What is the Matter With the Iowa ACA?

By run75441. Originally published at Angry Bear

The story as it is told is “Iowa’s Healthcare Market has imploded. Companies have gone out of business, lost money, premiums increased, policies canceled, etc. “ With Obamacare’s fifth open-enrollment season kicking off on Nov. 1, the consequences are playing out across one of America’s most politically influential states as residents struggle to maintain coverage.” It has been difficult to implement the ACA with the issues with the healthcare exchanges, Republicans badmouthing the ACA, and its first attempt at a US healthcare policy. Just one insurer is willing to sell policies in 2018. Why did it end up this way and what caused it?

Gov. Kim Reynolds: “Obamacare is unaffordable, unsustainable and unworkable and Obamacare has driven out consumer choice and competition.”

Trump: “Obamacare is finished. It’s dead. It’s gone. There is no such thing as Obamacare anymore.”

Vanessa Beauregard a resident of Iowa: “I cannot believe our politicians and government have put us in this situation. It’s just not right when you’re not a deadbeat.”

Dave Anderson, a health insurance expert at Duke University. “It’s hard to build inexpensive networks when the only hospital within 30 miles has you over a barrel.”

Aaron Todd, chief strategy officer for the Iowa Primary Care Association.: “There wasn’t a political will to make hard decisions or move people. They basically saw [keeping the noncompliant plans] as a relief valve.”

Nick Gerhart, who authorized the noncompliant plans to remain in the market as the state’s insurance commissioner. : “Why would I stand in the way of people keeping their insurance? It was a viable option. What does it look like if they’re in? The [premium] increases still would have been significant.” Disagreeing with these being a destabilizing factor.

Here is the story as I know it, a half commitment to the ACA with a lot of resistance from Republicans.

CoOportunity turned out to be the canary in the co-op coal mine. In the ensuing three years, 19 of the 23 nonprofit startup plans across the country, seeded with more than $2 billion in loans, collapsed after piling up huge financial losses. Gerhart, a Republican appointee, blames the disastrous performance in part to a lack of effective oversight from federal officials at the Center for Medicare & Medicaid Services.

Effectively you’re running a venture capital firm out of CMS with nobody who understands insurance.

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After three years on the sidelines, Wellmark finally entered Iowa’s exchange this year. It did not go well. Company officials attributed its troubles in part to a single patient who was costing the company $1 million a month in claims. A company executive revealed in a speech to the Des Moines Rotary Club earlier this year that the customer in question was a 17-year-old boy with hemophilia.

If one could look to one and two things which plagued the ACA in Iowa, one could look to the Risk Corridor Program and Reissuance Program. Both were put in place to :

– Compensate insurance companies for losses whether nonprofit or for profit.

– To cover those instances when an insurance company would end up with one, two, or a few of the $1 million dollar insured a company had to cover, could not deny for pre-existing conditions, or cancel due to illness or disorder (which by-the-way still exists in Advantage programs).

So what happened?

The Risk Corridor program in the PPACA protects insurance companies from losses during the first three years if they did not estimate premiums properly which can happen in new markets with different characteristics. With the mandate to insure all with pre-existing conditions, keeping children on parents plans, the exchanges, etc.; the Risk Corridor program was put in place (besides two other safe guards) giving insurance companies and Co-ops a three year window to get it right. Besides looking at losses, the Risk Corridor also looked at the profits of companies who had estimated accurately, had excess profits as a result, and required them to pay a ratio of excess profits into the Risk Corridor fund to help underwrite the losses of other companies. Outside of a plus or minus 3% was the basis for whether you gave up a ratio of profits or received a ratio of funding from the Risk Corridor program. The Risk Corridor program is nothing new and was used successfully with Medicare Part D forcing the evil insurance companies to share profits with the government. It still is in place for Part D and “still” generates additional revenue for the government. I do not recall any Republicans complaining about funding for insurance companies then; but then too, Part D was Bush’s legislature while the PPACA legislation was Obama’s. Strictly politics and constituents will pay the price of it.

Depicting the Risk Corridor particulars rather than attempting to explain it in writing will give a better explanation. Click here to better read the chart. Please note the plus or minus 3% and then the different ratios of revenue sharing or funding from and to healthcare companies and Co-ops.

So what happened? The Risk Corridor program works well for Part D, brings in revenue for the government, and is still in place. February 2014 found Rubio testifying to the House Committee on Oversight and Government Reform on behalf of his bill. At the same time the CBO released their evaluation of the Risk Corridor program. Instead of being detrimental and a fiscal drag, the CBO projected the federal government would collect $8 to 16 billion from health insurers. Premiums would outpace claims, $8 billion would be distributed to the plans losing money, and $8 billion in additional revenue would be left for the federal government. Another House probe suggested initially there would be a shortfall with claims exceeding premiums.

The Republicans were not sitting idle and were investigating ways to derail the PPACA. As the ranking member of the Budget Committee, Senator Jeff Sessions and the chairman of the House Energy and Commerce Committee, Rep. Fred Upton came up with a plan to attack the legality of the Risk Corridor payments. They joined forces with the Appropriations Panel Chairman Rep. Jack Kingston whose panel funds the Department of Health and Human Services and the Labor Department. Kind of get the picture so far?

Questioning whether the Risk Corridor payments were being appropriated correctly, the Appropriations Panel forced the HHS to make changes in how they appropriated funds allowing Congress to stop all appropriations. The PPACA could no longer appropriate the funds as they were subject to the discretion of Congress. The GAO issued an opinion on the legality of what the HHS was doing with funds.

GAO Letter to Senator Jeff Sessions. September 30, 2014: Discussion; “At issue here is whether appropriations are available to the Secretary of HHS to make the payments specified in section 1342(b)(1). Agencies may incur obligations and make expenditures only as permitted by an appropriation. U.S. Const., art. I, § 9, cl. 7; 31 U.S.C. § 1341(a)(1); B-300192, Nov. 13, 2002, at 5. Appropriations may be provided through annual appropriations acts as well as through permanent legislation. See, e.g., 63 Comp. Gen. 331 (1984). The making of an appropriation must be expressly stated in law. 31 U.S.C. § 1301(d). It is not enough for a statute to simply require an agency to make a payment. B-114808, Aug. 7, 1979. Section 1342, by its terms, did not enact an appropriation to make the payments specified in section 1342(b)(1). In such cases, we next determine whether there are other appropriations available to an agency for this purpose.”

Further down in the GAO letter, the GAO leaves the HHS an out of using other already available appropriations for the Risk Corridor payments to insurance companies. Classifying the payments as “user fees” was another way to retain the authority to spend other appropriations already made by Congress. Otherwise if revenue from the Risk Corridor program fell short, the administration would need approval for addition appropriations from Congress. As it was, the HHS could no longer appropriate funds to make Risk Corridor payments unless the funds were already appropriated by Congress or Congress approved new funds which was not going to happen with a Republican controlled House.

Appropriations Panel Chairman Rep. Jack Kingston put the final nail in the coffin by inserting one sentence in Section 227 of the 2015 Appropriations Act (dated December 16, 2014) which escaped notice. In the 2015 Appropriations Act, the sentence inserted said no “other” funds in this bill could be used for Risk Corridor payments.

Sec. 227. None of the funds made available by this Act from the Federal Hospital Insurance Trust Fund or the Federal Supplemental Medical Insurance Trust Fund, or transferred from other accounts funded by this Act to the “Centers for Medicare and Medicaid Services–Program Management” account, may be used for payments under section 1342(b)(1) of Public Law 111-148 (relating to risk corridors).

This action blocked the HHS from obtaining any of the necessary Risk Corridor funds from any other Congressional appropriated program funds.

Nothing was said by Senator Sessions, Representatives Upton or Kingston before passage on what they had managed to do. It was Senator Rubio who issued a news release saying the provision was appropriate even though he had little to do with it. In the end, Colorado Rep. Jack Kingston’s one sentence purposely created a $2.5 billion shortfall in the Risk-Corridor program in 2015 as the HHS had collected $362 million in fees. Insurers who had misjudged the market sought nearly $2.9 billion in payments, many nonprofit insurance Co-ops failed, healthcare insurance companies began to raise premiums to compensate, and some healthcare insurance companies recognizing an untenable environment created by Republicans took their losses and left the market.

If you wish to know why there are few insurance companies and no Coops issuing healthcare policies on the exchanges, the policies are arbitrarily expensive by default, and companies are leaving or going bankrupt, etc. Ask your Republican Senators and Representatives why they sabotaged the Risk Corridor Program.