How O’Care Repeal’s Weakening Of Protections Could Affect Employer Plans

This post has been updated.

Beyond reshaping the individual health insurance market, the version of the Obamacare repeal plan that House Republicans intend to vote on Thursday could have major implications on employer plans and may even make consumers in the large group market vulnerable to a weakening of the current law’s consumer protections, health care experts have suggested.

The argument is an open question, according to health law specialists, and likely hinges on how the Trump administration interprets previous Obama-era guidance for the Affordable Care Act.

Nonetheless, as House Republicans rush to vote on their bill, the American Health Care Act, they may reap an unintended consequence that has barely been addressed and stands to amp up the political risks of the GOP repeal effort. About half of all Americans receive health insurance through their employers, according to the Kaiser Family Foundation.  Eighty-six percent of those enrollees – or 110 million Americans – receive coverage through a large employer plan, the Brookings Institution’s estimates.

The logic is a complicated but rests on the argument that by allowing some states to opt out of certain ACA insurer mandates, the GOP bill would put cracks in the floor of protections for everyone, including those on large employer plans.

The current bill, thanks to an amendment proposed by Rep. Tom MacArthur (R-NJ) and Rep. Mark Meadows (R-NC), would allow states to opt out of certain market reforms under the ACA including its 10 Essential Health Benefits. The Essential Health Benefits set the standard for the 10 coverage areas—such as maternity, prescription drugs and preventive services—individual health plans are required to offer. States historically have had their own standards on such mandates, but the Affordable Care Act set a federal minimum that has reshaped the insurance market to make plans everywhere more comprehensive.

The Affordable Care Act also places a prohibition on lifetime and annual coverage caps, which eliminated limits on medical costs that some insurers imposed under their pre-ACA plans. That ban on lifetime and annual caps applies not just to individual and small group plans, but to large group employer plans, too. The caps are currently constricted, by law, to apply to Essential Health Benefits. So in theory insurers could cap coverage that is not among the 10 broad mandated areas.

Under the Republican health bill, however, that federal minimum would no longer exist if some states chose to waive it.

“A plan can impose an annual or lifetime limit with regards to maternity coverage, once maternity overage was no longer within the definition of EHBs,” Matt Fiedler, a Brookings scholar who previously worked for the Obama administration, told TPM.

Not only would consumers in waiver states be vulnerable, Fiedler has argued that if even if just one state starts scaling back its definition of essential health benefits, large employer plans everywhere can then introduce lifetime and annual caps to the coverage areas that no longer would be considered essential health benefits.

A GOP aide for the House Energy and Commerce committee, which has jurisdiction over the GOP health care legislation, reached out to TPM after this story was published with a statement that claimed that the state waivers do not apply to the large group market while acknowledging that some regulatory language may need to be cleaned up.

“The MacArthur amendment explicitly allows states to seek a waiver for essential health benefits only for the individual and small group market, and it will have no effect on the large group (employer) market, Any ambiguity with 2011 guidance could be resolved by Secretary Price,” the aide said.

Fiedler first raised this concern in a Brooking’s article in March, when Republicans were contemplating a version of the bill that allowed states to redefine their EHBs, and he renewed the debate over the potential risk to employer plans again this week, as momentum grew behind the MacArthur amendment letting states opt out of it if they met certain, vague conditions.

Putting large group plans everywhere at risk, according to Fielder, is Obama-era guidance that said that large employer plans could use the details of Essential Health Benefits set by any state to be in compliance with its annual and lifetime limit bans, not merely the state the plan was being offered in. This loophole was not a big deal under a fully-functioning Affordable Care Act because its 10 Essential Health Benefits meant that every state’s standards had to include those broad coverage areas.

“Under the Obama administration all the definitions for EHB were pretty robust, so whatever flexibility there was was pretty circumscribed,” Gary Claxton, a vice president of the Kaiser Family Foundation, told TPM in an email.  “The waivers here could eliminate whole categories of services and would be a far bigger deal and open more benefits to limits. “

However, other health care policy experts cautioned that it was a uncertain that this is how the legislation, if enacted, would play out, given the ambiguity of the regulatory language. At the very least, they acknowledged that it was very much an open question, and one that would likely be decided by Health and Human Services Secretary Tom Price, the former Republican congressman from Georgia who has for years railed against Obamacare and the federal government’s role in health care.

“This a possible outcome, but I don’t think by any means it would be automatic,” Timothy Jost, a health law specialist at Washington and Lee, told TPM.

One potential wrinkle is that some of the relevant regulatory language actually sets compliance according to a state’s EHB-benchmark plan. In the implementation of the ACA, each state got to choose one among its most popular plans to serve as the benchmark for how it defined required benefits within the 10 categories. If the current form of the Republican legislation became law, but the HHS did not smooth out this regulatory hiccup, there’s a scenario that the old standards may survive as a relic of the ACA.

Regardless, health care policy experts agreed that if the MacArthur amendment became law there would likely need to be some sort of regulatory language to address these potential technical issues, and some speculated that Price would be inclined to give large group plans the maximum flexibility at the expense maintaining a broad definition of Essential Health Benefits.

“Giving states power to waive the ACA’s essential benefits standard undermines not just that protection, but others, too – including those that shield consumers from catastrophic costs incurred for essential medical services,” said Justin Giovannelli, a research professor and project director at the Center on Health Insurance Reforms at Georgetown University’s Health Policy Institute.  “And the risk is not just for people who buy health insurance on their own, but potentially for everyone with employer-based coverage, as well.”

Likewise, the ACA’s limits on out-of-pocket costs for employer plans is wrapped up in similarly open-ended agency language that hinges on the HHS secretary’s discretion, according to Fiedler.

The HHS did not respond to TPM’s questions about how would approach a potential technical fix. MacArthur’s office also did not respond to TPM’s inquiries on whether he was aware of this issue and if he was looking to address it.

The ACA’s protections for large employer plans could be preserved if the HHS adjusted its interpretation of how they interacted with Essential Health Benefits.

“I’m pretty dubious that the Trump administration would want to do that given the approach they have taken on a whole host of questions,” Fiedler said.