July 20, 2017

Why experts say HHS' analysis of the Cruz amendment is flawed

Daily Briefing

A draft report from the Trump administration says the so-called Cruz amendment included in the revised Better Care Reconciliation Act (BCRA) would lower premiums and increase enrollment in individual market plans—but some experts criticized the report for failing to account for key factors, and an insurance industry trade group has called the amendment "simply unworkable in any form."

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The HHS draft report, first obtained Wednesday by the Washington Examiner, comes as GOP Senate leaders weigh which health reform bill they would seek to advance next week. Senate Majority Leader Mitch McConnell (R-Ky.) on Wednesday in a change from earlier this week suggested the Better Care Reconciliation Act (BCRA) was back on the negotiating table.

The updated legislative text for the BCRA and CBO's analysis of the updated bill, both published Thursday, did not include the amendment HHS scored. CBO on Thursday released a score of the updated text. According to The Hill, lawmakers have said it could take CBO weeks to score the amendment. Dylan Scott reports for Vox that the Cruz amendment is still being considered by GOP leaders, but was not included in the updated bill text given CBO's timeline.

Lawmakers also are considering reviving a 2015 "repeal-and-delay" measure, which CBO scored Wednesday, that would immediately repeal parts of the ACA while giving GOP lawmakers more time to come up with a plan to replace the ACA's coverage expansions.

About the amendment

The proposed amendment, known as the Consumer Freedom Amendment, would allow insurers that offer plans that comply with the ACA's requirements to also sell plans that do not adhere to the ACA's rules. The aim would be to allow insurers to offer less generous, and thus less costly, plans than are available under the ACA.

Both health care experts and the insurance industry have criticized the amendment. America's Health Insurance Plans and the Blue Cross Blue Shield Association in a letter to Senate leaders wrote that, under the provision, health plans not compliant with the ACA could "'cherry pick' only healthy people from the existing market making coverage unaffordable for the millions of people who need or want comprehensive coverage, including, for example, coverage for prescription drugs and mental health services."

As such, they wrote, the provision "is simply unworkable in any form and would undermine protections for those with pre-existing medical conditions, increase premiums, and lead to widespread terminations of coverage for people currently enrolled in the individual market."

What HHS found

The draft HHS report struck a more optimistic tone. It estimated that under the provision, monthly premiums for a 40-year-old individual who purchased a non-ACA compliant plan would range between $200 and $210 by 2020, while those who choose a silver-level, ACA-compliant plan would expect to pay between $370 and $430 per month.

The report compared these figures to ACA premiums for an "enrollment weighted average" under current law that "contains all ages," which it projected to fall between $570 and $635.

While non-ACA-compliant plans under the amendment would have relatively low premiums, HHS found that deductibles would be high. It estimated deductibles for those non-compliant plans would run as high as $12,000, while out-of-pocket costs would be capped at $12,000, Politico reports. 

HHS also projected the amendment would increase enrollment in the individual market. The draft report projected such enrollment would reach 16.1 million people by 2024, compared with nearly 14 million projected under current law.

Some experts reacted with skepticism

Experts pointed to several key limitations of the estimate.

Matt Fiedler, a fellow at the USC-Brookings Schaeffer Initiative for Innovation in Health Policy, suggested that the report erred by comparing premiums for a 40-year-old under the Cruz amendment to those for a "weighted average" of ages under current law. "It's not apples to apples," he said.

According to Politico, HHS' projections largely rely on a "proprietary model" that provides little details on how the department conducted its calculations and determined factors such as which individuals would purchase non-ACA compliant plans over compliant ones.

Further, MarketWatch reports that the report focuses solely on the amendment and does not incorporate any other BCRA provisions, which presents problems as the BCRA would change the way tax credits to help individuals purchase coverage are calculated.

Craig Garthwaite, director of the health care program at Northwestern University's Kellogg School of Management, said, "The details get a bit dicey," adding, "No one I've talked to thinks [the analysis] is well done."

Additionally, MarketWatch reports that HHS' projections for the number of people covered by individual insurance do not account for reductions in enrollment to Medicaid, which the BCRA would roll back. The Congressional Budget Office (CBO) previously estimated that the original BCRA's Medicaid changes would result in 15 million Medicaid beneficiaries losing coverage by 2026.

According to Kaiser Health News, HHS did not respond to requests for comment.

CBO has not yet released an analysis of the Consumer Freedom Amendment, and it is unclear whether it will do so (Ferrechio, Washington Examiner, 7/19; Goldstein, MarketWatch, 7/19; Cancryn, Politico, 7/19; Appleby/Rovner, Kaiser Health News, 7/19; CBS News, 7/19; Weixel, The Hill, 7/20; Scott tweet, Vox, 7/20).

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