5 things to know about the Patient Freedom Act

With the repeal and replacement of the Affordable Care Act (ACA) on the top of Republicans’ legislative to-do list in Congress, Sens. Susan Collins, R-Maine, and Bill Cassidy, MD, R-Louisiana, have proposed a plan that aims for a middle ground: allowing states that like or dislike the ACA to choose their own path.

“We have been stressing the importance of making sure we have a replacement plan ready to go with the repeal of Obamacare, in order to ensure that no one sees a gap in their healthcare coverage,” said Cassidy, who founded a community clinic aimed at treating uninsured patients. “With the introduction of the Patient Freedom Act of 2017, I believe we now have that plan.”

Here are some of the provisions in their plan:

1. “If you love your Obamacare, you can keep it”

The first selling point of the legislation is to offer states options for what their post-ACA health insurance market will look like. The first option is keeping the ACA system as-is, including the individual and employer mandates and 95 percent of the federal subsidies for buying insurance provided under the ACA.

“We recognize that what works best for the people of Maine or New Hampshire might not be right for the people of Louisiana or California,” Collins said. “Our bill respects these differences by giving states three options to choose the path that works best for their citizens. Option one would allow a state to choose to continue operating its insurance markets pursuant to all the rules of the Affordable Care Act.”

Under the proposal, states that had expanded Medicaid eligibility will continue to receive federal funding.

2. The “State Alternative Plan”

The second option is what Collins and Cassidy call the “State Alternative Plan.” This would keep some protections from the ACA, like bans on insurers imposing lifetime or annual limits on benefits. 

Instead, each resident enrolled in a qualified health plan would be given a Roth Health Savings Account (Roth HSA), with federal funds being deposited directly into those accounts, either through per-person grants or refundable tax credits. The funding would be equal to 95 percent of what a state would have received in tax credits and Medicaid expansion funds under the ACA.

States would automatically be placed into this option if no decision is made on a post-ACA path within a year of when the legislation is enacted.

3. Do-it-yourself option for states

The last option is deliberately vague, saying states could “design and regulate insurance markets that work for their specific populations, without any federal assistance.”

This option keeps the same ACA protections as the “State Alternative Plan,” while giving up all of the subsidies and tax credits from the law. According to Kaiser Family Foundation Senior Vice President Larry Levitt, this would create an issue when neighboring states have insurance markets with vastly different regulations and risk pools.

“It would be extremely difficult under a Cassidy-Collins approach for a state to maintain a heavily-regulated insurance market, like under the ACA, if insurers could set up shop in a state with minimal rules,” Levitt said.

4. Auto-enrollment

A common critique of the Republicans’ approach to replacing the ACA is how the loss of the individual mandate would lead to younger, healthier customers not buying insurance, potentially creating the very death spiral they say the ACA is heading toward.

Cassidy and Collins’ plan tries a different approach at keeping those patients in the risk pool: auto-enrollment. Under their legislation, anyone who doesn’t have coverage through an employer or the individual market would be automatically enrolled in a stripped-down, high-deductible health plan. These plans would include pharmaceutical benefits, meet HHS-set network adequacy requirements and cover childhood vaccinations without cost-sharing, which Collins said qualified these plans as “real insurance,” not like the pre-ACA catastrophic coverage plans.

The senators argued this could replace the individual mandate as a method for ensuring a more stable risk pool.       

“We had an insurance company model our proposal, and they told us just by this automatic enrollment feature, you could lower premiums by 20 percent, and that’s while keeping people who are sicker in the pool,” Cassidy said.

Unlike the individual mandate, however, people would be allowed to go without insurance. The legislation requires states to provide “a simple method for enrollees to opt out of this default coverage.”

5. Continuous coverage requirement

Like other Republican ACA alternatives, the Patient Freedom Act offers a slim exception to covering pre-existing conditions: the requirement for continuous coverage.

Patients can’t be denied coverage or charged more for those conditions as long as they go no longer than 63 days without coverage in any 18-month period and stay enrolled through annual open enrollment periods. If they do allow coverage to lapse, insurers can deny coverage or force a medical surcharge on them, but only for the same amount of time they went without coverage. They would be eligible for the auto-enrollment plan during that time.

This system poses a problem for insurers. Patients would be able to maintain “continuous coverage” through skimpier, lower-cost plans, but then switch over to more robust coverage when they’re sick, creating adverse selection in the market.

“I think this is an example of a provision that may or may not look the same way as it does now once it’s flogged through the effort to get votes, its subject to lobbying and analysis by the Congressional Budget Office,” Levitt said.