Best’s News & Research Service - November 03, 2020 09:33 AM (EST)
Presidential Choice Could Impact Future of Health Care, Tax Reform and Underwriting
OLDWICK, N.J. //BestWire// - With a presidential election fast approaching, insurers have a lot on the line. Business could look very different for the industry depending on whether President Donald Trump or former Vice President Joe Biden wins the race, from the future of the health insurance market, to whether corporate tax rates go back up and what kind of information can be used in underwriting.
Health insurance has been a defining campaign issue ever since President Barack Obama and Biden in 2010 pushed through the Affordable Care Act, which has managed to thrive despite massive growing pains and initial public resistance. This year, the raised eyebrows are aimed at Biden’s public option.
“There are great concerns about how a public option could be dilutive of the employer marketplace and could diminish it,” said Joel Wood, senior vice president of Government Affairs for the Council of Insurance Agents and Brokers.
Biden’s proposal said the plan would be “like Medicare” and keep prices down by negotiating with health care providers. According to his platform, Biden opposes efforts to get rid of private insurance.
The industry will have a preview of what it could look like as Washington state has a public option with multiple carriers that will begin coverage Jan. 1, 2021 (Best’s News, July 9, 2020).
The candidates also differ on tax policy. Though the industry lauded Trump’s reduction of the corporate tax rate to 21% in the Tax Cuts and Jobs Act of 2017, Biden’s plan to hike the corporate tax rate to 28% isn’t exactly being met with open arms.
Biden’s plan also calls for other tax increases, including a minimum 15% rate on book income for corporations with more than $100 million in annual net income, according to the Tax Foundation.
Trump’s CARES Act, a part of the stimulus, provided a special rule applicable for all companies’ net operating losses in 2018 to year-end in 2020, allowing them to be carried back to each of the five tax years prior to the year of loss, which would help all insurance segments, an April Best’s Commentary said (Best’s News, April 7, 2020).
Higher taxes obviously would not be welcome, industry representatives said. “The rate matters,” said Nathaniel Wienecke, senior vice president of Federal Government Relations for the American Property Casualty Insurance Association. “Ultimately as businesses are taxed, that’s an expense and that goes into how we build and price our products.”
The two sides also clash on the Obama administration’s application of a disparate impact standard in housing. The president wants it removed, while Biden wants it strengthened.Property/casualty insurers are with Trump on this one.
The rule, which would limit underwriting criteria in homeowners policies, places risk-based underwriting factors such as the type of neighborhood where a policyholder resides “in the cross hairs,” said Jimi Grande, senior vice president, Government Affairs for the National Association of Mutual Insurance Companies.
NAMIC and other groups have been in court with the federal government over the rule since 2013 (Best’s News, July 24, 2013).
As for Biden’s health plan, it doesn’t spell out the fine details — at least not as much as his tax proposal — said Mason Shea and Tracy Watts at health benefits consultants Mercer. Without hefty tax credits, they said, it seems unlikely many people working for large employers would choose a public option over employer-sponsored coverage. It could be somewhat more attractive to workers in small businesses, who tend to pay more for coverage, they said in a blog post.
“If a public plan achieves lower premiums and allows for an employer buy-in, we could expect to see a wave of employers taking this option,” they wrote. “That would likely create upward pressure on commercial prices — similar to that currently resulting from Medicare’s lower reimbursement rates — which over time would lead more employers to take the buy-in option, adding still more pressure on commercial prices, and so on. This scenario could have long-term implications for employer-sponsored insurance.”
Biden’s plan has public support. According to an insure.com poll, out of eight options to improve health care, the leading choice among Democrats, Republicans and independents was providing a public insurance option for individuals while preserving employer-sponsored coverage.
Also unknown are the details of Trump’s health plan, which insurancequotes.com analyst Michael Giusti calls “aspirational.”
In speeches, Trump rails against Biden’s plan as “socialism” and claims it would abolish private health insurance for 180 million people.
Trump, who supports ending the ACA, said Oct. 16 he would “always protect patients with preexisting conditions” — one of the consumer guarantees in the ACA. He earlier signed an executive order saying the preexisting conditions protection would remain in place, but Democrats and a health policy official said the order had no legal weight (Best’s News, Sept. 28, 2020).
The ACA may be on thin ice with the swearing-in of Amy Coney Barrett as the newest member of the U.S. Supreme Court. Barrett has been critical of the ACA in the past, which might bode poorly for the law when the court hears arguments in a case against it the week after the election (Best’s News, Sept. 28, 2020).
Keeping the ACA and building on it is one issue on which insurers agree with Biden. Matt Eyles, president and chief executive officer of America’s Health Insurance Plans, said it would be “complete chaos” if the law were overturned (Best’s News, Oct. 27, 2020).
For preexisting condition protections to be maintained without the ACA, federal subsidies and tools to build up and stabilize a broad pool of insureds would be required, according to Larry Levitt, executive vice president for Health Policy at the Kaiser Family Foundation. Medicare For All or a heavily subsidized high risk pool also could accomplish the goal of protecting consumers with affordable coverage, he said in a policy brief.
“All of these approaches, including the ACA, have trade-offs and require significant government regulation and financing,” Levitt said. “While it seems that every candidate — including President Trump — is vowing these days to protect people with preexisting conditions, you can’t just click your heels together three times and make it come true.”
The candidates also differ on the role of the federal government in fighting the COVID-19 pandemic, with Trump leaving primary responsibility to the states, Levitt added. Biden would put the federal government in charge and expand testing, eliminate out-of-pocket costs for COVID-19 treatment and provide funding for additional pay and protective equipment for essential workers, he said.
The pandemic is forcing insurers to reassess their Medicare Advantage and Medicaid programs, as more than 5.4 million people became uninsured when they lost their jobs earlier this year (Best’s News, Aug. 4, 2020).
Records show Biden as of Oct. 23 has outraised Trump in insurance-related campaign donations during this election cycle, with $6.2 million in contributions, compared to Trump’s $4.3 million, according to the Center for Responsive Politics. Trump, however, did not have to raise funds for a primary race as Biden did.
Insurance industry campaign giving this cycle far exceeds 2016, when Hillary Clinton received $3.3 million and Trump collected $1.3 million, records show.
(By Timothy Darragh, associate editor, BestWeek: Timothy.Darragh@ambest.com)