One year after we entered a new era in healthcare consumerism with the rollout of the Affordable Care Act (ACA), I want to look ahead at the critical issues and challenges the program faces in 2015 that will have a significant impact on its effectiveness and future course.
The spotlight is on the pending Supreme Court case, King v. Burwell, which will likely decide the future of a key feature of the ACA: the subsidies people receive to make their health insurance premiums more affordable. Yet a host of other issues are also on the agenda, ranging from the medical devices tax to the so-called Cadillac tax, the individual and employer mandates, and the consumer experience, to name a few.
While it’s not clear when each of these issues will be decided, what’s certain is that interest groups with entrenched positions will try to influence the outcomes. Today, it seems that everyone is a healthcare expert. Debate will be heated. The media will spin stories in many directions. But hopefully we can come together as a nation and find thoughtful, bipartisan solutions that help us reach the common goal of providing affordable, quality healthcare to all Americans.
We’re already on that road. In its first year, ACA enrolled about 6.7 million people through newly created marketplaces, or exchanges. Of that number an estimated 5 million previously had insurance in the individual market, for a net gain of 1.7 million people who were previously medically uninsured. An additional 8.7 million people received insurance as part of the ACA’s Medicaid expansion; 7.5 million people were in the 27 states and the District of Columbia that signed on to the Medicaid program (23 states did not).
Still, an estimated 29 million people remain uninsured. The reforms and revisions to ACA now under consideration will affect progress in reducing that number, with the most contentious issue being the subsidies. Subsidies played a significant role in encouraging more people to sign up in 2014: some 85 percent of new enrollees qualified for subsidies.
The King v. Burwell case narrowly focuses on the subsidies provided to enrollees in the 36 states that declined to run their own exchanges, which prompted the Federal government to step in and run them. The challengers reason that these subsidies contravene the ACA, which specifically says that subsidies should go to people who bought coverage “through an Exchangeestablished by the State.”
I’m not a lawyer, but strictly speaking the challengers apparently have at least a definitional claim. Practically speaking, however, an exchange is an exchange, whether State or Federal authorities run it. The question is whether the court will be charitable in its interpretation of the challenger’s argument.
Regardless of what the judges decide, we should also rethink the structure of the marketplace and how subsidies are allocated for those who are not enrolled in the Medicaid program. Because the Exchanges are too small a funnel to push through the remaining 29 million uninsured, I suggest we let individuals follow their subsidies, and at the same time we unleash the power, innovation, and ingenuity of the marketplace to provide a wider variety of insurance plans.
This way, individuals can choose the plan they want from an assortment of approved and regulated insurance products – much like they do with Medicare Advantage programs – and apply their subsidies as they wish. The result will be increased access and coverage, the core objectives of the ACA.
There’s another issue concerning subsidies that must be addressed: flexibility for the states. Historically, the States have regulated insurance, not the Federal government. While it looks like the States want to block the subsidies with the Supreme Court case – and to scuttle the ACA in the process – I believe what the States really want is more flexibility to oversee parts of a program that has traditionally been their domain.
Flexibility will allow the States to devise new models that reflect not only the preferences of the party in control of the State government, but also the Administration’s overall intent with the ACA. Many States are moving in this direction: Arkansas, Iowa, Michigan, and Pennsylvania have already secured approval for their state-specific approaches, while Tennessee, New Hampshire, and Indiana have submitted waiver proposals. Meanwhile, discussions are underway in Montana, Wyoming, and Utah between the governors and the State legislatures to find a new way. The remaining States will be closely watching the outcomes of these processes to determine their own course of action.
In addition to these issues, expect the following to play a critical role in determining the effectiveness of the ACA as the program matures:
Employer Mandate/Workweek Eligibility
One of the most contentious issues under discussion is the employer mandate, which requires all employers with 50 or more full-time employees to provide health insurance, or pay a $2,000 per worker penalty. Critics say this impedes business growth, while supporters argue that it’s necessary to expand coverage. If the employer mandate is maintained, a secondary sticking point is the definition of a full-time employee: a proposal before Congress would raise the benchmark for full-time work from 30 hours per week, as currently stipulated in the ACA, to the more traditional 40 hours per week. As a result of these changes, employers would be able to offer health coverage to fewer workers.
Like the employer mandate, the individual mandate is a cornerstone of the ACA. It helps ensure that as many people as possible are covered and that healthy people don’t opt out of coverage. Yet the individual mandate, upheld by the Supreme Court, remains controversial for a simple reason: Americans don’t like being told what to do.
Medicaid expansion for low-income people was a key element of the ACA, along with higher payments to primary care physicians to encourage them to treat more Medicaid patients. However, those pay increases have now expired. Following the reimbursement rollback, the question is whether there will be adequate compensation available to attract and retain a sufficient number of primary care physicians to treat the growing ranks of Medicaid patients.
Medical Device Tax
The 2.3 percent excise tax on the sales of most medical devices sold in the U.S., like heart implants and artificial joints, is expected to raise $29 billion to help finance ACA programs over the next decade. But many in the medical devices industry argue that the tax stifles innovation and job creation and will raise health care costs.
This 40 percent excise tax on high-cost employer health plans was aimed at raising revenue; pressuring plan sponsors – including employers and unions – to offer less expensive plans; and compelling patients to carefully select only necessary medical services. Employers, who must pay the Cadillac tax, consider it a burdensome, long-term tax increase.
Three “Rs” Stabilization Program: Risk Adjustment, Reinsurance, and Risk Corridors
This program was designed to help insulate insurers from a high level of uncertainty, unpredictability, and potential losses when setting premiums in the new marketplace. The goal was to keep premiums affordable, encourage insurers to participate in exchanges, and minimize premium fluctuations. Modifying these support mechanisms, which is expected, or perhaps eliminating them, would have a substantial impact on how insurers price premiums and the level of health plan participation at the exchanges.
The Consumer Experience
After surviving a catastrophic and disappointing launch, the State and Federal healthcare exchanges are now functioning with a fairly reasonable level of efficiency, allowing consumers to obtain information and sign up for plans. But as Americans become more engaged in the process, they will expect the same consumer-friendly and easy-to-navigate online experiences they’re used to at commercial websites, where they purchase products and services. This will require a level of investment and development that will be difficult for the Exchanges, but which is critical to creating a winning digital experience for healthcare consumers.
All of these issues will stoke heated debate as we try to find solutions to the many problems and challenges facing the Affordable Care Act. Hopefully, we won’t lose sight of the common goal along the way: achieving an affordable, high quality healthcare system for all Americans.