Bills
| 3.23.22

Should Obamacare’s Health Insurance Tax Credits & Subsidies Be Expanded? (S. 1213)

Do you support or oppose this bill?

What is S. 1213?

(Updated December 5, 2019)

This bill — the Consumer Health Insurance Protection Act of 2019 — would require health insurers which provide coverage under Medicare and Medicaid to participate in the exchanges established by the Affordable Care Act (ACA or Obamacare). Its key provisions include  increasing federal subsidies for people buying ACA plans, expanding eligibility for ACA tax credits, capping premiums at 8.5% of income, ensuring plans cover essential health benefits, and imposing tighter controls on private insurers by banning short-term, limited coverage “junk” insurance plans.

Specifically, this bill would: 

  • Require companies to live up to the same standards that are set for private insurers when they participate in Medicare and Medicaid.
  • Set limits on insurance company profits to match those insurers can earn in Medicare and Medicaid.
  • Set up an ombudsman program to track consumer complaints about insurers.
  • Protect against unreasonable premium increases with stronger rate review standards.
  • Require insurers providing coverage under Medicare and Medicaid to offer coverage on the ACA exchanges in areas with limited insurer competition.
  • Increase premium tax credits, expand cost-sharing reduction (CSR) subsidies, and make more families eligible for premium tax credits to guarantee that every individual on the ACA exchanges has access to a plan that covers 80% of out-of-pocket costs and costs no more than 8.5% of income in premiums.
  • Guarantee payment of Cost Sharing Reduction reimbursement payments (CSRs);
  • Strengthen protections for essential health benefits.
  • Require all short-term insurance products to meet ACA standards.
  • Block the Trump administration's regulations on association health plans.

Argument in favor

Health insurers that are making money from Medicare and Medicaid (both government-funded healthcare programs) should be required to participate in the ACA exchanges. That will help ensure affordable, accessible health insurance for more Americans along with expanded Obamacare tax credits and insurance subsidies.

Argument opposed

Forcing health insurers into the ACA marketplace just because they make money off Medicare and Medicaid could put them into financially untenable positions, which have caused major insurers to leave the Obamacare exchanges in the past. This could in turn harm all consumers’ abilities to purchase health insurance.

Impact

Health insurance purchasers; health insurance companies; health insurance companies making money off Medicare and/or Medicaid; insurance company profits; ACA; ACA plans; ACA marketplace; Trump administration regulations on association health plans; and CSR subsidies.

Cost of S. 1213

A CBO cost estimate is unavailable.

Additional Info

In-Depth: Sen. Elizabeth Warren (D-MA) reintroduced this bill from the 115th Congress to build on the Affordable Care Act (ACA), hold health insurance companies accountable and strengthen consumer protections in private health insurance: 

“A family's security can be swept away with just one bad diagnosis - just like with my little family back in Oklahoma. When I was 12, my daddy had a heart attack and we almost lost everything. So long as private health insurance exists, there is no reason to allow our health care to be held hostage by insurance companies that refuse to do better. Our bill will hold them accountable while significantly improving access to health care for millions of Americans."

Sen. Warren, who supports single-payer healthcare and is a cosponsor of legislation to that effect introduced by Sen. Bernie Sanders (I-VT), does not envision this plan as an alternative to more ambitious proposals. However, as she made clear in a January 2019 speech to the consumer group Families USA, she understands that enacting a single-payer plan would be difficult, and that private insurance probably wouldn’t disappear overnight. Thus, she envisions this bill as a way to get something done right away to subject the health insurance industry to the type of stringent consumer financial protections she’s already successfully championed in the financial sector. Sen. Warren tweeted to this effect when she introduced this bill in 2018: 

“We need #MedicareForAll – and until we get it, there's no reason private insurers can't provide coverage that lives up to the high standards of our public health care programs.”

Last Congress, original cosponsor Sen. Kamala Harris (D-CA), who is also an original cosponsor of this bill in the current Congress, said: 

"No one should have to choose between receiving quality healthcare and putting food on their table, a roof over their head, or retiring with dignity. This legislation is a critical step forward for Americans who are feeling their paychecks squeezed over rising costs of healthcare as insurance companies earn record profits.” 

Families USA is among a number of consumer advocacy groups that supports this bill. Its Senior Director of Federal Relations, Shawn Gremminger, says: 

“Families USA is proud to support Senator Warren’s Consumer Health Insurance Protection Act. This is a robust, comprehensive bill that is aligned with our mission to put consumers first.  It provides extensive reform to the private health insurance markets and strengthens consumer protections —including protections for individuals with pre-existing conditions. We appreciate that the bill aims to improve our current coverage system—which is critical to any component of the next generation of health care coverage. We urge members of Congress to support this legislation that takes real steps to improve access to affordable health care for America’s families.”

Writing for the Black Agenda Report, Margaret Kimberley argues that this bill props up a poorly-designed health insurance system: 

“This… is a plan to provide subsidies to pay for a system that is unnecessarily costly. Like Obamacare, it enshrines private sector control, which is the cause of all our health care problems.”

In March 2018, the CBO projected that funding CSRs (the Trump administration stopped funding them in October 2017, arguing that there wasn’t an appropriation for these payments) would actually reduce, not increase, Obamacare coverage. In an analysis comparing the effect of funding CSRs against a baseline where CSRs aren’t being paid, the CBO found that because funding CSRs would effectively cut subsidies for many subsidized enrollees, this would reduce healthcare coverage by 500,000 to one million people by 2021.

This bill has six Democratic cosponsors in the 116th Congress. Last Congress, it had six cosponsors, of whom five were Democrats and one was an Independent, and didn’t receive a committee vote. The bill is endorsed by Families USA, Consumers Union, Public Citizen and Community Catalyst.


Of Note: Although the Affordable Care Act (ACA) ended some of health insurance companies’ most egregious practices — such as annual and lifetime coverage limits and discrimination against those with pre-existing conditions — that they previously used to shift costs to patients, many patients continue to struggle with getting adequate, fairly priced coverage. According to Sen. Warren, three out of 10 American adults with health insurance now says they’re having a hard time paying their medical bills. 

Simultaneously, health insurance companies are pulling in nearly 60% of their revenue (over $200 billion in 2016) from Medicare and Medicaid. Simultaneously, some of these insurers claim they can’t afford to participate in the ACA exchanges.

In health insurers’ defense, it’s worth noting that since Obamacare’s inception, numerous major insurers have been forced to leave the ACA marketplace due to higher than expected expenses, especially in states that didn’t expand Medicaid under the ACA. Simultaneously, since Trump took office, there has been uncertainty as to whether the Trump administration would continue paying CSR payments to defray medical costs for low-income people on ACA plans. Should the Trump administration choose to stop making these payments (a relatively easy proposition, as it would merely have to stop appealing a 2014 court decision), it would leave insurers in the ACA marketplace liable for billions in medical expenses. 

Additionally, nearly a third of the 23 nonprofit health insurance plans (also known as co-ops) created by the ACA were out of business by the end of 2015. By July 2016, there were only seven of the original 23 co-ops remaining — and all had lost money in FY 2016, at a $1.7 billion cost to taxpayers in the form of federal loans. Lower-than-expected payments from the federal government were a challenge to these organizations’ fiscal health.

The Kaiser Family Foundation (KFF) reports that while a number of insurers exited the ACA marketplace or reduced their service areas in 2018 due to legislative and regulatory uncertainty, bringing the average number of companies per state to 3.5 in 2018 (versus 4.3 in 2017), this trend is reversing for 2019. In November 2018, the average number of companies per state for 2019 was 4.0, ranging from one company in five states (Alaska, Delaware, Mississippi, Nebraska, and Wyoming) to more than 10 companies in three states (California, New York and Wisconsin). For 2019, 58% of enrollees (living in about 23% of counties) had a choice of three or more insurers, up 10% from the 48% of enrollees who had so many options in 2018. 

A 2015 Urban Institute study assessing the cost of a plan with several features like this bill, including switching to a gold plan benchmark for subsidies, found that it would cost $221 billion over a 10-year period.


Media:

Summary by Lorelei Yang

(Photo Credit: DJHEAVYD via Flickr / Creative Commons)