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3 weird AHCA individual health product effects

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If the House Republicans’ American Health Care Act proposal really becomes law and takes effect as written, what could it do to the individual major medical insurance products and supplemental health products?

A team at the Congressional Budget Office, a congressional research agency, has given insurers, agents and brokers some clues by analyzing all 122 PDF pages of the proposal well enough to “score” it, or estimate how it might affect health coverage, federal revenue and federal spending over a 10-year period.

Related: ACA definitions: Enrollment period basics

In the CBO analysis, which is available here, the CBO team estimates that the AHCA as a whole would cut spending by $1.2 trillion, cut revenue by $883 billion, and cut the federal deficit by about $337 billion, or about $1,000 per U.S. resident, compared with what it might be if the current rules stay in place (and health insurers generously decide to continue providing health coverage under current rules).

The CBO team predicts commercial insurers could cover 23 million people through individual and family coverage in 2026, compared with 25 million if the current Affordable Care Act rules stay in place (and the individual major medical market continues to exist). The number of people with commercial nongroup coverage might about the same as it is today. The CBO estimated a year ago, in March 2016, that about 22 million had nongroup major medical coverage, purchased either through an ACA exchange or through the off-exchange market.

Related: Jeff Smedsrud’s ACA replacer plan

The CBO team also talks a little about what the AHCA world individual health market might be like.

Here’s a look at some of what the CBO team sees in its crystal ball. 

Clients could end up with policies that cover a Pap smear and a colonoscopy "for free," but nothing else till the deductible is met. (Image: Allison Bell/LHP)

Clients could end up with policies that cover a Pap smear and a colonoscopy “for free,” but little else till the deductible is met. (Image: Allison Bell/LHP)

1. Benefits warp

For political reasons, many of the Republicans supporting the AHCA proposal call it an “Obamacare repeal” bill, and many Democrats and reporters who don’t know any better echo that language.

But, for complicated reasons related to traditional Senate procedural rules, all the AHCA proposal would do is change ACA provisions that relate to the federal budget. The proposal includes many provisions that would cut ACA taxes and spending provisions. The proposal would, for example, kill an ACA preventive health fund that’s supposed to try to prevent flu pandemics and other catastrophic disease outbreaks.

The proposal would not kill most ACA product mandates.

The proposal would eliminate an ACA provision that now requires an individual or small-group major medical plan to cover about 60 percent of the actuarial value of the ACA “essential health benefits” package, or list of benefits a solid health plan ought to cover. The proposal would also eliminate the need for insurers to fit plans into “metal level” tiers. Today, insurers are supposed to classify plans as bronze, silver, gold or platinum plans, with actuarial values ranging from 60 percent of the EHB for bronze plans and up to 90 percent of the EHB for platinum plans.

The proposal would, however, keep the ACA cap on what a plan can expect an enrollee to spend each year, out of pocket, on in-network care covered by the plan. The 2017 out-of-pocket spending maximum limits are $7,150 for individual coverage and $14,300 for family coverage.

In the real world, efforts to create basic, “bronze level” plans, which cover about 60 percent of the actuarial value of the EHB package, already lead to plans with relatively low monthly premiums, individual deductibles at or near $7,150, and skimpy benefits before enrollees meet the deductible.

Under AHCA rules, the same conflicting forces would be even stronger in 2026, but they would probably make offering a product that covered much less than 60 percent of the actuarial value of the EHB difficult, the CBO team says. 

The CBO is predicting that a combination of the elimination of the 60 percent actuarial value minimum, the out-of-pocket spending maximum, and market forces would reduce the average actuarial value of an individual or family plan to about 65 percent of the value of the EHB, compared with an average of about 70 percent if the current rules stay in effect (and current-rule products stay on the market).

In other words: The CBO believes that the typical consumer in the individual market would get a mid-level silver plan in 2026 if current ACA rules continue.

In AHCA world, the same consumer might end up with a plan that was more like a bronze plan than a silver plan.

For an agent or broker, that means any accident insurance products, hospital indemnity insurance products, or other products that help consumers fill in major medical coverage gaps today could be even more popular under AHCA rules.

Whatever AHCA rules do, they are unlikely to hurt sales of gap-filler products.

Related: Walden framework could shape post-ACA health underwriting 

The ACA could continue to shape individual health product benefits packages in the strangest ways. (Image: Allison Bell/LHP)

The ACA could continue to shape individual health product benefits packages in the strangest ways. (Image: Allison Bell/LHP)

2. ACA relics

Republicans say they want the AHCA proposal to be just one of three major health system change efforts.

Senate rules may determine whether AHCA can have sisters.

Some Republicans are pushing President Donald Trump and Republican Senate leaders to eliminate traditional Senate rules that slow the passage of bills.

If Republicans in Congress are unwilling or unable to block the president, the president might be able to make major health system change efforts with executive orders, even if those efforts fail to attract the support of even 51 members of the Senate.

But, under traditional Senate rules, Republicans need 60 votes in the Senate to get an ordinary bill to the floor of the Senate, and 51 votes to get a budget measure to the Senate floor.

Normally, Congress passes just one budget resolution per year. Republicans structured AHCA as a budget measure to get access to the 51-Senate-vote approval process.

Republicans now have 52 seats in the Senate.

If traditional Senate rules prevail, and Republicans try to give AHCA two health system change sisters, then those sister bills would have to attract the support of at least eight Democrats and independents. Winning the support of independents and moderate Democrats could be difficult, given the current state of the political climate.

If AHCA became law, and no other major health system changes took effect, then all of the ACA individual benefits mandates would stay in effect.

An individual plan available for sale in 2016 might have a $10,000 deductible, and cover just 55 percent of all cover the insured receives, but, because of the ACA preventive services package coverage requirement, it might cover an annual checkup, a Pap smear, a colonoscopy and a flu shot with no out-of-pocket costs for the insured.

The issuer might still have to provide an ACA Summary of Benefits and Coverage notice, along with an ACA Uniform Glossary.

Hospitals might have a strong incentive to use checkups as a vehicle for selling patients affordable, flat-rate primary care services packages, to try to put themselves in a position to collect the insurance money once a patient did reach the health plan deductible. Agents might start to see the primary care services packages as the real products to sell consumers, and the major medical policies as catastrophic coverage add-ons.

Related: More young adults got privately covered in third quarter

In the future, finding the good products might take a lot more work. (Image: iStock)

In the future, finding the right health coverage products might take more work. (Image: iStock)

3. Hidden treasures

The CBO team notes that the AHCA tax credit would be available to purchasers of off-exchange individual major medical coverage as well as on-exchange products.

Today, bronze-gold-silver-platinum metal level system helps consumers compare health plans, the team says.

Analysts at the CBO and another congressional research agency, the staff of the Joint Committee on Taxation “expect that, under the legislation, plans would be harder to compare, making shopping for a plan on the basis of price more difficult,” the CBO team says.

Elimination of the metal level system could create new hassles for agents and brokers who want to compare plans, but it could create opportunities for producers to help bewildered consumers. It could also create opportunities for companies to offer producers and consumers new types of health coverage comparison tools.


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