“Section 1332 of the ACA gives the Secretary of Health and Human Services broad power to approve state requests to innovate in offering coverage to their populations if the innovations expand coverage and don’t increase costs. The Trump Administration has approved a number of these requests. The Biden Administration is more likely to restrict innovation and promote uniformity.”
William G. (Bill) Stuart
Director of Strategy and Compliance
November 19, 2020
Two weeks after the election, we have a pretty good idea of the distribution of power in Washington, DC, beginning in early January.
Former Vice President Joe Biden’s election will be certified by the Electoral College in mid-December, giving Democrats control of the executive branch.
Democrats will retain the House of Representatives, although with fewer members and the slimmest majority by either party in more than a century. Ballots are still being counted in a handful of elections, though the consensus view is that Democrats will retain a majority of between six and 10 seats. That means that defections of four to six members could stall any legislation.
Republicans have a 50-48 working advantage in the Senate, with two pending runoff elections in Georgia. If Democrats win those two seats, they’ll have 48 seats, plus two independents who caucus with them. In a 50-50 Senate, Vice President-elect Kamala Harris, in her role as president of the Senate, would cast a deciding vote for the Democrats. But a half dozen or so Democrats represent states that are either red (Republican) or purple (nearly even party split) in the more conservative heartland, so that bloc may be as difficult to keep together as was the Republican 52-seat majority in 2017 when the Senate failed to repeal provisions of the Affordable Care Act (ACA).
So, what does it all mean for healthcare in the new Congress?
Focus on COVID-19
The incoming administration’s priority will be on expanding coverage through strengthening ACA provisions. This effort is expected to include larger premium subsidies that extend beyond 400% of the federal poverty rate, more federal funding for Medicaid, and more funds to states and hospital systems for the direct care of patients. In addition, much time will be spent considering how to prioritize the distribution of vaccines, whether to make vaccination mandatory and expanding the supply of personal protective equipment for medical professionals.
No Radical Changes
During the Democrat presidential primaries, various candidates proposed three distinct approaches to reform that have audiences within the party. None is likely to pass during the 117th Congress:
Medicare for All. Although more than half of House Democrats and many Senate Democrats have co-sponsored legislation for a federal takeover of the design, delivery, and financing of all medical care in the United States, this approach won’t become law during the next two years. Democrats would be unlikely to gain a majority in the House, or even in a 50-50 Senate, to advance this policy. It may be introduced by the left-leaning bloc of House Democrats, but the chairs of the two committees of jurisdiction (Ways and Means, and Energy and Commerce) aren’t co-sponsors and are not expected to hold hearings. Speaker Pelosi and her leadership team will make sure a bill doesn’t advance for a full vote.
Medicare Buy-in. President-elect Biden supported this measure, which allows people to buy into Medicare before age 65. It would help older Americans who don’t have access to employer-sponsored coverage and face high premiums in the nongroup based on age. But the pandemic and resulting layoffs have decimated Medicare finances, as the Part A trust fund is expected to be exhausted as early as 2024 rather than 2026 as projected within the last year.
Public Option. The president-elect is a strong advocate for this approach, in which plans designed and funded by the federal government compete directly with private insurance. These plans would most likely reimburse providers at Medicare or Medicaid prices – well below the prices negotiated by private insurers. The cost advantage enjoyed by the public-option plans could result in a massive migration to these government-run plans, depending on who has access to them (nongroup buyers in markets without sufficient private competition? All nongroup buyers? Small employers?). This approach would likely fail in a Republican Senate, but it might be viable if Democrats control the upper chamber.
Much of the Trump Administration’s healthcare policy was enacted by executive order – the president’s power to create rules that aren’t subject to congressional approval. President Trump used this approach after the GOP’s failure to make major changes to federal law in 2017. These executive orders can be changed by a future administration without congressional action. And President Biden is already preparing a number of executive actions in many areas – healthcare, trade, environment, energy – to replace Trump Administration actions.
Here’s what you can expect to see within weeks of the inauguration:
Short-term, limited-duration plans. These are nongroup policies that don’t have to follow the ACA market reforms (comprehensive benefits, community rating, no denying coverage based on pre-existing conditions). Enrollment is concentrated among people with brief gaps between employer-sponsored overage, healthy individuals, and people who face high premiums in the nongroup market but don’t qualify for premium subsidies.
Democrats have labeled these policies junk plans. And they charge that these plans skim the good risk from the nongroup markets governed by ACA market reforms, making the nongroup population sicker, older, and poorer than what it otherwise would be, thus driving premium higher. Many states, leveraging their role as the primary regulators of medical coverage, have crippled the implementation of these plans.
Association of Health Plans and Individual-Coverage Health Reimbursement Arrangements. These other two pillars of the Trump Administration’s reform efforts may be scuttled. But it’s quite possible that they’ll remain intact. States are using their regulatory powers to manage the regulations that expand Association Health Plans. And ICHRAs offer the potential to expand coverage – a Biden Administration policy – and potentially strengthening nongroup markets.
Abortion. Nearly a half-century after the Supreme Court’s landmark decision legalizing abortion nationwide, this issue dominates every serious conversation around healthcare at the federal level. The Trump Administration issued executive orders that restricted access to abortions. Expect the Biden Administration to overturn those orders during its first few days to strengthen his standing with his party’s base.
Religious freedom’s collision with the ACA. Federal courts and executive actions have defined the balancing of religious freedom or public accommodation. This conflict includes whether religious and faith-based organizations can refuse to cover the cost of contraceptives through their employer-sponsored medical plans and whether healthcare providers can refuse to perform certain services due to religious objections.
Executive orders on price transparency and drug prices. The Trump Administration recently released guidance requiring hospitals to post their prices for common services and attempting to rein in prescription drug prices. It will be interesting to see whether the Biden Administration revises, opposes, or doesn’t touch these orders.
Section 1332. The ACA gave broad discretion to the executive branch to write regulations to define the broad guidelines outlined in the legislation. The Trump Administration used this discretion to reshape the law where it could. Section 1332 of the ACA gives the Secretary of Health and Human Services broad power to approve state requests to innovate in offering coverage to their populations if the innovations expand coverage and don’t increase costs. The Trump Administration has approved a number of these requests. The Biden Administration is more likely to restrict innovation and promote uniformity.
Is there common ground between the two parties? Yes.
President-elect Biden made his pitch to the American people based on his ability to manage the pandemic better than President Trump. He’s motivated to make an immediate mark in this area. And a (likely) Republican Senate stands between him and his policies. At the same time, the public will support the Biden Administration’s efforts and not look with favor on GOP efforts that appear to be more petty and political than philosophical.
Thus, both parties will have to come to the bargaining table. Vice President Biden and Republican Senate Majority Leader Mitch McConnell served together in the Senate for 24 years. Both understand the legislative process and each other. Expect the bargaining to take place between these two leaders, with an assist from a vice president-elect who’s a current member of the Senate. This alignment stands in sharp contrast with recent negotiations over pandemic-relief bills, which have taken place between the Trump Administration (Treasury Secretary Steve Mnuchin) and Speaker of the House Pelosi. Here’s what to look for:
- The current Congress and administration may pass another pandemic-relief bill before the 116th Congress adjourns next month. Senate Republicans have resisted the House’s $2.2-trillion-dollar price tag. But Republicans are in a better bargaining position with a GOP White House than they will be as of noon Jan. 20. This is an opportunity to trade priorities – perhaps codifying ICHRAs through legislation.
- President Biden will be looking for more federal money to expand coverage during the pandemic. This is an opportunity for Republicans to deal – perhaps an expansion of Health Savings Accounts to seniors (Medicare enrollees pay, on average, more than $3,000 annually out-of-pocket for medical expenses other than premiums).
- Both Democrats and Republicans complain about the out-of-pocket financial responsibility on nongroup and employer-sponsored small-group plans. The high deductibles and coinsurance often make care prohibitively expensive, even with coverage. Look for an effort to address this issue, perhaps through an expansion of the cost-sharing subsidies currently available for enrollees with incomes below 250% of the federal poverty level. Republicans might want to exchange additional relief with a change in the law increasing Health Savings Account contributions levels and allowing tax-free distributions for premiums. The tax benefit would put nongroup buyers on equal tax-footing with employees who purchase coverage through an employer.
- Everyone in Congress wants to address surprise medical billing and rising prescription drug prices. But divisions on the solutions aren’t just Democrat versus Republican, but also House versus Senate. The chair and ranking member of the Senate committee of jurisdiction (Health, Education, Labor, and Pensions, aka HELP) had forged an agreement on surprise billing. But the chair, Sen. Lamar Alexander, is retiring, creating a change in leadership. The presence of Sens. Bernie Sanders, Elizabeth Warren, and Rand Paul makes for an interesting dynamic. expect agreements on this issue, especially with the new administration’s focus on coverage.
The Bottom Line
There won’t be any major changes in the design, delivery, and financing of medical care during the next two years. Voters blocked that path with their votes in House and Senate races. The new administration will take a pragmatic approach to reform, focusing on greater coverage and financial access to care during a pandemic.
What We’re Reading
When Amazon bought PillPack, a small online pharmacy, two years ago, it acquired a license to sell prescriptions through the mail. Earlier this week, it announced its plans to launch that business. Judging from the stock-price declines of 9% at both CVS and Walgreens and 15% at Rite Aid, the potential disruption is huge.
The Wall Street Journal weighs in on how to calculate whether a Health Savings Account program is the right coverage option for you.
If you’re a regular reader of this column, you know these five facts about Health Savings Accounts, right?