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THE AFFORDABLE CARE ACT. Professor Leonard J. Nelson, III. OVERVIEW OF AFFORDABLE CARE ACT . Insurance Exchanges Essential Benefits Benefit Tiers “Three Legged Stool” Individual Mandate Insurance Reforms Premium Subsidies. Employer Responsibilities Grandfathered Plans

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overview of affordable care act
OVERVIEW OF AFFORDABLE CARE ACT
  • Insurance Exchanges
  • Essential Benefits
  • Benefit Tiers
  • “Three Legged Stool”
      • Individual Mandate
      • Insurance Reforms
      • Premium Subsidies
  • Employer Responsibilities
  • Grandfathered Plans
  • Medicaid Expansion
  • Preventive Care
  • SCOTUS Case
insurance exchanges
Insurance Exchanges
  • States to establish exchanges to facilitate purchase of “qualified health plans” by individuals and small businesses
  • If State doesn’t, then Federal Government will set up exchange
insurance exchanges1
Insurance Exchanges
  • Administered by non-profit or governmental agency
  • individuals and small businesses with up to 100 employees can purchase qualified health plans
  • > 2017 states can permit businesses > 100 employees to purchase coverage through the exchange
insurance exchanges2
Insurance Exchanges
  • Enrollment periods:

“ The Secretary shall require an Exchange to provide for—

(A) an initial open enrollment… (B) annual open enrollment periods, as determined by the Secretary for calendar years after the initial enrollment period;(C) special enrollment periods specified in section 9801 of the Internal Revenue Code of 1986 and other special enrollment periods under circumstance similar to such periods under part D of title XVIII of the Social Security Act…”

insurance exchange regs
Insurance Exchange Regs

§ 155.410 Initial and annual open enrollment periods.

(a) General requirements.

(1) The Exchange must provide an initial open enrollment period and annual open enrollment periods consistent with this section, during which qualified individuals may enroll in a QHP or enrollees may change QHPs.

(2) The Exchange may only permit a qualified individual to enroll in a QHP or an enrollee to change QHPs during the initial open enrollment period specified in paragraph (b) of this section, the annual open enrollment period specified in paragraph (e) of this section, or a special enrollment period described in § 155.420 of this subpart for which the qualified individual or enrollee has been determined eligible.

essential health benefits package
Essential Health Benefits Package
  • “Qualified Health Plans” must include an essential health benefits (EHB) package to be designated by the Secretary
  • Except for “grandfathered” plans , all small group and individual plans offered both within and outside exchanges must offer at least EHB
  • Self Insured Plans not required to offer EHB
essential health benefits
Essential Health Benefits
  • To be defined by States rather than Federal Government but subject to broad statutory guidelines
essential health benefits1
Essential Health Benefits
  • “HHS intends to propose that essential health benefits are defined using a benchmark approach. Under the department’s intended approach announced today, states would have the flexibility to select a benchmark plan that reflects the scope of services offered by a “typical employer plan.” This approach would give states the flexibility to select a plan that would best meet the needs of their citizens.
    • States would choose one of the following benchmark health insurance plans:
      • One of the three largest small group plans in the state by enrollment;
      • One of the three largest state employee health plans by enrollment; 
      • One of the three largest federal employee health plan options by enrollment;
      • The largest HMO plan offered in the state’s commercial market by enrollment. 

If states choose not to select a benchmark, HHS intends to propose that the default benchmark will be the small group plan with the largest enrollment in the state. 

The benefits and services included in the benchmark health insurance plan selected by the state would be the essential health benefits package. Plans could modify coverage within a benefit category so long as they do not reduce the value of coverage.”

essential health benefits2
Essential Health Benefits
  • Essential health benefits must include items and services within at least the following 10 categories:
    • Ambulatory patient services
    • Emergency services
    • Hospitalization
    • Maternity and newborn care
    • Mental health and substance use disorder services, including behavioral health treatment
    • Prescription drugs
    • Rehabilitative and habilitative services and devices
    • Laboratory services
    • Preventive and wellness services and chronic disease management, and
    • Pediatric services, including oral and vision care
benefit tiers
Benefit Tiers
  • In the Exchanges-Four Categories (all providing essential benefits package) plus separate Catastrophic plan
    • Bronze: covers 60% of the standard benefits cost
    • Silver: Covers 70% of the standard benefits cost
    • Gold: covers 80% of the standard benefits cost
    • Platinum: covers 90% of the standard benefits cost
    • Catastrophic:
      • Only available for those age <30
      • Only available in the individual market
the three legged stool
“The Three Legged Stool”
  • Insurance Reforms
  • Individual Mandate
  • Premium Subsidies
        • http://theincidentaleconomist.com/wordpress/stools-need-more-than-two-legs/
insurance reforms
Insurance Reforms
  • Prohibition on use of pre-existing condition limitations
  • Guaranteed Issuance and Renewal
  • Adjusted Community rating - age ratio limited to 3:1, geography, family size, and tobacco use (1.5:1 ratio)
  • No annual and lifetime caps
  • f
problem community rating adverse selection
Problem:CommunityRating & Adverse Selection
  • Private insurance markets suffer from adverse selection – people know more about their likely future use of services than does the insurer
  • Medical underwriting & experience rating put people & groups in risk pools commensurate with their expected use.
  • Putting everyone in the same risk pool raises premiums for the young/healthy but lowers them for the old/sick.
individual mandate
Individual Mandate
  • Penalty imposed on applicable Individuals for failure to maintain minimum essential health insurance coverage for themselves and their dependents
  • Person providing coverage required to report annually to IRS
individual mandate1
Individual Mandate
  • Rationale:
    • Necessary to prevent adverse selection if you have insurance reforms
    • Reduces free riders
    • incentivizes insurers to develop more efficient delivery systems
individual mandate2
Individual Mandate
  • Enforcement
    • Penalty of the greater of $695 per year up to a maximum of three times that amount ($2,085) per family or 2.5% of household income.
    • Penalty to be phased in:
      • $95 or 1% of income in 2014
      • $325 or 2.0% of income in 2015
      • $695or 2.5% of income in 2016
      • > 2016 annual COLA
individual mandate3
Individual Mandate
  • Exemptions from fine:
    • Financial hardship
    • religious objections
    • American Indians
    • Those without coverage < 3 months
    • Undocumented immigrants
    • Incarcerated individuals
    • Those for whom the lowest cost plan option > 8% income
    • Those with incomes <tax filing threshold
premium subsidies to individuals
Premium Subsidies to Individuals
  • Rationale: Increases access and enables lower income persons subject to mandate to afford to buy insurance
  • Provided for purchase of insurance through exchanges
  • Refundable & advanceable premium credits for those with incomes between 133-400% of FPL
  • Pegged to the “silver” plan
premium subsidies to individuals1
Premium Subsidies to Individuals
  • Sliding scale limiting premiums to % of income
    • Up to 133 %-2%
    • 133-150% FPL: 3 – 4%
    • 150-200% FPL: 4 – 6.3%
    • 200-250% FPL: 6.3 – 8.05%
    • 250-300% FPL: 8.05 – 9.5%
    • 300-400% FPL: 9.5%
employer responsibilities
Employer Responsibilities
  • Small Employers (< 50 full-time employees)
    • Not required to provide coverage or make contribution to coverage provided through exchanges
    • May purchase coverage outside or through exchange but subject to essential benefits requirement unless “grandfathered” in
    • Tax credits for employers <25 full time employees with average compensation <$50,000 that offer health insurance and pay at least 50% of premiums
          • Available beginning in 2010
          • >2013 must be offered QHP through exchange
          • May only be claimed in two tax years >2013
employer responsibilities1
Employer Responsibilities
  • Medium Size Employers (50 -100 full time employees)
    • Not required to offer coverage
    • May purchase coverage outside or through exchange (SHOP) but subject to essential benefits requirement unless “grandfathered” in
    • If fail to offer “minimum essential coverage” and one fulltime employee receives a subsidy through the exchange, then employer will be assessed $2000 per full time employee (excluding first 30 employees)
    • If does offer, but one fulltime employee receives subsidy, employer will be assessed the lesser of $3000 for each employee receiving subsidy or $2000 per full time employee where premium contribution >9.5% family income.
employer responsibilities2
Employer Responsibilities
  • Large Employers (>100 fulltime employees)
    • Most currently offer plans
    • If fail to offer “minimum essential coverage” and one employee enrolls in exchange, then face same penalties as medium sized employers
    • Not required to provide EHB if “grandfathered “ in or self insured
    • Not eligible to purchase group insurance through exchanges until 2017-then states can open it up
    • Employers with > 200 full-time employees required to automatically enroll all employees with opt out allowed
grandfathered status
Grandfathered Status
  • Can Switch Carrier
  • Cannot:
    • Significantly cut or reduce benefits
    • Raise co-insurance charges
    • Significantly raise co-payments
    • Significantly raise deductibles
    • Significantly lower contributions
    • Add or tighten annual limit on what insurer pays
medicaid expansion
Medicaid Expansion
  • Expand Medicaid eligibility to all <age 65 w/ incomes below 133% FPL (actually 138% because of 5% income disregard)
  • All newly eligible adults to get at least essential benefits package
  • States have to expand eligibility if they participate in Medicaid
  • Some states considering dropping out, but not likely
  • Constitutionality challenged but rejected in Florida case by Judge Vinson-”coercion and commandeering”
medicaid expansion1
Medicaid Expansion
  • Increased Federal Funding for Medicaid Expansion
      • 2014 – 2016-100%
      • 2017 -95%
      • 2018-94%
      • 2019-93%
      • >2020-90%
medicaid expansion2
Medicaid Expansion
  • Maintenance of Effort-States can’t cut Medicaid eligibility without losing matching funds from the federal government
  • Some states seeking waiver-block grants, e.g., Washington State
preventive services
Preventive Services
  • All non-grandfathered group plans and individual plans have to provide without co-pays and deductibles
  • Defined by HHS-August 1, 2011
  • Contraceptives and sterilization included –limited religious exemption that would cover parishes but not larger organizations (e.g., Dioceses, hospitals, Catholic Charities).
preventive services1
Preventive Services
  • HHS delays, but does not change, rule on contraceptive coverageBy Nancy Frazier O'BrienCatholic News ServiceWASHINGTON (CNS) -- Although Catholic leaders vowed to fight on, the Obama administration has turned down repeated requests from Catholic bishops, hospitals, schools and charitable organizations to revise its religious exemption to the requirement that all health plans cover contraceptives and sterilization free of charge.Instead, Kathleen Sebelius, secretary of the U.S. Department of Health and Human Services, announced Jan. 20 that nonprofit groups that do not provide contraceptive coverage because of their religious beliefs will get an additional year "to adapt to this new rule."Jan.20, 2012
constitutionality
Constitutionality
  • The 11th Circuit declared the I individual mandate unconstitutional, but the DC Circuit and the Sixth Circuit upheld it
  • Federal government-limited, enumerated powers
  • Does federal government have authority under Commerce clause to force purchase?
scotus case
SCOTUS CASE
  • “The Supreme Court has granted review of [an Eleventh Circuit decision involving] …. The Court has set aside 5 1/2 hours for oral argument (arguments at the Court are typically restricted to one hour, with each side granted a half hour of argument). The four issues on which the Court has granted review are:
    • The constitutionality of the individual mandate, requiring most Americans to purchase health insurance by 2014 (2 hours of argument)
    • Whether the individual mandate is severable (if it is found to be unconstitutional, or whether the entire Act would have to fail (90 minutes of argument)
    • Whether the Anti-Injunction Act prevents challenges to the Affordable Care Act at this time (1 hour of argument)
    • Whether the Affordable Care Act's expansion of the Medicaid program is constitutional (1 hour of argument)”
      • Legal Challenges to the Affordable Care Act, HFMA
eleventh circuit decision
Eleventh Circuit Decision
  • “In a two-to-one decision, the U.S. Court of Appeals for the Eleventh Circuit upheld U.S. District Court Judge Roger Vinson's ruling in State of Florida v. U.S. Department of Health and Human Services that the individual mandate exceeds Congress's powers under the Commerce Clause. It overruled Judge Vinson, however, on the question of whether the individual mandate is severable, holding that the remainder of the Affordable Care Act is valid.”
    • Legal Challenges, HFMA
eleventh circuit decision1
Eleventh Circuit Decision
  • “The two-member majority formulated the question before the court as "whether the federal government can issue a mandate that Americans purchase and maintain health insurance from a private company for the entirety of their lives." Under this theory, the majority argued, the Commerce Clause would give "Congress the power to direct and compel an individual's spending in order to further its overarching regulatory goals" simply because "Americans have money to spend and must inevitably make decisions on where to spend it.“
    • Legal Challenges, HFMA
eleventh circuit decision2
Eleventh Circuit Decision
  • “This would be an unprecedented reach of congressional power under the Commerce Clause, the majority reasoned, one that stretched beyond constitutional limits. Judge Frank M. Hull, one of the two-member majority, is the first judge appointed by a Democratic president (William J. Clinton, in 1997) to rule that the mandate is unconstitutional.”
    • Legal Challenges, HFMA
sources
Sources
  • Linda J. Blumberg, How Will the Patient Protection and Affordable Care Act Affect Small, Medium and Large Businesses, Urban Institute (Aug. 2010)
  • CCH Law, Explanation and Analysis of the Patient Protection and Affordable Care Act (2010).
  • Keeping the Health Plan You Have: The Affordable Care Act and “Grandfathered” Health Plans, Healthcare.gov.
  • Essential Health Benefits: HHS Informational Bulletin, http://www.healthcare.gov/news/factsheets/2011/12/essential-health-benefits12162011a.html
  • Legal Challenges to the Affordable Care Act, http://www.hfma.org/Templates/Print.aspx?id=24263