Chapter 4 – Affordable Care Act

FAST FACTS

  • An estimated 20 million Americans gained coverage under the Affordable Care Act (ACA) as of early 2016, 12.7 million of whom enrolled as individuals through the insurance marketplace (source) (source).
  • During the open enrollment period for 2017, 9,201,805 individuals signed up for ACA marketplace insurance in the 39 states that use the healthcare.gov platform (source). This compares to 9,625,982 who enrolled through healthcare.gov in the previous year (source). Data from all 50 states and D.C. won’t be available until a later date.
  • During 2016 enrollment, 85 percent of individuals enrolling through the federal marketplace were eligible for premium tax credits (source).
  • The Congressional Budget Office (CBO) estimates that marketplace enrollment will reach 15 million in 2017, and stabilize between 18 and 19 million between 2018 and 2026 (source) (source).
  • The number of uninsured Americans fell from 37 million in 2010, about 20 percent of the population, to 29 million, or about 16 percent of the population, after the first open enrollment period ended in 2014 (source). As of April 2016, the uninsured rate is at about 12.7 percent, down from 19.9 percent in September 2013 (source).
  • As of August 2016, more than 10.5 million Medicare beneficiaries had saved $20.8 billion on prescription drugs, an average of $1,945 per beneficiary, since the ACA was enacted in 2010, according to the Centers for Medicare & Medicaid Services (CMS) (source).

BACKGROUND

The Patient Protection and Affordable Care Act, more commonly known as the Affordable Care Act (ACA) or Obamacare, officially rolled out its major coverage provisions on October 1, 2013.  Three years later, it remains as controversial as the day President Barack Obama signed it, according to polls (source) (source). And despite the law surviving two major Supreme Court challenges with most of its provisions intact (source) (source), the results of the 2016 elections now place the future of the law in doubt. President Donald Trump campaigned on a pledge to “completely repeal Obamacare” (source), and his administration and congressional Republicans drafted a bill, the American Health Care Act (AHCA), that would have made major changes to ACA provisions, but it was withdrawn from consideration by House Speaker Paul Ryan on March 24, 2017 (source). Talks continue between the White House and congressional leaders for a revised health care bill (source).

SUPREME COURT

Although implementation was proceeding as scheduled, it was not until June 28, 2012, that the Supreme Court settled a threshold legal question in the National Federation of Independent Business et al. v. Sebelius. In a 5 to 4 ruling, in an opinion authored by Chief Justice John Roberts, the court held that Congress could, in fact, impose the so-called individual mandate, given Congress’ power to levy taxes. In so doing, the court upheld the central tenet of the ACA (source)

However, it did impose a significant – and unexpected – change to the law. In the same case, the states’ suit against the Department of Health and Human Services (HHS) had also argued that the law’s mandatory expansion of Medicaid – the joint federal-state health program for those with low incomes – was unfairly coercive (source). The states argued that the law essentially blackmailed them by making them either expand Medicaid to everyone with incomes up to 133 percent of the federal poverty level (amounting to $16,394 for an individual in 2017), or give up all their Medicaid funds (source). The court agreed, and the justices held that the Medicaid expansion was optional and up to the discretion of the states.

In November 2014, the Supreme Court announced its plans to hear King v. Burwell, a case that questioned the constitutionality of premium subsidies offered through federally-run marketplaces. The Court heard oral arguments in March of 2015, wherein the petitioners argued that wording in the ACA (“established by the State”) prohibited the issuance by the IRS of tax credits and cost-sharing reductions offered by states that do not operate their own exchanges (source).

On June 25, 2015, the Supreme Court ruled 6-3 to uphold the health law subsidies, holding that Congress did not delegate the authority to the IRS to determine who would receive tax credits and that Congress clearly intended subsidies to be applied to all types of marketplace exchanges (source). As a result, the more than 6 million consumers (around 87 percent of total marketplace consumers) who receive federal subsidies to purchase health coverage can continue to be able to do so (source).

WHAT THE ACA DOES

The coverage provisions of the law have gained by far the most attention. But they are only one of three major pieces of a multi-part measure. What follows is a summary that can serve as a beginner’s guide to the law:

Insurance Reforms

Many portions of the ACA are aimed at establishing new rights and benefits for patients who have health care coverage from private insurance companies, regardless of how they gain such coverage.

The insurance-related provisions of the law offer several protections to patients, including elimination of cost-sharing for preventive services (source); restrictions on insurance companies from dropping coverage because a person gets sick (source); and allowing parents to keep adult children on their health insurance plans until age 26 (source).

Another rule requires insurance companies to spend 80 to 85 percent of each premium dollar (depending on the policy) on direct medical expenses, rather than administrative costs or profit. If a plan exceeds the limit, called a medical loss ratio, it must refund the difference (source). The law also requires that premium increases greater than 10 percent be automatically reviewed, making it easier for states to deny rate hikes (source).

Quality Improvement, Delivery System Changes and Cost Containment

One of the most frequent complaints by ACA opponents is that it does not do enough to contain the rising cost of health care. The ACA, however, includes changes intended to test possible ways to make care more efficient, effective, and less expensive in the future. It created the Center for Medicare and Medicaid Innovation (CMMI) to encourage and oversee demonstration projects in this area (see Delivery System Reform chapter). Here are a few examples of emerging models:

  • Patient-Centered Medical Homes are intended to encourage doctors to work in partnership with nurses and other health professionals to provide primary care services. The idea is to give patients a one-stop shopping experience where they can get multiple medical needs met in a coordinated fashion, and by the appropriate member of the care team. (source).
  • Accountable Care Organizations, or ACOs, are groups of physicians, hospitals, and other health care providers that band together to manage the health of a population of patients, and take the financial risk for keeping those patients healthy across a wide variety of care settings. ACOs, which are similar to health maintenance organizations (HMOs) and other types of managed care plans, are designed to encourage care quality improvement (source).
  • The Independent Payment Advisory Board, or IPAB, one of the more controversial cost-related provisions of the ACA, called for a 15-member panel to make recommendations if Medicare spending exceeded certain limits compared to the growth of the economy as a whole (source). Starting in 2013, Congress was required to act on IPAB’s proposals or pass legislation that would save the same amount of money. If Congress failed to act, the secretary of the Department of Health and Human Services (HHS) was required to implement the cuts as recommended by the IPAB (source). Despite predictions that the IPAB might be triggered by Medicare spending growth in 2017, as of September 2016, the Obama Administration had not appointed anyone to the board. If no one is appointed to IPAB by the time Medicare growth triggers its convening, the HHS secretary would dictate the recommendations to check Medicare spending (source).

Health Insurance Coverage Expansion

Most of the major expansions of insurance coverage were implemented on January 1, 2014. Since then, about 28 million Americans have gained health coverage either through the marketplaces or through Medicaid (source). An estimated 2.3 million young adults gained coverage by getting insurance under their parents’ health plans (source).

Much of the attention, when it comes to expanding coverage, has gone to the health insurance marketplaces. These are online portals where individuals and small businesses may shop for insurance, find out if they qualify for tax credits or subsidies to help them afford coverage and, if they have very low incomes, get referred for enrollment in Medicaid (source).

Originally, Medicaid was expected to account for half of the law’s increase in coverage; about 17 million more people by the year 2022, according to the Congressional Budget Office (CBO) (source). But the Supreme Court ruled in 2012 that the ACA’s Medicaid expansion was optional for the states, and since then only 32 states including Washington, D.C. have expanded their programs. HHS estimates that enrollment in Medicaid and the Children’s Health Insurance Program (CHIP) has increased by 14.5 million since October 2013 (source).

Under the ACA, insurance companies cannot refuse to cover individuals with pre-existing health conditions, and they cannot charge higher premiums based on medical history. It is because of this provision that Congress, at the urging of the insurance industry (source), also included an individual mandate, whereby most Americans are required to obtain or maintain insurance coverage or pay a tax penalty (source). In 2017, the annual fee for not having insurance is $695 per adult, $347.50 per child (up to $2,085 for a family), or 2.5 percent of household income above the tax return filing threshold for a person’s filing status – whichever amount is greater (source).

Public Health and Prevention

The ACA also includes provisions geared toward improving population health. (See Public Health and Prevention chapter.) The law created the first mandatory funding stream dedicated to improving the public’s health with the Prevention and Public Health Fund (PPHF) (source). Money goes toward activities ranging from prevention programs to workforce building initiatives. These activities include community and clinical prevention initiatives; research, surveillance and tracking; public health infrastructure; immunizations and screenings; tobacco prevention; and public health workforce and training (source). The ACA originally authorized $18.75 billion for the fund between FY 2010 and FY 2022, and $2 billion each year after 2022 (source). On February 22, 2012, President Obama signed the Middle Class Tax Relief and Job Creation Act of 2012, which significantly shrunk the fund (source). For FY 2016, Congress appropriated $1 billion for the fund (source).

Long-Term Services and Supports

One thing the law does not include is a program to help people pay for long-term services and supports (LTSS) provided in the home. (See Long-Term Services and Supports section.) As part of the year-end bill to address the “fiscal cliff,” at the end of 2012, Congress repealed the Community Living Assistance Services and Supports (CLASS) Act, which was part of the ACA (source).

LOOKING AHEAD

President Trump and Republican leaders in Congress have placed a high priority on repealing and replacing the ACA in 2017, but the first legislative attempt to do so, the American Health Care Act (AHCA), was withdrawn from consideration by House Speaker Paul Ryan on March 24, 2017 (source). Talks continue between the White House and congressional leaders for a revised health care bill (source).

A full repeal of the ACA would require Democratic votes in the Senate, since 60 votes would be needed to block a filibuster. Through the budget reconciliation process, provisions of the law with a budgetary impact can be rolled back, but that would leave intact major parts of the law, such as the requirement that insurers cover anyone regardless of health history (source).

In addition, any replacement for the ACA could take time – possibly years – to implement. In the meantime, millions of Americans are getting insurance coverage through the ACA marketplaces and Medicaid expansion, and an immediate repeal of those parts of the 2010 law could leave millions without coverage. Even small changes in the near term could cause additional insurers to stop selling policies on the individual market, leaving consumers with few if any options to purchase coverage (source).

To address insurer participation in the marketplaces, the Centers for Medicare & Medicaid Services issued in February 2017 a proposed rule that would shift some regulatory oversight to the states and that would both shorten the open enrollment period and tighten the rules for special enrollment (source). The proposed rule was designed to make it more appealing for insurers to remain in the ACA marketplaces in 2018 (source).

Concerning both the design of a new Republican health care plan and maintaining viable insurance markets during a transition period, experience with the ACA puts the spotlight on two areas:

  • Affordability. The ACA was expressly designed to help spread the cost of insurance more broadly. That helps mostly older and/or sicker people pay lower premiums, but to make that happen, others pay more, mostly those who are younger and/or healthier.However, if young consumers can’t be enticed to purchase health coverage, the relative lack of healthy policyholders in the risk pool will drive up premiums for those who do purchase insurance. In the individual market, where people have a choice between purchasing coverage or paying a fine, many younger people have continued to simply pay the fine, since in most cases it totals far less than the cost of coverage, even after penalties are fully phased in (source).HHS in 2016 launched a campaign to enroll young adults. Adults under age 35 represented about 45 percent of all 2014 taxpayers who paid the penalty for not purchasing health insurance. Leading up to the fourth open enrollment period for 2017 coverage, HHS announced that it would coordinate with the Internal Revenue Service (IRS) to reach out to uninsured individuals and families. It also created private-sector partnerships with organizations such as Lyft and the American Hospital Association to further target younger enrollees (source).Additionally, with the recent announcement of several large insurers cutting back their participation in the ACA marketplaces ahead of 2017 open enrollment, premiums for benchmark plans on the federal marketplace rose by an average of 26 percent from 2016 to 2017, according to HHS (source). Insurers exiting the marketplaces cite more than anticipated sicker and costlier patients in justifying their exits from the marketplaces (source). These issues raise significant questions about the stability and future of the ACA marketplaces.
  • Cost Containment. Even after the passage of the ACA there remains a huge debate about the best ways to rein in health care spending. Republicans generally want to limit government involvement in health care and promote competition in the health care markets (source). Democrats want to stay the course with the ACA and have been taking credit for the slower growth in health care spending over the last several years, even though there is widespread disagreement about whether that can be attributed to the law, or that the trend will continue (source).

EXPERTS

Drew Altman, president and CEO, Kaiser Family Foundation, 650/854-9400

Joseph Antos, Wilson H. Taylor scholar in health care and retirement policy, American Enterprise Institute, 202/862-5938, jantos@aei.org

Joel Ario, managing director, Manatt Health Solutions, 202-585-6500, jario@manatt.com

Lynn Blewett, professor, health policy & management, University of Minnesota, 612-624-4802, blewe001@umn.edu

Linda Blumberg, senior fellow, Urban Institute, 202/261-5709, media@urban.org

Tom Bradley, chief, Health Systems and Medicare Cost Estimates Unit, Congressional Budget Office, 202/226-9010, tom.bradley@cbo.gov

Mollyann Brodie, executive director, public opinion and survey research, Kaiser Family Foundation, 650/854-9400

Stuart Butler, senior fellow, The Brookings Institution, 202/238-3183, smbutler@brookings.edu

Michael Cannon, director of health policy studies, Cato Institute, 202/789-5200, mcannon@cato.org

James Capretta, resident fellow and Milton Friedman chair, American Enterprise Insititute, jcapretta@aei.org

Sean Cavanaugh, deputy administrator and director, Centers for Medicare & Medicaid Services, 410/786-3350, sean.cavanaugh@cms.hhs.gov

Gary Claxton, vice president, director, Health Care Marketplace Project, co-director, Program for the Study of Health Reform and Private Insurance, Kaiser Family Foundation, 202/347-5270

Sara Collins, vice president, health care coverage and access, The Commonwealth Fund, 212/606-3838, src@cmwf.org

Sabrina Corlette, research professor and project director, Georgetown University Center on Health Insurance Reforms, 202-687-3003, sc732@georgetown.edu

Cynthia Cox, associate director, Program for the Study of Health Reform and Private Insurance, Kaiser Family Foundation, 202/347-5270, ccox@kff.org

John Dicken, director, health care issues, Government Accountability Office, 202-512-7043, dickenj@gao.gov

Stan Dorn, senior fellow, Health Policy Center, Urban Institute, 202/261-5709, media@urban.org

Paul Fronstin, director, Health Research & Education Program, Employee Benefit Research Institute, 202/775-6352, fronstin@ebri.org

Jon Gabel, senior fellow, National Opinion Research Center, 301/634-9313, Gabel-Jon@norc.org

Rachel Garfield, associate director, Kaiser Commission on Medicaid and the Uninsured, Kaiser Family Foundation, 202/347-5270

Paul Ginsburg, director, Leonard D. Schaeffer Initiative for Innovation in Health Policy, University of Southern California, 202-797-6268, pginsburg@healthpolicy.usc.edu

Dan Hawkins, senior vice president for public policy and research, National Association of Community Health Centers, 202/296-0131, dhawkins@nachc.org

Douglas Holtz-Eakin, president, American Action Forum, 202-559-6420, dholtzeakin@americanactionforum.org

Timothy Jost, Robert L. Willett Family Professor of Law, Washington and Lee School of Law, 540-564-2524, jostt@wlu.edu

Genevieve Kenney, codirector, Urban Institute Health Policy Center, 202/261-5709, media@urban.org

Jon Kingsdale, director, Wakely Consulting Group, 339-927-1138, jonk@wakely.com

Larry Levitt, senior vice president, special initiatives, Kaiser Family Foundation, 650/854-9400

Dan Mendelson, president, Avalere Health, 202/207-1310, dmendelson@avalere.com

Thomas Miller, resident fellow, American Enterprise Institute, 202/862-5886, tmiller@aei.org

Robert Moffitt, senior fellow, Heritage Foundation, 202/608-6210, Bob.Moffit@heritage.org

Rachel Nuzum, vice president, federal and state health policy, The Commonwealth Fund, 202/292-6722, rn@cmwf.org

Kavita Patel, nonresident fellow, economic studies, The Brookings Institution, 310/968-1627

Kip Piper, president, Health Results Group, 202/558-5658, piper@healthresultsgroup.com

Karen Pollitz, senior fellow, Health Reform and Private Insurance, Kaiser Family Foundation, 202/347-5270, kpollitz@kff.org

Chas Roades, chief research officer, The Advisory Board Company, 202/266-5326, roadesc@advisory.com

Sara Rosenbaum, professor, George Washington University Milken Institute School of Public Health, 202-994-4230, sarar@gwu.edu

John Rother, president and CEO, National Coalition on Health Care, 202/638-7151, jrother@nchc.org

Diane Rowland, executive vice president, Kaiser Family Foundation, 202/347-5270, drowland@kff.org

Robin Rudowitz, associate director, Kaiser Commission on Medicaid and the Uninsured, Kaiser Family Foundation, 202/347-5270, rrudowitz@kff.org

Alina Salganicoff, vice president and director, Women’s Health Policy, Kaiser Family Foundation, 650/854-9400

Benjamin Sommers, assistant professor, Harvard T.H. Chan School of Public Health, 857-540-1126, bsommers@hsph.harvard.edu

Jennifer Tolbert, director of state health reform and associate director of the Kaiser Commission on Medicaid and the Uninsured, Kaiser Family Foundation, 202/654-1417, jennifert@kff.org

Cori Uccello, senior health fellow, American Academy of Actuaries, 202-223-8196, uccello@actuary.org

Brian Webb, manager, health policy and legislation, National Association of Insurance Commissioners, 202/471-3978, bwebb@naic.org

Gail Wilensky, senior fellow, Project HOPE, 301/347-3902, gwilensky@projecthope.org

Joel Zinberg, visiting scholar, American Enterprise Institute, Joel.Zinberg@aei.org

 


The Sourcebook was made possible with the support of the Robert Wood Johnson Foundation, with ongoing support from the National Institute for Health Care Management (NIHCM) Foundation.