GOP eyes insurer fund to save ObamaCare repeal

A version of this story originally appeared on The Hill Extra.

If Republicans move ahead with repealing ObamaCare, a proposed Patient and State Stability Fund would likely be a key component to keeping the fragile insurance market intact amid massive changes.

The $100 billion fund, included in the embattled House GOP bill, is the result of months of meetings between congressional staff, insurance commissioners and other officials that began before Republicans took complete control of Washington.

Under the proposal, states could use their share to help out insurers and subsidize the high cost of the chronically ill, known as reinsurance.

The fund is “the straw that mixes the drink,” a Republican aide for the House Energy and Commerce Committee told The Hill Extra.

{mosads}Republicans are on defense after the dramatic failure of their first effort to repeal ObamaCare, which the Congressional Budget Office (CBO) estimated could throw 24 million people off insurance rolls.

But the stability fund recently gained new prominence as Republicans attempted to show progress on their ObamaCare repeal bill before leaving for a two-week recess.

The CBO assumes that it would stabilize markets and lower premiums, key features Republicans need in any replacement of the Affordable Care Act.

Just hours before lawmakers left town, the Rules Committee hastily met and reported out an amendment to add $15 billion to the fund, but the new money could only be used for an explicit purpose — funding an invisible risk-sharing program.

In mid-March, Republicans included a separate $15 billion amendment to the fund, specifically for maternity care and mental health and substance use disorder treatment. 

But the GOP bill is a long way from becoming law. It still hasn’t passed the House, and there’s no indication a vote will come soon. 

Moderate and conservative Republicans would have to put aside major differences, and the legislation would have to get through the Senate — which would likely re-work parts of the House bill.

But the fund still remains a popular element of the bill.

Under the plan, states have a decision to make: They can choose to use the money for several purposes or for reinsurance by default.

Other uses include promoting access to preventive care and other services, such as mental health and substance abuse treatment; reducing out-of-pocket costs; and/or paying healthcare providers; and more.

Mike Kreidler, Washington state insurance commissioner, told The Hill Extra he’d be interested in using the dollars to offer financial assistance to those with high deductibles. But he doesn’t really believe the state will ever have to make that decision. 

Elsewhere, Alaska already has a state innovation waiver, which is essentially an extension of reinsurance at the state level. The plan would keep sick individuals in the marketplace, but subsidize their cost to the insurance plan.

The state would be interested in using the stability fund for this program, and also possibly to help insurers with reducing their consumers’ out-of-pocket costs, known as cost-sharing reduction subsidies, Lori Wing-Heier, director of the Alaska Division of Insurance, told The Hill Extra.

Congressional scorekeepers projected that, by 2026, premiums will drop to roughly 10 percent below the current law, but the analysis is predicated on states largely using the stability fund for reinsurance.

“If those funds were devoted to other purposes, then premium reductions would be smaller,” the CBO reported.

Caroline Pearson, a senior vice president of Avalere Health, called it “the best thing” in the House bill for marketplace stability.

Yet, several health experts pointed to potential wrinkles on the horizon.

In later years, states have to partially match the funds to receive them. Some states could see competing stakeholders vying for their share of the money, which could lead to a lobbying frenzy. And the fund sunsets in 2026.  

“What happens to premiums in 2027 when this thing expires or have we now created a permanent entitlement for health insurers to some kind of reinsurance, bailout, whatever you want to call it by creating this fund?” Chris Jacobs, a former health policy congressional aide and founder of Juniper Research Group, asked. “Is this fund just going to be a fund in perpetuity for health insurers?”

States receive different amounts of money based on two calculations.

For the next two years, 2018 and 2019, states would get the federal dollars with no commitment. 

Starting in 2020, states would begin partially matching the funds they receive.

But paying at all could potentially be a problem for cash-strapped states.

“There’s no state match required in the first two years, so it would seem a no-brainer for states to make use of the money,” Larry Levitt, a Kaiser Family Foundation senior vice president, said. “But in later years, there is a state matching requirement and that could discourage some states from using these grants.”

An Energy and Commerce aide said the money wouldn’t necessarily have to come from state revenues; it just has to be non-federal dollars. 

For example, plans could add assessments onto their policies, essentially having each consumer pay a little extra.

But state insurance commissioners have more pressing issues on their mind. Insurers need to see certainty and marketplace stability as they ready their rates and decide which markets to enter for plan year 2018.

In particular, commissioners said they’re worried about the future of the cost-sharing reduction subsidies, which pay insurers to keep out-of-pocket costs down for low-income consumers.

“We’re talking about these issues, but probably the biggest area of uncertainty that’s hanging out there are the cost-sharing reductions,” Alfred Redmer, Maryland’s insurance commissioner, told The Hill Extra. “What’s going to happen there? Who knows. If that’s not resolved that in and of itself would have a significant and maybe fatal blow the Affordable Care Act.”

Kreidler, of Washington state, echoed those concerns.

“From my standpoint right now, I don’t think the American Health Care Act is going to become law,” he said, “but I think the neglect that is coming from HHS is much more likely to be the hard threat that we’re facing right now.”

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