Can the Affordable Care Act survive without the individual mandate? The answer from U.S. territories appears to be “no.” Fragmented implementation of the law in the territories has wreaked havoc on their insurance markets, leaving many residents with no options for health coverage — the opposite of the law’s intent.
In July, federal officials sent a letter exempting American Samoa, Guam, Puerto Rico, the Northern Mariana Islands and the U.S. Virgin Islands from certain other ACA requirements in an attempt to make the law work. But many stakeholders say the exemptions will not entirely fix the problems that health care reform has caused in the territories, and some say the exemptions could lead to unintended consequences in the states.
In the letter, officials explained that the exemptions were granted because the definition of a “state” under the Public Health Service Act does not apply to the territories. A CMS spokesperson said the government is “providing additional flexibility to the territories in order to implement the law in a way that recognizes their unique situations.”
Much of ACA No Longer Applies to Territories
The decision marks a change in the government’s stance. Just a year ago, Gary Cohen — director of CMS’ Center for Consumer Information and Insurance Oversight — wrote a letter to Northern Mariana Islands officials, saying, “However meritorious your request might be, HHS is not authorized to choose which provisions [of the ACA] … might apply to the territories.”
Now, territories are exempt from:
- Essential health benefits requirements;
- Guaranteed availability of coverage;
- Having a single risk insurance pool;
- Health insurance rate review;
- Implementing a community rating system; and
- The medical-loss ratio provision.
Why Territories Sought Exemptions
The exemptions did not come out of the blue. For years, health officials in the territories warned that the ACA threatened the stability of their health insurance markets because the law’s individual mandate only applies to states. Prior to the exemption, insurers in the territories were required to meet the law’s strict — and costly — coverage standards, but unlike their domestic counterparts, they lacked the promise of additional customers incented to buy coverage because of the individual mandate.
Another complication: Residents in the territories do not qualify for health insurance subsidies.
Last December, John McDonald, director of the Virgin Islands’ banking and insurance department, said, “HHS and the government itself describe health care reform as a three-legged stool where you have the [individual] mandate, the subsidies and the market reforms. Well, what they’ve basically done is left us with a one-legged stool.”
Many insurers left the territories’ insurance markets after the ACA took effect. For example, there were no individual health insurance plans for sale in the Northern Mariana Islands on Jan. 1.
Exemptions Don’t Necessarily Fix Problems
Angela Weyne, insurance commissioner in Puerto Rico, told California Healthline that the exemptions are “an important change” for the territory. “Before the announcement, Puerto Rico was confronting particular challenges due to the unique characteristics of its health insurance market worsened by the fragmentation of the legal provisions of the ACA applicable to Puerto Rico,” Weyne said. “Puerto Rico now has several options for its health insurance system.”
However, Weyne added that “although HHS exempts Puerto Rico from certain provisions of the [ACA], all of the provisions that were extended to Puerto Rico through a previous interpretation of the law … will continue to be in effect through the Health Insurance Code of Puerto Rico (HICPR).” Those provisions already have become law in the territory, but the newly released exemptions still give Puerto Rico “greater flexibility in certain specific areas to make decisions that are more aligned with our particular circumstances,” she said.
Other territories are putting off giving the green light on the exemptions by choice. Officials in the Virgin Islands have told insurers to continue complying with the ACA’s provisions until the territory can obtain clarification on some of the exemptions. John McDonald, director of the Virgin Islands’ Division of Banking and Insurance, said, “We just need them to be clearer on some of these issues.”
Territories Not In the Clear, and Exemption Could Have Unintended Consequences
Some territorial officials had hoped for a different solution. For example, some regulators had advocated for extending the individual mandate and subsidies to the territories instead of issuing exemptions to other portions of the law.
In addition, some say the exemptions do not fix all of the issues that the territories’ insurance markets face. Weyne said that while the exemptions will help Puerto Rico’s market, officials there still are concerned about the law’s health insurance provider fee, which still applies to the territories. She said, “Though most premium increases in Puerto Rico were being caused by the expansions of the rights and benefits provided by the ACA, the premiums in Puerto Rico have also been significantly impacted by the Health Insurance Providers Fee … [which] represents a premium increase of up to 2.5% in Puerto Rico.”
Weyne added, “Moreover, the [fee] must also be paid by any private insurance company that insures the risks of the government health plan … further increasing the costs of the [the plan] as well as all Medicare Advantage related programs.”
The exemptions also could have some unintended consequences. For example, Weyne noted that states could request “the same flexibility.” One lawmaker already has used the changes as a launching pad to call for ACA exemptions for Alaska. In a release, state Sen. Lisa Murkowski (R) argued, “The administration needs to recognize the unique needs of the territories as well as small population states like Alaska where premiums under the health care law have seen double and triple digits increases for some Alaskans from 2013 to 2014.”
Where Do the Territories Go From Here?
The newly granted exemptions do not guarantee that problems with the territories’ insurance markets are over. Officials face other challenges to taking advantage of the changes, such as ACA provisions already being written into local laws.
Moving forward, territorial agencies will have to work with local and federal officials to gain clarity about the exemptions and how they will apply to the territories. And many — like Puerto Rico — will be focused on what is now possible, rather than other solutions that have not been enacted. Weyne said, “We don’t want to venture into what may have been a better scenario for us. We have no other option than to look at what positive outcomes for the wellbeing of our citizens can we achieve with the new interpretation of HHS.”
Around the Nation
Here’s a look at other stories making news on the road to reform.
Rx drug access: John Lechleiter in Forbes outlines a recent study finding that silver plans offered through the ACA’s exchanges are nearly four times more likely than employer-sponsored plans to include a combined deductible for medical and pharmacy coverage, which can reduce access to prescription drugs.
Increasing mental health care access: Adrianna McIntyre at Vox highlights research finding that the ACA has increased mental health care access for those ages 18 to 25.
ACA ‘survival guide’ for large businesses: John Bennett, the president and CEO of New York’s Capital District Physicians’ Health Plan, offers guidance in Albany Business Journal‘s “Health Care Inc.” for large employers who are selecting employee health plans that comply with the ACA.