The Congressional Budget Office has concluded the Alexander-Murray bipartisan compromise on the Affordable Care Act (ACA) would cut the federal deficit by $3.8 billion over the next decade. But that only scratches the surface: The proposed legislation would also alleviate two major problems that in recent years have crippled ACA insurance markets and jeopardized the healthcare coverage of millions of Americans.
First, the proposed legislation restores funding for a payments program that allows private-marketplace insurers to offer comprehensive health coverage to less affluent Americans at a price well below the underlying cost of the plan. When those payments through the cost-sharing reduction (CSR) program stopped this year, premiums rose on certain ACA plans by more than 20 percent, our research shows.
Rather than bailouts, as some ACA critics portray them, these reimbursements should be seen more accurately as pass-through payments that can stem the tide of carriers leaving ACA state exchanges. Not reimbursing insurance companies would be akin to the federal government requiring car dealerships to sell sports utility vehicles for the price of a compact, or grocery stores to hand over steaks for the price of hamburgers.
Second, the bipartisan compromise improves the arduous process that states must currently go through to get permission to deviate from the ACA to design more affordable programs better suited for their residents’ needs. Currently, to obtain a waiver, the entire process can take sometimes more than a year and often costs hundreds of thousands of dollars in staff time and consulting fees to comply with the rigid procedures. The bipartisan proposal cuts the review time to 90 days from 180 and requires a decision within 45 days in situations where states face the potential of excessive premium increases or the exit of all marketplace insurers.
As I recently shared in my testimony to the Senate HELP committee requiring deficit neutrality requirements be met each year the waiver rather than over the life of the waiver could prohibit innovative overhauls that may require ramp-up or phase-in periods to become fully effective. The bill would change the requirement, so that the waiver need only be deficit neutral over both the term of the waiver and the 10-year budget plan.
To date, nine states have requested waivers, and four have been granted. There are success stories, such as Alaska’s waiver, which allowed the state to cut premiums 20 percent by creating an invisible high-risk pool of people with chronic conditions. Other state attempts have not fared as well, with Iowa pulling its waiver request recently when it appeared it was headed for rejection based on the current ACA guardrails and comments by the Centers for Medicare and Medicaid Services (CMS).
And here’s where the bill needs to go further. While faster reviews and the ability to meet deficit neutrality requirements over the period of the waiver would be a vast improvement, meaningful reforms by the states may still be hindered by restrictive interpretations of whether proposed innovations would meet affordability or enrollment requirements. This is a test the law currently applies to the aggregate effect of each change on the entire population affected, but which the compromise takes a step further by compelling changes to also meet the test when examining certain age and income groups.
In addition, state flexibility to explore value-based benefits could make coverage more affordable for all. For example, allowing lower out-of-pocket maximums for high-value services reduces a burden that causes individuals managing chronic conditions to forgo needed services.
But perhaps the biggest point to be made in favor of the compromise is that it is an acknowledgement by both Republicans and Democrats that the ACA is not without flaws and needs tinkering. The two sides disagree on the extent of problems and the scope of repair. Some think the law is unsalvageable. But no one can deny the fact that 20 million more people have health coverage today than before ACA’s adoption in 2010. Surely, we all agree that more people with coverage is a good enough development to be willing to compromise on.
Tammy Tomczyk Partner, Oliver Wyman Actuarial Consulting