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March 2, 2015

Washington Health Policy Week in Review Archive 9b15c8d6-97e7-4dff-aafc-34372391c961

Newsletter Article


More Than 8.8 Million Signed Up During Health Law Enrollment, HHS Says

By Rebecca Adams, CQ Roll Call

February 25, 2015 -- More than 8.8 million people signed up for health insurance coverage through the federal marketplace or were re-enrolled by the Obama administration in the sign-up period that ended Feb. 22 under the Affordable Care Act.

Some of those people have not yet paid their first premium, which is necessary for the coverage to begin.

The estimates are for 37 states that relied on

Health and Human Services Department officials said that about 90,000 consumers who had insurance last year through marketplace plans were dropped because those people did not provide the documentation of their citizenship or immigration status. The administration had previously projected that 200,000 people would lose coverage.

The administration also released a breakdown of how many people that signed up through were new customers this year and how many were re-enrolled by the administration. Health and Human Services officials automatically renewed coverage for people who signed up in 2014 but did not return to choose coverage for 2015. About 53 percent of the people covered this year were new while 47 percent, or about 4.17 million enrollments, were renewed. 

The next sign-up period is expected to begin on Nov. 1. However, people can enroll before then through a variety of circumstances, including a change in residence, family size, job, or insurance coverage.

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Poll Documents Drop in Uninsured Rate

By Rebecca Adams, CQ Roll Call

February 24, 2015 -- A recent Gallup survey indicates the number of people who have insurance is on the rise. No state in the nation saw an increase in the population of people lacking coverage, and nationwide, the uninsured rate fell 3.5 percentage points from 2013 to 2014, according to the poll.

Arkansas and Kentucky led the states in expanding coverage, followed by Oregon, Washington, West Virginia, California and Connecticut.

The national uninsured rate fell from 17.3 percent of Americans in 2013 to 13.8 percent in 2014, the lowest annualized rate that the Gallup poll has been tracking health care coverage.

The states that saw the biggest improvements were those that both expanded Medicaid to people with income of up to 138 percent of the federal poverty level and chose to set up their own health insurance marketplaces. The uninsured rate fell 4.8 percentage points in states that took both steps, while those that did just one or neither fell 2.7 percentage points.

In August, the New England Journal of Medicine reported that more than 10 million people gained coverage from January 2012 through June 2014. That translates into a drop in the uninsured rate of 5.2 percentage points by the second quarter of 2014.

The Gallup poll sample size was 178,072 adults in 2013 and 176,702 adults in 2014. The margin of sampling error is plus or minus 1 to 2 percentage points for most states, but is close to plus or minus 4 percentage points for states with small populations such as North Dakota, Wyoming, Vermont, and Alaska.

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Fear of Chaos Mounts over Health Law Case

By Melissa Attias, CQ Roll Call

February 23, 2015 -- There's no shortage of dire predictions about what would happen if the Supreme Court strikes down the system for awarding subsidies to people seeking insurance under the Affordable Care Act.

Millions more could be added to the ranks of the uninsured, the cost of coverage could rise dramatically, and insurance markets could be thrown into chaos, or at least temporary instability.

For all those hypotheticals, though, the only thing that's certain is the country will be more divided than ever over President Barack Obama's signature legislative achievement, with many states forced to quickly decide what new steps, if any, to take to reach out to those losing their subsidies.

The political and financial stakes lend high drama to the March 4 oral arguments in the third major legal challenge to the health law, a lawsuit that attacks nothing less than the financial underpinnings of its coverage expansion.

The case—King v. Burwell—focuses on whether the financial help that low- and middle-income Americans receive under the law to help cover the cost of their health coverage is contingent upon what type of insurance marketplace, or exchange, exists in their state. Challengers argue that wording in the overhaul limits the subsidies to residents of states that created their own exchanges, not the 34 that defaulted to the federal government marketplace. The lawsuit seeks to invalidate an IRS rule the Obama administration issued interpreting the law as providing subsidies in all states.

If the majority of justices agree with the plaintiffs, billions of dollars of subsidies would evaporate unless states, the administration, or Congress respond with plans that fit the contours of the changed market.

Precisely what a response would entail depends on how broadly the court rules, making demands to craft contingency plans an iffy proposition.

Leading voices on both sides of the challenge think it's unlikely the subsidies will disappear on day one, but they're also skeptical that Congress will act promptly to avoid a major disruption in coverage.

Instead, experts predict the administration will ease the process for states currently using the federal exchange to convert to their own marketplaces so the financial aid can continue to reach their residents.

Even that would leave the country divided. Democratic-controlled states and some GOP-controlled ones would likely cast the widest safety net by taking steps to keep subsidies flowing while participating in the law's simultaneous expansion of Medicaid, the federal-state health program for the poor. Other states will pick one option and provide a partial extension of coverage. And holdouts would do nothing, leaving their residents without the options available in other areas.

A ruling that leaves some states without subsidies or expanded Medicaid runs counter to the law's goal of reducing national variations in coverage, according to Jonathan Oberlander, a health policy and management professor at the University of North Carolina, Chapel Hill.

Though hospitals and insurers will put immense pressure on so-called "purple states" to establish exchanges, governors and legislators in Republican-led states like Texas who fiercely oppose the law will find it convenient to abstain.

"You will have growing division, which you already have, between participating and boycotting states," Oberlander says. "It's going to be a mess."

Should the IRS rule be scrapped, experts generally predict a lag of about a month before subsidies disappear, though that hinges on the way the ruling is worded. Justices may be able to create a longer transition period by staying the ruling until, say, the next open enrollment period for people to sign up for coverage. While that would buy some time to make accommodations, it would also be ideologically inconsistent, according to one of the architects of the challenge.

Michael Cannon, the Cato Institute's director of health policy studies, says it would be "very awkward" for the court to decide the subsidies aren't authorized but allow them to continue for some period.

When the ruling takes effect, and more specifically when people in the 34 affected states are told they have a problem, would determine how quickly the administration and Congress begin to respond. Although administration officials have brushed off congressional Republican questions about contingency plans, people on both sides of the debate believe the White House will do whatever it can to soften the blow.

One option would be issuing regulations or guidance allowing states that currently use the federal marketplace to more easily be considered to have established their own exchanges. A state would still have to take some action to assert that it's establishing a marketplace, but wouldn't necessarily have to start from scratch, allowing officials to leverage the existing federal investments in information technology.

"What would likely happen is the administration would create some sort of path by which a state could essentially take over the exchange infrastructure and deem it to have established an exchange," says Robert Bradner, a partner at Holland & Knight.

Seven states already participate in a hybrid arrangement in which they rely on the federal government but still handle some enrollment functions and likely would have the easiest time adapting to the new landscape.

Any such administrative steps to accommodate states could stoke another legal challenge that lands them back before the high court, though that would take time.

But experts say there is no obvious quick fix to keep the subsidies flowing everywhere without help from Congress or the buy-in of each state.

"Anybody who thinks this can be fixed administratively is being much too optimistic," says Nicholas Bagley, an assistant professor of law at the University of Michigan.

"There is no silver bullet," Bagley says.

There's widespread agreement that the health care landscape would have to be in complete turmoil for a Republican Congress to make subsidies available on the federal exchange.

Cannon says that would be viewed not only as extending the health law, but also as reinstating its coverage mandates, because penalties many employers face for not providing workers coverage are tied to people receiving subsidies.

Additionally, more people would be exempt from the law's requirement that individuals buy insurance if coverage becomes unaffordable.

Instead, GOP leaders could try to leverage a ruling against the administration to advance some of their other health law-related priorities, such as repealing the employer mandate or the excise tax on medical devices.

They also could opt to provide states with a short-term transition period to decide on a path forward.

Leading conservative voices are urging Republicans to use a ruling to put their own health policies in place, and to have plans ready well ahead of an expected decision in June.

Key senators have started discussing possible contingency plans, and House Majority Leader Kevin McCarthy of California formally announced the formation of a working group in late January to sort out the issue alongside the broader replacement effort.

But there's an intraparty debate about what the best approach would be with Obama still wielding the veto pen.

Scott Gottlieb, a resident fellow at the American Enterprise Institute, recognizes that governors are going to be under immense pressure to keep the subsidies flowing, particularly if the administration provides a workaround.

Gottlieb thinks Congress should pass legislation that provides additional flexibility for federal exchange states that decide to use a new administrative process to be considered state exchanges.

That flexibility would include language to free the marketplaces from federal regulations so that old plans not in compliance with the health law's coverage requirements could continue to be sold.

In an op-ed with American Health Policy Institute President Tevi Troy, Gottlieb wrote, "So long as the administration redefines a 'state run' exchange, it seems proper to have Congress address what requirements accompany such a redefinition."

Heritage Foundation senior research fellow Edmund F. Haislmaier thinks Congress should instead tackle the way the subsidies are designed, which he terms narrowly limited and over-complicated.

Lawmakers could offer a simpler design and follow up by looking at provisions that raise costs, he says, citing one requirement that plans can only charge seniors up to three times more for premiums than younger people.

On a practical level, Haislmaier doesn't see reinstating subsidies in the federal exchange as helpful.

"It's like plugging the hole in the roof while the basement's flooding and the dining room's on fire," he says.

The inability of Republicans to agree on a plan to replace the health law makes it clear that bringing the diverse GOP caucus together to rally around one approach will be an uphill battle. In the end, Congress could do nothing, leaving the issue for the administration and states to sort out.

"People who are really desirous of repealing the law might just say, 'Terrific, great—this is not my problem,'" Bradner says.

States wouldn't be so lucky, and would probably face fierce lobbying from insurers and the hospital industry to ensure that subsidies keep flowing.

Representatives of both health industries submitted friend-of-the-court briefs ahead of oral arguments urging the justices to side with the Obama administration, on the grounds that the challenge could significantly harm Americans in federal exchange states.

"Experience in the states clearly demonstrates that enacting health insurance reforms without ensuring broad participation, particularly among those who are young and healthy, will have major consequences for individuals and families," Karen Ignagni, president and CEO of America's Health Insurance Plans, said in a statement.

The problem is that without subsidies bringing down the cost of coverage, healthier people who find premiums unaffordable may decide it's not worth it to continue paying for health plans. Enough defections would skew the risk pool of enrollees toward older, sicker people who are more likely to maintain coverage.

"This is very serious stuff," says Timothy Jost, a law professor at Washington and Lee University. "These people are trying to blow up the non-group health insurance market in the United States because they hate the Affordable Care Act so much."

Although insurers included an opt-out clause in their agreement with the federal exchange that could allow companies to leave if the subsidies disappear, it may not have a tangible effect.

Robert Laszewski, president of Health Policy and Strategy Associates, an insurance industry consultant, says the provision "doesn't mean anything" because of cancellation notice requirements at the state level and federal constraints established by the Health Insurance Portability and Accountability Act.

Laszewski expects insurers to stick with the status quo long enough to see whether affected states would decide to set up their own exchanges, noting that a financial backstop established under the health law will protect carriers through 2016.

Health plans eventually have a huge decision to make if a state opts not to act, he adds.

Beyond pressure from industry stakeholders, Democrats are sure to take to the hustings and highlight anecdotes about individuals facing higher premiums as a result of the decision.

A recent Urban Institute report estimated that average premiums in the non-group market would rise by 35 percent, while RAND Corporation projected a 47 percent boost among individual market plans that comply with the health law.

Democrats could also use an expected increase in the number of uninsured Americans to bolster their argument, though Haislmaier says he thinks the effect of the ruling and the general role of exchange coverage are being overstated.

For the first nine months of 2014, he says the net increase in private health coverage was only 893,000 people after accounting for a drop in employer-based insurance.

As has been the case with the Medicaid expansion, some states may ultimately opt to set up their own exchanges while others continue to refuse, leaving disparities across the country.

But when the finger-pointing begins in Congress, Laszewski thinks Republicans will lose the blame game, noting that the reverberations of the decision could even reach wealthy Americans covered through plans outside of the exchanges.

"I don't think they have any concept of how much trouble they're going to be in," he says.

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Burwell: Administration Lacks Back-Up Plan If Justices Rule Against Health Law

By Melissa Attias, CQ Roll Call

February 24, 2015 -- Health and Human Services Secretary (HHS) Sylvia Mathews Burwell recently sent a letter to Capitol Hill stating that the administration has no back-up plan if the Supreme Court rules against the health care law's system for distributing insurance subsidies.

"We know of no administrative actions that could, and therefore we have no plans that would, undo the massive damage to our health care system that would be caused by an adverse decision," Burwell wrote. The name of the letter's recipient is redacted, but an HHS spokeswoman said it went out to Republican offices.

The letter comes one day before Burwell is scheduled to testify before the House Labor-HHS-Education Appropriations Subcommittee and two days before she's slated to appear before the House Energy and Commerce Health Subcommittee—both occasions that she would be expected to face questions about whether the Obama administration has contingency plans for the Supreme Court case, King v. Burwell.

Earlier this month, Burwell drew fire from Republicans on the Senate Finance Committee for repeatedly dodging questions about contingencies.

The Supreme Court will hear oral arguments March 4 and a ruling is expected by the end of June. The case focuses on whether the subsidies that low- and middle-income Americans receive under the 2010 health care law to help cover the cost of health coverage are contingent upon whether a state created its own insurance marketplace or whether it uses the federal marketplace.

According to the plaintiffs, the wording in the law restricts the subsidies to residents of states that set up their own exchanges and an IRS rule that also provides them in the 34 states that defaulted to the federal exchange is illegal. Some experts have predicted chaos in insurance markets and a rise in the uninsured population if the justices uphold the challenge.

In her letter, Burwell said the administration is "confident that we will prevail because the text and structure of the Affordable Care Act demonstrates that citizens in every state would be entitled to tax credits, regardless of whether they purchased their insurance on a federal or state marketplace." But she said a decision against the government would cause "massive damage"—millions would lose their subsidies and be priced out of coverage, the enrollee pool in the individual market would skew toward those who are sick, raising costs for everyone, and the uninsured would seek care in emergency rooms, further increasing costs.

The letter could boost pressure on GOP lawmakers in both chambers who have said they're working on their own response if the court sides with the plaintiffs.

"By admitting they have no contingency plan to assist the millions that may lose subsidies, the administration confirms how the misguided law is unworkable for the American people," Senate Finance Chairman Orrin G. Hatch, R-Utah, said in a statement. "I'm committed to working with my Republican colleagues on how Congress can respond to help those hurt by Obamacare's broken promises, including those in a post–King v. Burwell world."

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Medicaid Enrollment Continued to Grow at Year's End, Report Shows

By Rebecca Adams, CQ Roll Call

February 24, 2015 -- The pace of Medicaid and children's health coverage enrollment continued to grow steadily in December, rising nearly 0.8 percent from the previous month.

Almost 10.8 million people were enrolled in Medicaid or the Children's Health Insurance Program in December, according to an enrollment report that the Centers for Medicare and Medicaid Services released last week. 

The programs grew nearly 18.6 percent, or by nearly 10.8 million people, from the average enrollment in the months just before the first open enrollment period for marketplace plans began in October 2013 to December 2014.

The increase from November to December was essentially the same as in the previous month. Enrollment from October 2014 to November 2014 grew by 0.79 percent, according to figures that were revised upward slightly from preliminary estimates. 

In Kentucky, the state with the largest growth, the programs ballooned by nearly 76.9 percent over that timeframe. Vermont's enrollment swelled by nearly 70.7 percent, while programs in Nevada grew by 64.9 percent and in Oregon by nearly 64.6 percent.

States that expanded Medicaid, like those states, grew most dramatically, although most states' enrollment rose at least a bit. The average increase in the programs in states that had implemented broader Medicaid eligibility guidelines was just over 27 percent, while the average in non-expansion states was 7.3 percent.

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Health Law Subsidy Recipients with Bad Information Won't Owe More Taxes

By Rebecca Adams, CQ Roll Call

February 25, 2015 -- About 50,000 tax filers, who received incorrect information about subsidies they received under the health law and already filed their 2014 returns, won’t have to pay any sums they owe as a result of the government's mistake.

Centers for Medicare and Medicaid Services officials announced last week that about 800,000 tax filers, which could be more than 1 million individuals, got incorrect tax statements. Principal Deputy Administrator Andy Slavitt said some of those people may have gotten tax refunds that were too big, while others didn't receive all they were owed.

A Treasury Department spokesperson said Tuesday that people who have filed do not need to amend their returns. “The IRS will not pursue the collection of any additional taxes from these individuals based on updated information in the corrected forms,” said the spokesperson.

The remaining people affected, who have not yet filed their returns, should wait until they get corrected forms as early as next week.

But Treasury officials are encouraging people who have filed already to check if their refunds should have been bigger and re-file their taxes if need to recoup the difference. If the taxpayer sees that the monthly premium for the local benchmark plan on the original form is less than the premium listed on the corrected form, it may be worth refiling.

“Individuals may want to consult with their tax preparers to determine if they would benefit from filing amended returns,” said the spokesperson.  

The tax problem is separate from longstanding concerns about whether some consumers underestimate how much they would earn and took subsidy credits last year that were too generous. If someone claimed too much of a credit to discount the price of their insurance premium, that person will have to pay it back.

H&R Block Inc. estimated in an analysis Tuesday that about 52 percent of people who enrolled in private health insurance through marketplaces last year are learning that they got subsidies that were too high and have to pay them back. People have had to return an average of about $530, which decreased their tax refund by about 17 percent, the company said. On the flip side, about 33 percent of marketplace customers overestimated their income and are getting bigger refunds than they expected, with the average amount totaling $365 on average, an approximately 11 percent boost. 

Rebecca Adams can be reached at [email protected]

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