The ACA is a complicated law. It has a lot of moving and interacting parts in it. It also has parts that can be severed from the rest of the law without significant operational impact. I want to conduct an inventory of the major elements that we will need to be familiar with during the second round of healthcare and health finance reform debate. A basic understanding of what the different parts of the law do and how they play nicely with the other parts of the law will put you in good shape over the next couple of months.
I will break things down to the broadest stand alone structure and make comments as needed. This is long and wonky so it is all below the fold.
General Finance and Revenue
General taxation — these taxes are applied to upper income Americans as increases to the marginal income tax rate and as an expansion of taxable income definition. Reducing or rolling back the rate increases will have negative impacts on the federal long run budget but they will not have immediate impact on coverage availability. Other taxes such as the artificial tan excise tax would also fall into this general category.
The healthcare industry is also taxed to pay for the ACA coverage expansion. These taxes were effectively a form of gainsharing from industry players in the 2009-2010 negotiations. They are not popular as the losses are focused on well connected industrial players and there has been bipartisan support to reduce the Medical Device Tax and the fully insured premiu tax. Other taxes have been fading out as the reinsurance tax was already written to expire at the end of 2016.
The Cadillac Tax or a 40% excise tax on high cost premiums has already been pushed back two years in the 2015 budget deal. It is now due to start in 2020 but there is frequent legislation to either kill it entirely or delay it further. It is likely to fail as no one besides health policy and tax policy wonks actually likes the idea. This will need to be reframed as a feasible tax vehicle moving forward.
Employer mandate — This is a fine on employers with more than fifty full time employees who do not provide health insurance to their employees. Eliminating this will have minimal impact on coverage. KFF has a good PDF summary of the logic flow:
- Applies only to companies with more than 50 employees
- Two conditions triggering two different penalties
- If less than 95% of people are not offered any coverage
- If an eligible employee receives an Exchange subsidy than the penalty is
- 2280/12 *(Total employees-30) per month of Exchange subsidy
- If an eligible employee receives an Exchange subsidy than the penalty is
- If offering non-affordable coverage and an employee receives a subsidy penalty is 3390/12 per subsidized employee to a maximum of 2280/12 *(Total employees -30)
Major Coverage Provisions
Under-26 The ACA mandates that employer sponsored plans allow parents and guardians to treat their adult children under the age of 26 as dependents. This allows the adult children to receive employer sponsored coverage through their parents’ policy. It is the smallest piece of the coverage expansion pie.
Between two and three million people are estimated to have initially gained coverage through the Under-26 provision of the ACA. If this provision was eliminated, some of these people would lose coverage, others would gain coverage through other employer sponsored opportunities, the individual market or Medicaid.
Medicaid Thirty two states either have or are in the process of expanding eligibility of their state’s Medicaid program to all adult citizens and long term permanent residents to allow enrollment up to 138% of Federal Poverty Line. There are no asset tests. Several states have used the 1115 waiver process to create state specific expansions (Arkansas, Iowa, Kentucky, Indiana etc). Eighteen states have not expanded Medicaid. Some of these non-expansion states have some of the key stakeholders attempting to expand but in other states there is elite indifference.
The Center for Medicare and Medicaid Services (CMS) estimates approximately 16 million more people have signed up for Medicaid in October 2016 compared to October 2013. Not all of these people have signed up via the Medicaid expansion. Most states have seen a significant “woodworker” effect where people who were eligible but not signed up for Legacy Medicaid (SSI/TANF eligibility categories) were motivated to investigate their health insurance options due to the increased public salience of health insurance. Once they contacted the system, they were determined to be eligible for Legacy Medicaid.
Individual Qualified Health Plan (QHP) — This is the primary element of what people think of when they think of the ACA. This is the exchanges. This is the premium tax credits. This is cost sharing reduction subsidies. This is the area of guarantee issue, community rated coverage where everyone can buy a policy without regard to their health status during open enrollment. It is also the area where a single major finance element is needed, the individual mandate tax is used as a cudgel to get low cost and relatively healthy people into the risk pool.
There are two elements here. The first element is the on-Exchange population. It is Healthcare.gov or CoveredCalifornia or any of the other state based exchanges. People who buy on Exchange are able to receive whatever subsidies that they are eligible for. CMS expects about 13.8 million people to effectuate an on-Exchange policy during the 2017 Open enrollment period. Attrition occurs every year as the individual market is a holding area for a significant portion of the buyers.
The off-Exchange universe has no subsidies attached to the purchase of health insurance but otherwise it is fairly similar structurally to the on-Exchange elements. The Congressional Budget Office expects approximately 9 million people to be covered by off-Exchange policies in 2017.
Individual Mandate as a component of the QHP market
Vox (as always) has a good explainer:
The penalty for not carrying coverage in 2015 is $395 or 2 percent of income, whichever is greater. In 2016, it rises to $695 or 2.5 percent of income. The federal government recoups this penalty via the tax filing process (this calculator tells you how much you would pay).
Subsidies
There are two sets of subsidies that make buying an on-Exchange QHP less expensive and more valuable for eligible buyers. Premium tax credits can be paid either in advance to the insurer or at the filing of the tax return. They are fully refundable and cover the difference between an individuals’ responsibility as determined by family income as a percentage of the Federal Poverty Level (FPL) percentage and the actual premium charged. The subsidy is based on the cost of the second least expensive Silver plan available. Premium tax credits are available for people who make between 100% and 400% FPL and who has no one in the household being offered affordable insurance through work.
The second subsidy is the Cost Sharing Reduction (CSR) subsidies that attach to Silver plans. These subsidies decrease the deductible and other out of pocket expenses and thus increase the actuarial value of the plans. Kaiser Family Foundation has the breakdown:
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Provide cost-sharing subsidies to eligible individuals and families. The cost-sharing credits reduce the cost-sharing amounts and annual cost-sharing limits and have the effect of increasing the actuarial value of the basic benefit plan to the following percentages of the full value of the plan for the specified income level:
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100-150% FPL: 94%
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150-200% FPL: 87%
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200-250% FPL: 73%
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250-400% FPL: 70%
There is a lawsuit, House vs Burwell, working its way through the courts. The House of Representatives contends that the CSR subsidies are not mandatory appropriations and that there has been no discretionary appropriation to fund the subsidy payment to carriers. The District court has agreed with the House. Payments are still being made to carriers as the Obama administration appeals. If CSR subsidies are not funded, CMS will allow carriers to withdraw from the on-Exchange market immediately.
Charles Gaba has a good round-up of how the market could collapse. I’ve truncated some non-critical steps:
- Trump orders his Treasury Secretary not to make February CSR payments.
- This triggers exit clause for carriers, who yank all Silver plans from the exchange immediately.
- All of this likely becomes moot anyway, since without offering a Silver plan, the carrier can no longer participate on the exchange at all.
- Carriers are legally kicked off the exchanges entirely. ~12 million people (~10 million relying on subsidies, ~2 million paying full price) are immediately (?) thrown onto full-price off-exchange market.
- The 2M paying full price already presumably don’t see any change (yet), but the other 10M or so now have to pay full price for plans they can’t possibly afford in most cases.
- Perhaps ~1M at upper end of (lost) subsidy level scramble and stick it out; the other ~9M are basically screwed.
- With fully 50% of the entire individual market now wiped out, but all other regulations still in place (community rating, guaranteed issue, etc), off-exchange market is also utterly destabilized, threatening the remaining 9-10 million there as well (perhaps not until 2018?)
SHOP small business — SHOP was a tax credit based exchange for smaller businesses. It has had minimal use with under 100,000 people enrolled via SHOP in 2015. Eliminating this provision would have minimal impact as the people covered by SHOP would most likely be eligible for subsidies on Exchange.
Major Benefit/Policy Regulatory Areas
Essential Health Benefits (EHB) — Essential health benefits are ten areas that a health plan has to have to be a qualified health plan. A QHP is a plan that meets the individual mandate requirement if it was first issued after the signing of the ACA. EHB’s vary somewhat between states. The major areas of future debate will be maternal, mental health (including substance abuse) and some preventive services.
Preventive health services are a requirement that they be included at no cost-sharing to the member. Preventive health services including contraception are identified by federal rule making and not by law. Eliminating some of the categories of EHB would lower premiums slightly while also re-introducing gender and condition based effective price discrimination.
Mental Health Parity — Mental health services are required by law to be treated the same in terms of cost sharing as physical health services. On a practical basis that means mental health cost sharing usually looks like specialist cost-sharing.
Actuarial Value and maximum out of pocket limits — The ACA limits the maximum amount of money out of pocket (in addition to premiums) a person can be made to spend in a year on their health insurance. This will vary by the actuarial value level which is the expected portion of the total pool’s bill covered by the carrier. Actuarial values are set by law in the ACA for the individual market (Catastrophic, Bronze, Silver, Gold, Platinum) but there is wiggle room. There have been proposals to lower allowable actuarial value (Senator Begich’s Copper plan, Manhattan Institute proposed 40% and 55% AV plans, etc)
Lower actuarial values (all else being equal) will lead to lower premiums but much higher out of pocket maximums.
Medical Loss Ratio — Carriers are required to spend at least 80% of their premium dollars on claims or qualified quality improvement activities in the individual and small group market. This requirement goes to 85% in the medium and large group markets. If the carriers can not meet these goals, refunds are sent out.
Medicare
Medicare Part D Donut Hole — the Donut hole in the Medicare Part D is shrinking. It is due to be completely eliminated by 2020 under current law.
Medicare Advantage payment equalization — Pre-ACA research showed that Medicare Advantage (Medicare Part C) plans were getting significantly overpaid for the same actual medical risk compared to traditional Fee for Service Medicare. The ACA has lowered the relative payments to Medicare Advantage to the point where most MedPAC and health policy researchers believe the two programs are getting paid roughly the same now.
System Delivery Reform and Innovation
Medicare is the primary experimental arm of federal health policy because it is the biggest single payer in the country and it is under Federal control, oversight and operational management. Medicare has been charged to institute a wide variety of payment structure and service delivery reforms including bundled payments, gain sharing and other structures that are experiments and pilot projects to move Medicare away from fee for service to some type of value based care. Several organizations within the Center for Medicare and Medicaid Services (CMS) have been granted either extraordinarily powers or significant budgetary authority and freedom to experiment and then roll out best practices if they are found to be actuarial improvements.
The Society of Actuaries commissioned a white paper by Milliman to examine non-fee for service payment methodologies in 2015. Appendix B has a good overview of the significant changes to payment reform elements of the ACA
This is a very high level overview of the major moving parts in the ACA. I think I have it organized so that one part could be eliminated without severe consequences for everything else.
sherparick
From Atrios, a message: http://www.eschatonblog.com/2017/01/the-good-old-days-are-back.html
The Good Old Days Are Back
Everybody forgets now, but we didn’t really spend the aughts trying to influence George Bush. We couldn’t do that. We spent the aughts trying to get horrible Democrats to not be quite as horrible, and the media covering the whole thing to not be so horrible. If we couldn’t stop the horrible things we could maybe at least stop the Democrats from owning all of them. Saving them (and us) from themselves was a big part of it. I didn’t know if we could stop Republicans from privatizing Social Security (we did! yay us!) but we had to do our best to make sure it wasn’t all bipartisany. It’s the usual “if everyone is to blame, then no one is” combined with the Democrats’ love of running on the slogan, “Not quite as evil as the other guys!”
This all buried in some legislative procedural stuff in the Senate, but basically last night 13 Democrats in the Senate voted against allowing cheaper drug imports from The People’s Republic of Canadia. Some hope you don’t notice, and some don’t care if you notice. Some do care. I bet Cory Booker, who took some time off rescuing pets in front of TV cameras and posting inspirational quotes on the website twitter dot com to show how woke he is to help to make sure you have to pay more for lifesaving drugs, cares quite a bit if you notice. Someone’s gotta be the Dem candidate for president in 2020, after all.
His DC office number is:
(202) 224-3224
His Newark office number is:
(973) 639-8700
They care a lot more if they get calls from people they represent generally. People who have worked in Congressional offices always say this and mostly they’re right. But when the phone lines are jammed because so many people are calling they don’t have time to care about who is calling, they just want it to stop.
Call DC if you don’t live in New Jersey, call Newark if you do.
Get an explanation for the vote, if he has one. Let us know what it is!
For those Senators in other states, here is the list.
https://www.reddit.com/r/Political_Revolution/comments/5nisw5/these_democrats_just_voted_against_bernies/
West of the Cascades
This is extraordinarily helpful. It’s also terrifying that the new Trump administration has the unilateral power to destroy the exchanges within a month of taking office by not making the February CSR payments. I’m not familiar with that lawsuit but I hope there are pro-CSR intervenors ready to try to carry the litigation forward if the government won’t.
Richard Mayhew
@West of the Cascades: How do they get standing is my question?
ArchTeryx
@Richard Mayhew: Class action from everyone that stands to lose their insurance and healthcare?
Richard Mayhew
@ArchTeryx: IANAL but if I was, there is no constitutional entitlement to the continued funding of a discretionary budget item even if the results will cause immense harm. The courts will punt this out as a political question where the harmed individual(s) are supposed to use the political process to protect themselves.
ArchTeryx
@Richard Mayhew: Equal protection argument. Many of the harmed individuals did try to use the political process and were denied. When it comes to hundreds of thousands, even millions, of deaths, there’s no can of worms too big to open.
MomSense
@sherparick:
Just want to say how strongly I object to this especially targeting Cory Booker. The man broke precedent and as a sitting Senator testified before a committee of the Senate against a fellow Senator who is the nominee for AG. Then he went to his committee where he asked tough questions to Tillerson. Then he went to the floor of the Senate where he voted in all the other amendments to uphold the protections and benefits of the ACA. Jesus, he was a hero yesterday and I do not think we should call to chastise him for being against something that has ZERO chance of happening in this Congres..
Honestly this approach is harmful. It really pisses me off.
Mary G
I think the political remedy will be more useful. A commercial with people who tell their stories of lifesaving care they’ve received seems like a no-brainer.
MomSense
@sherparick:
How about we focus on the Senators we need to flip before the reconciliation vote?
How about we focus on the Representatives whose constituents have the most to lose?
West of the Cascades
@Richard Mayhew: It looks like a couple of CSR recipients (individuals) have moved to intervene (with a good firm representing them) — https://www.scribd.com/document/334743333/House-v-Burwell-Motion-to-Intervene — my guess is that they do have a protectable interest in the litigation sufficient to justify the intervention standard (whether their motion is timely is a harder issue), but their argument on standing (pp 13-18 of the motion) seems to founder on the redressibility point – even a court decision in their favor wouldn’t force the government to make discretionary payments — while an unfavorable decision in House v. Burwell would remove their benefits, a favorable decision (reversing the district court decision and holding that the House’s position is wrong) might not actually redress their claimed injury, because it seems like the President could cut off benefits or Congress defund them. Hard to tell. Glad to see some folks in there trying.
Comrade Colette Collaboratrice
@sherparick: @MomSense: No fucking kidding. If ever there were a moment NOT to ride the purity pony to the sky, this is it. Call Republicans, tell them to keep the ACA (and Medicare), and keep calling until they beg for mercy. If you must call Booker, thank him for all the reasons MomSense cited.
? Martin
@ArchTeryx: The states will sue the federal government for breaking the contract. The courts can’t possibly claim that the states don’t have standing to look out for the well being of their residents.
? Martin
@Mary G:
Nobody denies that. But it’s a lower priority than maintaining power or ideology. There’s no actual denial that ACA saves lives. The GOP simply oppose HOW it saves lives. That approach wouldn’t change anything.
randy khan
@MomSense:
If I were calling Booker’s office, I’d start by saying how proud I was that he testified against Sessions yesterday, and then say that I hope he’ll reconsider his view on importation of Canadian drugs. I’d be nice about it – as you say he’s really been very good so far, and he needs to be encouraged to stick together with the rest of the Dems, not scolded.
randy khan
In other ACA news, I’ve noticed a bunch of “I hate Obamacare” people crowing on Facebook. I’ve spent too much time (and yet not enough) disabusing them of their generally laughably wrong complaints about it.
I say this because it’s one of the things we need to do – push back against the lies whenever we see them.
? Martin
This is why I’ve largely given up on fighting at the federal level.
Federalism is going to get massacred in the next 2 years at least, and possibly 4 unless Dems can retake a chamber in 2018. To a large degree, federal elected officials lose power to state officials. That means that if the feds blow up ACA, your best recourse is to turn to your state for a remedy. Now, California is large enough to do this, and blue enough to do it in a way that I like, but not all states have that combo. I’m not sure what to tell people in other states, but the results may not be what Trumps supporters expect. ACA was set up to largely transfer cash from states like California to states like Alabama. With that gone, California can choose to hold onto that cash (through new taxation/regulation to offset what was dismantled) and spend it locally. That’s potentially a win for California and definitely a loss for Alabama, but one that they voted for, so I don’t feel too bad for them. If that makes California economically stronger and Alabama economically weaker, I don’t feel too bad about that either – inevitably that’ll mean more congressional districts for us, and more voting power. It is a long, cruel game, but its the game we were handed so we might as well make the most of it. I don’t see how Californians benefit by trying to rescue states that clearly haven’t thought through their decisions. As Obama said about Israel – he can point out their decisions that he thinks hurts their self-interest, but ultimately it’s their decision to make. I say the same thing about states that voted for Trump.
There’s no point calling my Senators, they are leading this fight. I’m better off calling my governor and my state reps and telling them to pull single payer or a state-funded exchange policy together right fucking now.
sherparick
@MomSense: Between Trump’s tweets and the “Base” no Republican is going to flip on this matter. And yes, I do think we to criticize Booker, Warner, Tester, Murray, etc., that on these health care votes they can’t give the Republicans any cover by giving any Democratic votes for these measures. The catastrophe has to be completely Republican owned.
MomSense
@randy khan:
If by some miracle we can keep the ACA and prescription drug importation/negotiation come up before the Congress then I’d call and talk to him about it. Why cloud the congratulatory message now when there is nothing to do about it.
He voted against an issue that was not going to pass even if he had voted for it. That is the kind of vote we give to members if needed in the best of circumstances. Nancy Smash used that technique to great effect when she was Speaker. Same for Reid, Mitchell, O’Neill, etc.
scottinnj
@randy khan: To be fair to Booker the pharmaceutical industry is one of the biggest employers in the state of NJ (Menendez the other NJ Senator also voted against this). I’m not saying his vote is a profile in courage but it’s not that different than any Senator from a coal state backing coal.
Mark Regan
@Richard Mayhew:
This is not a discretionary budget item, it’s a statutory right.
FernandoPoo
Doesn’t the ACA also remove the lifetime cap insurance companies would pay for an illness?
ArchTeryx
@FernandoPoo: Or anything, yes. Lifetime caps were routine beforehand. One cancer or chronic diagnosis, and you’d burn right through it in no time and end up functionally uninsured.
MomSense
@FernandoPoo:
Yes it does. And that was a big reason people lost their houses and went bankrupt pre-ACA.
If your kid has cancer and you get to the end of your 1,000,000 lifetime cap you don’t stop treatment even if it ruins you financially.
ThresherK
Okay, I have some LearneeLows telling me that R’s stood up to big pharma and some D’s caved to it this week.
I’m not clicking the link they provided. What’s the reality?
Ohio Mom
So far today I spent my morning at the oncologist–just my four year check-up, we are all 99% sure I’m cured (no such thing in the breast cancer biz as 100% sure)–and part of my afternoon calling every single one of Rob Portman’s offices, one call to a Sherrod Brown office to profess my undying love, and three calls to various Mitch McConnell offices.
I didn’t count but probably ten more hash marks in the world. What else is there I can do, within the limitations of my day-to-day life?
The only satisfaction I’m getting is that it is pretty obvious those senators are getting LOTS of calls. Those interns sound worn out. Heh.
Mark Regan
@West of the Cascades: Unfortunately, this afternoon the D.C. Circuit panel denied the House v.
Burwell motion to intervene.
http://premiumtaxcredits.wikispaces.com/file/view/order%20denying%20motion%20to%20intervene.pdf/603953852/order%20denying%20motion%20to%20intervene.pdf
randy khan
@scottinnj: I agree. It’s one reason I wouldn’t give him a hugely hard time on this.
jenn
@Ohio Mom: Awesome! I just got off from phone calls to my Rep/Sens, too! I think the main extra thing is to do whatever you can to mobilize others around you to call, as well.
goblue72
@? Martin: Hopefully Jerry is already thinking about this. His budget released this week projected a $1.6 billion deficit, so he’s already setting the stage for budget fights this year. I am hoping he’s clearing the decks of new spending and cutting back a bit in order to be ready to take on the big hits coming down the pipe, like salvaging Medi-Cal after the GOP repeals the ACA and guts Medicaid.
I have already heard some talk that if the GOP is successfully in cutting corporate taxes or taxes on the wealthy, that the Legislature will push to re-capture that via increased state taxes. It will be tough due to the Mod Dems holding all the card in Sacramento, courtesy of the jungle primary system that Arnie foisted on us.
schrodingers_cat
@sherparick: If I never have to hear Bernie’s name ever again, it will be too soon.
gene108
@Mary G:
The problem with liberal America: Who is going to pay for it?
There are no billionaires willing to fork money over to fund the liberal agenda. They have pet projects that overlap with liberal interests, but that is as far as they go.
The Truffle
@? Martin: I think the Dems’ best bet is to aim for governorships in 2018. See this link for more.
I agree that in the short term states like Alabama will suffer, but…they voted for this. So be it.
john fremont
@? Martin: So we Coloradans should go for getting Colorado Care back on ballot then.
jake the antisoshul soshulist
Steve King was on NPR this afternoon.
He said everyone he knows hates O’care and thinks we were better off before it.
Healthcare is not a right.
Medicaid should be block grants because federalism.
If you have a pre-existing condition you should have had insurance before you got sick.
If I was terminal, I would try to arrange to die in front of his office door.
Ben Vernia
There’s also dozens of other provisions buried in the ACA that a simple repeal would screw up. I represent whistleblowers and defendants in False Claims Act suits, and there were several provisions relevant to that law that have essentially nothing to do with health insurance.
gorram
@gene108: t a x e s #WhatLikeIt’sHard?
Richard Mayhew
@john fremont: get the homework done but yes