Below is an excerpt from the Texas Conservative Coalition Research Institute's 2020-2021 Healthcare & Human Services Task Force Report. You can read the entire report here.
The detrimental impact of the Affordable Care Act on the nation’s health insurance market would be difficult to overstate. Well-documented skyrocketing costs for individuals and families, coupled with decreasing plan choices as multiple insurers decline to offer ACA Exchange plans,[i],[ii],[iii] have left many Texans in the position of choosing health insurance coverage or putting that money towards other necessities. To be clear- this law is a federal problem, and these issues can only be completely resolved by Congress repealing this troubled law. While that possibility is highly unlikely in the current political landscape, state leaders should continue to look at opportunities to make the healthcare marketplace more tenable for consumer and insurers within the federal status quo.
Two areas that deserve examination by the Legislature in the current session are reducing unfunded government mandates on health insurance plans, and identifying opportunities to increase coverage through the use of association health plans.
Unfunded government mandates generally take two forms in terms of health insurance coverage- mandated benefits and any willing provider (AWP) laws. While mandates are often designed to provide a benefit to a relatively small number of the insured population, every insured person contributes to the cost of each one through increased premiums. Although some mandates may appear harmless enough, and well-intentioned in many cases, each and every one contributes to an increase in overall premiums.
Benefit Mandates
A significant amount of the consternation around the Affordable Care Act (ACA) was due to its substantial benefit mandates, designated by the law as essential health benefits (EHBs), and for playing a role in putting the commercial market into a state of crisis. Most people, regardless of their stance on the issue of mandated benefits, agree that these mandates drive up the cost of healthcare coverage, capable of causing an increase in monthly premiums between one and five percent per benefit.[iv] The ACA requires that plans cover ten categories of “essential benefits,” including maternity care, mental health and substance abuse disorder care, and oral and vision care coverage for children.[v]
Often, benefit mandates are difficult to deny because they target sympathetic populations, such as mandated cochlear implants for child deafness, and/or they seem innocuous because they are limited to conditions that only impact a small number of the population, such as treatment coverage for certain conditions related to craniofacial abnormalities. Obviously, Texans are sympathetic to people suffering from such afflictions (mandate bills have been filed in prior sessions on both topics, with the former passing into law). However, authorities on health policy warn against falling into this trap because these well-meaning mandates have an adverse cumulative effect. One policy expert explains:
In general, it’s politically palatable for lawmakers on both sides of the political aisle to pass benefit mandate after benefit mandate. This legislation shields them from being called out for explicit tax increases, and the per member per month (PMPM) cost of each imposed on policyholders is miniscule...
The insignificant cost of each standalone bill also makes mandate legislation politically feasible for special interests and other medical providers to get their way, which explains why there are now 2,200 mandates nationwide – up from almost zero in the 1970s. But the issue becomes problematic when multiple bills are introduced simultaneously.[vi]
Benefit mandates have grown exponentially over the years and, as one economics professor explains, each mandate comes with its own trade off that should be carefully considered by lawmakers who must decide whether the cost is justified or whether it will be ultimately detrimental to the employers that drive the U.S. economy.[vii] The Texas Department of Insurance provides a chart of the state’s mandated health benefits as of September 1, 2017.[viii] This does not reflect any mandates that may have been adopted since then, but is still worth studying.[1] While the majority of these benefits are federally required, some are applicable only within the state. Of particular note is the state-only mandate for certain group plans to cover in vitro fertilization.[ix] While people are naturally sympathetic to those dealing with fertility issues, this mandate can have exponential ongoing costs; the costs are not only those of the treatments themselves, but also those of the resulting high-risk and/or multiple-birth pregnancies (e.g., twins/ triplets), which carry an increased risk of premature delivery.[x]
Any Willing Provider (AWP) Mandates
Under managed care, a health plan contracts with certain providers that make up the plan’s network. The majority of Americans with private health insurance are enrolled in some form of managed care.[xi] In addition to this coverage in the commercial market, the State of Texas utilizes managed care in its employee and teacher group coverage plans, as well as in Medicaid and the Children’s Health Insurance Program (CHIP).
By only contracting with certain providers, health plans have the opportunity to negotiate lower prices and, more importantly, adopt standards that may restrict lower-quality providers from joining their networks. This applies to medical and pharmacy benefits.
Researchers at the Washington Legal Foundation explain how health plans, and ultimately health care consumers, achieve greater cost savings and better services through exclusive pharmacy networks (emphasis added):
Many networks are highly exclusive. The greater a network’s exclusivity, the more customers a member pharmacy can expect. The prospect of a large number of customers creates intense competition for exclusive networks; this competition leads pharmacies bidding for network membership to offer higher discounts in order to join the network. It is well understood that cost savings resulting from this exclusivity are generally passed on to consumers in the form of lower premiums, lower out-of-pocket costs, and better services.[xii]
Since the 1980s, there have been attempts through various AWP laws to require that health plans include certain provider groups and/or hospitals in their networks.[xiii] Proponents of such laws argue that they “level the playing field,” particularly for independent practitioners, and provide greater choice to consumers.[xiv] While the any willing provider concept may on the surface appear good for patients, experience has proven that these mandates actually have the opposite effect. AWP laws adversely impact consumers by driving up the costs of care (thereby further reducing access to low-cost, high-quality insurance coverage) and restricting competition.[xv] One analyst described it thusly: “The preponderance of evidence and economic logic would counsel emphatic rejection of new or even existing AWP … laws.” To expound on that notion:
The laws themselves suppress competition at the provider level in the name of enhancing competition at the point of service level. And by design they also suppress price competition at the point of service level, since all agree to the insurers’ terms of what to charge consumers. They want consumers to have access to all providers but for price variation to the consumer to be off the table. But if all providers offer the same price to consumers and if all providers are in every plan, then no plan is different from another, either. So in practical effect, strong AWP laws … also suppress competition at the plan level.[xvi]
The Federal Trade Commission (FTC) also has a strong history of opposing attempts to pass or enforce AWP laws, deeming them anti-competitive and, ultimately, anti-consumer. Researchers quote the FTC, when discussing a state-sponsored AWP law, as saying, AWP laws “preempt competition among providers, instead of protecting the interest of patients. In other words, such laws appear to protect competitors, not competition or consumers.”[xvii]
In a separate letter to CMS, the FTC explained that AWP laws “can also limit competition by restricting the ability of insurance companies to offer consumers different plans, with varying levels of coverage, cost, and choice. These restrictions on competition may result in insurance companies paying higher fees to providers, which generally lead to higher premiums, and may increase the number of people without coverage.”[xviii]
By eliminating competition among providers and prohibiting health plans from employing innovative and quality-based contracting standards, AWP mandates can have the perverse effect of actually leading to lower-quality, higher-priced care and even reducing the availability of health insurance for Texans.
1. Policy Recommendation: Reject Unfunded Mandates
TCCRI has long supported rejection of unfunded government health care mandates in any form, and this should be defended irrespective of whether the ACA is in effect. In the 87th Legislative Session, state lawmakers should look to unwind any mandates that are not currently required by federal law and continue to reject all proposed mandates. Texas has a long history of preventing government mandates from impacting the free market’s ability to provide innovative, high-quality, cost-effective solutions across all industries. Allowing government mandates to dictate the daily operations of private sector businesses will only lead to negative outcomes for Texas healthcare consumers. In addition to the anti-competitive environment and rising healthcare costs that mandates usher in, they also set a dangerous precedent of allowing the government to dictate to private businesses with whom who they must contract. Benefits that are very limited and only apply to a small percentage of enrollees must be still be rejected, as allowing even a small mandate begins the path down a slippery slope that makes it very difficult to draw a line on which mandates are, and are not, acceptable. For this reason, mandates should be rejected in all forms.
2. Policy Recommendation: Pass a Mandate-Free Catastrophic Coverage Option
In the 85th Session, HB 4213 (Phillips) was filed and would have authorized health plans to offer catastrophic health benefit plan, free of any state-mandated health benefits. If passed, this legislation would have augmented SB 541(83R) (Williams/ Sp: Taylor), which allows employers and health maintenance organizations (HMOs) to offer plan options free of certain state mandates. Current law, as a result of SB 541, allows employers and plans to waive many state-specific mandates, but does still prescribe some benefits that must be covered, such as certain pre-existing conditions and serious behavioral health conditions.[xix] It is also important to remember that when SB 541 was passed in 2003, it was done so in a pre-ACA world and largely geared towards group health plan offerings. HB 4213, as filed, would have amended the same section of the Insurance Code as SB 541 to include an additional option for a completely mandate-free catastrophic plan for group plans and individual consumers.
Though HB 4213 did not proceed past the House committee stage last session, the 87th Legislature should make this a goal for this session using the following language to amend Chapter 1507 of the Texas Insurance Code (taken from HB 4213):
SUBCHAPTER C. CATASTROPHIC PLANS
Sec. 1507.100. CATASTROPHIC HEALTH BENEFIT PLANS. Notwithstanding Subchapters A and B or any existing requirement, a health carrier or health maintenance organization may offer a catastrophic health benefit plan that does not include state-mandated health benefits as described by 1507.003(a) and 1507.053(a).
Although some catastrophic plans are available to purchase in the private market, removing the requirement for any mandates could encourage other carriers to provide additional competitive offerings.
Catastrophic plans are often attractive coverage options for young, healthy individuals. According to an October 2020 report by United States Census Bureau, the age at which the uninsured rate is the highest is 26, followed by ages in the late 20s.[xx] This makes sense, as individuals in this age group are no longer eligible for coverage as dependents of covered parents (this ends at age 26 under the ACA), and many are likely facing the choice of whether or not to purchase insurance coverage for the first time. As one noted healthcare policy expert explains, “Healthy people tend to buy insurance based on price. Sick people, however, look at likely out-of-pocket costs for their illnesses and want broader networks.”[xxi] So, while a catastrophic plan is not for everyone, it could provide a great value for someone who does not see the need to pay a large monthly premium for regular primary care and prescription drug coverage, but does recognize the value of a lower cost plan that would cover health emergencies.
The current healthcare environment can seem overwhelming, especially in terms of what states can do to effect any positive change in the face of so much sclerotic federal policy. One option that some small employers can use to provide health coverage for themselves and their employees is association health plans, or AHPs. TDI explains that AHPs involve an “arrangement where businesses group together to provide their employees’ health insurance, either on a fully insured or a self-funded basis,” with the goal of “lower[ing] premiums using economies of scale and exemptions from some small-employer requirements.”[xxii] Simply put, AHPs allow small businesses to join together and purchase coverage that is typically only available to larger employers, where risk is spread across a larger population. And, because the plans are not subject to all of the ACA’s mandates, their premiums are generally more affordable than ACA Exchange plans.
New rules released under the Trump Administration would have eased regulations on AHPs, paving the way for greater use of these plans under the “commonality of interest” threshold, with the two basic “interests” being professional (e.g., florists in a state) or geographic (e.g., small businesses in a certain metro area).[xxiii] The rules would have also taken a historic step in allowing small business owners to join AHPs as sole proprietors and allowing AHPs to form for the sole purpose of providing coverage. While these rules could have provided high quality lower-cost coverage for millions of Americans, major provisions of the rules were struck down by a federal court.[xxiv]
The left-leaning D.C.-based judge who struck down much of the rule described it a clear “end-run around the Affordable Care Act,”[xxv] which is ironic, as the ACA effected the very climate that necessitated the coverage alternatives provided by the rule. While the lawsuit dealt a major blow to what could have been an optimal solution to the havoc wreaked upon the private marketplace, states should not completely abandon AHPs as a viable option. Instead, Texas lawmakers should continue to foster an economy that welcomes AHPs so small businesses can fully utilize the options currently available and stand ready to expand the use of these plans if and when the option presents itself. Texas is home to 2.8 million small businesses that provide jobs to almost 5 million people;[xxvi]these Texans need and deserve affordable quality coverage free of intrusive and expensive government mandates.
1. Policy Recommendation: Reject Additional Regulations on AHPs
Texas currently allows both fully insured and self-funded AHP options with varying requirements depending on the specific type of plan.[xxvii] State lawmakers must reject any attempts to saddle AHPs with any additional burdensome regulations that could further restrict such plans as a practical option for working Texans.
2. Policy Recommendation: Examine Whether Legislative Changes are Needed to Allow Small Employers to Fully Maximize AHPs
It is almost certain that the Biden Administration will do nothing to promote the use of alternative private market solutions like AHPs. However, the legislature must ensure that the state is fully maximizing AHPs as currently allowed. Lawmakers should examine whether any current statutory requirements need to be removed or amended to allow small businesses in Texas to form or join AHPs.
[1] Collection of mandated benefits data by TDI was temporarily suspended for 2020 but is set to resume in June 2021.
[i] Claxton Gary, Levitt Larry, Rae Matthew, Sawyer Bradley. “Increases in cost-sharing payments continue to outpace wage growth.” Kaiser Family Foundation. June 15, 2018, Available at: https://www.healthsystemtracker.org/brief/increases-in-cost-sharing-payments-have-far-outpaced-wage-growth/#item-start. [ii] Luhby Tami. “Obamacare shoppers find fewer insurer choices on exchanges.” CNN. November 13, 2017, Available at: https://money.cnn.com/2017/11/13/news/economy/obamacare-insurer-choice/index.html. [iii] Antos Joseph R., Capretta James C. “The ACA: Trillions? Yes A Revolution? No.” Health Affairs. April 10, 2020. Available at: https://www.healthaffairs.org/do/10.1377/hblog20200406.93812/full/. [iv] Bihari Michael, M.D. “Mandated Health Insurance Benefits Explained: Health benefit mandates are controversial.” Verywellhealth. Updated June 2, 2020. Available at: https://www.verywellhealth.com/mandated-health-insurance-benefits-1738931. [v] See Healthcare.gov. “What Marketplace health insurance plans must cover.” Available at: https://www.healthcare.gov/coverage/what-marketplace-plans-cover/. [vi] Restrepo Katherine. “Want Affordable Health Insurance? Scale Back on Benefit Mandates.” Forbes. April 5, 2017, available at: https://www.forbes.com/sites/katherinerestrepo/2017/04/05/want-affordable-health-insurance-scale-back-on-health-benefit-mandates/?sh=266e9be05573. [vii] Bailey James, Webber Douglas. “Hidden Costs of Health Benefit Mandates.” Real Clear Policy. June 16, 2015. Available at: https://www.realclearpolicy.com/blog/2015/06/17/hidden_costs_of_health_benefit_mandates_1334.html. [viii] Texas Department of Insurance, “Mandated Health Benefits as of September 1, 2017,” available at https://www.tdi.texas.gov/hmo/documents/manhealthben.pdf. [ix] Tex. Insurance Code § 1366, Subchapter A. [x] Preidt Robert. “IVF Tied to Higher Odds for Pregnancy Complications.” February 4, 2019. Available at: https://www.webmd.com/baby/news/20190204/ivf-tied-to-higher-odds-for-pregnancy-complications#1. [xi] United States Census Bureau. “Percentage of People by Type of Health Insurance Coverage: 2019.” Report No. P60-271, Figure 1. September 15, 2020. Available at: https://www.census.gov/content/dam/Census/library/visualizations/2020/demo/p60-271/figure1.pdf. [xii] Klick, Jonathan and Wright, Joshua D., “The Anti-Competitive Effects of ‘Any Willing Provider’ Laws,” Washington Legal Foundation: Legal Backgrounder Vol. 27 No. 4, March 2012. Available at: https://s3.us-east-2.amazonaws.com/washlegal-uploads/upload/legalstudies/legalbackgrounder/3-23-12KlickWright_LegalBackgrounder.pdf. [xiii] America’s Health Insurance Plans, “Analysis: How Any Willing Provider Makes Health Care More Expensive,” September 23, 2014, p.1. [xiv] Klick Jonathan, Wright Joshua D. “The Anti-Competitive Effects of ‘Any Willing Provider’ Laws,” Washington Legal Foundation: Legal Backgrounder Vol. 27 No. 4, March 2012. Available at: https://s3.us-east-2.amazonaws.com/washlegal-uploads/upload/legalstudies/legalbackgrounder/3-23-12KlickWright_LegalBackgrounder.pdf [xv] Ibid. [xvi] Nichols, Len M., George Mason University, College for Health and Human Services, Center for Health Policy Research and Ethics, “Deju Vu? The Debate Over Any Willing Provider Laws May Return, Sad to Say,” Issue Brief #2, September 2014, p. 5. [xvii] Klick, Jonathan and Wright, Joshua D., “The Anti-Competitive Effects of ‘Any Willing Provider’ Laws,” Washington Legal Foundation: Legal Backgrounder Vol. 27 No. 4, March 2012, p.3. Available at: https://s3.us-east-2.amazonaws.com/washlegal-uploads/upload/legalstudies/legalbackgrounder/3-23-12KlickWright_LegalBackgrounder.pdf. [xviii] Federal Trade Commission, “Comments on Contract Year 2015 Policy and Technical Changes to the Medicare Advantage and the Medicare Prescription Drug Benefit Programs,” Letter to CMS, March 7, 2014. Available at: https://www.ftc.gov/system/files/documents/advocacy_documents/federal-trade-commission-staff-comment-centers-medicare-medicaid-services-regarding-proposed-rule/140310cmscomment.pdf. [xix] Tex. Insurance Code Chapter 1507. [xx] Conway Douglas. “Adults Ag 26 Had Highest Uninsured Rate Among All Ages, Followed by 27-Year-Olds.” United States Census Bureau. October 26, 2020. [xxi] Goodman, John C. “High-Deductible Health Insurance: The Good, The Bad, and The Ugly.” Forbes. March 11, 2018, available at: https://www.forbes.com/sites/johngoodman/2018/05/11/high-deductible-health-insurance-the-good-the-bad-and-the-ugly/?sh=529f8dfc7b18. [xxii] See Texas Department of Insurance. “Association health plans.” Available at: http://www.texashealthoptions.com/cp/associationplans.html. [xxiii] Coleman Kev. “How to Start an Association Health Plan.” Updated January 25, 2020. Available at: https://www.associationhealthplans.com/ahp/start-create/#:~:text=A%20professional%20commonality%20of%20interest,not%20obligated%20to%20do%20so.. [xxiv] Keith Katie. “Court Invalidates Rules on Association Health Plans.” Health Affairs. March 29, 2019. Available at: https://www.healthaffairs.org/do/10.1377/hblog20190329.393236/full/. [xxv] Ibid. [xxvi] NFIB. “Texas Small Business Legislative Agenda 2021.” January 2021. Available at: https://assets.nfib.com/nfibcom/NFIB-Legislative-Agenda-1.pdf. [xxvii] See Texas Department of Insurance. “Association health plans.” Available at: http://www.texashealthoptions.com/cp/associationplans.html.