Obamacare is hardly repealed, but some may have more and costlier insurance choices-i.e. and Other Effects of the Tax Bill

25551900_1394093210720334_2253461270479693121_nSometimes, in fact, more and more times I really believe that our leaders are reminiscent of the comedy team, the Three Stooges. I wonder if our elected officials are comedians or idiots.

Jayne O’Donnell and Herb Jackson wrote that hours after Congress passed the tax bill Wednesday; President Trump declared the Affordable Care Act “essentially” repealed.

In fact, it’s barely touched. But is or was it repealed?

What was repealed — effective in 2019 — was the requirement that nearly everyone has insurance or pay a penalty at tax time.

“This is important but it’s not the heart of the ACA, by any means,” says Sara Collins, vice president of health care coverage and access for the non-profit Commonwealth Fund.

What the tax bill doesn’t change:

  • The federal and state exchanges that sell insurance to those who don’t get it from their employers will remain open and people who gained Medicaid coverage under the expansion of the program will be able to keep it.
  • Subsidies will remain available if these people who make below 400% of the federal poverty limit (about $98,000 for a family of four).
  • Most employers will still be required to offer plans that comply with the law. And a variety of other requirements for insurers, doctors, and hospitals will be intact until or unless Congress or the Department of Health and Human Services (HHS) changes them by legislative or regulatory fiat.

The mandate’s “effect was highly exaggerated because it wasn’t an effective mandate to begin with,” says health care economist Gail Wilensky, who headed the Centers for Medicare and Medicaid Services in the George H.W. Bush administration.

The penalty for not having insurance was often far less than the cost of having insurance. Besides, there were too many ways people could be exempted from the requirement, says Wilensky, a senior fellow with the global health foundation Project Hope.

Mitch McConnell said that he is Ready To ‘Move On’ From Obamacare Repeal, But Others In GOP Say Not So Fast!

Senate Majority Leader Mitch McConnell wants 2018 to be a year of bipartisanship, even if that means moving on from GOP dreams of cutting welfare and fully rolling back the Affordable Care Act. How refreshing!

The Kentucky Republican on Thursday broke with House Speaker Paul Ryan, R-Wis., on the approach to paring back spending on programs like Medicaid and food stamps. In an interview with NPR, McConnell said he is “not interested” in using Senate budget rules to allow Republicans to cut entitlements without consultation with Democrats.

“I think entitlement changes, to be sustained, almost always have to be bipartisan,” McConnell said. “The House may have a different agenda. If our Democratic friends in the Senate want to join us to tackle any kind of entitlement reform, I’d be happy to take a look at it.”

McConnell said he wants to spend much of next year focused on issues on which Republicans can work with at least some Democrats in the Senate.

“This has not been a very bipartisan year,” McConnell said. “I hope in the new year, we’re going to pivot here and become more cooperative.”

Republicans spent most of the year struggling and failing, to follow through on promises to repeal and replace the Affordable Care Act, also known as Obamacare. Democrats refused to work with Republicans while they were trying to dismantle President Barack Obama’s signature domestic achievement, and McConnell hopes that next year will be different.

“Well, we obviously were unable to completely repeal and replace with a 52-48 Senate,” McConnell said. “We’ll have to take a look at what that looks like with a 51-49 Senate. But I think we’ll probably move on to other issues.”

McConnell is referring to the political reality that the odds for legislation with only GOP support become longer in January when Sen.-elect Doug Jones, a Democrat from Alabama, takes office.

Republican demands to gut the ACA also declined after Congress effectively eliminated the individual mandate by zeroing out the tax penalty in Obamacare as part of the tax bill approved this week. McConnell hopes to focus instead on stabilizing the insurance marketplaces to keep premiums from skyrocketing in the early months of 2018, a promise he made to moderate Republican Sen. Susan Collins of Maine to get her support for the tax bill.

“I think the repeal of the individual mandate takes the heart out of Obamacare,” McConnell said. “We want to steady the insurance markets if we can … and I think we’ll probably be addressing that part of health care sometime next year.”

Republican Sen. Lindsey Graham of South Carolina immediately pushed back on McConnell’s comments. “To those who believe — including Senate Republican leadership — that in 2018 there will not be another effort to Repeal and Replace Obamacare — you are sadly mistaken,” Graham said in a statement and on Twitter.

But remember that Speaker Paul Ryan (R-Wis.) said that lawmakers need to “revisit” ObamaCare, but also pointed to welfare reform as the focus of next year.                                                                                                                                                        “ObamaCare is collapsing and failing, so we won’t be able to ignore that problem,” Ryan said at a news conference. “So we’re going to have to revisit the problem of a health-care marketplace that is collapsing and that is something that we’re just going to have to get on to.”

However, Ryan did not make clear whether ObamaCare repeal would be part of next year’s fast-track process known as reconciliation to get a measure through the Senate without needing Democratic votes.  Republicans only get one shot at that process next year, and Ryan mentioned health care after saying that welfare reform would be the focus of the fast-track process next year.

“Next year, we want to take on criminal justice reform, we want to take on skills, getting people the skills they need to get the jobs they want, career and technical career education and welfare reform, so those are the kind of entitlement reforms that we’re talking about,” Ryan said.

Some conservatives want the fast-track reconciliation bill to include both welfare reform and ObamaCare repeal.

Any effort on health care faces long odds in the Senate, made even tougher by the victory of Democrat Doug Jones in Alabama this week. Senate Republicans will be able to lose only one vote, and more than that number of Republican senators opposed various ObamaCare repeal efforts earlier this year.

How the GOP Tax Bill Could Affect Health Care

Healthcare Dive reported that Companies should brace for change.

The 30-plus-year drought since the last tax code overhaul may be over as Congress sets out to vote on and place a now-finalized tax bill on President Trump’s desk.

The bill slashes the corporate tax rate from 35% to 21%, and also includes massive changes to how income earned or kept offshore is treated.

In other words, this week could be monumental for business accounts nationwide. Every industry could see effects — including healthcare. Here’s a 60-second overview of what the bill could change, and where industry associations stand on it:

The effect on Healthcare:

IMPACT: Repeal of the Affordable Care Act’s individual mandate is likely to upset payer risk pools and ripple to other players, but hospitals averted elimination of their ability to use tax-exempt bonds.

POSITION: Hospitals and insurers overwhelmingly oppose repealing the individual mandate, but in general the industry stands to gain substantially from the bill’s cut to the corporate tax rate.

ANALYSIS: Repealing the individual mandate would result in about 14 million fewer people with coverage in 2026 and premium increases of about 20%, according to the Congressional Budget Office. Fewer people with health plans mean fewer people seeking care services. Mandate repeal is likely to pull younger and healthier consumers out of the market, resulting in higher premiums and an increase in high-deductible health plans. The rate of insured could also be compromised if the changes to the tax code trigger automatic cuts to Medicare that could reach $25 billion a year under congressional budget rules.

One big win for industry: The final bill keeps the ability of hospitals to use so-called private activity bonds to finance infrastructure and other investments.

Healthcare companies will also be pleased the final product retains the deduction for certain medical expenses and also lowers the threshold from 10% to 7.5% for two years.

Republican leaders have said the separate budget legislation will address destabilization of ACA exchange markets by funding cost-sharing reduction payments and reinsurance programs. Analyses, however, have shown those measures aren’t enough to give the market a sound structure.

What is the Bigger Picture?

The tax reform does not just affect healthcare. Here’s how the bill may alter other industries.

The Effect on the Biopharma Industry:

IMPACT: The GOP tax plan is largely a win for pharma and biotech companies, which stand to benefit from a lower tax rate on cash they have parked abroad.

POSITION: The trade group BIO backed the Senate version of the bill, praising the corporate tax rate cut. But plenty of big pharma CEOs have publicly stated their support for tax reform.

ANALYSIS: The industry will benefit in large part due to a reduced tax rate on foreign income, allowing companies to repatriate cash. Analysts estimate that large-cap pharma alone keeps nearly $98 billion offshore. The new plan lowers that rate from 35% to 15.5%.

During a 2005 tax holiday allowing companies to bring some profits back at a 5.25% tax rate, Pfizer Inc., Merck & Co., and Johnson & Johnson were among the biggest beneficiaries.  A study later found companies tended to cut jobs and use the money for stock buybacks.

Some top pharma players, including Pfizer, have said they were holding off on any meaningful M&A this year until they had clarity on tax reform since they can use the offshore cash for such transactions.

The new bill cuts the overall corporate tax rate to 21% from 35%. Yet, most biopharmas typically pay far less than the statutory rate already. Data compiled by a professor from NYU  recently showed that across 164 drugmakers, the aggregate effective tax rate was 19.41% — so for most big pharmas, in particular, the lower rate will be a neutral/negative development.

Orphan drug credit: The final bill also trims the 50% write-off enjoyed by companies that develop orphan drugs to 25%. One version of the bill cut it altogether, so the trim is a win. The credit applies to R&D for rare disease drugs with the intent of spurring development in orphan indications.

The effect on Human Resources:

IMPACT: Tax reform is expected to impact several areas of interest to HR: paid leave, fringe benefits, automation, and offshoring.

POSITION: The tax proposal could, on balance, be good for companies and in turn good for HR professionals. The industry has not taken a specific stance on the issue to date.

ANALYSIS: Tax reform is expected to impact several areas of interest to HR including some core issues such as paid leave, fringe benefits, automation, and offshoring.

One proposal would give employers a tax credit equal to 25% of an employee’s salary if it paid them during FMLA leave. There are several proposals to scrap deductions for benefits employers often are involved in, like transportation and relocation expenses.

Some thought the bill might create new tax incentives to encourage employers to create jobs. (That’s what the Trump administration promised, after all.) Instead, it proposes to allow employers to write off the full value of machines right away, perhaps encouraging automation without an accompanying incentive for hiring humans.

The bill proposes to exempt some income from U.S. companies with operations outside the country. This encourages business to send work overseas, some experts have said.

HR will probably like the paid leave proposal, as it gets at an existing problem without a mandate. Instead, it’s an incentive to do something many are already doing anyway. On the flip side, the fringe benefit exclusions do the opposite, creating a disincentive for employers to offer those benefits.

The automation and offshoring items are, on their face, good news for companies. Some, however, say they’re not as useful without an incentive to hire people, too. After all, machines can’t be upskilled when needs shift.                                                                 Insurers are bracing for the repeal of the individual mandate.                                                                                                                          Shelby Livingston reported that the GOP tax proposal, slated for a vote on Tuesday, would ax the Affordable Care Act’s requirement that most individuals enroll in an insurance plan or pay a financial penalty starting in 2019. The potential repeal of the individual mandate, which is now a sure thing, has some health insurers worried and already thinking about potential rate hikes that would be needed to keep them from losing their shirts.
Even though open enrollment for 2018 individual coverage ended last week, insurers already have their eyes on 2019. Initial requests for 2019 individual market coverage are due in the spring. If the mandate is repealed, industry experts predict that younger, healthier people would drop their coverage, leaving insurers to cover a population that skews sicker, costlier and heavily subsidized.

In fact, the Congressional Budget Office projected that 4 million people would drop their health insurance plans in 2019, rising to 13 million by 2027.
Insurers would have to raise rates significantly to cover the cost of insuring a sicker population. Some insurers would likely stop selling coverage altogether.

It would be “a little bit like insuring only burning houses,” said Chet Burrell, CEO of Blues insurer CareFirst, which has already lost north of $600 million on its individual ACA plans from 2014 through 2017. “When you insure a whole geographic region of houses, it’s one thing. When you insure only those that are burning, it costs a bloody fortune.”

The individual mandate requires most Americans to buy coverage or pay a penalty of $695. It has long been the most unpopular piece of the ACA, but insurance experts say it’s a necessary piece that keeps the individual insurance market, including the ACA exchanges, from collapsing.
About 84% of exchange customers, or 8.6 million people, in the first half of 2017 received a premium tax credit, which helps lower the cost of premiums for people with incomes up to 400% of the federal poverty level.

How the repeal of the mandate affects an insurer depends on the mix of customers an insurer enrolls. Blue Cross and Blue Shield plans, for instance, attract a higher-income population, many of whom don’t receive premium tax credits. So plans like CareFirst face losing a large portion of healthier members if the mandate is repealed and may have to raise rates significantly to cover them. Those premium increases would fall on the shoulders of the remaining unsubsidized members, who may then choose to drop coverage.

On the other end of the spectrum, an insurer like Centene isn’t fretting over the absence of a mandate because its predominantly low-income, heavily subsidized population will keep its insurance even without a mandate. Because federal tax credits grow as premiums rise, members with subsidies will be insulated from insurers’ price hikes.

“I don’t think it’s going to affect us,” Centene CEO Michael Neidorff said. “There’s a lot of people who, now that they’ve had (insurance), will want to keep it.” He added that Centene’s ACA exchange business continues to do well. The insurer is one of the few health plans that has turned a profit on the exchanges, thanks to its experience managing the care of Medicaid recipients.

“Do I wish we still had the mandate? Overall, it was put in for a good reason. But it’s not going to stop me from continuing to be successful with these products,” he added.

Sabrina Corlette, a health insurance expert at Georgetown University, said insurers like Centene may see the repeal of the mandate as an opportunity. If other insurance companies leave the market, Centene could swoop in to take up the leftover business.
For most insurers and many unsubsidized patients, though, the loss of the mandate will be a blow, she said, especially considering the many other actions undertaken by the Trump administration and Congress in the last year that have weakened the individual market. The repeal of the individual mandate comes after the Trump administration ended the cost-sharing reduction payments that lower out-of-pocket costs for consumers and promoted the sale of short-term plans through an executive order.
“You take the mandate plus all the policy actions that have taken place to this date, I actually think it’s understandable that carriers would look at the situation and say: I don’t have a trusted government partner; why would I stay in this market?” Corlette said.

Even with the individual mandate in place, insurers have been retreating from the ACA exchanges because of regulatory uncertainty and because they are having trouble turning a profit. Large, national insurers, including Aetna, Anthem, Humana and UnitedHealth Group, have mostly fled the marketplace, which is now dominated by regional Blue Cross and Blue Shield companies.
Corlette expects the jockeying between insurers and regulators that occurred this year when states were trying to plug bare exchange counties to continue in 2019. State insurance commissioners and local politicians were successful in ensuring there were no counties lacking insurers for the 2018 coverage year. But “they may not have a lot of leverage in 2019,” she said. Some insurers “are saying it’s not worth the headache.”
Corlette expects the jockeying between insurers and regulators that occurred this year when states were trying to plug bare exchange counties to continue in 2019. State insurance commissioners and local politicians were successful in ensuring there were no counties lacking insurers for the 2018 coverage year. But “they may not have a lot of leverage in 2019,” she said. Some insurers “are saying it’s not worth the headache.”
Joel Ario, managing director of Manatt Health and a former Obama administration official, said a repeal of the individual mandate would lead insurers to demand other ways to stabilize the insurance market. States could also impose their own individual mandate penalties, but it’d be hard to gather political support for such an unpopular ACA provision.
More likely, insurers will call for reinsurance programs.
“There will be many insurers, if not most insurers, talking about reconsidering their participation in 2019, and as that talk settles in, the pressure on Congress to approve a reinsurance fund will increase,” Ario said.
CareFirst’s Burrell has already called for a federally funded reinsurance program in which the federal government would help finance the extremely high costs of the sickest individuals above a certain threshold. By removing those high-cost members from the general risk pool, premiums for other members would decrease. Some states, including Alaska, Minnesota, and Oregon, have reinsurance programs of their own.                                                                                                                                                     So, we don’t really know what the GOP will do to health care, but it looks like they will have a limited time to do anything before they lose their majority is in jeopardy. I do like Mitch McConnell’s desire for a bipartisan approach for stabilizing the insurance industry, health care, and entitlements. This could be an interesting year.

My family just wanted me to make this a very short blog post and just wish you all a Merry Christmas. But I really believe in keeping the education process going as we approach the consideration of the single-payer health care system and whether it is the best approach for the U.S.A.

Anyway, Merry Christmas to all and wishes for a wonderful New Year!

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