Components of ACA Not Working Well

VII. Key Issues: Regulation & Reform >> C. Health Reform >> Affordable Care Act (ACA) >> ACA Repeal >> Components of ACA Not Working Well (last updated 11.20.16)

Insurance Reforms

Children with Pre-existing Conditions

The law was intended to prevent insurers from excluding children with pre-existing conditions effective in 2010, but due to a drafting error, the law made this provision applicable in January 2014 (when it is applied to all adults).  The DHHS subsequently issued a rule on June 28, 2010, that beginning Sept. 23, 2010, group health plans cannot exclude enrollees (employees, spouses or dependents) under age 19 based on pre-existing conditions. A survey conducted in 2011 found that “passage of the new health care law prompted health insurance carriers to stop selling new child-only health plans in many states. Of the 50 states, 17 reported that there are currently no carriers selling child-only health plans to new enrollees. Thirty-nine states indicated at least one insurance carrier exited the child-only market following enactment of the new health care laws.”

Annual Limit Rule Waivers

ACA rules required most insurance plans to begin phasing out annual limits on coverage starting in September 2010 (after which plans cannot have annual limits of less than $750,000; such limits rose to $1.25 million by 2011 and were eliminated entirely by January 1, 2014). However, some companies that employ seasonal workers, part-time employees, and volunteers offer so-called “mini-med” plans (offering basic coverage capped at $5,000, for example). Due to concerns that such companies  (such as McDonald’s) might drop their coverage, the administration began issuing waivers to this requirement. These began as 1-year waivers that were subsequently extended to qualified employers. No waiver applications were accepted after September 22, 2011.  In all more than 1,700 employers covering more than 3.9 million enrollees were given such waivers (more than 100 employers also were denied such waivers, representing more than 1 million enrollees). This included nearly 500 Health Reimbursement Arrangements (HRAs). However, on August 19, 2011 CMS issued guidance that exempts HRAs that are subject to the restricted annual limits as a class from having to apply individually for an annual limit waiver.  Critics have noted that over half (58%) of plan members benefiting from these waivers were labor union members.

Medical Loss Ratio Waivers

The MLR rules require insurers to spend at least 80 percent of premiums on medical care and quality in the individual and/or small group markets (i.e., to spend no more than 20 percent for administrative expenses and profits). A total of 18 states and territories have sought waivers from this requirement. Yet HHS has only approved six of these waivers, and most at levels, and for durations, different than requested by the state.

Early Retiree Reinsurance Program (ERRP)

This was a temporary program to provide employers and other health plan sponsors funding for insuring early retirees between the ages 55 and 65 and their dependents. Eligible plan sponsors were intended to be given partial federal reimbursement for health benefit claims beginning June 1, 2010 until 2014, when the new exchanges were to be up and running. Critics characterized it as mostly a bailout for public-sector and union health benefit programs (government plans accounted for 47% of plans given assistance, while unions accounted for another 10%). On May 5, 2011, DHHS stopped accepting applications for the program and denied all claims after December 31, 2011, because the $5 billion allotted had already been exhausted.

Pre-Existing Condition Insurance Plan (PCIP)

To cover the period between 2010 and January 1, 2014 when new insurance rules would ban insurers from denying coverage to those with pre-existing conditions or charging them higher rates, the ACA created temporary high risk pools starting on July 1, 2010 (the federal government administered the program in 23 states leaving state administrators responsible in the remaining states). CBO originally estimated that 700,000 individuals would be covered through the PCIP, however only about 135,000 were actually served. On February 15, 2013, CMS suspended enrollments and cut back benefits for those in the PCIP plan due to concerns about exhausting the $5 billion allocated for the program.

Comprehensive Benefits Mandate

•  Getting Better Health Care For Much Less Money. “As Congress and the incoming Trump administration consider how to replace the Affordable Care Act (ACA), they should focus on the drivers of excessive spending, the primary one of which is comprehensive health insurance. By doing so, President-elect Trump can best attempt to deliver on his promise of great health care for much less money… Through Medicare, Medicaid, the ACA, and the tax exclusion for employer-sponsored insurance, the federal government is providing more than $1 trillion of subsidies for comprehensive health insurance each year. The subsidies tend to be delivered directly to insurance companies or hospitals. Outcomes would undoubtedly be far better if financial assistance was provided directly to consumers and market forces—producers attempting to satisfy consumer desires and consumers looking for the best deals were allowed to flourish.” Blase, Brian. (Forbes, 11.16.16)

Individual Mandate

Overview

• CBO. Payments of Penalties for Being Uninsured Under the Affordable Care Act: 2014 Update (6.5.14). CBO and JCT have estimated that about 30 million nonelderly residents will be uninsured in 2016 but that the majority of them will be exempt from the penalty. Those who are exempt include:
  • Unauthorized immigrants, who are prohibited from receiving almost all Medicaid benefits and all subsidies through the insurance exchanges;
  • People with income low enough that they are not required to file an income tax return;
  • People who have income below 138 percent of the federal poverty guidelines (commonly referred to as the federal poverty level) and are ineligible for Medicaid because the state in which they reside has not expanded eligibility by 2016 under the option provided in the ACA;
  • People whose premium exceeds a specified share of their income (8 percent in 2014 and indexed over time); and
  • People who are incarcerated or are members of Indian tribes.

CBO and JCT estimate that 23 million uninsured people in 2016 will qualify for one or more of those exemptions. Of the remaining 7 million uninsured people, CBO and JCT estimate that some will be granted exemptions from the penalty because of hardship or for other reasons. Among the uninsured people subject to the penalty, many are expected to voluntarily report on their tax returns that they are uninsured and to pay the amount owed. However, other people will try to avoid payments. CBO and JCT’s estimates of the number of people who will pay penalties account for likely compliance rates as well as the ability of the Internal Revenue Service (IRS) to administer and collect the penalty payments.

• CBO. Payments of Penalties for Being Uninsured Under the Affordable Care Act (9.12.12). An earlier version of this report estimated that 2 million additional individuals would pay the mandate penalty in 2016 and mandate penalty collections would be about $3 billion higher. The 2014 report explained the difference between the two reports as follows: “The decrease in the number of people who are projected to pay the penalty largely stems from an increase in CBO and JCT’s projection of the number of people who will be exempt from the penalty. That increase is attributable in part to regulations issued since September 2012 by the Departments of Health and Human Services and the Treasury and in part to technical updates and changes in the economic outlook.”
• CBO. Payments of Penalties for Being Uninsured Under the Patient Protection and Affordable Care Act (4.22.10). Compared to the 2012 analysis, about two million fewer uninsured people were projected in April 2010 to pay the penalty each year, and collections were expected to be about $3 billion less per year.Most of the difference—about 85 percent—in the number of people who are expected to pay the penalty tax stems from changes in CBO and JCT’s baseline projections since April 2010, including the effects of legislation enacted since that time, changes in the economic outlook (primarily a higher unemployment rate and lower wages and salaries), and other technical updates. A small share—about 15 percent—of the change in the number of uninsured people expected to pay the penalty results from the recent Supreme Court decision.

Exemption Categories

Medicaid Expansion

As of mid-June 2013, only 26 states were firmly committed to the Medicaid expansion permitted under the ACA (which would cover all individuals below 138% of poverty), another state was leaning towards expansion, 4 states were pursuing alternative models, 6 states were leaning towards not participating and 13 were firmly opposed to expansion. As of March 14, 2016, 32 states including DC had adopted Medicaid expansion. The issue was Under Discussion in 3 States and 16 States were Not Moving Forward at this Time.
In states that do not expand Medicaid, individuals between 100-138% are able to obtain highly subsidized coverage on their state exchange. There are 3.1 million uninsured poor individuals who hypothetically might qualify for Medicaid coverage in those 20 states. By the ACA’s design, those below poverty are ineligible for subsidized exchange coverage.

Health Exchanges

Unresolved Policy Issues

• Rosenbaum, Sara. Federal Policy Implementation under the Affordable Care Act: Six Issues Whose Final Resolution Awaits, as Implementation Moves Forward. HealthReformGPS, (8.6.13). “In any law as large and complex as the ACA, it is inevitable that certain important policy issues still await resolution. The issues identified here do not impede implementation. But they are important issues nonetheless, and their resolution will strengthen health reform as it moves forward.”  The author is a strong supporter of ACA, but this comprehensive compendium is useful in illustrating some major problems that may or may not be resolved by ACA’s implementing regulations:
  • Nondiscrimination on the basis of race, national origin, gender, age, or disability in the provision of federally subsidized health insurance
  • Non-discrimination by qualified health plans in the provision of essential health benefits
  • Enforcing the Act’s health insurance market reforms
  • Aligning the Medicaid and Exchange markets
  • Fallback policies in Marketplaces with no, or inadequate, QHPs
  • The community benefit obligations of nonprofit hospitals seeking federal tax-exempt status