Health Policy Report

The Week in Review

The Senate had the week off from Washington, leaving the House to conduct a modest slate of legislative business. Most notably, House lawmakers advanced a $36.5 billion disaster relief package in a 353-69 vote under suspension of the rules. The bill represents the second installment of aid since a series of natural disasters struck southeast Texas, Florida, and Puerto Rico, among other areas. The breakdown of funds includes $18.7 billion for the Federal Emergency Management Agency’s disaster relief fund, $576.5 million for wildfire recovery, and $16 billion to keep the National Flood Insurance Program (NFIP) afloat.

The White House made significant headlines in the healthcare and foreign policy arenas this week as President Trump made a series of announcements on Thursday and Friday. Specifically, the White House released an executive order on Thursday that would encourage the creation of cheaper health plans that do not abide by many of the consumer protections and benefit rules prescribed by the Affordable Care Act (ACA). That executive order was followed shortly by the announcement that the White House intends to end disbursing the cost-sharing reduction payments that help subsidize coverage for low-income individuals. A full breakdown on both developments are included in the roundup below.

On Friday, President Trump took the controversial step of “de-certifying” Iran’s compliance with the multi-nation nuclear deal struck in 2015 that involved lifting economic sanctions in return for controls on Iran’s nuclear development. The move is a step short of withdrawing the United States from the deal, although the President has threatened he would “terminate the deal” should Congress not approve “satisfactory” changes. What remains unknown is whether Iran – and the other members of the international negotiating team – will recognize the American demands as legitimate. Importantly, and despite President Trump’s assertions, the international observers monitoring Iran’s nuclear program have insisted that the nation remains in compliance with the deal’s terms. 

The Week Ahead

The House and Senate are set to switch places this week as the Senate returns from their weeklong recess and the House departs for an in-district work period until Oct. 23. The Senate agenda starts with confirmation votes for Callista Gingrich to be Ambassador to the Holy See and David Joel Trachtenberg to be Principal Deputy Under Secretary of Defense, which are scheduled for today and tomorrow, respectively. Senate lawmakers are also likely to take up their version of a fiscal 2018 budget resolution (text) after the House passed their budget earlier this month. Republicans are seeking to complete the process in a timely fashion in order to facilitate their ambitious goal of sending tax reform legislation to the president’s desk before the end of the calendar year.

Administration Announces Decision to Pull CSRs

The Department of Health and Human Services (HHS) and the White House late Thursday announced that they would immediately discontinue Affordable Care Act (ACA) cost-sharing reduction (CSR) payments. Despite its ambivalence over the subsidies, the Administration has been deciding on a month-by-month basis to make payments to insurers since it took over in January. The legality of the CSR payments – which were authorized by the ACA but never appropriated – has been the subject of a lawsuit between the House of Representatives and the former (and now current) Administration. The district court ruled in favor of the House and the Obama Administration appealed the decision, but the appeal has been on hold since President Trump took office. During that time, 16 states have intervened to defend the previous Administration’s position in the case out of fear that the new Administration would no longer protect their interests.

As part of the decision to cut off payments, the Administration released a legal opinion from the Justice Department finding that the CSR payments were illegal. In the opinion, Attorney General Sessions notes that “although the Department of Justice has previously defended in court the government’s decision to use the permanent appropriation [for the CSR payments], I have concluded that the best interpretation of the law is that the permanent appropriation… cannot be used to fund the CSR payments…”

The Congressional Budget Office (CBO) in August estimated that cutting off the CSRs would “increase the federal deficit, on net, by $194 billion from 2017 through 2026.” CBO reasoned that insurers would seek to offset losses from the discontinuance of the CSRs by raising premiums. The federal government would then bear the brunt of the those premium increases by paying higher premium subsidies. In addition to increasing the deficit, the Administration’s decision raises important questions about the future stability of the individual market. The higher premiums projected by CBO could prompt individuals to leave the market or stop paying premiums. When the CSR payments stop, insurers would be entitled under their contracts with the federal government to withdraw from the Exchanges. The decision also puts tremendous pressure on Senate HELP Committee leaders to converge on a bipartisan agreement to provide stable CSR funding, though objections from conservative factions will be hard to overcome.

As far as the legal implications of this decision, commenters have highlighted the possibility that states intervening in the ongoing litigation will ask the court to prevent the Administration from cutting off payments. In addition, they point out, insurers would be able to sue in the Court of Federal Claims to recoup the unpaid subsidies promised to them under the ACA.

Trump Issues Executive Order Setting Path to Expand Association Health Plans, Short-Term Plans, HRAs

Also last Thursday, President Trump signed an Executive Order (EO) that seeks to broaden the availability of Association Health Plans (AHPs); expand the definition of short-term limited duration insurance (STLDI) policies; and change Health Reimbursement Arrangements (HRA). It is important to note that this EO likely does not have an immediate legal effect. The order instructs the Department of Health and Human Services (HHS), Treasury, and Department of Labor (DOL) to “consider” the proposed policies, for which implementation would likely necessitate formal notice and comment rulemaking. Many commenters have highlighted that broadening access to AHPs and STLDI amounts to a “workaround” to ACA coverage requirements, which could have a significant destabilizing impact on the individual and small group market if healthier people are drawn to these alternative options.

Last week’s EO instructed the DOL to consider reinterpreting AHPs as the type of insurance subject to insurance requirements that apply to large group plans under the Employee Retirement Income Security Act (ERISA), which are not subject to ACA essential health benefits (EHB) and actuarial value (AV) requirements. The Administration notes that the proposal is aimed at providing small business workers with a broader range of insurance options at lower rates in the large group market. The Administration elaborates that “a broader interpretation [of ERISA] could potentially allow employers in the same line of business anywhere in the country” to form AHPs across state lines. The Administration says employers would not be able to exclude employees from the plan or set premiums based on health status.

In the EO, the President directs the agencies to consider expanding access to STLDI.  The Obama Administration had restricted such plans to a duration of three months, with enforcement taking effect on April 1, 2017. The EO notes that STLDI is not subject to ACA rules and estimates that it costs one-third the premium of ACA-compliant coverage. According to the Administration, STDI nonetheless may have “broad provider networks and high coverage limits.” It is unclear whether STLDI policies ultimately would be considered minimum essential coverage and satisfy the individual mandate penalty.

The EO further directs the agencies to consider modifications to HRAs “so employees can better use them for their employees.” The Administration notes that “expanded HRAs could potentially give American workers greater flexibility and control over how to finance their healthcare needs.” This could include using employer-contributed, non-taxable HRA funds toward individual market premiums, which had been restricted under the Obama Administration.

Congressional reactions have fallen along predictable partisan lines. Senate Finance Ranking Member Ron Wyden (D-OR) said the EO “will undermine protections for those with pre-existing conditions, segregate the market into sick and healthy, and reopen the door to scam health insurance that doesn’t cover real care.” House Energy and Commerce Chairman Greg Walden (R-OR) and Health Subcommittee Chair Michael Burgess (R-TX), meanwhile, welcomed the EO and said it would provide “more affordable options.”

Hargan to Serve as Acting HHS Secretary 

On Tuesday, the White House announced that President Trump had appointed former corporate lawyer and George W. Bush administration official Eric Hargan to be acting Secretary of Health and Human Services (HHS). Hargan’s appointment comes following the resignation of Tom Price, who vacated the post after several Politico articles chronicled his travel costs while using private and government planes. Trump announced that Hargan will now fill the role that Price left behind as Republicans continue their ongoing efforts to repeal and replace the Affordable Care Act.  

Hargan’s previous experience at the HHS includes serving as deputy general counsel, principal associate deputy secretary, and acting deputy secretary under the Bush administration. Just last week, the Senate backed Hargan’s nomination to be HHS Deputy Secretary 57 to 38.  U.S. Food and Drug Commissioner Scott Gottlieb was also reportedly considered for the acting secretary position, but claimed he would better serve the administration by remaining in his current role.

CHIP Reauthorization May Not See Action Until December

Although both Republicans and Democrats agree on a five-year reauthorization of federal funding for the Children’s Health Insurance Program and a phase-out of the 23 percent funding bump enacted under the Affordable Care Act (ACA), they have hit a snag over how to pay for it. It wasn’t clear how close the two sides were to an agreement on the $8.2 billion in offsets as the Friday (Oct. 13) deadline set by Republicans for negotiating the pay-fors loomed, but House Freedom Caucus Chair Mark Meadows (R-NC) said he thinks House Republicans could pass CHIP funding extension legislation without support from Democrats. Republicans this past week said they would delay the floor vote on CHIP in order to seek a compromise on offsets, and Energy & Commerce Chair Greg Walden (R-OR) set the deadline after a long, contentious CHIP markup by his committee.

As questions and concerns arise over the timing of the now-expired funding for the program, sources report that House Republicans are looking to work out an offset deal with Democrats because it would put pressure on the Senate to adopt the House bill. Some are wondering whether Republicans were instead buying time to convince members of their own party to vote for the bill, but Rep. Meadows has indicated that was never a problem. Additionally, sources confirmed last week that the Senate will focus their time over the next four weeks on issues related to the federal budget and tax reform, leaving no time for a stand-alone health care bill. Many now suspect that the CHIP legislation will most likely be part of a bigger “end of year” spending package in December.