By Melissa Attias, CQ Roll Call

October 15, 2015 -- The Obama administration is aiming to add fewer than 1 million paying customers to the health care law's insurance exchanges by the end of 2016.

Health and Human Services (HHS) Secretary Sylvia Mathews Burwell said her department aims to have 10 million people paying for coverage through the marketplaces set up under the Affordable Care Act by the close of next year, up from a projected 9.1 million by the end of 2015.

The goal is much lower than the Congressional Budget Office’s (CBO) projections from March which estimated that 21 million people would have coverage through the exchanges in 2016—a discrepancy that HHS defended on a conference call.

Richard Frank, assistant secretary for planning and evaluation, said HHS adjusted its estimates because significant shifts to the new exchanges from individuals who have employer-sponsored insurance and those who buy their insurance on their own through the individual market outside of the exchanges have not occurred as expected.

He also noted that the administration is expecting to sign up 25 to 30 percent of the eligible people who are still uninsured, which he argued is "fairly big growth." HHS projected that between 2.8 million and 3.9 million uninsured individuals who qualify for exchange coverage will choose plans during the third open enrollment period that runs from Nov. 1 to Jan. 31. That’s out of an estimated pool of 10.5 million people who could sign up.

"Rather than reaching the plateau in three years as CBO projects, we’re seeing a much longer path to the longer-term equilibrium for this market," Frank said. The CBO estimated that exchange enrollment would surge from 11 million in 2015 to 21 million in 2016 before growth would level off.

The administration’s goal of having 10 million people who paid their premiums enrolled by the end of next year matches federal projections. HHS’s Office of the Assistant Secretary for Planning and Evaluation estimated that between 9.4 million and 11.4 million people will be paying their premiums and remain enrolled at the close of next year, based on past experience and market fluctuations from individuals’ changing life circumstances.

That’s lower than the 11 million to 14.1 million people who are expected to take the first step of enrollment by selecting plans on the exchanges during open enrollment. That includes 7.3 million to 8.8 million people who are expected to renew their coverage from last year.

But some may not end up paying their premiums.

The number of people enrolled in health plans sold in state and federal insurance markets fell from 11.7 million who had signed up near the end of February to 10.2 million paid customers at the end of March, according to HHS. Some people switched their coverage and some were dropped by insurers after they did not pay their premiums.

Burwell called 10 million "a strong and realistic goal," noting that the uninsured population will be harder to reach compared to past enrollment periods. She said the remaining pool is younger, more likely to be male and often unaware of the exchanges or available financial assistance. The administration plans to target its messaging and outreach to reflect that.

"This open enrollment’s going to be a challenge but ultimately having fewer uninsured Americans to sign up is a good problem to have—because that is what our fundamental core goal is: to reduce the number of uninsured," Burwell said.

The penalty for individuals who do not have health coverage will increase in 2016 from $325 or 2 percent of taxable income in 2015 to $695 or 2.5 percent of income, whichever is more.

Lori Lodes, spokeswoman for the Centers for Medicare and Medicaid Services, said it’s the administration’s responsibility to make sure consumers understand their options.

"We need to make sure that we are very clear and explicit about that $695 penalty so that people understand the choice that they are making," she said.

By Marissa Evans, CQ Roll Call

October 15, 2015 -- Every state experienced an uptick in Medicaid spending and enrollment during fiscal 2015, but that growth is expected to slow down in the next year, according to a report the nonpartisan Kaiser Family Foundation released Thursday.

"This is an extraordinary time in Medicaid," said Vernon Smith, principal for Healthcare Management Associates, one of the researchers who conducted the state-by-state survey of Medicaid officials. "The program has expanded its role in every state."

The 2010 health care law allowed states to accept federal funds to expand eligibility for the health program for the poor to individuals with incomes up to 138 percent of the federal poverty level starting in 2014. So far, 30 states, and the District of Columbia have broadened the program.

States experienced growth, regardless whether they expanded their programs. Nationwide, the number of people enrolled in Medicaid increased on average by 13.8 percent in fiscal year 2015, following enrollment growth of 8.3 percent the year before.

Spending increased on average by 13.9 percent during fiscal year 2015. The previous year, spending climbed an average of 14.3 percent nationwide. Medicaid officials attributed the increase to a bump up in provider payments and the cost of prescription drugs.

But researchers said enrollment will taper off next year. An improved economy will mean less people applying for Medicaid. Researchers also said that the ways states choose to renew Medicaid benefits for individuals whose coverage is expiring will have an effect.

In fiscal 2016, Medicaid enrollment across all 50 states and the District of Columbia is projected to increase on average of 4 percent. Spending is expected to increase an average of 6.9 percent.

Expansion States

Growth is projected to rise most in those states that expanded eligibility, continuing a recent trend. In the states that expanded Medicaid, enrollment is projected to increase on average by 4.5 percent in fiscal 2016.

Meanwhile, non-expansion states are expected to continue to see some increased participation among those previously eligible but not enrolled. Enrollment in those states will rise an average of 2.8 percent, according to the study.

During fiscal 2015, states that expanded saw enrollment and spending growth that outpaced the 22 non-expansion states, according to the report.

In the 28 states and District of Columbia that had expanded by then, beneficiary enrollment rose on average by 18 percent and Medicaid spending increased on average by 17.7 percent.

In the states that did not expand Medicaid at the time of the study, enrollment grew by 5.1 percent, thanks in part to an influx among parents and children who were previously eligible but did not know about the program until publicity about the law got their attention. Non-Medicaid expansion state spending increased by 6.1 percent, according to the report.

Justin Senior, deputy secretary for Florida’s Medicaid program, said at a briefing about the report that his state had anticipated an enrollment bump due to residents finding out through Healthcare.gov, the federal health exchange, that they qualified for the program.

While the state’s monthly cost per member fell, the overall spending increases are still "putting pressure on other budget priorities," Senior said.

Robin Rudowitz, associate director for the Kaiser Commission on Medicaid and the Uninsured, said that expansion states are seeing savings in areas like behavioral health, uncompensated medical care and criminal justice health care costs as well as an increase in revenue. She said those savings could help states as they shoulder more Medicaid costs starting in 2017. The federal government is covering all the costs of newly eligible people through 2016 but in 2017, the subsidy begins to decline, falling to 90 percent by 2020.

The annual Kaiser study on Medicaid enrollment and spending focuses primarily on fiscal years 2015 and 2016. At the time the survey was conducted, only 29 states and the District of Columbia had expanded programs.

By Ryan McCrimmon and Melissa Attias, CQ Roll Call

October 15, 2015 --Social Security beneficiaries won’t receive an annual raise in 2016, the Social Security Administration announced Thursday.

Due to low inflation in recent months held down by low gas prices, there won’t be any cost-of-living adjustment in January for nearly 65 million Americans who receive Social Security and Supplemental Security Income benefits, or for federal Civil Service retirees who receive government pensions.

It marks just the third time in 40 years that benefits haven’t increased—only in 2010 and 2011 did recipients’ monthly payments remain flat from the previous year.

Beneficiaries saw a 1.5 percent bump in 2014 and a 1.7 percent increase in 2015.

Automatic cost-of-living adjustments went into effect in 1975 to ensure the purchasing power of Social Security benefits doesn’t erode with inflation. The adjustment is based on the consumer price index for urban wage earners and clerical workers, known as CPI-W, which is calculated by the Labor Department.

When that consumer price index declines or remains the same, there’s no boost to monthly Social Security benefits.

"As determined by the Bureau of Labor Statistics, there was no increase in the CPI-W from the third quarter of 2014 to the third quarter of 2015," the Social Security Administration said in a news release Thursday. "Therefore, under existing law, there can be no [cost-of-living adjustment] in 2016. "

Many lawmakers consider CPI-W an outdated measure of inflation.

Some in Congress have proposed using an index for elderly consumers, including prices for drugs, housing and health care, as a more accurate reflection of the living costs of seniors. Earlier this month, Tennessee Republican John J. Duncan Jr. introduced a House bill (HR 3074) that would create the special inflation rate for seniors. Under the current system, he said, "By the time seniors see a raise, it is already outdated and based on expenses of young, urban workers."

Advocates for seniors are lobbying for the change. "The CPI-W reflects the purchasing patterns of workers, many of whom are younger and healthier than most Social Security recipients," wrote Nancy LeaMond, executive vice president for AARP, in a letter sent Wednesday to members of Congress. "As a consequence, the CPI-W underestimates how Social Security beneficiaries experience inflation, and how much their benefits should in fact increase to maintain purchasing power."

Some conservative lawmakers have pushed back, worried about the long-term viability of Social Security. They’ve typically backed tighter inflation measures like the so-called chained consumer price index.

The lack of a benefits bump next year will force some belt-tightening among seniors and other retirees.

"For tens of millions of people this has a devastating impact on the long-term adequacy of their benefits," said Ed Cates, president of the Senior Citizens League, an advocacy group for seniors. Cates called it "a loss of income that most beneficiaries simply can’t be expected to bear."

A recent survey by the group found that 87 percent of respondents saw their benefits boosted by less than $29 a month by the 2015 cost-of-living adjustment, yet 90 percent of respondents said their monthly expenditures rose by more than $39 a month over the previous year.

In a statement after the announcement Thursday, the Senior Citizens League urged Congress to pass an "emergency" cost-of-living adjustment, saying the group "feels strongly that a modest one-time payment of $250 would give seniors much-needed relief next year."

Some Medicare Premiums to Spike

Thursday’s announcement is also expected to prompt substantial increases in Medicare Part B premiums for about 30 percent of beneficiaries in 2016, leaving the Obama administration and Congress with another issue to grapple with before the end of the year.

The other 70 percent of enrollees in Part B, which covers doctors’ visits and outpatient services, are protected by a "hold harmless" provision that prevents their Part B premiums from increasing more than their Social Security payments. That means their premiums will stay frozen at the 2015 rate, while premiums for those not covered by the provision would have to rise significantly to make up the difference.

New enrollees, those who do not receive Social Security checks, higher-income beneficiaries, and people with both Medicare and Medicaid are not protected by the hold harmless provision.

The 2015 Medicare trustees report estimated that the premium rate for those beneficiaries would rise from the current $104.90 per month to $159.30 per month in 2016. Final premiums, which could differ from those in the report, are expected to be announced by the Health and Human Services Department later this month.

Democrats in both chambers are pressing for congressional action, with House Minority Leader Nancy Pelosi of California highlighting the issue at an event last week. Ron Wyden of Oregon, the ranking member on the Senate Finance Committee, and Rep. Dina Titus of Nevada introduced bills (S 2148, HR 3696) the same day that would freeze premiums at the 2015 level for those excluded from the hold harmless.

White House spokesman Josh Earnest said Thursday that President Barack Obama was concerned about seniors having to pay the increased premiums in a year with no Social Security cost of living adjustment. "We're aware of this problem," he said, but declined to specify Obama's plans.

Some sort of relief could get wrapped into end-of-the-year budget legislation, particularly with Republicans expected to insist on offsetting the cost of a fix. The price tag could be in the ballpark of $10 billion depending on the selected approach and final premium rates.

By Melissa Attias, CQ Roll Call

October 16, 2015 -- It’s been five years since the health care overhaul was enacted, but one of the most contentious elements, even for the law’s Democratic supporters, has yet to be sprung on the U.S. medical system.

The so-called Cadillac tax, a 40 percent levy on the cost of employer-sponsored coverage above an annual limit, is due to take effect in 2018 and takes aim at overly generous benefits that supporters contend are driving up national health spending. The tax was intended to help fund the law’s insurance coverage expansion and getting rid of it would cost an estimated $91 billion through fiscal 2025.

With as many as half of large employers sponsoring plans that could potentially be in the tax’s crosshairs, talk of repealing the tax is intensifying. And unlike most other health care law repeal efforts, Democrats are helping stoke the fire, worried that the tax could hit generous union health plans the hardest.

"Very strong defenders of the Affordable Care Act are asking for the White House to change their minds on this," says Tom Leibfried, health care lobbyist for the AFL-CIO.

The tax effectively has become the new Obamacare punching bag, replacing the law’s tax on medical devices that a sizable number of Democrats have long pushed to repeal.

In 2018, the threshold for the Cadillac tax would be $10,200 for single coverage and $27,500 for family plans, levels that critics note are indexed in future years to the consumer price index instead of medical inflation and are likely to affect a growing number of plans.

"The ultimate effect of this tax will be to make it impossible for many employers to continue sponsoring coverage for their workforce," says American Benefits Council President James Klein, whose group is part of a new coalition working to eliminate it.

The repeal effort began in earnest this summer, after the Supreme Court upheld the legality of the law’s insurance subsidies and, in the process, took pressure off Democrats eager to keep the law’s coverage expansion intact. A group of employer organizations, businesses, and unions joined forces in July to launch the coalition focused on scrapping the levy.

The drumbeat intensified in September, when senators from both parties introduced repeal bills building on measures introduced in the House earlier in the year. House Republicans also voted to eliminate the tax as part of a budget package targeting parts of the health care law and Planned Parenthood, and even Democratic presidential candidate Hillary Rodham Clinton weighed in by encouraging Congress to get rid of it with a full offset.

"Really go back to February, and it was just kind of like this didn’t exist in terms of people’s mindsets," says Connecticut Democrat Joe Courtney, the sponsor of a House repeal bill (HR 2050). "Now we’ve sort of hit a tipping point in terms of the fact that people are kind of aware that this is a ticking clock and that it really needs action."

Rep. Frank C. Guinta, a New Hampshire Republican and the sponsor of another House repeal bill (HR 879), adds, "Members of Congress talk about the middle class all the time and what can we do to help the middle class. Well, this 40 percent tax is going to directly impact them one way or the other."

The White House is standing by the tax, aware it would have to find new sources of revenue to replace the $91 billion cost of repealing the levy. A group of 101 health economists and policy experts also came to the defense of the tax in October in a letter to top tax-writers in Congress.

Pros and Cons

Paul Van de Water, one of the signers and a senior fellow at the left-leaning Center on Budget and Policy Priorities, says the levy would not only help pay for a law that provided millions of people with insurance coverage but also limit the tax exclusion for employer health insurance, which economists widely view as a way to slow the growth of health spending.

"This is a first step in that direction, and it does so in a targeted manner," Van de Water says.

The letter itself focused on the merits of the tax rather than wading into the politics of the broader health care law. The signers hold "widely varying views" on other parts of the overhaul, it stated, but they’re united in urging Congress not to weaken the tax unless lawmakers enact an effective alternative to rein in cost growth.

Nonetheless, opponents argue that the tax unfairly penalizes employers with workers who need more care and those located in expensive areas. Companies are already responding by shifting health costs to employees to avoid triggering the tax, they say, while others will drop their plans rather than pay it.

The American Benefits Council’s Klein predicts that the tax will also pressure employers to drop some of the cost controls they’ve put in place, such as flexible spending accounts and certain on-site clinics, because they count toward annual dollar limits that trigger the tax.

Foes of the tax also take issue with supporters’ assertion that employers who curtail health benefits will make up the difference in increased wages. "Labor has people that negotiate wages and benefits," the AFL-CIO’s Leibfried says, "and when you talk to our negotiators they laugh when they hear this."

The assumption is particularly contentious because it contributes to the provision’s score. A January estimate from the Congressional Budget Office projected that only about a quarter of the anticipated revenue would come from receipts from the tax itself, with the rest stemming from changes in employees’ taxable income.

Although employers and insurers are responsible for actually paying the tax, Leibfried maintains it is passed through to consumers because it forces cuts in benefits and increases cost-sharing that will ultimately result in people forgoing care.

Van de Water says the fight over the tax has to remain on the big picture: "The rationale here is to provide an incentive for more economical use of health care and just paring back slightly the generosity of benefits is an expected and appropriate response."

The momentum for scrapping the tax puts Democrats in a bind, though many in Congress appear to be concluding it’s better to be on the side of repeal.

"It’s clear the Democrats in general are very supportive of the Affordable Care Act and proud of its effectiveness," says Jared Bernstein, a former adviser to Vice President Joseph R. Biden Jr. who is now at the Center on Budget and Policy Priorities. "Since that effectiveness is in part a function of pay-fors, some of the Democratic opposition has surprised me a bit."

House Democrats largely opposed the Cadillac tax during the debate over the law, and powerful labor interests that helped many of them into office are part of the campaign to nix it.

The tax also doesn’t fare well with the public: A recent Kaiser Health Tracking Poll found 60 percent opposed to the Cadillac tax, just above the 57 percent that favored eliminating the medical device tax.

But Democrats are still wary of opening up the health care law for changes as long as Republicans control both chambers of Congress and continue to campaign for a full repeal of the law. They’re also mindful of the toes they would have to step on to cobble together enough revenue sources to make up for the $91 billion price tag.

While the Obama administration has been relatively quiet about the tax, it’s still voicing support for the provision when asked. A White House spokesperson says the administration opposes repeal because it "would hurt our economy by increasing the deficit, raising health care cost growth and cutting workers’ paychecks."

Democrats who have signed on to the repeal effort—more than 140 are co-sponsors of Courtney’s House bill—have been quick to emphasize their loyalty to the broader health care overhaul. Republicans have given them some leeway by largely avoiding painting it as an attack against the law itself.

"We’re not talking about Obamacare here," Republican Sen. Dean Heller of Nevada said at a news conference introducing a Senate repeal bill (S 2045). "That thing has been argued for five years—for five years—and I don’t see it going anywhere for the next couple of years at a minimum. So, we want to talk about an onerous tax."

Many top Democratic lawmakers, aware the tax won’t be felt for more than two years, have ducked taking a public stand. Rep. Sander M. Levin of Michigan, ranking Democrat on the House Ways and Means Committee, says he’s always worried about opening the law back up but that Democrats are "taking a hard look" at the Cadillac tax and the implications of its regulations.

Offset Issues

Insisting on an offset could turn into an uphill battle at a time when Congress is already scouring for funding for pressing matters like a budget deal, though it could also give Democrats a pass for voting against a repeal bill that lacks one. Ohio Democrat Sherrod Brown introduced Senate repeal legislation (S 2075) with "sense of the Senate" language that the lost revenue should be offset without proposing a source for that money. Democratic presidential candidate Bernard Sanders of Vermont was among the cosponsors.

Republicans, meanwhile, are also being warned away from targeting the Cadillac tax without replacing it with a better alternative.

James C. Capretta, senior fellow at the conservative Ethics and Public Policy Center, says simply scrapping the tax now would further entrench the health care law by eliminating one of its least popular provisions. And it would make it much more difficult to come back and cap the tax break for employer coverage, he says, which is likely to be a part of GOP plans to replace the health

"It would make absolutely no sense to get rid of it and refight the fight," says Capretta. "I don’t think there’s any chance they would replace it in the current environment."

While some observers think the tax could be in the mix as part of a year-end fiscal deal, which would save Democrats from having to take a separate vote on the issue, the toxic nature of a debate over another health care law repeal may not provide either party with enough incentives.

Advocates are lobbying for quick action, however, emphasizing that employers are already curtailing benefits and that labor contracts sure to be affected by the tax are being negotiated. At this point, they appear unwilling to settle for anything less than a full repeal, including finding a way to provide relief through the regulatory process.

Defenders of the tax, meanwhile, are banking on the ability to make changes later if it ends up conflicting with the overhaul’s mission of providing affordable care.

"If the Cadillac tax really gets in the way of that goal, it’s going to need to be adjusted," Bernstein says. "Sometimes when you’re making major policy changes like this you do have to get under the hood and do tweaking."

By Kerry Young, CQ Roll Call

October 16, 2015 -- A Colorado health cooperative (co-op) is going public with its fight against a dramatic slashing of payments from a federal risk-management program, which it says puts its fledgling business in peril.

Colorado HealthOP Chief Executive Julia Hutchins is turning to new and traditional media to try to prod federal action to aid the survivors among the roughly two dozen nonprofit insurers that were created with loans made possible through the 2010 health law.

Most of these co-ops started operations only last year and face strict demands on capital reserves. Some will be deeply affected by a $2.5 billion shortfall in the federal risk corridor program and subsequent 87 percent reduction in expected payments for this year.

"We were really blindsided by that," Hutchins said in a Colorado Public Radio article, which the co-op pasted on its Facebook page. "We felt like we’d done our part in helping serve individuals who really needed insurance as the Affordable Care Act rolled out. Now we’re the ones left holding the bag."

Other co-ops are more quietly supporting the work of their trade group in pressing lawmakers and the Obama administration for help. Their Facebook and web pages and Twitter feeds are free of the kinds of direct appeals for support that Hutchins is making. The National Alliance of State Health CO-OPs (NASHCO) is calling for full funding of the risk corridor program and changes in rules that they say are obstacles to the growth of these new business.

"To date, regulatory obstacles have made it virtually impossible to raise additional capital to support growth," said Kelly Crowe, chief executive of NASHCO, in an Oct. 1 statement.

The co-ops face tough odds in securing assistance from Congress, whether in terms of additional funds to address the shortfall or help in changing the rules governing the program. Many Republicans long have questioned the premise of using federal funds to start new insurance co-ops and have expected them to fail.

Many co-ops counted on the three-year risk corridor program's payments through 2017, which were intended to help private and nonprofit insurers adjust to a market vastly changed by the health overhaul.

But in December, Republicans added a provision to the fiscal 2015 spending package (PL 113-235) that blocked the Obama administration from trying to tap major sources of federal funds for the risk corridor program. This program is designed to shift money collected from the insurers with the lowest costs to those with the highest, in order to limit losses and gains. Without access to other funds, the Centers for Medicare and Medicaid Services (CMS) had to apply the $362 million collected from insurers against $2.87 billion in claims for this year's payments.

That shortfall caused the leaders of the Kentucky Health Cooperative to decide to cease operations at the end of this year. Senate Majority Leader Mitch McConnell, R-Ky., described the failure as another harmful consequence of the health overhaul. Tennessee regulators on Wednesday said another co-op, Community Health Alliance, would end operations. On Friday afternoon, Health Republic Insurance of Oregon announced that it would fold, citing the reduction in risk corridor payments as a cause.

That brings the number of co-ops that have failed since starting operations to seven. Last month, state insurance regulators separately announced that they would take control of a Louisiana health co-op and began to wind down a New York co-op. The Nevada Health Co-op announced in August that it had made a voluntary decision to cease operations at the end of this year, although state regulators last month sought to take control of the process through receivership. CoOportunity of Nebraska and Iowa was forced to shut down last December. Another co-op project never started operations, failing after Vermont regulators denied its bid for a license.

Many of the surviving co-ops expect to sell insurance next year, even with the disappointing payouts from the risk corridor program. Among them is Boston-based Minuteman Health, which said in a statement that it had "lacked confidence that the program would work as forecast by CMS and had not counted on the money."

Minuteman Health, which estimated enrollment this year at about 14,000, was owed about $281,088 through the risk corridor program for its results last year.

"We recorded this as required on our income statement, but on our balance sheet we categorized the Risk Corridor receivable as a 'non-admitted asset'—a polite, insurance-speak way of saying we do not believe we will ever see the money," the co-op said in a statement. "In short, for 2014 the Risk Corridor amount due Minuteman was immaterial and Minuteman did not count on receiving it."

For Colorado HealthOP, though, the risk corridor shortfall is a true peril, according to Hutchins. "The federal government has reneged on its obligations to pay Colorado HealthOP more than $10 million...which jeopardizes its ability to meet capital reserve requirements," she said.

Colorado HealthOP still might be able to make a profit in 2016, Hutchins said. But despite the possibility of a positive cash flow, the stringent capital reserves requirements could cause the co-op to collapse. The reduction in federal payments increases this risk, according to Hutchins.

"Our business model works. It's the vagaries of politics that are broken," she said. "Colorado HealthOP has fulfilled its responsibility; now it is time for Congress to step up and fulfill theirs."