HEALTHCARE
Here’s How the COVID Relief Bill Can Remake Health Care Policy in the US
Private health care companies are primed to defend the new bill
“You can’t fight something with nothing.”
For opponents of national health reform, this has become something of a proverb. This phrase — conceived by the California public relations firm of Whitaker and Baxter for its client the American Medical Association (AMA) — was first employed in 1949 as a strategy in the fight against the rising tide of support for national health insurance. The AMA had long fought against any type of insurance, government-sponsored or private insurance, as a financial threat to the industry.
As national health insurance gained momentum, the AMA could no longer show up to the health care fight with no alternative — they needed something. The AMA, therefore, began pushing the much lesser of two evils: private insurance. As Clem Whitaker said to the AMA’s annual convention in 1949:
“We want everybody in the health insurance field selling insurance as he never sold it before. If we can get ten million more people insured in the next year and ten million more in the next year, the threat of socialized medicine in this country will be over.”
Why is this particular piece of history from America’s long struggle for health care reform relevant today?
That’s because it explains how the public will come to support making the COVID relief bill’s (formally known as the American Rescue Plan Act (ARPA)) temporary enhancements to the ACA permanent. If ARPA’s temporary changes to the ACA were made permanent, they would reshape the politics of health care in the country.
As Jon Walker described in The Prospect, ARPA represents “the most important philosophical change in American health care ever.” By increasing the generosity of existing subsidies to purchase health insurance, and by making everyone, regardless of income, eligible for subsidies, ARPA’s ACA enhancements would create the clearest pathway to affordable, universal health insurance in US history.
The promise of universal insurance, alone, however, might not be enough to build a constituency of beneficiaries capable of protecting these improvements in the future. An expanded ACA would, however, also further cement the role of private insurance companies within the US health care system and make that industry a champion of these latest reforms. It would also release the considerable pressure building behind the movement for Medicare for All. Paradoxically, ARPA might just become the broader health care industry’s tool in the fight against national health insurance.
ARPA includes several significant, though temporary, reforms to government health care programs, including Medicaid, CHIP, and the ACA. ARPA offers new financial incentives paid for by the federal government to entice the twelve remaining holdout states to finally adopt the ACA’s Medicaid expansion.
ARPA’s most prominent health care reform, however, is the enhancement of the ACA’s premium subsidies. Prior to ARPA, the ACA provided premium subsidies to individuals and families earning between 100% — 400% of the federal poverty level. The ACA established a sliding scale that capped the percent of income an individual or family would be required to spend on health insurance premiums, with the federal subsidy making up the difference between the capped amount and the cost of a benchmark plan. The enhancements contained in ARPA increase the generosity of the subsidies by lowering the income cap, while also ending the upper income bound. Prior to ARPA, there was no cap on how much someone making more than 400% FPL would have to spend on their health insurance premiums. Now, no matter what a person or family’s income is, the most they would have to spend on a marketplace plan is 8.5% of income. These enhancements to the ACA’s marketplace subsidies represent the first true improvement to the ACA in its eleven-year history. But, as is the case with other parts of ARPA, the enhancements end after 2022.
Almost immediately following the passage of ARPA, attention turned to the question of whether or not the subsidy enhancements would eventually be made permanent. In other words, would ARPA’s ACA reforms create positive political feedback — what political scientists call policy feedback — to compel their continuation? Commonly, this is a question of whether or not a new, enlarged, and electorally-consequential “subsidy constituency” would make it politically dangerous for members of congress to let the enhanced subsidies end after 2022.
In addition to recent research suggesting that policy feedback effects may not be as electorally consequential or politically constraining in the current age of polarization, Adrianna McIntyre makes an astute observation that the “subsidy constituency” may be politically weak because of the nature of the policy benefit. Because much of the population who purchase insurance though the ACA’s marketplaces may only be enrolled for relatively short periods of time, the constituency ephemeral. The benefits are potentially big, but time-limited.
While there are credible reasons to doubt the potential for the recent health care reforms to generate a constituency of voters, there is another major political force that will be deeply interested in making ARPA’s ACA subsidy enhancements permanent: the health care industry.
In twenty-six of the thirty-four states that adopted the ACA’s Medicaid expansion as of 2020, more than seventy-five percent of the expansion population are enrolled in private Managed Care Organizations (MCOs) like Molina or Cigna. In the marketplaces, all 10.5 million enrollees purchased insurance from private companies, with eighty-six percent of enrollees receiving premium subsidies under the pre-ARPA eligibility rules.
The insurance industry has benefitted financially from new beneficiaries (or customers) created by the ACA’s Medicaid expansion (roughly 14.8 million beneficiaries) and the Health Insurance Exchanges (also known as marketplaces) (roughly 10.5 million beneficiaries). Since 2014, for example, major Medicaid managed care organizations (MCOs) like Molina and Cigna have seen stock price growth of 497% and 170%, respectively, both surpassing the S&P 500’s 114% percent increase over the same time period.
Large insurers in the marketplaces have also experienced considerable growth in their stock prices since 2014, with Centene and Anthem’s stock price increasing by 314% and 268%, respectively, since January 2014. This growth is by no means the sole product of the ACA, but it does demonstrate that the ACA’s policy landscape is one that is favorable to MCOs.
Yet there is another reason that the broader health care industry would favor making ARPA’s ACA enhancements permanent. That reason, you can’t fight something with nothing. Like the growth of private insurance sixty years ago, an expanded ACA would reduce the pressure for a broader national health insurance reform like Medicare for All. The expansion of the ACA would also further cement the role of private insurance companies within American health care policy — both public and private. But remaking health care politics and policy around a more robust and stable ACA also favors the broader health care industry, which is loathe to see the consolidation of buying power and the lower prices that could be more easily produced by a single-payer system like Medicare for All.
Since President Biden established a new Special Enrollment Period on February 15, 2021 that allowed new enrollees to sign up for insurance through federally-operated marketplaces, insurers have jumped back into the marketplaces and insurers have increased bonuses to brokers who enroll new beneficiaries. Similarly, directors of state marketplaces are encouraging insurers to invest in new marketing to drive marketplace enrollment, while the marketplaces, themselves, are increasing outreach and marketing. There are tremendous health and financial benefits to getting more people insured, whether through public or private insurance, but there is also the potential added benefit for the health care industry of establishing and securing a more ideal policy landscape than some alternatives on the horizon — no matter how distant they may seem right now.
