Next week, the Senate Health, Education, Labor and Pensions Committee begins hearings on short-term solutions for stabilizing the individual health insurance markets. This will mark the first bi-partisan effort on healthcare our government has tried since President Trump’s inauguration. Below we will discuss what the hearing is about and what negotiations we could see come from it.
Hearing Agenda
First, don’t expect to see any negotiation of the big issues, like Medicaid or Medicare, or prescription drug costs for that matter. Rather, the meeting will address the singular issue of stabilizing the individual healthcare marketplace.
Arguably, this is the best way for our representatives to handle this issue this late in the game. With the GOP failing to repeal and replace in July, action needs to be taken immediately to prevent premiums from skyrocketing in 2018. Senate Majority Leader Mitch McConnell, R-Ky., said shortly after the GOP’s failed push that, "any solution that Congress passes for a 2018 stabilization package would need to be small, bipartisan and balanced." With the large repeal measures presented by the GOP no longer having a chance of passing the house, the discussion will be relegated to the only thing left on the table, the individual market place.
The hearing will almost certainly address the most noteworthy variable that affects the individual market place, cost-sharing reduction (CSR) payments. You may have heard of CSR payments, but here’s a quick refresher. The CSR payments were originally placed into the Affordable Care Act (ACA, better known as Obamacare) to balance the costs that insurance companies would take on for offering lower deductibles and copays to low-income individuals. Last year, the CSR payments accounted for approximately $7 billion in spending.
What negotiations can we expect around the CSR payments?
You may have heard that if the CSR payments are stopped, millions of people in the exchanges will have their health insurance jeopardized, as they would likely not be able to pay for the projected 19 percent national average increase in their premiums. What many of these reports fail to mention is that this is gross premium increases. If premium subsidies are included, the actual impact would be far less dramatic, as 90 percent of people in the individual market already receive premium subsidies. The CBO’s own report that came out Aug. 15th says that those who purchased silver plans, "would pay net premiums that were similar to what they would pay if the CSR payments were continued."
Therefore, the argument over CSR payments is actually over whether we subsidize low-income individuals’ policies through the insurance companies, or directly through the government. A full impact analysis of canceling the CSR payments can be read on the CBO’s website.
What we can hope for is a conciliatory discussion, where Republicans could offer to make the CSR payments permanent, and in exchange, Democrats could offer reduced mandatory benefits for the plans offered in the Obamacare marketplace. This would be a significant victory for all Americans, as the excessive requirements for insurance are a direct cause of premium increases.
Sadly, we may never see such efforts during the hearing. The CSR payment issue will likely manifest in the hearing as Democrats claiming that Republicans are threatening to abandon low-income Americans for the sake of politics, where in fact it would be the opposite. Democrats would be trying to save the failing legacy of Obamacare by refusing to offer any concessions that would guarantee CSR payments. They may choose this route, but it would be sacrificing an opportunity to make meaningful changes to our healthcare system simply to spite Republicans for political gain.
Ultimately, this is a chance for both parties to make gestures of good faith, as they both have something the other wants. Democrats want the Republicans to make the CSR payments official, enshrining an aspect of Obamacare that is essentially a subsidy hot potato.Republicans want the Democrats to offer reduced mandatory plans for insurance companies, which is a measure that will actually reduce the cost of premiums. The way in which those reductions manifest though could take many forms. One could say that this is an opportunity for a start to healthcare reform, but this is Washington D.C. we’re talking about, so don’t get your hopes up.
Richard S. Bernstein, CEO of Richard S. Bernstein & Associates, Inc., West Palm Beach, is an insurance advisor for high net worth business leaders, families, businesses, municipalities, and charitable organizations. An insurance advisor to many of America’s wealthiest families, he is a writer, trusted local and national media resource and expert speaker on estate planning and health insurance. Visit his website at www.rbernstein.com. To read more of his reports — Click Here Now.