Transcript National Healthcare Reform: How PPACA will impact Colorado

The Affordable Care Act
as of 2013
April 26-27, 2013
Robert Semro - Policy Analyst, The Bell Policy
Center
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The Legal and Political Status of
the Affordable Care Act (ACA)
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The ACA in 2013
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The Affordable Care Act is the law of the land
It was ruled constitutional in the summer of 2012
Court challenges regarding contraceptive services are still pending
As a result of the November 2012 elections, repeal or fundamental structural changes
are not likely in the near future.
The vast majority of the law will be implemented prior to the 2014 mid term elections
Opponents would require a veto proof majority in the midterm elections to repeal,
fundamentally restructure or defund the law prior to 2016.
Once implemented taking away benefits will be very difficult to do politically
Some parts of the law will be subject to federal budget pressures
The law will be amended in the future and provisions such as the Medicare Independent
Payment Advisory Board and the 2.3% excise tax on medical device manufacturers may
be repealed or significantly changed
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THE ACA DOES NOT REPRESENT THE END OF HEALTH CARE REFORM !
A Brief Summary of Insurance
Reforms in the Affordable Care
Act
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ACA Private Insurance Reforms
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Insurance reforms
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Individual Mandate: Most U.S. citizens and legal residents will be required to purchase
minimum insurance coverage or pay a tax penalty (Effective January 1, 2014)
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Grandfathered Plans: Plans in effect before March 23, 2010 are grandfathered and
are not required to implement some reforms, unless those plans change significantly
Guaranteed issue of coverage in the individual / small group markets:
Insurance companies must offer coverage regardless of pre-existing conditions
Community rating in the individual and small group markets: Allows rating
variation based only on age (limited to 3 to 1 ratio), premium rating area, family
composition, and tobacco use (limited to 1.5. to 1 ratio) (Effective January 1, 2014)
Elimination of coverage rescissions: Prohibits insurance companies from
rescinding coverage based upon health status (Effective January 1, 2014)
Prohibition on Lifetime Benefit Caps: Prohibit individual and group health plans
from placing lifetime limits on the dollar value of coverage (Effective 2010)
ACA Private Insurance Reforms
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Insurance reforms (Cont.)
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Prohibition on Annual Benefit Caps:. Beginning in January 2014, individual and
group health plans cannot use annual benefit caps on benefits.
Individual and Small business insurance exchanges: Creates state-based health
benefit exchanges . (Opens on October 1, 2013, coverage effective January 1,
2014)
Premium tax credits and cost sharing subsidies (only available through the
exchange): tax credit subsidies for lower income Americans that can be used to
purchase health insurance (January 1, 2014)
Insurance Rate Review: Insurance companies must justify rate increases
Medical Loss Ratios: Insurance companies must spend 80 to 85 cents of every
premium dollar on healthcare (2011)
Extends eligibility for dependents up to age 26 (2010)
ACA – Medicare and Medicaid
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Medicare
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Expansion of Medicaid
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Solvency of Medicare: ACA extends the solvency of Medicare from 2016 to 2024
Medicare Prescription drug benefit donut hole: ACA will close the Medicare Part
D Donut hole by the year 2020
Free preventative services and wellness visits (2011)
Expand Medicaid to all non-Medicare eligible individuals under age 65 (children,
pregnant women ,parents, and adults without dependent children) with incomes up to
133% FPL (Effective January 1, 2014) $15,282 (individual) or $31,322 (family)
Would make Medicaid available to about 240,000 Coloradans by the year 2022
All applicants are presumed eligible based upon income prior to approval of the
application.
Reform Details
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The Individual Mandate
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The Requirement to Have Minimum Health
Insurance Coverage
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The Affordable Care Act requires that:
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Most U.S. citizens and legal residents with incomes above the federal income tax
filing thresholds obtain minimum essential health care coverage or pay a tax
penalty (for each month of non-compliance)
Insurance companies will provide individuals, businesses and the IRS with
notification of coverage
Source: FY2012-13 JBC Staff Budget Briefing, December 15, 2011, page 43
The Requirement to Have Minimum Health
Insurance Coverage
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The minimum coverage provision would not apply to:
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Persons under the tax-filing threshold
Persons with financial hardship or for those whom the lowest cost plan option exceeds
8% of an individual’s income
Persons without coverage for less than three months
Persons receiving Medicare or Medicaid
Military families and persons living overseas
Persons with religious objections
Native Americans
Undocumented immigrants
Persons who already get health insurance from their employers under a qualified plan,
the individual insurance market, or are self insured under a qualified plan
The Requirement to Have Minimum Health
Insurance Coverage
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How the minimum coverage provision is enforced:
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Insurance companies will provide notice of coverage to the IRS, employers and
individual policy holders.
Penalty will be paid as part of the taxpayer’s annual filing
Taxpayers who are required to pay a penalty but fail to do so will receive a notice from
the Internal Revenue Service (IRS) that they owe the penalty.
If they do not pay the penalty, the IRS can attempt to collect the funds by reducing the
amount of their tax refund in the future.
Individuals who fail to pay the penalty will not be subject to any criminal prosecution or
penalty
No federal agency can file a notice of lien or levy on any property for a taxpayer who
does not pay the penalty.
The Requirement to Have Minimum Health
Insurance Coverage
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According to the Colorado Health Institute an estimated 380,000 or roughly 7 out of
every 100 Coloradans would be required to purchase insurance or pay a tax
penalty
Approximately 4 out of the 7 would receive a federal subsidy to purchase insurance
Potential issues with the Individual Mandate:
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The penalty may be too low to keep people from purchasing insurance only when they
need it.
The penalty may not drive enough people into the system to reduce premium costs
Medicare and Seniors
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Summary of ACA Provisions
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The ACA extends the solvency of Medicare from 2016 to 2024
Traditional Medicare-covered benefits cannot be reduced or taken away
Medicare Advantage Plans must continue to provide traditional Medicare benefits
Spending reductions to Medicare are not allowed to
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Ration care
Reduce or change benefits or eligibility
Increase co-pays or premiums
The Medicare prescription drug benefit “donut hole” will be closed between now
and the year 2020 when the donut hole will essentially be eliminated
Medicare will provide a free annual wellness visits and free preventative services
Implements the Elder Justice Act
Specific Provisions Affecting Seniors
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Closing the Medicare Part D Coverage Gap (Donut Hole)
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Annual Wellness Visits for Seniors as of January 1, 2011, the annual wellness visit
benefit includes the following services:
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In 2013, the Part D coverage gap starts at $2,970 and extends to the catastrophic coverage
threshold at $4,750.
By the year 2020, the Medicare Part D “donut hole” should effectively be closed
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Routine measurements, such as height, weight, blood pressure, and body mass index (BMI)
Review of individual medical and family history
Review of the medications, supplements, and vitamins that the beneficiary is currently taking
Discussion of the care that is currently being received from other health care providers
Review of functional ability and level of safety (for example, risk of falling at home), including any cognitive impairment,
as well as a screening for depression
Discussion of personalized health advice that takes into account risk factors and specific health conditions or needs,
including weight loss, physical activity, smoking cessation, fall prevention, and nutrition
Discussion of referrals to other appropriate health education or preventive counseling services that may help minimize or
treat potential health risks
Planning a schedule for the Medicare screening and preventive services that will be needed over the next 5 to 10
years
Specific Provisions Affecting Seniors
Medicare Preventive Services
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Source: http://familiesusa2.org/assets/pdfs/health-reform/Consumer-Guide-Medicare-Preventive-Care-Benefit.pdf
Specific Provisions Affecting Seniors
Medicare Preventive Services
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Source: http://familiesusa2.org/assets/pdfs/health-reform/Consumer-Guide-Medicare-Preventive-Care-Benefit.pdf
Specific Provisions Affecting Seniors
Medicare Preventive Services
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Source: http://familiesusa2.org/assets/pdfs/health-reform/Consumer-Guide-Medicare-Preventive-Care-Benefit.pdf
Changes in Medicare Spending Due to the ACA
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Medicare Spending Reductions
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Under the Affordable Care Act spending will be reduced by over $716 billion
dollars between 2013 and 2022. Those spending reductions come from:
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Reducing payment reimbursements to hospitals (35% of savings)
Reduction of payments to Hospitals for seeing uninsured patients (5% of savings)
Reductions in payments to home care providers (8% of savings)
Provisions to reduce waste fraud and abuse through provider screening, enhanced
oversight and compliance programs, establishment of a nation wide data base, and
stronger penalties (18% of savings)
Payment reductions to Medicare Advantage plans (34% of savings )
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As of 2010 the cost to the government of Medicare Advantage patients on average was 117 percent of
regular fee-for-service Medicare
Payment reductions will be phased in from 2011 – 2017
Medicare Advantage plans that improve services will earn bonus payments beginning in 2011
Medicare Advantage plans will be required to spend 85 cents of every premium dollar on health care
Medicare Spending Reductions
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Possible Impact to MA Plans
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To date the impact on MA plans has been minimal
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The effect of these payment reductions is expected to vary across counties and by insurance
carrier.
Plans will continue to be required to provide all benefits that are covered by traditional
Medicare
May charge higher premiums, increase cost-sharing, reduce their network of providers, or
reduce "extra benefits" such as dental care or eyeglasses.
Some carriers (most likely the smaller ones) may choose to get out the business entirely.
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According to the US Centers for Medicare & Medicaid Services (CMS) Access to MA
supplemental benefits remains steady and beneficiaries’ average out-of-pocket spending
remains constant
The average MA premium in 2013 was projected to increase by $1.47 from last year
Access to the Medicare Advantage program remains similar to past enrollment
Medicare Spending Reductions
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Under the Affordable Care Act Medicare spending growth will be capped at a rate of
½ percent more than the growth of the U.S. economy (GDP – Gross Domestic Product)
Under the Affordable Care Act spending reductions cannot:
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Establish an Independent Payment Advisory Board
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15 medical experts (nominated by the President and approved by the Senate)
Must make recommendations to reduce spending if Medicare spending exceeds the
growth rate of the economy plus ½ percent
The Board is prohibited from:
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Reduce traditional existing benefits
Reduce eligibility
Increase taxes, premiums or co-pays
rationing care, increasing revenues, changing benefits, eligibility, co-pays, premiums,
subsidies
Congress can change any of the boards recommendations
Medicare Spending Reductions
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If Congress does not change those recommendations or cannot agree on
alternative, then the recommendations of the IPAB will be implemented
Potential issues with these provisions:
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How successful will these provisions be in reducing waste, promoting efficiency, and
reducing pricing/costs?
What will be the practical impact of downward pressure on provider payments at a
period of potentially higher patient volume?
Will these reductions reduce the number of providers that will see Medicare and
Medicaid patients?
What will be the practical impact of these reductions on doctor patient interactions?
Medicaid Eligibility Expansion
Low Income Coloradans
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Expanding Medicaid Eligibility
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On January 1, 2014 Colorado will expand Medicaid eligibility to all citizens and
legal residents under the age of 65 if they have annual incomes between 0% and
133% of the federal poverty level.
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All applicants are presumed eligible and do not have to wait for the application to
be approved
The Colorado Health Institute estimates that:
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In 2013: $15,856 for an individual and $32,499 for a family of four
Under the ACA the federal government will pay 100% of the cost of these newly insured
Coloradans for 2014, 2015 and 2016. Beginning in 2020 the state will pay 10% of the
cost of these expansions
240,000 Coloradans will gain Medicaid coverage by the year 2020. Of that number:
 167,000 will be newly insured
 73,000 will move to Medicaid from private insurance
Expanding Medicaid Eligibility
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The expansions are projected to add $4.4 billion to the state economy and about
22,000 new jobs by the year 2025
Potential issues with the expansion of Medicaid eligibility:
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Will there be enough Medicaid providers / workforce to meet the increased demand (at
least in the near term)
Will federal funding be reduced over time (Hospital Provider Fee and 90% federal
contribution)
Health Insurance Exchanges
and Subsidies
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Colorado Health Benefits Exchange
Connect for Health Colorado
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Creates state-based Health Benefit Exchanges and Small Business Health Options
Program (SHOP) Exchanges: Administered by a governmental agency or non-profit
organization (COHBE will be operational beginning October 2013, with full coverage on
January 1, 2014)
Individual and SHOP exchange: Individuals and small businesses with up to 50
employees can purchase qualified insurance coverage beginning in October 2013.
Establishes minimum qualifications for plans that offer coverage in the exchange
(QHP – Qualified health plans)
Establishes minimum essential benefits “Essential Benefits Package”
No “Active Purchasing”
Premium tax credit and Cost Sharing Subsidies: Are only available for coverage
purchased through the exchange
Colorado Health Benefit Exchange
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Metal Tiers —Four Levels of Coverage:
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Bronze Tier: Represents minimum creditable coverage and provides the essential
health benefits, covers 60% of the benefit costs of the plan, with an out-of-pocket limit
equal to the Health Savings Account (HSA) current law limit ($5,950 for individuals and
$11,900 for families in 2010)
Silver Tier: Provides the essential health benefits, covers 70% of the benefit costs of the
plan, with the HSA out-of-pocket limits
Gold Tier: Provides the essential health benefits, covers 80% of the benefit costs of the
plan, with the HSA out-of-pocket limits
Platinum Tier: Provides the essential health benefits, covers 90% of the benefit costs of
the plan, with the HSA out-of-pocket limits
Catastrophic plan for individuals under 30
Tiers are based upon how much the plan pays for and not benefits
Federal Health Insurance Subsidies
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Advanced Premium Tax Credits: You are eligible for an APTC if:
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You are a lawful resident of the U.S.
You plan to file taxes for the benefit year
Not eligible for government insurance (Medicaid, Medicare, CHIP, Tricare, VA)
Your income is between 100 and 400 percent of the Federal Poverty level
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In 2013 (FPL changes every year): annual income between $11,490 and $45,960 for an
individual
Or an annual income between $23,550 and $94,200 for a family of four
If your employer does not offer coverage
If the premium for your employer sponsored insurance (individual plan) is more than 9.5%
annual family income at the time of enrollment
If the employer’s plan covers less than 60% of health costs
APTCs can only be used in a state or federal health insurance exchange who will
advance the credit to your insurance company
Average credit $5,320 in 2014; $7,500+ in 2022
Federal Health Insurance Subsidies
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The tax credit will be based upon your annual income:
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Average credit $5,320 in 2014; $7,500+ in 2022
To claim an APTC you must:
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Agree to file a tax return
If married file a joint return
Certify that you are not a tax dependent
Attest you will claim personal exemption for each person identified in the coverage family
Purchase insurance through the exchange
Federal Health Insurance Subsidies
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Family size and income can change:
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Birth or adoption
Marriage or divorce
New job
Job loss
Higher salary, promotion, increased hours
If you got too much premium tax credit based on your actual income, you owe
If you got too little premium tax credit based on your actual income, you get a
refund
Federal Health Insurance Subsidies
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Federal Cost Sharing Subsidies: People with income between 100 percent and 250
percent FPL are also eligible for cost-sharing subsidies, which allow them to enroll in
plans with a higher actuarial value (these plans are more generous). The plan will pay a
greater amount of the covered costs, taking that burden off of the enrollee
Cost-sharing subsidies are paid directly to the plan (There is no reconciliation requirement
at the end of the tax year).
Federal Health Insurance Subsidies
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Federal Health Insurance Subsidies
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Potential issues with subsidies
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Federal subsidy funding may be reduced in the future
Subsidies for employees who have unaffordable family coverage are based upon
individual coverage
Individuals will move in and out of subsidy eligibility (churn). Subsidies may have to be
refunded to the government
Employers / Employees and
Health Insurance Coverage
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Employer Penalties
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52% of the private sector in Colorado offers health insurance
49% of the private sector offers health insurance in the United States
From 2000 to 2011 the percentage of small businesses offering coverage in the U.S.
dropped from 68% to 57%
There is no strict “employer mandate”
Penalties only apply to companies with more that 50 full time employees (30 or
more hours per week or 130 hrs. in the calendar month)
Part time employees are factored into the 50 employee calculation (less than 30
hours per week) (Total number of hours worked in a month by the part-time employees
and divide by 120 to get the number of part-time-equivalent employees for the month)
Employers do not have to offer coverage to part time or seasonal employees and
these employees do not trigger a penalty
Employer Penalties
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Employer coverage penalties (Effective January 1, 2014)
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Employers that do not offer health insurance coverage:
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Employers that do not cover at least 95% of their full time employees
Assesses employers with 50 or more full-time employees that do not offer coverage
and have at least one full-time employee who receives a premium tax credit a fee of
$2,000 for each full-time employee, excluding the first 30 employees will be
assessed.
Example: Total of 50 employees – 30 employees = 20 employees x $2,000 =
$40,000 annual penalty (but penalty is paid on a monthly basis)
Alternative Example: $166.67 per month multiplied by the number of full-time
employees, excluding the first 30
Part time or seasonal employees that receive a subsidy do not trigger the
penalty and do not have to be offered coverage
Penalties delayed to 2015 for employers intending to offer coverage
Employer Penalties
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Employers that offer coverage:
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Note: Employees who are offered coverage by an employer are not eligible for
premium credits (subsidies) unless the employer plan does not have an actuarial
value of at least 60% or if the employee share of the premium exceeds 9.5% of
income for employee only coverage.
Penalty is triggered if one employee receives a federal subsidy to purchase
insurance
Employers with 50 or more full-time employees that offer coverage but have at
least one full-time employee receiving a premium tax credit, will pay the lesser of
$3,000 for each employee receiving a premium credit or $2,000 for each fulltime employee, excluding the first 30 employees.
Penalty is assessed monthly (May be as much as $250/month per employee
receiving subsidy)
Part time or seasonal employees do not trigger the penalty or need to be
offered coverage
Employer Penalties
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Potential Issues with Employer penalties
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Employer Sponsored Insurance – future coverage trends
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Employers may drop coverage and pay the applicable penalty and redesign
compensation arrangements for full-time employees (the penalty may be cheaper than
buying insurance)
Employers may offer coverage to a portion of full time employees and pay the penalty
for the remainder
Employers may choose to hire more part time employees in the future to limit penalty
liability
Employers may choose to restructure and turn full time employees into part time
employees (larger companies, low skilled employees, un-competitive labor markets)
Moving to defined contribution as opposed to defined benefit plans
Less benefits, higher employee contributions, higher deductibles and out-of-pocket costs
Taxes
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Taxes That Would Apply to Individuals
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Unreimbursed Medical Expenses Deduction: Increases the threshold for the
itemized deduction floor for unreimbursed medical expenses from 7.5% of adjusted
gross income to 10% of adjusted gross income for regular tax purposes. The provision
waives the increase for individuals age 65 and older for tax years 2013 through
2016. (Effective January 1, 2013)
Medicare Part A Tax Increase: Increases the Medicare Part A (hospital insurance)
tax rate on wages by 0.9% (from 1.45% to 2.35%) on earnings over $200,000 for
individual taxpayers and $250,000 for married couples filing jointly. (Effective
January 1, 2013)
Taxes That Would Apply to Individuals
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High Income Unearned Income Tax: Imposes a 3.8% tax on unearned income for
higher-income taxpayers (thresholds are not indexed). (Effective January 1, 2013).
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Applies to individuals with a modified adjusted gross income in excess of:
 $125,000 (married filing separate)
 $200,000 (single)
 $250,000 (married filing jointly)
This tax applies to: interest, dividends, royalties, annuities, rents, income from passive
business activities, income from trading in financial instruments or commodities, gains
from assets held for investment like stock and other securities
This tax does not apply to: gains from assets held for business purposes, distributions
from IRAs /Roth IRAs, Income from tax-exempt and tax-deferred nonqualified vehicles
like municipal bonds, etc
Taxes That Would Apply to Individuals
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“Cadillac” or High Value Plan Tax (Effective January 1, 2018)
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Imposes an excise tax (which can be passed down to consumers through higher
premiums) on insurers of employer-sponsored health plans with aggregate values that
exceed $10,200 for individual coverage and $27,500 for family coverage.
The tax is equal to 40% of the value of the plan that exceeds the threshold amounts
Will likely not apply to seniors that are on Medicare or Medicare Advantage
THANK YOU
Robert Semro
Policy Analyst
Bell Policy Center
[email protected]
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