Opinion

Deals Will Be Cut for ACA Replacement – Who Wants What?

Just as when the Patient Protection and Affordable Care Act (Obamacare) was negotiated before its signing on March 23, 2010, health care entities are now jockeying to make sure whatever deal gets made to “repeal and replace” the ACA is as beneficial as possible to their interests. Who wants what?

Without doubt, health insurers are in the driver’s seat. Many have fled the Obamacare exchanges, driving premiums up and leaving consumers with few choices. If the ACA replacement plan doesn’t find a way for health plans to sell insurance at a price people will actually pay, everything else falls apart. What do health insurers want?

While America’s Health Insurance Plans, the national association representing most health insurers, has put forward a long list of concerns, in my estimation there are two key assurances health insurers want in order to support an ACA replacement plan.

The top priority of health insurers is predictability. For most businesses, a predictable regulatory and legal landscape is necessary in order to plan for capital investments, hiring, product development, etc. For health insurers, they simply cannot commit to any ACA repeal and replace scheme that asks them to offer products in the individual and small group market that are only viable for a year at a time. It is simply too difficult to manage risk and make money by enrolling consumers in a product that will only last for a year. It seems highly unlikely health plans will support any “repeal and replace” efforts that do not provide them with a level of predictability and certainty that will last over three to five years.

The second priority of health insurers is some requirement for consumers to make consistent payment of premiums. This appears in the popular press as a fight over the individual mandate, but that’s not the core problem for health insurers.

The ACA allows a person to pay their first month’s premium and receive services, then proceed not to pay the premium for the next three months, but still receive services. (After three months, the person can be kicked off the plan). Obviously, this needs to change so health plans don’t pay for high-cost services when a consumer isn’t paying premiums.

Additionally, in the opinion of health plans, the ACA has allowed too many Special Enrollment Periods, allowing consumers to game the system by waiting until they are sick or injured to sign up for insurance under one of the SEPs. Again, this essentially allows a consumer to pay for fewer months of insurance than the health plan has anticipated are necessary to cover the costs incurred and properly calculate actuarial risk. For a replacement plan to be accepted by health insurers, it would need to ensure consumers consistently pay premiums and can’t game the system.

Pharmaceutical manufacturers were at the table when the ACA was put together, and like the other entities involved in the negotiations, they agreed to give up some things in order to help the Obama administration fund the expansion of insurance coverage to millions of people. Manufacturers paid an estimated $90 billion via increased rebates and discounts in Medicaid and Medicare for the ACA’s expansion vision.

What do pharmaceutical companies want with repeal and replace? Like every other health business, they want predictability. Slightly different from health plans, however, innovative drug companies are already required to provide discounts to various patients (vets, safety net patients, Medicaid, Medicare, etc.) outside the requirements of the ACA. Whatever deal gets cut, pharma companies will want to make sure the replacement plan doesn’t demand price controls that would stymie innovation.

There are multiple health care providers with an interest in what happens to the ACA. Nursing homes, home health agencies, urgent care clinics, dialysis facilities, rehabilitation centers, to name a few, have a point of view about what they would like to see in ACA replacement. For the most part, however, only two groups of providers will really be at the table for negotiations: hospitals and physicians.

Hospitals are most concerned about reversing the payment reductions they agreed to in 2010. Hospitals cut a deal when the ACA was signed to take certain payment reductions in the Medicare and Medicaid Disproportionate Share Hospital programs. They agreed to these cuts because they were promised that more people would be insured so hospitals would have less uncompensated care. With “repeal” but no “replace,” or a “replace” that doesn’t ensure people purchase insurance, hospitals would still have the DSH payment reductions, but would also be forced to provide services to the more than 20 million uninsured people who might lose their health insurance coverage.

Physicians are most concerned about predictability and flexibility. Honestly, physicians got a rather raw deal with the ACA. They were forced to continue to provide services to patients even when they weren’t compensated by health plans. They were nudged into alternative payment arrangements in Medicare. They were asked to handle many more insurance types than before the ACA, which costs their offices additional money to administer. Though the American Medical Association isn’t saying it so bluntly, what physicians want in an ACA replacement deal is some predictability about how they will be paid for performing which services, and more flexibility in making recommendations to patients.

Physicians are likely to get what they want, as HHS Secretary Nominee Tom Price is an orthopedic surgeon who thinks physicians should be paid better and given much more autonomy. His previously proposed plan, if that were to be the “replacement,” would be much better than the ACA for physicians, especially in terms of reimbursement.

As the Trump presidency nears, various stakeholders in the health care industry will push for their specific interests in the “ACA repeal and replace” effort to ensure the replacement is as beneficial as possible to their business. It remains to be seen who will come out on top, but who wants what is clear.

 

Brenda L. Gleason is the founder and CEO of M2 Health Care Consulting. M2 provides strategic advice on state health policy issues to a wide range of health care companies.

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