rules on market conduct, unfair trade practices, network adequacy, and other consumer protections. The insurer must be licensed in all states where it offers QHPs and clearly notify consumers that its policy is not subject to the rules in the state where it is being sold. A state must additionally enact a law authorizing it to enter into a compact agreement pursuant to Section 1333.
The Secretary can only approve compacts that meet statutory guardrails. These guardrails are similar to those in Section 1332 of the ACA. To be approved, compacts must ensure that coverage will be at least as comprehensive and affordable as coverage under the ACA, provide coverage to at least a comparable number of residents as under the ACA, not increase the federal deficit, and not weaken enforcement of laws and regulations in states that join the compact.
Implementation To Date
To my knowledge, CMS has not issued rules or consulted with the NAIC to implement Section 1333 of the ACA. This is true despite the statutory deadline of July 1, 2013. No state has enacted legislation to authorize a compact nor has CMS received requests from states to approve a compact. Four states have adopted laws that authorize the sale of insurance across state lines while three states have adopted legislation to study this issue. Many other states have considered, but not enacted, similar legislation over the past few years.
These state laws have been largely unsuccessful at meeting their stated goals. In a 2012 study of all the states that had passed these laws (except Oklahoma), colleagues at Georgetown University’s Center on Health Insurance Reforms and I found that no out-of-state insurers had entered into these states or indicated their intent to do so. This was primarily because out-of-state insurers faced significant challenges in developing a network of providers in a new state. The difficulty of building a new network and the cost of care were the primary barriers to the sale of coverage across state lines, far more so than a state’s regulatory environment or benefit mandates.
The RFI asks for public comment on ways that CMS could further facilitate the sale of individual health insurance across state lines. The 22 questions focus on ways to expand access to coverage sold across state lines, ways to operationalize compacts, and the financial impact of doing so. (Section 1333 also allows insurers to, with the Secretary’s approval, offer “nationwide” QHPs if they meet certain plan requirements. The RFI does not appear to address these plans and focuses entirely on compacts.)
CMS asks for feedback on the advantages and disadvantages of compacts, actions the federal government could take to help facilitate sales across state lines, why states have not adopted new laws on compacts, and how the sale of coverage across state lines would affect people with preexisting conditions and disabilities, veterans, and other populations. CMS asks how difficult it is for small and regional insurers to develop provider networks in multiple states and if and whether insurers with a national provider network would face challenges in offering coverage through a compact. CMS also asks a series of questions related to rating, risk pooling, and out-of-pocket costs for coverage crossing state lines; other questions focus on insurers’ operating costs, market participation, and consolidation.
In an issue to keep an eye on, CMS asks whether other mechanisms outside of Section 1333 compacts (such as a memorandum of understanding) could be used to facilitate the sale of coverage across state lines. CMS goes on to ask whether selling short-term plans, farm bureau coverage, or other state-licensed coverage through such arrangements would help facilitate the sale of coverage across state lines. It is worth noting recent evidence that short-term coverage is already being sold across state lines through out-of-state associations that are exempt from state regulation. (It is also unclear why this question is included in the RFI since Section 1333 is expressly limited to the sale of QHPs that meet specific guardrails, and compacts could not be used to sell non-ACA coverage such as short-term plans.)
CMS notes that it does not intend to preempt state law or otherwise impede the role states play in regulating private health insurance. However, proposals to allow the sale of coverage across state lines can significantly undermine protections in a state where the product is being sold. These effects are outlined further in this NAIC resource. This is likely one reason why Section 1333 explicitly requires states to opt into a compact before the sale of coverage across state lines is allowed. Further, the RFI’s questions are silent as to the role of the NAIC in developing standards for compacts even though Section 1333 requires the Secretary to consult with the NAIC.
CMS notes that there are several other mechanisms to facilitate the sale of individual health insurance across state lines, such as interstate health compacts adopted at the state level. Although organizations such as the American Legislative Exchange Council advocate for broader types of state health compacts that would suspend federal insurance laws, CMS notes that these types of compacts would need to be approved by Congress and would likely face legal challenges.