President Barack Obama signed into law on March 23 the most sweeping reform of the United States health care system in the last 50 years. Combined, the Patient Protection and Affordable Care Act and the Reconciliation Act of 2010, now referred to collectively as the Affordable Care Act, dedicates more than $900 billion in new federal funding over the next decade to provide as many as 32 million of the 46 million uninsured people with access to affordable health insurance. This 32 million comprises approximately 11% of our population of residents.
The Affordable Care Act made its way through Congress and to our President’s desk in order to deal with the uninsured who are: ineligible for public programs, and are unable to afford private insurance, do not qualify for private insurance
or those that are eligible for public programs but have not enrolled.
By 2019, the government reports that the Affordable Care Act will result in 94 percent of Americans being covered, up from the 85% percent today.
The Whitehouse suggests that the Affordable Care Act puts our budget and economy on a more stable path by reducing the deficit by more than $100 billion over the next ten years — and more than $1 trillion over the second decade, through cuts to government overspending and reining in waste, fraud and abuse. The deficit decrease in no way suggests that there won’t be considerable tax increases to all citizens who can afford to pay, including small businesses, who are on tap for a significant increase in their costs of doing business.
Today, our healthcare spending is estimated at 15% of Gross National Product, with projection for the percentage to reach 19% by 2018. These numbers are often used to alarm the public, suggesting that our healthcare dollars are being squandered. When one looks at Canada’s 10.1 or England’s 8.4 or Japan’s 7.9, one must realize that our numbers include the profits derived from a largely private system and increases in administrative costs due to a complex multiple payer system. In other words, the dollars we spend on direct care, are not the as alarming as reported. It should also be noted that the overhead associated with our healthcare distribution finds its way back into the system through spending in other sectors, thereby producing a greater GNP than our peer nations — a clear marker for economic health. The US economy is typically ranked in the top 3% for economic vibrancy.
This is all not to suggest that our current system is not flawed, which might explain, fully, the success of this legislation.
There are over 2000 pages of laws and documents that address 4 key areas:
- Coverage access, along with coverage improvements
- Financing of future healthcare
- Mechanisms to reduce costs
- Solutions for Long Term Care
The expansion of healthcare to some of the 32 million people, along with the mandated coverage improvements are already in place, with the Department of Health and Human Services ready to bind coverage for high-risk individuals as early as August 1st. The high-risk pool is available for individuals with pre-existing conditions who have not been insured by creditable coverage for the 6 month period preceding the application for coverage. To prevent the current insurance market from ‘dumping’ high-risk insureds into this new marketplace, there is a specific reference in the law for reimbursements from such insurers who take such action.
This high-risk pool is intended to remain in place until replaced by Insurance Exchanges in 2014, which will be an alternative marketplace for Qualified Health plans for the uninsured, self-employed, and small groups regardless of health status. These exchanges will subsidize those with incomes between 133 percent and 400 percent of poverty level. The Government has funded the high-risk pool, to subsidize premiums, with 5 billion dollars. Unfortunately, it is expected that this funding will have to increase to 15 billion by 2013. This pre-existing insurance plan (PCIP) will charge based on age, sex, and territory. Premiums in Florida can be as high as $675 a month for a 50 year male with medical conditions.
The Exchanges will cover a broad range of health benefits, including primary and specialty care, hospital care, and prescription drugs. All covered benefits are available for you, even if it’s to treat a preexisting condition. In addition to monthly premiums, you will pay other costs. You will pay a $2,500 deductible for covered benefits (except for preventive services) before the plan starts to pay. After you pay the deductible, you will pay a $25 copayment for doctor visits, $4 to $30 for most prescription drugs, and 20% of the costs of any other covered benefits you get. Your out-of-pocket costs cannot be more than $5,950 per year. These costs may be higher, if you go outside the plan’s network.
Some of the provisions within the Affordable Care Act apply to all plans, individual and group, while others apply exclusively to new plans, leaving so called grandfathered plans alone.
Grandfathered can be defined as plans that do not change substantially. The following plan changes will result in the “cessation of grandfather status:”
- The elimination of all or substantially all benefits to diagnose or treat a particular condition.
- Any increase, measured from March 23, 2010, in a percentage cost-sharing requirement (such as an individual’s coinsurance requirement).
- Any increase in a fixed-amount cost-sharing requirement other than a co-payment (for example, a deductible or out-of-pocket limit), determined as of the effective date of the increase, that exceeds medical inflation plus 15%.
- Any increase in a fixed-amount co-payment that exceeds the greater of $5 (increased by medical inflation), or medical inflation plus 15%.
- A decrease in employer contribution rate by more than 5% or the addition of a new annual limit, when one didn’t previously exist, or a decrease in annual limits.
As of September 23rd, children under the age of 19 cannot be denied coverage for their pre-existing conditions; however, the law does not prohibit insurers from denying to insure the children, which is in the process of being remedied. It seems that the regulations were not drafted to require insurers to issue policies to these children.
As of September 23rd, insurers cannot rescind coverage on any health plan, new and grandfathered, except for fraud or intentional misrepresentation.
As of September 23rd, insurers cannot impose lifetime dollar limits on any, new and grandfathered, plan for essential benefits, like:
- Ambulatory patient services
- Emergency services
- Maternity and newborn Care
- Mental health and substance use disorder services
- Prescription drugs
- Rehabilitative services and devices
- Laboratory services
- Preventive and wellness services and chronic disease management
- Pediatric services, including oral and vision care
It should be noted that regulations impose a good faith requirement with respect to the interpretation of the term, essential health benefits. Additionally all insurers, but for grandfathered individual insurers, must provide no less than specified annual limits defined by law for essential benefits as previously defined. In 2010, the maximum annual benefit is set at $750,000, increasing to a maximum of 2 million prior to 2014 when limits are removed completely.
As of September 23rd, all new plans, or existing plans that change substantially, not grandfathered plans, must cover, with absolutely no charge to the patient, certain preventive services such as children immunizations, tobacco counseling for pregnant women, mammograms, colonoscopies, hepatitis B screening, depression screening, HIV screening for high-risk adults and obesity screening and counseling for adults and children. The non-grandfathered plans must also provide patient protections such as access to OB-GYNs and pediatricians without a referral by a separate primary care provider; and greater freedom for patients to obtain certain emergency treatment without certain plan restrictions.
As of September 23rd, dependents under 26 are extended coverage on a parents plan. This applies to all plans.
In 2014, the law finally prohibits insurers from engaging in discriminatory practices that enable them to refuse to sell or renew policies or limit benefits due to health status, nor can health status be used in setting premiums.
While the Congressional Budget Office found that the law would have little impact on premiums for employer’ sponsored coverage, there remains debate as to the laws possible impact on the cost of health insurance premiums. The extension of preventive care alone, along with the elimination of annual and lifetime benefits as well as what will be pre-existing coverage for children under 19, the new taxes to health insurers and healthcare providers, additional cost-shifting due to changes in Medicare reimbursements, and the weaknesses in reform which still permit the healthy to remain uninsured, could raise premiums an average of 40% through 2013. Without these changes, premiums were expected to increase 26% through that same period, with the greatest impact hitting individuals and small groups.
For more information about financing the Affordable Care Act, as well as cost containment measures and Long Term Care provisions, contact the author.