4 Key Elements of the Covid-19 Relief Legislation For Providers And Payers

COVID-19 Relief Legislation

The COVID-19 relief bill the House passed Wednesday is a major win for various sectors in the healthcare industry, and includes the biggest update to the Affordable Care Act since it was enacted 11 years ago this month.

The $1.9 trillion American Relief Plan was approved by a party line vote of 220-211, having made it through the Senate on Sunday with a tie-breaking vote from Vice President Kamala Harris. President Joe Biden said in a statement Wednesday he will sign the bill Friday.

While non-healthcare items like increased unemployment benefits, direct checks to most Americans and child tax credits have made the majority of headlines, a number of elements will directly affect hospitals and payers.

The American Hospital Association has lamented some of what was cut out of the bill, including a continuation of pausing Medicare sequester cuts, which have been on hold for a year but are set to go back into effect this month.

But the Federation of American Hospitals, which represents for-profit hospitals, praised the bill in a statement Wednesday, calling it “a substantive step towards all Americans having the security of health care coverage.”

Here are some of the legislation’s most important elements for providers and payers.

Money for Rural Hospitals

The legislation does not include additional money for the Provider Relief Fund that Congress created a year ago through the Coronavirus Aid, Relief, and Economic Security Act, but does funnel $8.5 billion specifically to rural hospitals.

Those facilities have been among the hardest hit by the pandemic, as sprawling health systems and for-profit chains have been able to mostly weather the financial turbulence. Some health systems, like HCA Healthcare, the Mayo Clinic and Kaiser Permanente have even returned some or all of the funding they received from the CARES Act.

But rural hospitals have far lower margins and those that are unaffiliated have fewer resources to fall back on when times are tough. Michael Abrams, managing partner of consulting firm Numerof & Associates, said the bailouts will prevent temporary relief but “won’t prevent hospital closures in the long run.”

“Rural hospitals entered the pandemic on shaky ground, and 12 months later there’s no doubt that they are struggling to shoulder the financial weight of the crisis,” he said.

Rural hospitals have been requesting more targeted relief from Congress as they struggle. In a letter to Congress last month, the National Rural Health Association asked for a 20% carveout from the Provider Relief Fund, saying “more funding is needed within this critical program to help providers as COVID-19 caseloads continue to surge in rural America.”

Major ACA Expansion

For years after its passage, Republicans tried to tear down the landmark health law, but it has largely remained intact despite legal challenges as well.

The stimulus package builds on the ACA in a few major ways.

First it temporarily boosts financial aid to help more Americans afford coverage — a major complaint of the marketplaces as they currently stand.

For many who didn’t qualify for financial help through subsidies, coverage was simply too expensive. Under the ARP, subsidies would be expanded to more people and become richer for those who already qualify.

“The amount of financial relief in the American Rescue Plan for people buying their own health insurance and struggling with the premiums is underappreciated,” Larry Levitt, executive vice president for health policy at the Kaiser Family Foundation, tweeted Wednesday.

But it comes with a price tag. The Congressional Budget Office estimates that temporarily enhancing subsidies — for this year and through 2022 — would increase the federal deficit by $34.2 billion.

But it’s a positive for insurers, as the CBO estimates it would increase the number of people with marketplace coverage by 1.7 million. It’s also a benefit for providers to have insured patients, lowering uncompensated care costs.

The package, now on its way to the president’s desk, was cheered by insurance lobby America’s Health Insurance Plans. “Improving affordability of individual market coverage by expanding eligibility and reducing premiums is essential to ensuring more Americans have the protection that health insurance coverage provides,” AHIP said in a statement.

Medicaid Incentives

The relief package also creates incentives for holdout states to expand Medicaid to their low-income residents.

The federal government would temporarily increase the share it pays to states to cover their Medicaid population by five percentage points if they choose to expand the program.

The increased share, known as the matching rate, would remain in place for two years and it applies to the traditional Medicaid population — beyond just the expansion population, according to KFF.

That’s an important distinction because the traditional Medicaid population is much larger than those in the expansion group. KFF noted the traditional group represents 79% of overall Medicaid spending in these states.

It may prove a tempting incentive, especially for states financially bruised by the fallout from the pandemic. For many states, Medicaid and education comprise a significant portion of the overall state budget.

The relief package also carves out additional benefits for women after childbirth.

States could opt to provide women with Medicaid coverage up to 12 months after the child is born, double the current time. The Medicaid program covers a significant portion of childbirths in the U.S. Extending coverage post partum could help address concerns of maternal mortality, particularly among women of color.

Full Coverage of COBRA Premiums

In addition to unemployment insurance and cash payments, one section of the sweeping package would provide unemployed workers continued health insurance benefits for free under the normally expensive COBRA health benefits program.

Workers who lose employer coverage and any dependents can now keep their group health coverage for free through Sept. 30. That’s through a provision of the ARP that gives businesses tax credits they can use to keep any departing workers covered, without the workers themselves having to pay anything out of pocket.

Once Biden signs the bill, the federal government will pay 100% of COBRA premiums for employees who lost their jobs during the pandemic. That’s more generous than the original version of the package passed by the House, which included a federal subsidy covering 85% of COBRA premiums.

The Congressional Budget Office estimates this change increases the cost of the COBRA-related provisions from $6.5 billion to $14.4 billion.

Despite the higher price tag, the need to make coverage available and affordable right now really can’t be overstressed, patient advocates say. The COBRA program was originally meant to provide short-term backup coverage as people move between jobs, for a limited period of 18 or 36 months depending on the situation, and the cost is unusually high.

Normally, departing employees who want to keep their plan are saddled with the full price of the insurance, which can be up to 102% of the full cost of the group coverage with administrative costs.

The average monthly premium for employer-sponsored family health coverage was almost $1,800 in 2020, with workers on average paying about $470, according to the Kaiser Family Foundation. Without their employer’s help, while participating in COBRA a recently laid-off worker could be saddled with up to $1,840 in monthly costs to cover themselves and their families.

That cost is prohibitive for many Americans, especially the millions in low-paid service or retail jobs that lost employment during COVID-19.

Covering the full price of COBRA is a deeply popular move. Roughly three-quarters of American employees think Congress should subsidize the cost of COBRA during the pandemic, according to a survey conducted by AHIP published Wednesday.

Myriad industry groups, including FAH, the Alliance of Community Health Plans, which represents nonprofit health plans and patient advocacy group Families USA applauded the broader COBRA subsidies in statements on the ARP’s passage Wednesday.

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