Skip to main content

Senate Bill Could Push Plans More to Employer, Medicare Market

Analysis  |  By Gregory A. Freeman  
   July 12, 2017

Health plans may focus more on employer coverage and Medicare Advantage as they wait out healthcare reform efforts. The current Senate bill could hold some benefits for them, however.

Uncertainty over healthcare reform has created considerable challenges for health plans participating in Medicaid and the exchanges, leading many large national plans to focus on the two markets that appear to be insulated from the healthcare reform debate: employer coverage and Medicare Advantage, says one analyst.

Health plans considering exchange participation are submitting proposed rates and making participation decisions without knowing whether cost-sharing reductions will be paid or whether healthcare reform will put exchanges on a path toward being phased out, says Jeremy Earl, JD, partner and healthcare analyst with the law firm of McDermott Will & Emery in Washington, DC.

Some deadlines have passed already and insurers will have little flexibility no matter what happens with the Senate Republicans' healthcare reform bill, he says.

Some large plans are moving more to employer coverage and Medicare Advantage as a sort of safe harbor, letting the debate continue over Medicaid and the state exchanges while they work in the areas least affected by the controversy, he says.

Related: Sicker, Older, and More Likely To Drop Medicare Advantage Plans

The potential effect on health plans is split according to their business models, he explains. Plans that are heavily invested in the Medicaid managed care business model are likely to experience setbacks if the bill passes, Earl says, because over time the population on Medicaid would be reduced.

There also is the potential for some health plans to benefit from passage of the Senate bill, he says.

"If it does pass, the funding for cost-sharing reductions for 2018 and 2019 is one of the big goals for plans that have already committed to the exchanges for those years," he says.

"Another potential positive for the health insurers is an elimination of the health insurance tax for 2018. That's one of the biggest focuses for the industry—trying to get the moratorium on that tax made permanent—because it works out to about a 3% tax on all the premiums they receive."

That tax, like most taxes, is passed along to the consumer, so eliminating it would also help consumers with lower premiums, Earl notes. That wouldn't happen immediately, though, as the health plans would have to factor the savings into the next years' premiums.

Earl expects the bill to be revised significantly, but he is not at all certain it will eventually be passed by the Senate. At this point, he says, some health plans might be more comfortable with a bill they don't entirely like instead of seeing the bill die and knowing further reform efforts, with unknown impact, will follow.

"The longer this bill is debated, the worse it is for insurers because they can't look into the future and have a good idea of where they will stand. That means they are going to brace for the worst because that is just prudent in the business world, to anticipate the worst outcome of an uncertain situation and make sure you can survive it as a business," he says.

"We're hearing now that the delay could even go into the August recess, and that's not what the insurers wanted. Good or bad, they want to know what's coming."

Gregory A. Freeman is a contributing writer for HealthLeaders.


Get the latest on healthcare leadership in your inbox.