Partisan attempts to repeal the Affordable Care Act (ACA) may be eclipsed this month by a bipartisan “market stabilization” bill to improve it. However, one top insurance industry priority—delaying or repealing the ACA’s health insurance tax—does not belong in such a bill.
In the wake of the bitter debate over health reform, a rough consensus has emerged about how to lower premiums, increase competition, and end Trump-induced uncertainties in the individual health insurance market.
These solutions are evident in bipartisan recommendations from the House Problem Solvers Caucus, the Bipartisan Policy Center, and governors including Kasich (R-OH) and Hickenlooper (D-CO).
One such agreed-upon policy is the appropriation of funds for reducing Marketplace cost sharing for low-income enrollees. President Trump’s threat to stop making these payments creates the risk of higher premiums and reduced insurer participation. Legislation ensuring such payments would prevent an estimated 20 percent premium increase.
Another policy with bipartisan support is a guarantee of sufficient funding for education and outreach. Recently cut by the Trump Administration, enrollment outreach helps ensure a sustainable risk pool and prevents future premium increases.
Contrary to popular belief, ensuring payments for cost-sharing reductions and outreach funding do not increase the federal deficit because they are assumed in the CBO baseline.
Congress is also considering a reinsurance program to provide public support for the sickest enrollees. Experience with the ACA suggests that $15 billion in reinsurance funding could lower premiums by roughly 15 percent. And the net federal cost could be half as much, since the policy would lower government expenditures on tax credits. Additionally, reinsurance promotes competition in underserved markets by providing “shock absorbers” against unexpected high-cost patients.
Contrary to popular belief, ensuring payments for cost-sharing reductions and outreach funding do not increase the federal deficit because they are assumed in the CBO baseline.
One policy noticeably absent from these bipartisan recommendations is one that would delay or repeal the health insurance tax. This is likely because, despite glitzy ads running on Fox, Morning Joe, and CNN, the tax repeal effort is more about uniting the insurance industry than about stabilizing the individual market.
First, repealing or delaying this tax would provide the least benefit to the market that needs it the most. Only 10 percent of the total federal cost of $12.8 billion (one-year delay) or $145 billion (full repeal) would accrue to the individual market. Other types of insurance, such as employer coverage and Medicare Advantage, would get the lion’s share of the benefit despite their low premium growth. And much of the reduction in the individual market would go to areas with low premium growth and high competition, rather than to those with high premium growth and low competition.
Second, the effect of delaying the health insurance tax on premiums is relatively small. The insurance industry projects that it would reduce premiums by 2.6 percent in 2018. That amount is roughly ten to twenty percentage points below the premium reduction expected under a same-sized reinsurance program or a cost-sharing appropriation.
Third, this year has provided little evidence that delaying the tax on insurance corporations effectively lowers premiums and increases choice. A one-year suspension of the health insurance tax was enacted for 2017 to smooth the end of temporary premium stabilization programs. However, while it contributed to big increases in earnings for some insurers, it clearly did not make a big difference for consumers. This may be why state officials have gravitated toward reinsurance rather than across-the-board tax breaks in their own stabilization proposals.
Lastly, repealing the health insurance tax is questionable fiscal as well as health policy. The ACA used a combination of tax increases and Medicare payment reductions to fund its coverage expansion and other policies. Indeed, enrollment in Medicare Advantage, Medicaid managed care, employer-sponsored insurance and the much smaller individual market has grown since the law was implemented, as have insurance profits. Thanks in part to the ACA, the health insurance industry has outperformed overall stock indices and, according to one analysis, is reaping “historically large profits” this year.
Time is limited—as is patience with proposals that produce little bang for the buck.
Congress should, in the recent words of one Senator, “bite off less than we can chew.”
Congress should, in the recent words of one Senator, “bite off less than we can chew.” This means a laser-like focus on proven, effective, and bipartisan market stabilization policies—not on delaying or repealing the health insurance tax.
Tags: health care, affordable care act, health insurance, Trumpcare
Keep the Health Insurance Tax
Partisan attempts to repeal the Affordable Care Act (ACA) may be eclipsed this month by a bipartisan “market stabilization” bill to improve it. However, one top insurance industry priority—delaying or repealing the ACA’s health insurance tax—does not belong in such a bill.
In the wake of the bitter debate over health reform, a rough consensus has emerged about how to lower premiums, increase competition, and end Trump-induced uncertainties in the individual health insurance market.
These solutions are evident in bipartisan recommendations from the House Problem Solvers Caucus, the Bipartisan Policy Center, and governors including Kasich (R-OH) and Hickenlooper (D-CO).
One such agreed-upon policy is the appropriation of funds for reducing Marketplace cost sharing for low-income enrollees. President Trump’s threat to stop making these payments creates the risk of higher premiums and reduced insurer participation. Legislation ensuring such payments would prevent an estimated 20 percent premium increase.
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Another policy with bipartisan support is a guarantee of sufficient funding for education and outreach. Recently cut by the Trump Administration, enrollment outreach helps ensure a sustainable risk pool and prevents future premium increases.
Contrary to popular belief, ensuring payments for cost-sharing reductions and outreach funding do not increase the federal deficit because they are assumed in the CBO baseline.
Congress is also considering a reinsurance program to provide public support for the sickest enrollees. Experience with the ACA suggests that $15 billion in reinsurance funding could lower premiums by roughly 15 percent. And the net federal cost could be half as much, since the policy would lower government expenditures on tax credits. Additionally, reinsurance promotes competition in underserved markets by providing “shock absorbers” against unexpected high-cost patients.
One policy noticeably absent from these bipartisan recommendations is one that would delay or repeal the health insurance tax. This is likely because, despite glitzy ads running on Fox, Morning Joe, and CNN, the tax repeal effort is more about uniting the insurance industry than about stabilizing the individual market.
First, repealing or delaying this tax would provide the least benefit to the market that needs it the most. Only 10 percent of the total federal cost of $12.8 billion (one-year delay) or $145 billion (full repeal) would accrue to the individual market. Other types of insurance, such as employer coverage and Medicare Advantage, would get the lion’s share of the benefit despite their low premium growth. And much of the reduction in the individual market would go to areas with low premium growth and high competition, rather than to those with high premium growth and low competition.
Second, the effect of delaying the health insurance tax on premiums is relatively small. The insurance industry projects that it would reduce premiums by 2.6 percent in 2018. That amount is roughly ten to twenty percentage points below the premium reduction expected under a same-sized reinsurance program or a cost-sharing appropriation.
Third, this year has provided little evidence that delaying the tax on insurance corporations effectively lowers premiums and increases choice. A one-year suspension of the health insurance tax was enacted for 2017 to smooth the end of temporary premium stabilization programs. However, while it contributed to big increases in earnings for some insurers, it clearly did not make a big difference for consumers. This may be why state officials have gravitated toward reinsurance rather than across-the-board tax breaks in their own stabilization proposals.
Lastly, repealing the health insurance tax is questionable fiscal as well as health policy. The ACA used a combination of tax increases and Medicare payment reductions to fund its coverage expansion and other policies. Indeed, enrollment in Medicare Advantage, Medicaid managed care, employer-sponsored insurance and the much smaller individual market has grown since the law was implemented, as have insurance profits. Thanks in part to the ACA, the health insurance industry has outperformed overall stock indices and, according to one analysis, is reaping “historically large profits” this year.
Time is limited—as is patience with proposals that produce little bang for the buck.
Congress should, in the recent words of one Senator, “bite off less than we can chew.” This means a laser-like focus on proven, effective, and bipartisan market stabilization policies—not on delaying or repealing the health insurance tax.
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Tags: health care, affordable care act, health insurance, Trumpcare