Revisiting Cassidy 2015 as a potential deal

Margot Sanger-Katz from the NY Times flags an interesting pre King vs. Burwell Republican plan that could actually pass the Senate with more than sixty votes.  It was designed to deal with a conservative win in King vs. Burwell.

Let’s look at it with the 53 page PDF here:

Section 101 is the three options a state has if the Supreme Court ruled in favor  in King in King v Burwell and thus knocking out advanced premium tax credits for people who lived in Healthcare.gov states.

Option 1 would be to stay under PPACA and establish a state based exchange. Option 2 would be a complete withdrawal from PPACA with no subsidies. Option 3 would be to establish a HSA-like equivalent of coverage with most of the regulator requirements, taxes and mandates of PPACA thrown out. This is actually interesting if the funding makes sense. The default assumption is a complete opt-out. States would have to to opt into either Option 1 or Option 3.

Section 102 talks about the state alternative with HSA. It wipes out mandates and federal regulation. Essential health benefits, minimal actuarial value coverage and other regulatory requirements of PPACA that define a qualified health plan also are junked in this section. 102-4-A authorizes an initial HSA grant and the rest of 102-4 describes the mechanics of that grant. 102-C establishes a public health block grant that is 2% of the eligible funds for the HSA.

Section 103 determines the size of the HSA subsidy. This is where the money matters. The HSA amount is age and geography adjusted which is very similar in function as the ACA benchmark Silver is determined by zip code and age of the recipient. Bingo — 103-1-B is meaty.

—The amount speci-
14 fied in this subparagraph for a State for a year
15 is 95 percent of the Secretary’s estimate of the
16 total payments that would have been made (as-
17 suming the existence of a State established Ex-
18 change in the State) under section 36B of the
19 Internal Revenue Code of 1986 and under sec-
20 tion 1402 of PPACA with respect to all quali-
21 fied residents in the State in the year

This is effectively the Basic Health Plan (Section 1331) funding mechanism. If anything it could be more generous depending on rule making and technocratic judgement as it is 95% of the total expenditure for all qualified residents in the state instead of the current rule making guidance that a 1332 (State Innovation Waiver) has to be budget neutral with regards to actual enrollment. This is fascinating!

103-2 is even more interesting. It is a block grant for states that did not expand Medicaid. The funding for 103-2-b is 103-1-B plus

the Secretary’s estimate of the
2 total payments that would have been made
3 to the State under title XIX of the Social
4 Security Act for individuals eligible to be
5 covered under section
6 1902(a)(10)(A)(i)(VIII) of the Social Secu-
7 rity Act assuming the election of a State to
8 provide Medicaid coverage under such sec-
9 tion and assuming the applicable Federal
10 medical assistance percentage were 95 per-
11 cent with respect to such individuals.

I can read this two ways.  The first is that this would be 95% of whatever the Expansion state match would be (100% 2014-2016, 95% 2017, 90% by 2020 etc) or just a 95% match.  I’m not sure how to read it.  The 95% federal match is a richer long term match than the Expansion states that would have to assume a 90% long term match for their Medicaid eligible population.

The rest of 102 deals with Medicaid wrap-around and ESI buy-up supports in a reasonably and consistent manner. 103-c-2-d is slightly problematic as there is no adjustment for Medicaid payments based on sex even though we have good evidence that female Medicaid beneficiaries cost slightly more. If 103-B-2 works correctly this should wash out but it would have been an implementation concern.

Section 104 deals with Exchanges. States may do what they want with the Exchanges in whatever manner they want. Healthcare.gov is to be made available as a resource to the states.

Section 104-C is also interesting. This is the coercive participation mechanism that replaces the individual mandate. States may enroll qualified/eligible individuals into creditable coverage as a default option. Everyone gets enrolled into something. The default coverage is paid for by the subsidy that an individual is eligible for and no out of pocket premium. As a practical matter, the coverage will have a very low actuarial value (105-2)and it will be truly be hit by a meteor coverage but it forces young and healthy people into the risk pool. This works because 103-1-B funds the state on all qualified individuals. The money pool may be bigger than current paid out APTC+CSR outlays.

104-D-1 has risk corridors and re-insurance that is funded locally. 104-d-2 is a risk adjustment change. The risk adjustment would be much closer to Medicare Advantage widget payments instead of the current concurrent revenue neutral comparative risk score times total premium zero-sum transfers. Widget payment risk adjustment is easier to predict and implement but not as useful.

Section 105 has meat in 105-D. This is the other coercive participation mechanism. If an individual does not elect to have creditable coverage and opts out of the auto-enrolled low value coverage for more than a 63 day break (the current HIPAA break), they are subject to underwriting exclusions and or uprated premiums for two years along with a 10% late enrollment premium penalty for the following eighteen months.

Section 106 deals with federal benefit regulations. The Option 3 HSA states would have to keep no lifetime or annual limits as well allow Under-26 coverage through employer sponsored insurance. Everything else in PPACA Title 1 goes out the window.

This actually seems to me to be a reasonable enough structure of a replacement plan. It allows states that want to keep PPACA to keep PPACA. It allows states that want to go in a different direction to go in a different direction with a super 1332 State Innovation Waiver and the possibility of higher net levels of federal funding depending on CMS rule making. The great weakness is that it allows states to screw their citizens over by opting out completely. But Option 3 (the HSA route) has a modified three legged stool approach. It has community rating, it has subsidies and it has guaranteed issue. All of it is a twist on the current ACA three legged stool but they descend from the same family tree with more than a passing resemblance.

Subtitle B is the Medicaid section.

Sec.111 shields HSA assets from some Medicaid asset tests. This makes the HSA a much more attractive route for low income individuals. It specifically excludes this exclusion from long term care. An HSA will be drained to pay for a nursing home before Medicaid becomes the payer of last resort. It is not a complete tax give-away.

Subtitle C is Price Transparency

Section 121-A creates a national standard for emergency services out of network charges. It would be 85% UCR for professional services or 110% of Medicare for facility and technical services. That would be a massive improvement in terms for most if not all states.

Title 2 is Health Savings Account/Tax law. I am not a lawyer. I am especially not a tax lawyer. Most of this needs a tax lawyer to work through. An HSA could be used to pay the premiums of a plan described as Option 3 in Title 1.

Section 204 — cash prices need to be published by providers for their services before rendering a service. I don’t think this would do much as price disclosure has not had much of an impact as there is still quite a bit of uncertainty and expensive to acquire and interpret information in the medical market. I don’t think it hurts. I don’t know if it helps much.

Section 212 tells the IRS and Treasury how to administer the HSA credits described in Title 1

Overall, this plan makes a good deal of sense. It is effectively a Super 1115/1331/1332 on steroids with what seems to me at first glance to be adequate funding and a coherent coercive mechanism to get healthy and young people into the market. If this or something like this is the “Replace” option, it would and should easily get 70 votes in the Senate as it is effectively a rebranding of the ACA with slight conservative tweaks on it.

About David Anderson
I am a research associate at the Margolis Center for Health Policy. I've written about health policy at Balloon-Juice.com as Richard Mayhew where I've enjoyed explaining the logic behind why an insurance company is behaving the way it is as there is almost always a reason besides pure spite or evil.

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