Virginia: Medicaid expansion on hold another week, while "Self-employed Small Group" law enters dangerous waters...

2019 OPEN ENROLLMENT ENDS (most states)

Time: D H M S

Two big developments (or in one case, a lack of development) out of Virginia this evening.

First: Just yesterday I was noting that it looked as though after 8 years, Virginia's state legislature might finally be going ahead and expanding Medicaid under the ACA as soon as today:

The stage is set for a showdown in the Virginia Senate on Tuesday over a budget compromise negotiated by Senate Finance Co-Chairman Emmett Hanger, R-Augusta, and House Appropriations Chairman Chris Jones, R-Suffolk, to expand the state’s Medicaid program and pay for the state’s share through a new tax on hospital revenues that also would boost Medicaid payments for inpatient provider care.

Unfortunately...that didn't happen:

Governor Northam Statement on Virginia Senate Budget Process

RICHMOND—Governor Ralph Northam released the following statement today on the ongoing discussions in the Senate of Virginia about the state budget:

“Today the leadership of the Virginia Senate asked the people of this Commonwealth to wait yet another week before the body acts on a budget. The continued delays and procedural stall tactics that we are seeing from the Senate create uncertainty for families and local governments, threaten Virginia’s bond rating and run afoul of this Commonwealth’s reputation for efficient and effective government.”

“This unnecessary delay is made more insulting to Virginians by the reality that the House of Delegates passed a budget that expands health care weeks ago, and a majority of Senators have indicated they would vote for a similar measure if the Senate would simply put one on the floor. Virginians have waited long enough. It’s time to pass a budget that expands Medicaid and invests in the future of our economy.”

(sigh) Ah, well. They've waited 8 years, I guess they'll have to wait one more week.

Meanwhile, over at healthinsurance.org, Louise Norris has an important update about that eyebrow-raising bill which I wrote about a couple of weeks ago:

Gov. Ralph Northam signed a new healthcare bill into law that will provide relief to many small business owners currently struggling with the Central Virginia insurance premium crisis.

Members of local advocacy group Charlottesville For Reasonable Health Insurance had provided testimony at the Virginia General Assembly and organized an email campaign, helping to ensure passage of the bill through the legislative session. Introduced by Sen. Creigh Deeds and effective July 1 2018, SB672 will allow self-employed people to take advantage of the much more affordable health plans in the small group business marketplace, without having to hire employees.

As you'll recall, what SB672 will do--assuming it's actually enacted--is basically allow sole proprietors or spousal teams (such as my wife and I, assuming we lived in Virginia) to declare ourselves a Small Business for purposes of enrolling in the Small Group market instead of using the Individual market.

The basic idea is this:

  • The Charlottesville region of Virginia is suffering from the highest unsubsidized ACA individual market premiums in the country, by far.
  • This means that unsubsidized individual market enrollees in this region have already reached the breaking point I've warned about many times, including Part 2 of my Risk Pool video explainer.
  • Nationally, around 24% of ACA individual market enrollees are self-employed.
  • Therefore, this bill would effectively provide a safety valve release for a quarter of the unsubsidized individual market enrollees. They'd theoretically be able to shop for small group policies, which are considerably less expensive in Charlottesville, instead of having only a couple of utterly unaffordable options on the ACA exchange.
  • As I understand it, unlike #ShortAssPlans, small group policies still have to include the major provisions of the ACA: Guaranteed issue, community rating and the 10 Essential Health Benefits, along with a cap on out-of-pocket expenses and no more annual/lifetime limits on benefits. In other words, pretty much all of the Blue Leg is still mandatory.

However, there's some pretty obvious downsides to this, which the folks who came up with the idea in the first place are well aware of. As Norris explained to me two weeks ago:

  • 1. It would, of course, damage the remaining ACA individual market even further, since perhaps 24% of the unsubsidized ACA market would flee that risk pool...and presumably it would mostly be a fairly healthy 24% (on the other hand, given how dire the situation is at the moment, most of these folks can't afford to pay full price for indy policies now, which is the whole reason they came up with this workaround in the first place).
  • 2. It might violate the ACA outright, since the ACA actually requires at least one paid employee for small group status
  • 3. It's possible that these policies would end up being categorized as Association Health Plans (AHPs) instead of Small Group...which, thanks to Trump's #ShortAssPlans executive order, could mean they'd end up being treated as Large Group plans, which in turn would allow them to have some ACA protections stripped.
  • 4. Even if they're allowed legally and categorized as Small Group plans as intended, it's possible that none of the carriers will want to offer them, since Group plans can be sold year-round under the ACA instead of being restricted to the Open Enrollment Period.

Well, Norris says there's been some further clarification...but some of it only makes the situation even murkier:

But that appears to conflict with the ACA, which requires a small business to have at least one employee in addition to the owner (and not a spouse of the owner) in order to enroll in a plan in the small group market. Indeed, the impact statement for S.B.672 notes that the legislation “may conflict with the federal Patient Protection and Affordable Care Act.”

There has been some confusion about whether S.B.672 was intended to align the state’s regulations with the federal government’s proposed regulations for association health plans...But that does not appear to be the case.

...“our intent was to allow a self-employed person to purchase a plan in the small group market. We received confirmation from BOI last week that effective July 1, BOI will require insurance carriers to offer small group plans to self-employed individuals (sole-proprietors, single owner LLCs).”

The Virginia Bureau of Insurance...clarified that self-employed people — without any additional employees — will be able to purchase coverage in the small group market, year-round, after the legislation takes effect in July.

In other words, as far as the state is concerned, bullet point #3 above isn't an issue: These would be considered fully ACA-compliant small group plans. The problem, of course, is that they would violate the ACA on that very point, setting up a state/federal legal showdown. Would CMS intervene as they did in Idaho? Who knows...

Allowing a self-employed person without any employees to purchase a small group plans is very different from the concept of allowing self-employed people to join associations and thus gain access to large group plans (which is what the Trump Administration has proposed). It’s unclear at this point whether the impact of the Virginia legislation will run afoul of federal rules, and if it does, whether the Trump Administration will step in and require modifications.

THIS is the critical thing to understand:

The small group market and individual market are subject to nearly identical regulations under the ACA...

But one key difference is the availability of coverage. Small group plans are available year-round, as long as the employer meets the insurer’s minimum participation requirements...In the individual market, however, coverage is only available during open enrollment...

If S.B.672 allows a self-employed person (without employees) unrestricted access to the small group market as an alternative to the individual market, it’s easy to see how that might incentivize people who are self-employed to skip coverage in the individual market, and then enroll in a small-group plan mid-year, if and when they end up needing health care.

In other words, even if CMS looks the other way and allows SB 672 to go into effect...the residents of Charlottesville may find that there's no one there to actually buy an insurance policy from:

When I addressed that issue with the Virginia Bureau of Insurance, they said that it’s too early to tell how insurers might address this issue. Anthem/Health Keepers clarified that as of May, they continue to require at least two non-married enrollees in order to qualify for a small group plan, and couldn’t say at that point what their future plans were.

Stay tuned, this is only gonna get dicier...