Editor’s note: First in an occasional series explaining Virginia’s policy debates.
A news release that Gov. Ralph Northam issued in late March couldn’t have come as much of a surprise to anyone. It mirrored another from last year, in which he explained why he vetoed a string of health care bills.
The arguments were the same: The bills “put Virginians at risk of being underinsured, result in rapidly increasing marketplace premiums and undermine key protections in the Affordable Care Act.”
During General Assembly committee hearings, Republican lawmakers’ also repeated prior year arguments: Health care is too expensive, and while the federal government fumbles for a solution, Virginia needs to do something to ease the burden for its residents.
At issue are bills that would expand access to short-term and catastrophic health plans. To Republicans, they present a reprieve from the high costs that many who don’t qualify for subsidies are facing on the individual market. To Democrats, they risk uprooting the market and leaving people on the hook for huge deductibles.
The political lines aren’t exactly stark in Virginia. Two of the bills were unanimously supported in the Senate, though the House was generally divided along party lines. But the back-and-forth tracks with the debate at the federal level as Republicans have tried to either repeal or dismantle the Affordable Care Act and the passionate divisions between the two parties on health care have become increasingly fierce.
But what are short-term and catastrophic plans, and why does one side see them as common sense solutions and the other label them as amplifying, rather than fixing, problems in the American health care system?
Short-term plans are traditionally considered coverage bridges for people switching between health insurers. They’re aimed at those who are between jobs, for example, or a college student who graduates in the spring but won’t start a new job until the fall.
But last year, the Trump administration issued a new rule that would allow states to expand short-term policies so people can remain on them up to a year, with renewals for up to 36 months.
They’re very cheap, but for a reason. They aren’t compliant with the Affordable Care Act, so they don’t have to cover pre-existing conditions, nor do they have to offer the ACA’s essential health benefits, such as maternity care, mental health care or prescription drug coverage.
Sen. Bryce Reeves, R-Spotsylvania, submitted bills for Virginia to expand access to short-term plans, one expanding the amount of time the coverage can last and the other that guarantees someone can purchase the plan again without re-underwriting. They were among those Northam vetoed.
During a House Commerce and Labor Committee meeting in February, Reeves told a story about a friend of his who doesn’t qualify for subsidies on the marketplace and he says pays more than $3,000 a month in premiums.
“We don’t have other options out there,” Reeves told the committee.
Both short-term and catastrophic plans bring with them fears of weakening the traditional, more comprehensive pools. In insurance, pooling is a way to ensure that the risks — like a major flood in the case of flood insurance, or massively expensive cancer treatment in health insurance — are spread across all the members of the pool.
“We know that if the problem is that insurance is too expensive, and you continue to drain healthy people out of the pool, then the only people left in the pool are going to be sick people, and the insurance premiums are going to go up even more, creating this death spiral in insurance lingo,” said Carolyn Engelhard, a health policy professor at the University of Virginia.
Some states, like California, Massachusetts and Oregon, among others, have prohibited the sale of short-term health insurance policies altogether if they don’t protect people with pre-existing conditions.
But consumers, some proponents of the plans argue, should know the risks. Short-term plans are required to have a prominent notice to consumers that reminds them to “check your policy carefully to make sure you are aware of any exclusions or limitations regarding coverage of preexisting conditions or health benefits,” according to the Kaiser Family Foundation.
Catastrophic plans are already offered in the ACA marketplace and are compliant with the health law’s requirements: They cover those with pre-existing conditions and must offer essential health benefits. In terms of the individual market’s metal tier system (platinum, gold, silver and bronze), these plans will make up a copper tier, meaning they’re at the bottom.
But access to them is limited. Currently they’re only available to those who are 30 years or younger and to people who have experienced a financial or other hardship. Legislation submitted this year and last year would have required the state to request a waiver from the federal government so that anyone would be eligible for the plans.
Like short-term insurance, catastrophic plans have cheaper premiums but the trade-off is a much higher deductible. Patients have to pay more for their services before their plan will pick up the tab, other than the three primary care visits guaranteed under the ACA. For 2019, the deductible for these plans is $7,900, according to healthcare.gov.
Freddy Mejia, a policy analyst with the Commonwealth Institute for Fiscal Analysis, pointed out that, if eligibility is broadened and more older, high-risk people sign up for catastrophic plans, they may not remain cheap.
The position against catastrophic plans is similar to those against their short-term counterparts. In his veto statement, Northam argued those plans fragment the individual market, as they attract otherwise healthy people who can afford to put off preventative care into the catastrophic plans, destabilizing the remaining risk pools.
He added that the plans leave people under-insured in much the same way that short-term plans do. Because they’re on the hook for such huge deductibles, many people will likely put off care, increasing the likelihood that their medical conditions could worsen — and get more expensive — without preventative care.
But lawmakers like Sen. Glen Sturtevant, R-Richmond, who sponsored the legislation (along with Del. Roxann Robinson, R-Chesterfield), adamantly disagree with that notion. He argues that more people are choosing to forego insurance altogether in light of how expensive it can be for those who don’t get subsidies. At least these health plans give them an option and ensure their pre-existing conditions are covered.
He also took issue with the suggestion that the plans would fragment the individual marketplace. Someone with catastrophic coverage would remain in the exchanges, he pointed out, rather than encouraging them to opt out of insurance altogether.
“This is a way to help bring people back in to that health insurance risk pool, make sure that more people are covered, and at the same time give them an affordable option,” he said.
How to fix the marketplace
While big decisions about the individual market are largely made at the federal level, the states do have some options to address high premiums.
One is creating a reinsurance program, which some states are doing successfully. It essentially moderates premiums by helping to pay the costs of people with high medical bills so that companies can, in turn, lower premiums.
The Virginia Market Stability Work Group, which Northam convened last year to study ways the state can stabilize premiums on the individual market, published a report in December that identified reinsurance as one of the “most promising” options “to stabilize Virginia’s individual market.”
Like their Republican counterparts, Democrats have also pushed to address health care costs for patients. In addition to Northam’s work group, legislators this session proposed options like increasing transparency and strengthening the rules around minimum loss ratio, which requires insurers spend 80 percent on their premium revenues on health claims.
Sen. Barbara Favola, D-Arlington, proposed a bill that would have required several types of coverage, like short-term and catastrophic plans, as well as association health plans and others, to provide preventative care, but it was defeated early in session on a party-line vote.
Until the state can agree to take a more drastic move to stabilize the individual market, though, legislators like Sturtevant will still try to do what they can to address high health care costs, he said.
“It’s a problem that still has not been solved,” he said. “Health care coverage has only gotten more expensive.”
CORRECTION: This article has been updated to correct Freddy Mejia’s employer. It is the Commonwealth Institute for Fiscal Analysis.