Download a PDF of ACAP’s letter here.

June 26, 2017

The Honorable Mitch McConnell
Majority Leader
United States Senate
S-230 U.S. Capitol Building
Washington, DC 20510

The Honorable Lamar Alexander
Chairman, Committee on Health, Education, Labor and Pensions
United States Senate
428 Dirksen Senate Office Building
Washington, DC 20510

The Honorable Orrin Hatch
Chairman, Committee on Finance
United States Senate
219 Dirksen Senate Office Building
Washington, DC 20510

Leader McConnell, Chairman Hatch, and Chairman Alexander:

On behalf of the Association for Community Affiliated Plans (ACAP), I am writing to express our opposition to the Better Care Reconciliation Act (BCRA) as released on June 22, 2017. ACAP represents 60 member plans in 29 states serving more than 20 million Americans receiving coverage through Medicaid, CHIP, Medicare Advantage D-SNPs, and the Health Insurance Marketplaces. Our members serve almost 1 of every 2 Medicaid enrollees in managed care and our QHP members have seen massive increases in coverage provided to enrollees in the health insurance Marketplaces nationwide.

ACAP believes that, as written, this legislation represents a fundamental threat to the millions of Americans who receive coordinated care services through Safety Net Health Plans. The BCRA will do harm to people who need coverage. As the majority of dollars spent in Medicaid today are for aged and disabled individuals, the massive cuts in this legislation threaten access to critical long-term care services and supports for aged and disabled individuals. In addition, millions of individuals with serious mental illness or substance use disorder currently receive treatment because they have Medicaid expansion and Marketplace coverage. Erosion of both will lead to loss of treatment options for many people in desperate need at a time when the opioid crisis threatens the social fabric of many communities across our country. This legislation also promises harm to the economy: while we are still awaiting the Congressional Budget Office analysis of the Senate bill, the House legislation would have resulted in the loss of nearly a million jobs by 2026 and significant reductions in gross state products and business output. In addition, the BCRA would result in some of our health plan members incurring billions of dollars in revenue losses and could fundamentally threaten their viability in the future, and therefore their ability to provide vital health care services to individuals in need. The BCRA does little to ensure comprehensive, quality coverage in the Marketplaces and we are deeply concerned about the impact on the nationwide network of federally qualified health centers, public hospitals, and other safety net providers that will be inundated with previously covered but newly uninsured Americans.

Specifically, our concerns fall into two broad categories for changes in Medicaid and the Health Insurance Marketplaces, and our opposition hinges largely on the following key points:

• The bill eliminates the enhanced match which effectively ends the ACA’s Medicaid expansion for adults with incomes up to 138 percent of federal poverty, and is likely to leave millions of Americans without affordable coverage options and undermine their health and financial stability.
• The legislation’s per capita allotment reforms cut hundreds of billions of dollars from federal Medicaid funding and fails to strengthen actuarial soundness requirements to protect managed care –– the dominant delivery system in Medicaid.
• The bill undermines comprehensive and affordable coverage through the Marketplaces.
• Guaranteed availability requirements coupled with a lack of individual mandate or continuous coverage requirements severely undermines the business sanity of the Safety Net Plans.

In an effort to provide constructive input on dialogue regarding health reform, ACAP submitted to the House and Senate a series of principles that were essential to gain ACAP’s support when reforming the Medicaid program in early 2017. These principles include:
1. Maintain the State Option for Medicaid Expansion
2. Maintain the Medicaid Program’s Guarantee of Coverage
3. Ensure Transparent, Verifiable, and Actuarially Sound Rate-Setting by States
4. Ensure Medicaid Contributes to Lifting People Out of Poverty
In reviewing the legislation, we believe that BCRA undermines these principles in two core areas:

Eliminate the Enhanced Match for the Medicaid Expansion — The BCRA takes steps to dramatically erode Medicaid coverage for adults with incomes up to 138 percent of federal poverty, who were granted eligibility under the Affordable Care Act. Currently, almost 15 million Americans have this coverage, and therefore access to critical physical, behavioral, and long-term care services. But the benefits of the Medicaid expansion for this population extend far beyond the new access to health care services for this population. The Medicaid expansion has also bolstered health job creation across the country because of what is called the “multiplier effect,” and indeed has helped the very people with Medicaid coverage seek or gain employment.

The BCRA violates our principle that the ACA’s Medicaid expansion remain a state option under the current law funding mechanism. The bill phases out the enhanced FMAP starting in 2021, leading to undue burdens on state budgets and a pullback of the historic federal role in financing the program. Second, the legislation uses eligibility “churn,” a phenomenon by which enrollees cycle on and off Medicaid despite eligibility status, to shift Medicaid payment burdens onto states and increase bureaucratic red tape for states, plans, and providers.

Failure to Ensure Transparent, Verifiable, and Actuarially Sound Rate-Setting by States. As constructed, the per capita allotment policy in BRCA will reduce federal Medicaid funding by hundreds of billions of dollars over ten years. These cuts will cause tremendous damage to Medicaid programs across the nation, threatening not only coverage for millions of low-income Americans, but harming providers and other businesses that serve Medicaid, costing jobs, and curtailing the innovations in delivery system change that are developing in many states.
In addition, these cuts will cause great harm to the Medicaid managed care plans that are the backbone of many Medicaid programs. ACAP has urged Congress to preserve federal actuarial soundness requirements in Medicaid managed care rate-setting. Combined with current state waiver authority, the BCRA’s inadequate per capita allotment payment structure (largely due to the calculation of the base year, an inflation factor that is not tied to Medicaid spending growth, and the lack of a rebasing schedule) will threaten the viability of Medicaid managed care programs in the states and runs the risk of sending these programs into a “death spiral.”

It is important to note that this is not a plan-only issue, since states’ failure to pay actuarially-sound rates has broad implications for the entire program. Actuarially unsound rates have a direct impact on reimbursement rates paid to a plan’s network of providers that deliver benefits to enrollees. Providers either accept inadequate payments – a common critique among policy-makers who are concerned about Medicaid access – or drop out of the network altogether. Without a robust provider network, enrollees will have difficulties accessing their Medicaid benefits and plans cannot meet minimum access requirements. If enough providers drop out of networks, it is impossible for health plans to deliver benefits – leading to a “death spiral” in a Medicaid managed care program that could force plans to withdraw from participation altogether.

The BCRA’s drastic federal Medicaid funding cuts will place immense pressure on states to reduce payments to providers and plans, suggesting that the scenario described above is all too realistic. Even under the current system, states are seeking waivers from oversight of actuarially sound rate-setting. ACAP believes that Congress should protect against state waivers of actuarial soundness requirements by excluding them from all 1115 waivers.

Because the BCRA makes massive cuts to federal Medicaid funding and does not protect plans from unsound rates, ACAP has no choice but to oppose this legislation. Failure of the BCRA to address this issue threatens access to care, the integrity of provider networks, and the dominant benefits delivery system under Medicaid and cannot be supported.

We appreciate that some provisions in the BCRA begin to help stabilize the individual market. However, we remain concerned that the steps taken do not go far enough to ensure business certainty for the Safety Net Health Plans offering coverage in the Marketplaces. In addition, we are further concerned about both the comprehensiveness of the coverage that would be offered, as well as affordability for low-income consumers, were the BCRA to be enacted in its current form.
As with Medicaid, ACAP has developed a set of principles for evaluating individual market reforms. Numerous provisions in the BCRA do not meet the litmus test set out in ACAP’s principles on reforming the health care system. These Marketplace principles are:

1. Ensure a stable business environment,
2. Ensure stable coverage for current enrollees
3. Ensure consumer protections
4. Ensure meaningful, comprehensive coverage
5. Require or provide strong incentives for enrollment (or penalties for non-enrollment)
6. Ensure affordability for consumers

Inclusion of cost-sharing reduction (CSR) funding in the BCRA would go a long way toward stabilizing the individual market given recent uncertainty leading up to rate-filing deadlines for issuers. As a pass-through to consumers, CSRs are vital to keeping coverage affordable for enrollees but also to the financial stability sought by issuers. A mid-year loss of CSR funding could easily result in a death spiral that would cause many issuers to withdraw from the market entirely. In addition, ACAP plans have consistently supported efforts to change age rating bands to a 5:1 ratio, instead of 3:1. This will allow issuers to charge younger enrollees less, hopefully encouraging their enrollment and improving the risk pool. We are pleased to see both of these provisions incorporated in the BCRA.

We are also pleased to see that tax credits would be available to enrollees between 0-138 percent FPL, a group currently left with limited affordable coverage options in states that have not expanded Medicaid. As Safety Net Health Plans that have generally focused on serving low-income and vulnerable populations, we are glad to see a recognition of this problem resulting from the Affordable Care Act. However, at the same time we are concerned that coverage many not be truly affordable for many consumers—a key tenet of ACAP’s principles. Specifically, we are concerned that older adults under 350 percent FPL would be responsible for paying significant portions of their income—more than they are likely able to afford at such an income level. Older, subsidy-eligible individuals could be required to pay as much as 16.2 percent of their income. The income bracket thresholds as set out in the BCRA would require that within each income bracket older individuals contribute more than their younger counterparts; the proposed 16.2 percent threshold is higher than under current law, which when coupled with a 5:1 age band rating allowance, would make costs even higher for older individuals. This problem would only be exacerbated for consumers between 350 – 400 FPL, who would no longer receive any subsidies toward purchasing coverage.

Additionally, and perhaps most concerningly, we believe that tying the tax credit amount to a benchmark plan with a 58 percent AV will lead to coverage that is generally unaffordable across the income-spectrum. ACAP has long been concerned about the so-called “bronze trap,” in which consumers purchase plans with low premiums but then are met with extraordinarily high deductibles. Already consumers have limited first-dollar coverage and difficulty affording the deductibles associated with credits tied to 70 percent AV plans. A drop to 58 percent AV will put consumers on the hook for even higher deductibles and copayments than they currently are. Similarly, we are concerned that with tax credits tied to a 58 percent AV, any coverage that is affordable will not be meaningful, as consumers may not be able to access needed services and are less likely to be protected from medical bankruptcies. This is particularly concerning for low-income consumers that may have costly or chronic health care conditions, such as an individual in need of an organ transplant or perhaps a type-1 diabetic in need of insulin and all the medical supplies that go along with it.
Because the BCRA does not ensure affordability for consumers, ACAP cannot support this legislation.

Zeroing out of the individual mandate penalty without some sort of incentive or penalty to induce coverage may be one of the most egregious components of the Marketplace provisions in the BCRA. Guaranteed issue, which ACAP strongly supports, without any form of incentive for enrollment is a sure-fire recipe for a death spiral. Appropriate incentives must be included in order to properly balance the risk pool by ensuring that enough consumers maintain coverage across their lifespan. While numerous other “continuous coverage” provisions have been discussed of late, ACAP plans believe that a strong individual mandate is the best way to achieve this goal and we encourage the Senate to address this concern. We would also be happy to discuss the advantages and disadvantages of other continuous coverage approaches.
The BCRA does not adequately support business stability for issuers. Because the BCRA does not include incentives for enrollment or penalties for non-enrollment, and would lead to a death spiral in the individual market, ACAP cannot support the legislation.

Finally, the overarching changes to 1332 Innovation Waivers again do not fit within the constraints of ACAP’s principles. We wholeheartedly agree that the current 1332 waiver rules are unnecessarily burdensome, allowing states’ limited flexibility and limited coordination with 1115 waivers. However, the proposed changes go too far. ACAP is concerned that the almost carte-blanche freedom given to states as far as benefits, actuarial value requirements, cost-sharing protections, and coverage numbers will effectively allow states to return to the days of cherry-picking. While the prohibition on pre-existing condition exclusions and community rating still exist, if essential health benefits are waived, which would be permitted, pre-existing condition exclusions and annual and lifetime limitations on cost-sharing can effectively be bypassed by simply not covering the health and medical benefits associated with high-cost or chronic conditions. For example, while an enrollee with cancer would still be permitted to purchase coverage, there is no guarantee that cancer-treatment would be covered; maternity and newborn care could be waived, leaving mothers and babies without access to important care that ensures a healthy start in life; or the millions struggling with opioid addiction could be denied needed behavioral health and substance use disorder services. This by no way would equate to meaningful coverage for our nation’s most vulnerable.
Because the BCRA does not ensure meaningful or comprehensive coverage for enrollees, ACAP cannot support the legislation.

Ultimately, while the BCRA includes some provisions that would help to stabilize the individual market, it also includes provisions that would destabilize it to an even greater extent, as well as provisions that would in fact reduce low-income, vulnerable consumers’ access to affordable, comprehensive health care coverage.

As ACAP has stated repeatedly, we are prepared – eager – to work with members of both the Senate and House to improve current law and provide sound and stable coverage for uninsured and low-income Americans. However, if the Senate does not substantially amend the Better Care Reconciliation Act to preserve coverage, regain stability, and improve affordability, we have no choice but to oppose this legislation. We urge you to vote no on BCRA when it comes to the floor unless it is markedly changed.


Margaret A. Murray Chief Executive Officer

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