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Jul 31 2023

The Un-Utilized ACA Religious Insurer Exemption

The ACA explicitly contemplates an exemption for religious insurance companies, making insurance companies the gatekeepers to a currently-unavailable insurance option that would allow millions of Americans to purchase insurance coverage aligned with their moral beliefs. The little-known exemption should be utilized to ensure Christians and other conscientious objectors receive access to adequate health insurance coverage that does not violate their consciences.

Background

With over 2,000 legal challenges, it is no wonder that the Patient Protection and Affordable Care Act (together with its implementing regulations, the “ACA”) – also known as “Obamacare” – has been called the “most challenged statute in American history”.((The Affordable Care Act’s Litigation Decade)) The legislation was viewed by many as too heavy-handed (some may recall a Supreme Court dialogue comparing the legislation to forcing Americans to buy broccoli).((National Federation of Independent Business v. Sebelius, 567 U.S. 519, 558 (2012))) The so-called “contraceptive mandate” was particularly offensive to Christians, and is one of the statute’s most challenged provisions. The mandate requires all group health plans and health insurance issuers offering group or individual health coverage to provide certain preventive services for women – including contraceptive services and abortifacients – free of cost.((42 U.S.C. § 300gg-13(a)(4); A Statement by U.S. Department of Health and Human Services Secretary Kathleen Sebelius, January 20, 2012)) The law was initially adopted with only a very narrow exemption as well as an accommodation that collectively provided some cover to houses of worship and religious non-profits.((76 FR 46621 (2011).)) The accommodation and the mandate itself were the respective subjects of litigation in the well-publicized Little Sisters of the Poor and Hobby Lobby cases.((Hobby Lobby Stores, Inc. v. Sebelius, 723 F. 3d 1114 (CA10 2013) (en banc); Little Sisters of the Poor Home for the Aged, Denver, Colo. V. Burwell, 794 F. 3d 1151, (CA10 2015). ))

Religious Insurer Exemption

Litigation continued through 2016, at which point an exasperated Supreme Court instructed the Department of Health and Human Services among others (the “Departments”) to come up with a workable solution that respects employers’ religious exercise.((Zubik v. Burwell, 136 S. Ct. 1557 (2016))) After a few failed attempts, in 2018 the Departments finalized rules that substantially broadened the exemption, and extended the exemption to for-profit entities, among others.((83 FR 57536 (2018); 83 FR 57592 (2018)))

For the first time ever, the rule extended the religious exemption to insurance companies who object to payments for contraceptive services based on sincerely held religious beliefs! ¹

But then . . . nothing really happened.

Sleeper or Big Deal?

With the exemption in place, insurers hold the keys to unlock a floodgate, providing millions of Americans with access to health insurance that does not conflict with religious beliefs proscribing payment for contraceptive services and abortifacients. Such access has been unprecedented since the implementation of the ACA. Consider these numbers:

155 million nonelderly Americans receive employer sponsored health insurance.² Even with the employer exemption, only relatively large employers have sufficient clout to customize their plans with the level of sophistication required to take advantage of the religious employer exemption. The rest are stuck with more-or-less one-size-fits-all plans designed to comply with the contraceptive mandate, and are unlikely to receive guidance on claiming a religious exemption. Introducing a religious insurer would permit off-the-shelf plans that exclude contraceptive and abortifacient coverage, making such a product accessible to small employers for the first time since the ACA was implemented.
15 million Americans receive individual health insurance through ACA products.((See Premium Stabilization Programs (CMS) )) Without a religious insurer, all individual ACA plans cover no-cost contraceptive services and abortifacients.((The 2018 rule gives lip service to objecting individuals and permits insurers to accommodate objecting individuals if the insurer is willing to offer a separate policy, certificate or contract of insurance for such objecting individuals (45 CFR § 147.132(b)). We are aware of no insurers who are willing to make such an accommodation.)) Introducing a religious insurer would allow these 15 million American to shop for ACA-compliant policies that do not fund contraceptive services and abortifacients for the first time since the ACA was implemented.
10.9 million Americans are currently uninsured but eligible for ACA subsidies, of which 6 million qualify for free ACA coverage!((A Closer Look at the Uninsured Marketplace Eligible Population Following the American Rescue Plan Act (KFF))) While myriad explanations exist for this enigma – unawareness of available subsidies may be the most plausible – many Americans are still ideologically opposed to ACA coverage, and would rather forego insurance than subscribe to an ACA policy. Introducing a religious insurer offering an ACA-compliant policy that does not fund contraceptive services and abortifacients would relieve the stigma associated with perhaps the most controversial aspect of the ACA (i.e., the contraceptive mandate), and may prove a welcome invitation for this vulnerable, low-income, and uninsured population.

The overwhelming majority of Americans are entirely dependent on a religious insurer extending the 2018 exemption benefits to them. But to date, we are unaware of any health insurance companies that have taken advantage of this exemption.((The Departments noted in 2018 that they were “not currently aware of health insurance issuers that possess their own religious objections to offering contraceptive coverage,” but they thought it was good idea to extend the exemption for consistency! (83 FR 57536, 57566 (2018))) (If you know of one, please write to us!)

Conclusion

Millions of Americans are morally opposed to contraceptive services and abortifacients,((8% of national adults find birth control morally wrong (Americans, Including Catholics, Say Birth Control Is Morally OK (Gallup))) and are completely hamstrung with no option but to purchase health insurance that violates their conscience. The market is ripe for a religious insurance company to claim the religious exemption and extend its benefits to these individuals and their employers. Not only is the target market significant, but extending these benefits is efficacious to ensuring that individuals have morally acceptable options, and would reduce the number of uninsured among perhaps the most vulnerable demographic in America. Presidio HealthCare is working to bring the first explicitly faith-based health insurance option to these families and employers with both non-ACA and ACA-compliant products.

83 FR 57536 (2018), codified at 45 C.F.R. § 147.132(a)(1)(iv). Note that while the scope of the contraceptive mandate continues to oscillate with administration changes, the issuer exemption may be here to stay. Earlier this year (2023), the Biden Administration proposed to limit the available exemptions, but left the issuer exemption untouched (88 FR 7236). [↩]
Health Insurance Coverage of Nonelderly 0-64 (KFF) [↩]

Jul 13 2023

BREAKING: Proposed Rules Would Dramatically Reshape Non-ACA Marketplace

On July 12, 2023, the Biden Administration published a Notice of Proposed Rule Making (“NPRM”) that would redefine and significantly curtail short-term limited duration insurance products. If adopted, approximately 3M Americans’ insurance coverage would be jeopardized. Timing of this NPRM dramatically emphasizes the need for individual health insurance options, and positions Presidio to serve as a release valve for these individuals, many of whom will be actively looking for coverage during 2024 open enrollment.

Background: What is Short-Term Limited Duration Insurance?

Short-Term Limited Duration Insurance (“STLDI”) preexisted the Patient Protection and Affordable Care Act (“ACA”) as a stop-gap measure for individuals in between coverage, but its importance was thrown into relief because of the ACA. The ACA subjected individual health insurance coverage to restrictions including guaranteed issue, prohibition of preexisting condition exclusions, and minimum essential coverage that includes access to free contraception, among others.((Title XXVII of the Public Health Service Act (“PHS Act”) )) While many of these restrictions are laudable in ideal scenarios (excepting the contraception mandate), they also had the effect of constraining insurance providers,¹ limiting competition,((Average insurers per state dropped from 5.0 in 2014 to 3.5 in 2018, with many states and metropolitan service areas having a single insurer for extended periods (Insurer Participation on the ACA Marketplaces, 2014-2021 (KFF)) )) and increasing premiums.((Premiums rose 121% for the first five years of the ACA (Rate Review Data (cms.gov)) )) As a result, pre-subsidy insurance premiums skyrocketed with the implementation of the ACA, leaving many families in want of alternative insurance options.((Id. ))

Importantly, STLDI is generally exempt from many of the ACA’s requirements because it is not considered “individual health insurance coverage” for ACA purposes.((42 U.S.C. 300gg-91(b)(5))) As a result, a market emerged through which creative insurance providers leveraged STLDI products, offering families affordable insurance alternatives. These products are often more affordable than their ACA corollaries because – unlike ACA products – STLDI can be underwritten, meaning the premiums are used to fund healthcare expenses of a healthier risk pool.((See Estimated Financial Effects of the Short-Term, Limited-Duration Policy Proposed Rule (cms.gov) (CMS chief Actuary estimated -49% change compared to average gross premium in the ACA marketplace as a result of 2018 STLDI expansion). The NPRM similarly acknowledged that STLDI premiums may be 54% lower than unsubsidized ACA coverage (88 FR 44596 (July 12, 2023), citingWhy do Short-Term Health Insurance Plans Have Lower Premiums than Plans that Comply with the ACA? (KFF)). ))

What exactly is meant by the terms “short-term” and “limited duration” has become something of a political volleyball. Critics are wary that STLDI has been hijacked to hoodwink consumers and end-run the ACA,((Shortchanged: How the Trump Administration’s Expansion of Junk Short-Term Health Insurance Plans is Putting Americans at Risk (U.S. House of Representatives Committee on Energy and Commerce Democratic Staff Report))) whereas proponents of STLDI appreciate the optionality these plans provide to families underserved by the ACA.((The Value of Short-Term Health Plans: Rebutting the Energy and Commerce Democratic Staff Report (Health Affairs)))

NPRM Changes

A 2018 rule currently in effect permits STLDI polies to cover a maximum period of less than 12 months, renewable up to 36 months in total.((83 FR 38212 (August 3, 2018))) STLDI policies must contain clear disclaimers alerting the policyholder of the policy’s nature and limitations.²

The NPRM proposes to limit STLDI maximum coverage periods to less than 3 months, or no more than 4 months together with all extensions and renewals.((88 FR 44596 (July 12, 2023))) It also prevents what it calls “stacking” policies from a single insurer within 12 months of the initial policy’s effective date.² It is unclear how the definition would permit an individual losing coverage early in the year to maintain coverage until open enrollment (typically beginning November 1), an observation unscrupulously referenced in the NPRM itself.((Id.)) The NPRM also proposes limits to fixed-indemnity insurance policies, similarly aimed at eliminating alternatives to ACA plans in the name of consumer protectionism, that would further limit options available to price-conscious shoppers.((Id.)) Table 1 compares current versus proposed STLDI rules.

Table 1

NPRM Effects

If implemented, the NPRM would effectively eviscerate the vast majority of alternative health insurance products currently available, leaving families with three primary options:

Enroll in ACA products;
Join a health sharing plan; or
Go uninsured.

The NPRM gives short shrift to the reality that most of the 3M Americans insured through STLDI policies are unlikely to enroll in ACA products when their policies expire, noting only that there would be an unquantified “potential increase in the number of uninsured individuals” as a result of the proposed rule.(( Id.))In fact, approximately 3M Americans are insured through STLDI policies,³ and the NPRM estimates only 120K will convert to ACA plans between 2024 and 2028.((88 FR 44596 (July 12, 2023))) That leaves a whopping 2.88M Americans unaccounted for.

Conclusion

Individuals and families at risk of losing health insurance as a direct result of the rules proposed in the NPRM are in need of creative solutions to provide financially-secure insurance options that 1) are affordable, 2) maintain access to broad PPO networks, and 3) do not force families to pay for services that violate their consciences. If the rules proposed in the NPRM are finalized, approximately 3M individuals who previously did not find value in ACA products will be actively shopping for new insurance. This casts new light on the need for creative insurance solutions providing valuable options and ensuring families retain access to affordable and secure health insurance. Companies like Presidio are needed now more than ever to provide these options to individuals who will be actively shopping for health insurance that meets their unique needs, and to serve as a backstop to ACA markets to reduce the number of uninsured individuals.((Evidence indicates that increasing ACA alternatives – including through deregulation of STLDI – reduces uninsured rates (Renewable Term Health Insurance: Better Coverage Than Obamacare, Manhattan Institute (manhattan-institute.org)))

For example, due in part to medical loss ratio requirements of the ACA, 15 states currently have no PPO individual ACA market products (opting instead for narrow-network HMO products) (Rate Review Data (cms.gov)) [↩]
Id. [↩] [↩]
Shortchanged: How the Trump Administration’s Expansion of Junk Short-Term Health Insurance Plans is Putting Americans at Risk (U.S. House of Representatives Committee on Energy and Commerce Democratic Staff Report) [↩]

Jun 29 2023

Winners and Losers of the ACA

The Affordable Care Act (“ACA”) had laudable goals, but also left vulnerable a significant demographic who were subjected to inflated premiums, narrow networks, and top-down mandates that required individuals to purchase products that violate their moral consciences. Private market solutions co-existing alongside ACA markets can alleviate pressures without destabilizing ACA risk-pools, and state and federal legislatures should expand these markets by relaxing stifling regulations.

How Has the ACA Hurt Families?

The ACA created winners and losers. The winners get access to Medicaid expansion or receive federal subsidies (for families making less than 400% of the federal poverty level “FPL”) to help purchase ACA coverage. The losers do not receive federal assistance but must pay the full cost of premiums, which rose 121% (17% year-over-year) for the first five years of the ACA.¹
Many American families were hurt by the rising costs of health insurance due to the ACA and are not properly served by the options developed by the private market and allowed by policymakers.
The following lists the main gaps in value for the segment of the population that do not receive employer-based coverage or adequate federal subsidies to purchase ACA coverage:
- Unaffordable Premiums – The ACA market is “guaranteed issue”, which means individuals with pre-existing conditions are guaranteed coverage, and their health cannot be considered in determining their premiums. While this is an important feature for those with pre-existing conditions, the existing framework shifts costs, resulting in higher premiums for healthy, unsubsidized families.
- Limited Networks – The ACA markets have resulted in a “race to the bottom” with many carriers offering only narrow networks and no preferred provider organization (“PPO”) products. Exhibit 1 shows the number of states with varying PPO product availability between the individual and small group markets. Looking at individual ACA markets, a whopping 15 states (including Texas) have zero available PPOs. Contrast that to only 3 states in the small group ACA markets that are without a PPO plan. This means that families with individual market ACA plans often have limited options to see their desired physicians and hospitals. This is the direct result of regulations that perversely incentivize carriers to develop the cheapest products possible, forcing carriers to cut costs, often resulting in limited patient choice.²
  Exhibit 1¹
- Lack of a Pro-life and Financially Secure Insurance Option – Christian families in this population must compromise between 1) ACA products that offer benefits contrary to the Christian faith, and 2) Health Sharing Ministry products that are not legally insurance and are not required to pay medical bills.
A decade of ACA implementation data and trends demonstrate that subsidies – not punitive mandates or limiting alternatives – are the primary drivers of increased enrollment. Implementing alternative risk pool options within the existing ecosystem (i.e., alongside guaranteed issue and subsidized options) will alleviate the burden with minimal impact to ACA risk pools. Here, we note that the penalty for violating the individual mandate was reduced to $0 in 2018 with no correlating increase to average premium prices, as seen in Exhibit 2.
Exhibit 2 shows the changes in Bronze ACA premiums for subsidized ACA coverage, unsubsidized ACA coverage and average costs for alternative non-ACA coverage. ((The 2018 drop in net premiums for subsidized enrollment was due to both high premium increases correcting for underpricing in 2014-2016 and the impact of “Silver-loading”. The second drop in 2022 reflects the enhanced subsidies introduced by the American Rescue Plan. While the detailed explanation of subsidy dynamics is beyond the scope of this blog post, it’s important to understand that per capita subsidy levels have significantly increased beyond the original design of the ACA subsidy structure. )) Increased access to non-ACA alternative risk pools (blue line) would be attractive to those having to pay the full premium (grey line), creating up to 25% savings for those individuals. At the same time, subsidies preserve the relative value for those receiving assistance (orange line).

Exhibit 2

The subsidized proportion of on-exchange enrollment has grown to over 90% (See Exhibit 3) while premiums have remained flat since 2018, indicating a stable risk pool that has not worsened with declining unsubsidized enrollment.

Exhibit 3

Christian families are increasingly enrolling in health sharing ministry products, with approximately 1.5 million individuals enrolled in 2021 (an estimated ninefold increase from 2014).³ Federal control of benefits in ACA markets, limited networks and unaffordable premiums in ACA markets are driving this increase. Meanwhile, some health shares have run into liquidity issues due to having no regulatory oversight, leaving many families at risk for medical debt.⁴

How Can We Improve This?

Policymakers at the federal and state levels should work to make available more affordable options outside of the ACA. This can be accomplished by allowing alternative marketplaces to exist with less restrictions. These marketplaces should:
- allow for healthier risk pools (pre-existing condition exclusions and policy underwriting) outside of the ACA;
- allow for benefit flexibility so that options aligned with Christian values can be readily available, along with higher deductibles and out-of-pocket maximums to reduce costs; and
- efficiently spend federal ACA dollars to maintain stability in the ACA markets.((Note that a few states, including Texas, are successfully navigating efficient spending of ACA dollars to increase enrollment.⁵
Lawmakers significantly increased subsidies compared to original ACA subsidy designs, only to enroll less than half of the expected number of enrollees.⁶ ACA enrollment is driven by subsidies. The fear of alternative risk pools hurting the ACA is unsubstantiated and has resulted in an unnecessary limitation of options for healthy families making over 400% of the FPL.
Private companies can innovate in current and future regulatory environments. Companies like USHealth Group have pioneered cost-effective options through innovation. Faith-based organizations like Presidio will do the same to meet the needs of unsubsidized Americans, and in a way that honors God’s creative order.

Conclusion

The American health insurance industry is large and complex. We have suffered from an increasingly “one size fits all” approach that leaves major gaps in access to health care that families can trust. The principle of subsidiarity should compel Christians to creatively implement a health care system that solves problems at the state level with private companies facilitating innovation. The majority of Americans are subsidized either by federal programs or through their employers (who receive tax incentives to cover their employees). Currently, families hit the hardest by the regulatory system are those who do not receive employer-based coverage or federal assistance. Federal rules have also squeezed out health insurance options that are compatible with the Christian faith. While private companies can innovate within the current regulatory environment, further expanded access to faith-based, financially-secure insurance options can be facilitated through federal and state policy changes that would be minimally disruptive to ACA markets.