With the release of the dismal CBO report on the American Health Care Act, the administration is playing defense. Secretary Price says the report is “just not believable” because it does not take into account the regulatory changes that he intends to make to bring down the cost of coverage. It also “ignored completely the other legislative activities that we’d be putting into place.”
This is all very vague, but what Price seems to have in mind is an alteration to the rule requiring insurers in the individual and small-group markets to cover the “essential health benefits.” If plans have to cover fewer things, the reasoning goes, they’ll be much cheaper, enabling millions of people to afford coverage that would otherwise be out of reach.
Don’t be fooled.
When it comes to essential health benefits, Congress has already been sidelined. Coverage requirements don’t directly affect the federal budget, which means they can’t be changed through reconciliation. And Democrats will filibuster any effort to water down the essential health benefits. So unless Mitch McConnell blows up the filibuster, there is no chance that Congress will act.
On the regulatory side, Price is hemmed in by the text of the ACA, which says that “the scope of the essential health benefits” must be “equal to the scope of benefits provided under a typical employer plan.” Price has some latitude to determine what counts as “typical,” but he can’t read the word out of the statute. He’s got to be able to identify a substantial number of plans in the employer market to use as a benchmark.
The Institute of Medicine looked into employer plans back when HHS was first considering what to do about the essential health benefits. It found that plans didn’t differ much from one another in the scope of their coverage. Prominent insurers reported “that little of the variation in customizing coverage in either the large and small group market is due to differences in covered benefits as opposed to benefit design options.” Instead, insurers held down costs by adjusting networks and cost-sharing.
If most employer plans cover the same stuff, you can’t squeeze much juice out of a redefinition of the essential health benefits.
Yes, Price can make some changes at the margin. Under its current approach to essential health benefits, HHS allows the states to select an existing employer plan to use as a benchmark. As Helen Levy and I explained in an article we wrote a few years back, existing plans will necessarily cover all services mandated under state law. Not all of those services, however, need to be considered “essential” within the meaning of the ACA.
Take infertility treatment, which is an essential health benefit in (at least) those fifteen states with infertility mandates. In other states, however, some small group plans exclude infertility treatment. Price could probably determine that plans that exclude such coverage are “typical” and redefine essential health benefits to categorically exclude infertility treatments. But that would yield only a tiny decrease in premiums.
What Price can’t do is lop off whole benefit categories. The ACA is explicit, for example, that the essential health benefits must include treatments for maternity care and mental health disorders. Because Price can’t exclude big categories from coverage, he’ll struggle to redefine the essential health benefits in a manner that will drive down costs.
Plus, if Price were to define essential health benefits in an especially parsimonious manner, he’d face a lawsuit challenging his decision as unreasonable. (I for one would love to litigate that case.) The resulting legal uncertainty would drive premiums up, not down. And remember, too, that Price can only change the existing rule by going through notice-and-comment rulemaking, which will take at least a year, maybe more.
Price therefore can’t do much to drive down premiums by tinkering with the essential health benefits. What gives me pause, however, is the possibility that he might take a page from the Obama administration’s playbook and “delay” the implementation of the existing statutory requirements. Such a move would be unconstitutional and vulnerable to a legal challenge, but I don’t know if that will stop HHS: refusing to enforce the law might be the only way to give insurers room to materially narrow their scope of coverage.
Apart from this illegal possibility, however, don’t put much stock in Secretary Price’s vague claim that future regulatory changes will transform CBO’s coverage estimates. They can’t and they won’t.