Proposed Legislation May Lower Individual Premiums by 40%

March 20, 2018 - Senator Lamar Alexander (R-TN), Senator Susan Collins (R-ME), House Energy and Commerce Committee Chairman Greg Walden (R-OR) and Representative Ryan Costello (R-PA) have proposed legislation that aims to lower individual health plan premiums by 40 percent.

The Bipartisan Health Care Stabilization Act of 2018 is a proposed addition to an omnibus spending bill. The healthcare bill includes suggestions for a federal reinsurance program, cost-sharing reduction (CSR) funding, and new state flexibility to develop stable insurance markets.

The GOP leaders are optimistic that the bill will allow Democrats and Republicans to agree on state and federal fixes to address rising individual premiums.

“Our recommendations are based upon Senate and House proposals developed in several bipartisan hearings and roundtable discussions,” the lawmakers said.

“According to independent experts, our proposal would reduce premiums in the individual market by up to 40 percent for farmers, songwriters, and small business men and women, and others who don’t receive insurance from the government or from their employer and who pay for insurance on their own,” the GOP lawmakers continued.

“A self-employed plumber making $60,000 may be paying $20,000 for health insurance. Over time, our proposal could cut up to $8000 from that insurance bill.”

Early estimates from the Congressional Budget Office (CBO) indicate that the bill would provide roughly 500,000 individuals each year from 2019 to 2022 with health insurance.

Additionally, the bill would create a short-term deficit of $19.1 billion but would not increase net direct spending after the year 2028.

However, an alternative CBO estimate suggests that provisions in the Bipartisan Stabilization Act may actually lead to enrollment decreases for members with higher incomes. Individuals with incomes of 200 to 400 percent above the federal poverty level (FLP) would drive decreases individual enrollment between 500,000 and 1 million by 2020 and 2021.

The CBO suggests that limited subsidies for higher income individuals would lead to enrollment decreases.

CBO and the Joint Committee on Taxation (JCT) believe that many of the stabilization policies will lead to federal savings on the cost of providing premium subsidies to low-income plan holders.

“In 2019, CBO and JCT estimate, about 60 percent of the federal cost for the default federal reinsurance program would be offset by other sources of savings, mainly by reductions in federal subsidies.”

The three-year reinsurance pool would be funded with $10 billion per year, according to the bill. States could create their own reinsurance pool, a traditional reinsurance pool, or a reinsurance pool based on successful designs used in Maine or Alaska.

The bill also funds the CSR payments that would provide financial assistance to individuals who are 250 percent below the FLP.

Lawmakers wrote the legislation that maintains Affordable Care Act provisions surrounding consumers protections in the individual market.

Payers must provide essential health benefits and can't deny coverage based on pre-existing health conditions, just like the laws in the ACA. Also included are Hyde Amendment protections that require certain abortion funding thresholds for public payer programs including Medicaid, Medicare, and CHIP.

New changes to federal healthcare policy include allowing the sale of health plans across state line and requiring the HHS secretary to issue regulations in regard to interstate sales. Additionally, any individual would be able to purchase catastrophic coverage in the form of new low-premium health plans, otherwise known as copper plans, under the proposed legislation.  

The lawmakers designed the bill with a number of state and federal changes to address stabilization.

The bill would offer permanent flexibilities for state Medicaid programs if the state implements a 1332 demonstration.

States would also be allowed to expand the sale of short-term health plans and association health plans (AHPs). The proposed bill contains federal requirements for payers or groups offering AHPs. The bill will also let state governments implement additional AHP policies on top of federal regulations.

The bill follows reports of a potential increase in individual health insurance premiums without legislative action.

Health plan actuaries and analysts from Harvard, UCLA, and UC San Diego found that policies like funding long-term insurance programs and providing health plan subsidies could prevent individual premiums from increasing between 34 to 96 percent by 2021.

The proposed legislation may help deter rising individual premiums if it is voted through the Senate and the House in the coming days.