HEROES Act Delivers a Win to the Health Insurance Industry

The HEROES Act, the new coronavirus relief bill introduced by House Democrats on Tuesday, includes protections for employer-sponsored insurance plans, which the health care industry has been lobbying Congress on for weeks. The proposed legislation includes subsidies for continued coverage for furloughed workers and people using COBRA, a continuing health coverage plan for those who have lost work, even if they don’t pay their premiums. The bill also creates avenues for premium assistance for certain categories of people who want to pay those premiums anyway and would open a special insurance enrollment period a week from the date it’s enacted into law. It also provides nine months of premium payments to health insurance plan administrators who don’t receive them during the ongoing pandemic. 

The push to protect insurance premiums comes as some health care companies, like UnitedHealth, Humana, and Cigna, have reported profits during the pandemic amid record-high unemployment levels and have boasted that they don’t expect to take a financial hit. 

In late April, dozens of industry groups — including the influential, conservative Chamber of Commerce — sent a letter to congressional leadership asking for direct subsidies for COBRA, expanding uses for health savings accounts, and increasing eligibility to access health insurance marketplaces. 

A couple of weeks earlier, the nations’ second-largest health insurance lobby, America’s Health Insurance Plans, joined a congressional call with members of the conservative Democratic Blue Dog Caucus to ask for protections for employer coverage. According to two sources familiar with the April 13 call, AHIP’s CEO discussed the importance of protecting employer-sponsored plans. One person on the call, who works for an insurer and was not authorized to speak publicly about the conversation, said AHIP’s push for targeted relief to employers who pay premiums to insurance companies was puzzling, given that insurance companies have seen recent profits. 

“AHIP discussed from the perspective of protecting employer-sponsored coverage, which would be the health plan. That’s what they sell,” the person said. “So they would basically be saying to their customer, you get some protection as long as the money goes to pay for the premiums.” 

“It’s a time where everybody is trying to get something for their industry, right? And the microphone was open to health plans,” they added. “It was a curious stance being taken.”

Congressional Democrats are setting themselves up for policy and political failure by adopting the industry groups’ request to improve COBRA only temporarily for the next year.

While fully subsidizing COBRA has the popular appeal of simplicity, it is inefficient, unfair, poorly targeted, could end up hurting some people, and does not even work toward closing the gaps in the nation’s health care system. It is inequitable because much more help will go to people who previously made higher incomes.

Subsidizing COBRA may be a good option for people laid off from high-paying jobs who more often had high-quality insurance. Meanwhile, workers who had no coverage or only low-quality employer insurance with very high cost sharing would more likely be better off on Medicaid than COBRA, given that new, enhanced unemployment benefits don’t count against eligibility for Medicaid. Medicaid has almost no cost sharing while a former employer’s coverage may have large deductibles and out-of-pocket limits. These lower-income hospitality sector employers are the ones most hurt by layoffs right now. Yet if the government fully subsidizes COBRA, this gives insurers a reason to mislead their recently laid-off customers to keep them on the rolls. Additionally, the HEROES Act does not provide assistance to individuals who have purchased their own insurance — rather than being provided coverage by an employer — and often have the most difficulties affording care.

Congressional Democrats are setting themselves up for policy and political failure by adopting the industry groups’ request to improve COBRA only temporarily for the next year. The provision in the HEROES Act runs through January 31, 2021, setting the United States up for a health care crisis at the start of President Donald Trump’s second term or a Joe Biden administration. On a purely political level, there is no reason to believe that the crisis will be over by November or that Senate Republicans are going to have any interest in passing more stimulus measures if Trump loses.

It would be political malpractice for Democrats to pursue any solution that is not permanent or at least based on automatic stabilizers that Trump can’t undermine. On a policy level, the coronavirus pandemic has merely brought to the fore existing inequality in the U.S. health care system. Tying health insurance to employment and therefore, ensuring a loss of insurance during times of unemployment, was a huge problem well before the crisis; the only real difference now is that it is happening to so many people at once. The fact that Congress is even exploring subsidizing COBRA is an admission that neither the existing COBRA nor the Affordable Care Act were properly designed to address what happens to a person’s health care when they suddenly lose their job. 

Reached for comment, AHIP Senior Vice President of Communications Kristine Grow said the group couldn’t speak to any meetings with members of Congress, adding that its focus on legislative proposals was solely in the interest of employers and employees keeping health coverage. “It’s for employers to keep their employees covered, and for people to get covered if they don’t have it today. Including incentives for employers to keep their employees on their health coverage, support for employees to afford COBRA coverage, and a special enrollment period to get people covered,” she said. 

Asked about the pattern of insurance companies posting significant profits during the crisis, Grow said it was too soon to know the financial impact of Covid-19 on the health care industry. “We didn’t have much of an opportunity to see an impact from COVID-19 in the first quarter because it was so early in the crisis — and we were not able to track COVID-19 through the health care system until codes went into effect at the end of March.” 

The Blue Dog Coalition, which is chaired by Reps. Anthony Brindisi of New York, Lou Correa of California, Stephanie Murphy of Florida, and Tom O’Halleran of Arizona, did not respond to requests for comment. 

The lobbying around health care comes as insurers have warned that premium costs could rise as a result of the ongoing pandemic, while reporting that they beat earnings expectations last quarter and are expecting to see their membership rise as millions of people lose their employer-sponsored coverage. 

Coronavirus relief funding measures passed over the last two months have included a number of health care-related provisions. Those include aid to providers, Covid-19 vaccine and testing coverage (although neither are readily available), funding for telehealth, expanding the use for health savings and flexible spending accounts for some over-the-counter medicines, and a temporary moratorium on Medicare sequestration.

In their April 28 letter to congressional leadership, industry groups asked that lawmakers “prioritize maintaining private health benefits for individuals and families and to increase coverage options for those who are already uninsured.” 

Among their specific asks was a direct subsidy for COBRA, a program intended for temporary use when people lose work or health benefits. A government subsidy of COBRA to ensure that people had commercial coverage, in addition to protecting premiums, was also discussed on the AHIP-Blue Dogs call. Given the high cost of employer coverage, COBRA is rarely a viable option for many people. The COBRA expansion wouldn’t cover deductibles and does not apply to people who previously didn’t have employer coverage but lost their jobs. The 2009 stimulus, passed in response to the Wall Street collapse, included subsidies for COBRA coverage.

The idea has gained traction among private insurers as they lose customers at an alarming rate, and especially among hospitals because they often charge people with employer insurance more than twice as much as those with Medicare or Medicaid. That’s why, for the federal government, fully subsidizing COBRA on a per person basis will actually be one of the most expensive ways for the federal government to keep coverage numbers up and also one of the worst ways to target it. 

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Private Hospitals, Now Demanding Bailouts, Lobbied to Defeat Cost-Saving Health Reform as Coronavirus Crisis Grew

House Democrats last month celebrated plans to expand COBRA subsidies as a major achievement. Unions, health insurance companies, and Democrats alike have unified behind the idea of an insurance bailout. The alliance is unlikely, but it makes sense for the moment as access to health care is a top priority for most people right now. But progressive advocates who pushed Medicare for All into a national conversation say an insurance industry bailout can’t solve the national health care crisis, which predated the current pandemic and will last long after things start to reopen. 

Vermont Sen. Bernie Sanders wrote an op-ed on April 28 criticizing Democrats’ push to subsidize COBRA. “Subsidizing COBRA, as they have suggested, would be both expensive and ineffective: Not only would health insurance corporations make massive profits off the plan—profits that come at the cost of the American taxpayer—but it would still leave tens of millions uninsured or underinsured,” he wrote. “Expanding COBRA during the pandemic would do nothing to cover those who already lacked insurance,” he added, noting that the program’s subsidies for premiums would not provide relief for low-income workers who still have to pay high deductibles. 

Wendell Potter, former Cigna vice president turned Medicare for All advocate, has been warning online against congressional aid to the insurance industry at a time when major companies are reaping profits. “Beware of my old industry — health insurers — trying to get a taxpayer handout,” he tweeted. “We should spend that money on providing healthcare to needy Americans, not subsidizing an inefficient & undeserving industry.”