Health Plan Weekly

Although a constitutional challenge to the Affordable Care Act (ACA) has been winding its way through the court system for more than two years — fueling ongoing concerns about the law’s future — the Supreme Court during a Nov. 10 hearing appeared highly skeptical that the case has much merit. That’s welcome news for the health insurance industry, as analysts have long pointed out that the sector is eager to move past the uncertainty that the lawsuit has created.

The suit in question, now known as California v. Texas, was first brought by a Texas-led coalition of conservative states in 2018. It argues that the ACA’s individual mandate — which compels people to purchase health insurance — is unconstitutional because Congress removed the mandate’s tax penalty via a budget bill in 2017. The states’ argument relies upon a 2012 Supreme Court decision in the case National Federal of Independent Businesses (NFIB) v. Sebelius, when the justices ruled that the mandate was constitutional because it fell under Congress’ taxing authority. So if the mandate is only permissible as a tax, and the tax is now zero, the conservative states argue that the mandate itself is now unconstitutional — and with it, the rest of the law.

by Jinghong Chen

Insurers that participate in the individual, small-group and large-group markets will issue a record high $2.5 billion in medical loss ratio (MLR) rebates to more than 11.2 million customers this year, an increase of almost $1.1 billion from rebates issued last year, according to CMS. Because health care utilization remains depressed, many health insurers are thriving amid the coronavirus pandemic. Several insurers have waived costs for COVID-19 treatments and offered up premium credits to lower the MLR rebates they could owe over the next couple of years (HPW 10/30/20, p. 1), as MLR rebate amounts are calculated on a rolling three-year average.

Now that the presidential race has been called for Joe Biden, policy experts are predicting that his administration’s health care agenda will be accomplished mainly through executive action. That’s a consequence of the likelihood of a divided Congress, along with the Trump administration’s reliance on executive authority to implement its health care policies, many of which the new administration will want to reverse.

Naturally, the most pressing issue for Biden will be the increasingly out-of-control COVID-19 pandemic. Along with vaccine planning and distribution, experts say that other areas of employer concern like testing and workplace safety are certain to see significant action from the White House. The new administration will also step up efforts to mitigate the devastation the pandemic has wrought on communities of color and low-income workers. Experts also predict the Biden administration will assess which Trump administration executive actions to revise or reverse, a process that could include Medicaid work requirements.

✦ CVS Health Corp. on Nov. 6 reported that its third-quarter 2020 adjusted earnings per share (EPS) was $1.66, beating the Wall Street consensus estimate of $1.33. From a quarterly operational perspective, “performance was well balanced with better results across PBM, retail, and health benefits,” Citi analyst Ralph Giacobbe observed. CVS also revised its adjusted EPS guidance to a range of $7.35 to $7.45, up from $7.14 to $7.27. In addition, the company revealed that CEO Larry Merlo will step down from his post in February, and that Karen Lynch, current executive vice president of CVS Health and president of Aetna, will take his place. Giacobbe said Citi was “a bit surprised” at the timing of CVS’s leadership change, since it’s still in the early stages of transforming its business. “Nonetheless, we believe expectations had been for change over time, and the appointment of Karen Lynch speaks to continuation of focus on health merging with retail serving as a differentiated diversified model,” he wrote. Read more at https://bit.ly/3l5tzP6 and https://bit.ly/3p2W3Lz.

✦ CMS approved Georgia’s Section 1332 waiver application to eliminate the state’s use of HealthCare.gov as a centralized enrollment platform starting in 2023, though the approval might be reversed or changed if former Vice President Joe Biden becomes president. Under the demonstration program, the state will still check consumers’ eligibility for exchange coverage, but all other consumer-facing activities will be outsourced to private web brokers and insurance companies. Read the approval letter from CMS at https://go.cms.gov/2TUn31I.

Cigna Corp.’s new segment Evernorth, which includes the company’s Express Scripts PBM business, drove strong third-quarter earnings that beat analysts’ expectations.

At the same time, the insurer’s medical loss ratio (MLR) ticked up to 82.6% from a very low 70.5% in the second quarter, as utilization of medical services bounced back from the depressed levels seen early in the COVID-19 pandemic.