clock menu more-arrow no yes mobile

Filed under:

The CRomnibus shows Democrats, Republicans actually working together on Obamacare

Chip Somodevilla/Getty Images

There are 10 lines of the CRomnibus that, ever since Yuval Levin noticed them on Wednesday, have gotten a fair amount of attention in health policy circles. In case you didn't make it to page 1,602 of the bill, here's what it says:

sec 102

If you are not fluent in CRomnibus-ese, what these paragraphs do are help Blue Cross Blue Shield plans in two ways. First is what Levin has pointed out: they make it easier for the carriers to meet an Obamacare requirement that insurers spend at least 85 percent of premium dollars on medical care.

But secondly, and arguably more importantly, the real deal for the Blues in this language is that it abolishes a tie Obamacare set up (maybe accidentally, more on that in a moment) between whether the Blues meet that requirement and whether they get some pretty big tax breaks they've received for decades now.

And the fact that these two changes are on their way to become law suggests something kind of weird about Obamacare politics: that, just maybe, we're entering an era where Democrats and Republicans make fixes and compromises around the Affordable Care Act.

The smaller deal for the Blues makes it easier to avoid refunds

The medical loss ratio requires insurers to spend at least 85 percent of premium dollars on actual medical care, rather than profits or administration or office buildings or whatever else insurance companies buy. Whatever amount they miss that target by, they have to rebate back to consumers.

Under the original drafting of the Affordable Care Act, for-profit insurers were able to count quality improvement activities (think: a wellness program, a nursing hotline) as part of the medical expenses — part of the 85 percent. But Blue Cross Blue Shield plans, which already had different kinds of tax breaks (you can read more about those here) couldn't count quality improvement measures. Those would fall into the 15 percent of non-medical expenses.

The CRomnibus changes that: as Levin points out, it allows Blue Cross Blue Shield plans to count quality improvement spending as part of the medical portion of their dollars. And this could matter for the size of rebates they pay out. Blue Cross Blue Shield Florida, for example, had to pay out the biggest MLR rebates in 2014.

The bigger deal for the Blues is one that isn't getting much attention

I'll start this section with a warning: we are diving into Section 833 of the Internal Revenue Service code, and it's going to get wonky.

Section 833 has been around for years, and it gives Blues plans a special tax deduction. Their name is right there in the section's title: "Treatment of Blue Cross and Blue Shield organizations, etc."

You can read the details of how this deduction works here but, suffice it to say that this is an important deduction for Blues plans. Then Obamacare changed how it works: the law says that, in order for Blues plans to keep their 833 status, they have to meet the MLR standard. Their tax status would ride on spending at least 85 percent of premiums on medical costs.

And this would create a lot of uncertainty for the Blues plans; lots of times they don't know where their MLR will come out until the end of the year. Maybe it will be 84 percent, maybe it will be 86 percent. And all of a sudden, there's a giant tax break riding on the whole thing.

What the CRomnibus does is cut this tie: it says that the Blues' 833 status won't have anything to do with their MLR. And, taken together with the changes that make the MLR target easier to hit, this section is all around good news for the country's largest non-profit insurer.

The insurers' success: getting a long-desired technical change

Is this helpful to Blue Cross? Definitely. Is it some slapdash, last-minute Congressional deal? Definitely not.

Officials at the insurance plan provided documentation showing that, since 2010, legislators on both sides of the aisle have pushed for this particular change, describing it as a technical correction.

In a floor speech delivered the day after Obama signed the Affordable Care Act, Sen. Max Baucus (D-Mont.) brought up the issues with the Blues' tax status as something that should be fixed. You can see it here, in the Congressional record from that day:


After Baucus' speech, there were follow-up letters from top-ranking Democrats and Republicans on the House Ways and Means Committee and Senate Finance Committee, making a similar case.

But letters don't change the law and, the complaint is only being addressed now, nearly five years after the law passed, as it squeezes onto the one major appropriations bill that Congress will pass this year.

One interesting way to think about this fix: yes, it's Democrats doing something to help the Blues. But it's also Republicans signing on to. There's a letter that Sen. Chuck Grassley (R-Iowa) and Rep. Dave Camp (R-Mich.) sent to Treasury on September 23, 2010, asking the agency to issue "temporary guidance" changing the rules for the Blues "until a legislative remedy can be enacted."

Legislative remedies for Obamacare have, so far, been few and far between. Republicans haven't wanted to fix a law they're in favor of repealing. But what you see happening here is both parties doing something that they think will make the Affordable Care Act work — something you pretty much never, ever seen on Capitol Hill.