States look to stabilize insurance markets in this season of great uncertainty
During Molina’s second-quarter earnings call earlier this summer, CEO Joe Zubretsky described this moment as “a season of great uncertainty.” It’s an evocative, almost Shakespearean phrase, and it’s been on my mind this week as some of those sources of uncertainty start to resolve with guidance coming out from HHS on the One Big Beautiful Bill Act’s provisions, while others remain, like whether the enhanced ACA subsidies will expire at the end of the year.
If you’re wired a certain way or went to business school, the most troubling thing about this uncertainty at the Federal level isn’t the potential coverage losses or hospital closures or premium rate hikes. The most troubling thing is that it makes it hard for a business to plan and efficiently deploy capital. And as a former corporate strategy guy, I’m a little sympathetic to this point of view. If you’re in the Medicaid managed care or Affordable Care Act marketplace insurance business, it’s very hard to make decisions right now because no amount of cranking on Excel or PowerPoint will help you answer the questions you have.
So state governments are stepping in to try and stabilize the markets and let the insurance company employees get some sleep at night. In August, Arkansas Governor Sarah Huckabee Sanders tried to jawbone carriers into lower rates. I’ve seen some critiques of this strategy, but these things are a negotiation, and it doesn’t cost much to try a tough opening position. The challenge for the governor is that the insurance companies have a say, too. They can always just decide to exit the market, and I don’t know what Huckabee Sanders’ BATNA is.
So other states are trying other things. Colorado has a uniquely challenging budget, which forces legislators to get creative. During a special session, they’ve floated a $100m interest-free loan from the unclaimed property trust fund for reinsurance, direct payments to insurers, and other strategies to stabilize the individual market.
On the Medicaid side, Oregon is upping its offer to Medicaid Managed Care organizations to try and keep them in the market. The state’s opening offer of a 3.4% increase YoY was bumped up to 6.8% and then 10.2%, but negotiations are ongoing.
My main takeaway from my time as a summer intern for a state senator is that state budgets are a fragile thing. They have to be balanced; no one likes raising taxes, and as I sometimes forget, state budgets need to finance other things besides healthcare, like education and roads. In the absence of certainty and dollars from the federal government, they have to try something, and moral suasion, creative financing arrangements, or just increasing their offers are all valid options. I’m curious which, if any, of these strategies will work in this season of great uncertainty.
ACA Marketplace
No progress on the enhanced subsidies
The biggest health care policy story this week is the ACA enhanced subsidy expirations, but there isn’t much to say about it yet. At the time of writing, House Republicans have passed a continuing resolution to keep the government open that doesn’t include an extension to the subsidies. In the Senate, Democrats have demanded an extension as a condition for their votes, and Republicans need their help to pass the continuing resolution, but right now it’s a lot of posturing, and if history is any guide, Congress will take this to the last minute, which is September 30th at 11:59 PM which puts insurance companies and their customers in a tough spot.
✍ Going Deeper
The conventional wisdom in the Health Tech Nerds community is that they won’t get renewed or probably not fully:
Full disclosure: I voted no in the poll. But I’ve since changed my mind based on some truly horrific polling on the issue for Republicans if the enhanced subsidies don’t get extended. So for me, the question is timing. The Democrats demanding they be included in the continuing resolution might seem intransigent, but there’s a good business case to be made for urgency. Plans have already had to submit their proposed rates to state insurance commissions, and in many cases, they’ve submitted two scenarios: with or without subsidies.
Any new scenario besides extending the subsidies as is or not extending them will require plans to refile rates. And time is running out. Payers will start sending out renewal notices soon, the shopping season in most states opens in October, and open enrollment starts in November. If the plan is to vote on the subsidy question in November, what do the payers tell their members about what the insurance will cost? Perhaps just a 🤷♂️.
ACA Marketplace
HHS allows individuals above 30 who are ineligible for subsidies to buy catastrophic plans
To help ease the anticipated sticker shock, HHS is allowing individuals over 30 to buy catastrophic insurance plans through the hardship exemption waiver. The move will surely be welcome to people who don’t qualify for subsidies, since these plans are often significantly cheaper than the cheapest Bronze plan. But there’s also the risk that this move will further destabilize the individual market with healthy folks opting for catastrophic plans and death spirals happening in the medaled plans.
✍ Going Deeper
I took a peek at the DC exchange to see what a catastrophic plan would cost me1. The cheapest option was $224 a month with a $9200 deductible. The cheapest bronze plan is about $150 more a month.
The challenge with insurance products is that you can’t know ahead of time how unhealthy you’re going to be in a given year, so people tend to choose the cheapest. Setting aside the risks of a death spiral I talked about above, there are political considerations to make as well. It’s nice to have the option for a cheaper plan, but if you buy catastrophic insurance and have to fork over up to $9200 before it starts paying out, you might be more upset at the insurance company or the government instead of your past self wanted to save a few hundred bucks.
The One Big Beautiful Bill Act
The sprint for a piece of the Rural Health Transformation program’s $50b starts now
A big concern when the One Big Beautiful Bill Act was being debated was that rural hospitals are really getting the fuzzy end of the lollipop with all the cuts to Medicaid. So to make it less painful, Congress included a $50b fund that states could apply for to help their rural hospitals, which was nice. Applications are now open, and if you’re doing anything rural health adjacent, I bet your state Medicaid agency is eager to hear from you.
✍ Going Deeper
There are sort of three basic criticisms of the program:
The Kaiser Family Foundation expects the OBBBA to pull out about $137b out of rural health in the next 10 years, so the rural communities are going to be about $87b short.
The underlying issue, that rural health is a tough business to be in, is going to remain. So people are skeptical that a one-time bolus of cash is going to allow rural health systems to transform from negative to razor-thin margins to long-term viable businesses. They probably would have preferred the somewhat predictable Medicaid reimbursement!
The application timeline is pretty tight
But $50b is $50b, so I don’t expect we’ll hear too much complaining.
Hill happenings, administrative actions, and Capitol convos
The Paragon Institute, the health-focused think tank with the closest ties to the Trump administration, shared its comments on proposed rules for the Outpatient Prospective Payment System, the Physician Fee Schedule, and the 340b rebate pilot.
House Ways and Means held a hearing titled Virtue Signaling vs. Vital Services: Where Tax-Exempt Hospitals Are Spending Your Dollars with Dr. Ge Bai, Will Hild, Dr. Christopher Whaley, Dr. Stanley Goldfarb, and Dr. Jill Horwitz. If you ignore the usual grandstanding, there was an interesting discussion on the merits of tax exemption for large and in some cases quite profitable systems. You can watch the testimony here.
Congress’s watchdog, the GAO, released a report on Medicaid Demonstrations for which the rules are getting tightened under the OBBBA. It’s been almost a running joke about how not budget neutral these demonstrations have been over the past few years, and I imagine we’ll be seeing a lot less creative, interesting, and very expensive waiver programs from now on.
From InsideHealthPolicy, CMS has created a special enrollment period for MA members who selected a plan based on inaccurate information in the provider directory. What a bummer it would be to think your doctor was in network when they aren’t, because the insurance companies did a bad job on directory management.
More from Health Tech Nerds
Community Briefing on the Transforming Episode Accountability Model (TEAM) from CMS: An overview of TEAM and highlights of some cool things community members and friends of HTN are doing for the program.
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1 Sort of, since I had to say I was 29 when in fact, I am not and these plans are age rated. But directionally