COVID-19 aid insurance language splits experts on necessity, scope

Reconciliation language would lower cost of exchange health coverage for a wide range of consumers

Rep. Pramila Jayapal, D-Wash., has pushed to include more of Democrats' priorities in COVID-19 relief legislation. (Tom Williams/CQ Roll Call file photo)
Rep. Pramila Jayapal, D-Wash., has pushed to include more of Democrats' priorities in COVID-19 relief legislation. (Tom Williams/CQ Roll Call file photo)
Posted February 19, 2021 at 9:00am

Democrats’ legislation to extend economic aid amid the pandemic is sparking debate over the scope of its insurance provisions and whether they belong in a COVID-19 relief package.

Critics say the provisions’ $52.8 billion price tag is far too high to justify the 1.9 million uninsured individuals that the Congressional Budget Office expects will gain coverage through the insurance exchanges and health care benefits for unemployed workers. By comparison, the Kaiser Family Foundation estimates that 14.9 million people are already eligible for coverage through the exchanges alone.

But proponents argue the language also reflects Democrats’ broader priorities on improving affordability for existing enrollees and helping people retain coverage they have not yet lost.

“This is clearly being written in the context of a COVID-relief stimulus bill, so it is stimulative,” said Loren Adler, associate director of the USC-Brookings Schaeffer Initiative for Health Policy. “It is a way to give people money that they would otherwise have been spending on health insurance, which has a stimulative purpose above and apart from your kind of standing affordability arguments.”

The reconciliation language would lower the costs of exchange insurance for a wide range of consumers.

The provisions would fully cover insurance premiums on the exchanges for people with income of up to 150 percent of the federal poverty level. It would revoke a cap on premium tax credits for households making more than 400 percent of the poverty level for 2021 and 2022.

The cost of premiums would also be capped at 8.5 percent of household income, and full tax credits would be extended to recipients of unemployment benefits for the two-year period. Tax credit recipients, meanwhile, would not be required to repay any excess credits for the 2020 tax year.

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Additionally, the bill would cover 85 percent of the cost of continuing employer coverage for workers who left or lost their jobs under the program known as COBRA through September, and open a 60-day enrollment window for those who dropped their COBRA plan or opted out.

The CBO estimates the COBRA provision would cost $7.8 billion, affecting 3 million new and current enrollees. Only 600,000 of those, however, would have been previously uninsured. That, combined with a lower number of job losses compared to the beginning of the pandemic, has some doubting its impact.

“We’ve already experienced most of the job losses of the recession,” Adler said, adding that there’s an additional information barrier for potential enrollees to overcome.

Republicans worry that the more generous premium tax credits on the exchanges could trigger employers to offload coverage for employees they have held onto throughout the pandemic.

Businesses with more than 50 employees would have to weigh the costs of violating the 2010 law's mandate to offer coverage. But Brian Blase, who served on the National Economic Council under former President Donald Trump, said the size of the subsidies involved would dwarf tax benefits employers receive for providing insurance to their workers.

“The main issue is this proposal makes the premium tax credit a much, much, much better deal for more workers,” said Blase, who now runs Blase Policy Strategies. “So particularly for older, upper-income workers, these subsidies are really large.”

Experts on both sides of the aisle see the $1.9 trillion reconciliation package as the first step in making permanent changes to exchange subsidies in a second piece of legislation later this year, provided Democrats can offset the costs to comply with rules allowing them to bypass a potential Senate Republican filibuster.

A separate piece of the overall package, approved by Energy and Commerce, would also further incentivize 12 holdout states that did not expand Medicaid eligibility under the 2010 health care law to do so. That would help individuals with income below the federal poverty line, who often are not eligible for either Medicaid in their state or the exchange subsidies.

Committees approved their portions of the reconciliation proposal last week, transferring the legislation to the Budget Committee to be combined into one package. The chamber is expected to vote on the package next week and send it to the Senate.

Spending more to lower consumers' costs

A CBO report released earlier this week projected the exchange and COBRA provisions would cost $52.8 billion in total over a 10-year period, reducing the number of uninsured by 1.9 million people.

Of that amount, $34.2 billion would fund expanded tax credits for the exchanges, adding coverage for 1.3 million people.

Households making more than 400 percent of the poverty level — who were hardest hit when the 2010 health care law was enacted, thanks to a spike in premiums and the lack of federal aid — would account for 40 percent of new enrollees.

A Kaiser Family Foundation analysis estimates that a 60-year-old making $52,000 a year currently pays more than 20 percent of her income for a silver level benchmark plan. Capping premiums at 8.5 percent of income and removing the subsidy cap would drop the premiums from $870 a month to $368.

Other winners would be those with income up to 150 percent of the poverty level, who would be guaranteed access to a zero-premium silver level plan. Some silver plans can also qualify for deductibles as low as $200 thanks to additional federal subsidies for cost-sharing.

“One key point that is easy to miss is that this proposal would guarantee access to a very low-deductible plan for at least 3 to 4 million people,” said Cynthia Cox, who oversees research on the health law at Kaiser.

But 8.9 million people already qualify for either a reduced or free plan on the exchanges, Cox added, making up more than half of the 15 million currently eligible. That fact is a point Republicans make for opposing the subsidy expansions.

“You should be reforming the rules that drive up the cost to insurance as opposed to just simply throwing more money at the insurers, which will just sop it up,” said Ed Haislmaier, a senior research fellow at The Heritage Foundation. “That actually incentivizes insurers to just keep raising rates.”

Expanding coverage will require more than just additional subsidies, which is why industry groups and the Biden administration are also focused on a new special enrollment period, which runs from Feb. 15 to May 15. Critics have questioned the need to reopen the exchange, considering that anyone who loses their health insurance automatically qualifies for a personal special enrollment window.

The Trump administration declined to reopen enrollment for this reason. Randy Pate, who oversaw the exchange under Trump, said the team was “preparing and ready” to reopen enrollment, but found that many large employers continued to cover health insurance for furloughed workers.

“We looked at other states that were running special enrollment periods and as the year went on, it just showed they weren't getting huge numbers of people,” he said, noting that California was an exception because of the state’s expanded subsidies. HealthCare.gov was enrolling a similar percentage of people who have qualifying events, he said.

But the easier process and the awareness from a full HealthCare.gov reopening makes a difference, said Ceci Connolly, president and CEO of the Alliance of Community Health Plans.

“It’s been incredibly difficult, much more complicated, a much slower process,” she said. “And so this streamlined process is now open to everyone, whether they just lost a job or for whatever other reason they may be going without health insurance, they now look around and they see a deadly virus and they think to themselves, ‘Gee, maybe now I should have coverage.’”

The Trump administration cut funding for marketing and groups that help enrollees navigate and understand coverage options, citing a low return on new enrollees for the money spent. But the administration continued to collect exchange user fees from insurance plans, meaning the Biden administration is sitting on an estimated $1 billion in unspent funds, according to Kaiser.

The Department of Health and Human Services is launching a $50 million marketing campaign for the new enrollment period, but contracts for navigators to talk to consumers will take more time, Cox said.

Some Democrats are still pushing for more.

“I have said to the administration and to the speaker that we have got to get the things that candidate Biden agreed to in the task force into these next packages, whether it's the Build Back Better package . . . as well as any additional legislation that goes through," Rep. Pramila Jayapal, D-Wash., said on a call with reporters Thursday.

But Democrats are constrained by the limitations of the reconciliation process, which Republicans also faced when they cleared a tax law in 2017.

“It’s totally fair to question whether this is the most efficient way to deliver insurance. I think supporters of Medicare for All, for example, would argue that you could cover more people for less per person potentially,” Cox said. “But this is the framework that Congress is working in, and under that framework, it’s not as expensive as I think some people are making it out to be.”

Lindsey McPherson contributed to this story.