The Good
Medicaid Expansion
Right now Medicaid coverage eligibility varies from state to state; but as an adult who is neither elderly or disabled or pregnant, getting on Medicaid is next to impossible even if you're poor. Most poor families can get their children covered due to CHIP, but not the parents. PPACA changes this, now the whole family will be covered. Anyone under 133% of the Federal Poverty Level will be eligible for Medicaid, even if youre completely healthy, single, with no kids. The only requirement required will be a measure of income.
Currently, Medicaid funding is split between the Federal Government and the States. Ideally its a 50/50 split, realistically its more like 60/40. However, the people who will qualify under the new rules will be covered 100% by the Federal Government until 2017. After that, the Federal money will scale back slightly, though they will continue to provide 90% of the funding with no expiration date.
Unfortunately, due to a Supreme Court ruling last year, the states are not required to expand Medicaid. Considering the billions of dollars of Federal money that will enter their state economies, most states are still expected to go ahead with it. Some, like Washington, are even setting the income level higher than 133%. However, other, more spiteful states, like South Carolina, are refusing. Ill discuss this in more detail later.
This is actually where many, if not most, of the newly covered people will come from; not private insurance.
Medicaid Reimbursement Increases
One problem with Medicaid is that it can be difficult to find doctors who accept it because it often pays out significantly less than Medicare (which usually pays less than Private Insurance plans). The help with that, Medicaid reimbursement rates have been set to match Medicares rates. On average, this will increase Medicaid payouts by 73%; though it (like most shit in this country) varies wildly from state to state.
The downside? The increase is only for 2013 and 2014. In 2015 all those rates drop back to their original rates. Personally, I think this may have been a budget trick pulled by Democrats to keep the overall cost of PPACA low. After two years of paying Medicare level rates, Congress will likely extend the rates rather than allow Medicaid rates drop by ~50% in 2015 when millions of Americans will be relying on doctors accepting Medicaid. If this cost had been included in the original bill it would have hurt the CBO rating. But its possible theyre really just that stupid and think that the temporary increase will get doctors to take Medicaid and then not care when the reimbursements plummet.
Insurance Exchanges
The Exchanges are virtual marketplaces, where many different insurance plans are offered. They all have to provide information about their plans in simple to understand language, with a standardized form so that they can be easily compared side-by-side. Most of this will be on a website, though I suppose there will be other means of selecting a plan for people without internet access. In theory, each state will run their own Exchange, but theyre not required to do so. States that dont wish to have their own will use one run by the Federal Government instead. Every plan on the Exchange must meet the coverage requirements in PPACA, and the states may set the requirements for plans on their Exchange to be higher if they wish it.
Plans will be rated as either Bronze, Silver, Gold, or Platinum plans. Theres not currently anything that spells out what kinds of plans are at each level, its dependant upon the cost sharing of the plan. Plans that take more of the cost burden are rated higher, and will likely have a higher premium. But one way to think about the difference between the ratings is like this:
Bronze - Lowest premiums, meets the bare minimum requirements. High Deductible plans. [60% actuarial value]
Silver - Low deductible with co-insurance plans. [70% actuarial value]
Gold - Co-Pay plans [80% actuarial value]
Platinum - Gold plans with additional benefits (Dental, Vision, Life Insurance, etc). [90% actuarial value]
The subsidies a person or family receive is then based on the second cheapest Silver plan. It is also based on their income compared to the Federal Poverty Level. For example, a young family of four has an income of $59,000 and the second cheapest Silver plan costs around $11,000. Because they make ~250% of the Federal Poverty Level, they are expected to pay 8.05% of their income towards the premium, and the subsidy picks up the rest. As a result they would pay $4600 and the government would pay the remaining $6400. However, if they wanted to they could apply this $6400 subsidy to any other plan on the Exchange. So they could choose the cheapest Bronze plan, apply that $6400 subsidy, and then pay whatever remains. Or pick a more expensive Platinum plan and apply the $6400 to that.
Out of Pocket Subsidies
Less often discussed than the premium subsidies, but related, are subsidies to reduce the Out-of-Pocket costs for low income families. The way this works is that there is a maximum limit for everyone: $6000 individual and $12500 family in 2014. But depending on your income, the government will pick up some of those out-of-pocket costs. So the family of four from the last example would only have an out of pocket maximum of $6250 for the whole family. The government would then pay the other $6250 of out of pocket costs if they occurred.
While the premium subsidies will be paid directly to the insurance providers, its currently unclear how these subsidies will work. Or at least I havent found an official explanation. Do families have to pay the cost, and get reimbursed? Does the government pay the insurance company to cover the cost? Does the government pay the health care provider in place of the patient?
SHOP Exchanges
These Exchanges are similar to the Exchanges for individuals, but they sell small group insurance plans to small businesses. And the government helps to subsidize these plans as well.
Medicare Advantage Payment Reductions
Medicare Advantage (Medicare Part C) is a program that allows seniors to choose from private insurance plans, rather than using the Federal Medicare plan. The idea behind this is the fallacy that private companies can always provide better results for lower costs than the government. However, the plan also provides a 15% bonus to the insurance companies. So, if the average cost to the government per Medicare recipient is $10,000, the government pays Medicare Advantage plans $11,500. Plus the plans are typically more expensive for the recipients than normal Medicare. So the government pays more, seniors pay more, and insurance companies profit. PPACA eliminates the 15% bonus - Medicare Advantage plans will now be paid the same as it costs to cover the average Medicare recipient for that year.
This is a large chunk of the Medicare Cuts Republicans have been bringing up in the past two elections.
Closes Medicare Donut Hole
Medicare Part D was introduced during the Bush administration as a way to help seniors pay for prescription drugs. However, it had a weird coverage plan:
$0 - $295 -> Patient pays 100% (Deductible)
$295 - $2700 -> Medicare pays 75%, Patient pays 25%
$2700 - $6154 -> Patient pays 100% (Donut Hole)
Over $6154 -> Medicare pays 95%, Patient pays 5%
PPACA closes the coverage gap. As of this year, Seniors only pay 50% for name brand drugs (79% for generics). This will eventually shrink between now and 2020, at which point they will pay 25%, eliminating the hole completely.
Mandatory Coverage Regulations
All plans will now have to cover a list of conditions and procedures. PPACA itself simply lays out broad categories (like Maternity Care) that they all must cover. The Department of Health and Human Services then decides what falls under each category. There are also limits set on out-of-pocket costs, no annual coverage limits and other regulations. I listed most of them above so I wont list them all again here. The goal here is to eliminate the problem of millions of Americans being Underinsured.
Abolishment of Pre-existing Conditions
This is a pretty significant reform, but doesnt take much to explain. In 2014, insurance plans cannot deny you coverage based on any health problems you may already have. The one kink in this is that they dont have to cover anything that occurs in the first 30 days youre on the plan. So calling up and buying insurance right after you break your legs, but before you go to the hospital isnt going to do you any immediate good. It will have to cover any follow ups related to the broken legs that occur more than 30 days later, however.
Contraceptive Coverage
Another part of the Mandatory Coverage, but one I felt deserves its own discussion. All plans are now required to cover contraceptives at 100%. Theres not really much more to say here, the benefits of giving nearly all women access to free birth control should be obvious.
Coverage of dependents up to 26 years old
Dependents may now stay on their parents/guardians health insurance plans until they are 26. This has been in effect for a few years now. If youre under 26, you can remain on your parents plan even if:
- You dont live with them
- You are married (but spouse/children are not covered)
- You are not financially dependent upon them
- You are eligible for insurance through your employer or school
The only exception for this is certain Grandfathered group plans, but this exemption ends in 2014.
State Exchange Waivers
In 2017, the DHHS will begin providing waivers to states who do not wish to run an Exchange or Medicaid. They will be required to have some other state-wide plan in place to provide their residents with healthcare. The most obvious example of this is the state of Vermont which recently passed a law to create a statewide single-payer plan for all residents. In 2017, when they will likely receive the waiver, they will be able to redirect the funds spent on the Exchange and Medicaid to their states single payer plan instead.
Business Mandate
Much like the Individual Mandate, there is also a requirement that businesses with more than 50 full time equivalent employees provide them with health insurance. Full time equivalent means that the business takes the number of hours worked by all employees in a month, divides it by 130 (~30 hours a week) and thats the number of full time equivalent employees they have. So simply hiring part time workers does not avoid the mandate, though there are problems with part time workers (discussed further below).
The insurance plan must provide minimum essential coverage defined by PPACA, must provide a minimum value of 60% cost coverage, and the employees portion of the premium must be less than 9.5%.
If a business does not provide this, they are taxed. There are two scenarios. In the first, they do not provide any insurance at all. If this happens, the tax is $2000 per full time employee, but the first 30 employees are excluded. The second scenario is where they do provide insurance, but some employees still buy on the Exchanges and get a subsidy. In this case, the tax is $3000 per employee that receives a subsidy, or $2000 per full time employee minus 30 employees; whichever is less.
And these rules apply to non-profits as well as for-profit businesses.
If youre interested in more details about the Business Mandate, the IRS issued its Rules regarding how it interprets this portion of PPACA and you can read them here.
The Not-So-Public Public Options
While the Public Option (a government run plan sold on the Exchanges) did not survive to the final legislation, I am fairly certain a weaker option was included in its place. The DHHS will select two insurance plans which will be made available in all states, one of which must be a non-profit plan.
I am having trouble finding information about this at the moment though, so take this with a grain of salt until I can find more info.
Here is a New York Times article about this part of PPACA. It's actually the Office of Personnel Management that is overseeing these plans, not DHHS. The question now seems to be whether or not these plans were bargained away as part of the tax deal at the start of 2013.
The Bad
Individual Mandate
Im sure most people have heard about this by now. Starting in 2014, if you do not have health insurance that meets standards set by PPACA you will have to pay a fine/tax. The penalty is assessed per person. So if two family members have insurance, but three dont the penalty is applied based on three people. In 2014 the penalty is relatively small, but increases in 2015 and 2016:
2014 - $95 per person, up to $285 for a family OR 1% of income -- whichever is higher
2014 - $325 per person, up to $975 for a family OR 2% of income -- whichever is higher
2014 - $695 per person, up to $2085 for a family OR 2.5% of income -- whichever is higher
There is also a fixed cap on the penalty, even for the percentage based penalty. The penalty cannot be higher than the cost of the cheapest Bronze plan available.
Also, the penalty for children under 18 is only half of the amount listed above.
Also, the penalty is applied monthly. So if you have insurance for 7 months, and no insurance for 5 months, you pay 5/12ths of the penalty listed above. And if you are uninsured for 3 months or less, the penalty is waived.
And incase that wasnt enough to wrap your mind around, there are also several exemptions to the mandate:
- If you make less than 100% FPL.
- If the cheapest plan available is more than 8% of your income after any subsidies you may qualify for. Even if its an employer plan.
- Certain religious groups who do not participate in the healthcare system, such as the Amish.
- Also, Native Americans, incarcerated individuals, people visiting on business, and illegal aliens are exempt.
Cadillac Insurance Tax
Starting in 2018 insurance plans that are expensive will be taxed. The tax is 40% of the cost of the plan above the threshold. For individual plans the threshold is $10,200, and $27,500 for family plans. So if a family plan costs $30,000 a year, the tax would be 40% of $2500 -- $1000 in tax. The tax is paid by the insurance provider, not the insured. However, the expectation is for some portion of the cost to be passed to the customer. There are also exemptions for plans for people over 55, and people in high risk professions.
Generally, unions are less than thrilled with this provision. As are big businesses that provide expensive benefits. So I wouldnt be surprised to see a push to eliminate this in 2017.
Medicare Payment Reductions
To help lower overall costs, and free up money for PPACA, changes were made to some of the formulas for calculating payments that Medicare makes to hospitals and other providers. The change is designed to allow the payments to continue to increase, just at a slower rate than they would have otherwise. The fear here is that it may cause some healthcare providers to decide they dont want to accept Medicare anymore. However, I also think that wed see Congress block these reductions if that becomes an issue. But its still an area that could end up being bad, or no big deal. Hard to say at this point.
Waivers and Grandfather Plans
Currently things are really confusing because there are all these new regulations to help improve insurance coverage; but at the same time the government is handing out waivers and grandfather exemptions to plans and companies like candy on Halloween. As a result, companies like McDonalds are still giving their employees shitty mini-med plans that come nowhere close to meeting the currently in place regulations. The expectation is that most of these will run out in 2014 or soon after, but it makes it confusing because it means benefits are in place for some people, but not for others.
Preventative Care Becomes Diagnostic Care
PPACA requires that preventative care is covered 100%. However, some of these procedures can suddenly cost money without a patients knowledge. For example, a routine colonoscopy at 50 should be covered 100% by insurance. But if the doctor finds something wrong, it ceases to be preventative and becomes diagnostic, which means the insurance company does not have to cover it 100%.
If youre healthy, its free; if they find bad news, you get to pay for it! Yay!
Single People Pay More Than Families
An oddity of the way subsidies are calculated is that its possible for someone to pay more for insurance if theyre alone than if they are paying for an entire family. For example, if youre single and make $45,000 a year, you may pay up to $4,275 for your own insurance. But a co-worker with a family of four making the same pay would pay $2,672 a year for their entire family.
Great news for families, but really weird and doesnt seem to make much sense that covering one person costs more than covering a family. In reality, the family plan is more expensive; its just that the subsidy for the single person is nearly nonexistent, but for the family its about $10,000 a year.
The Ugly
The Obamacare Cliff
This is any issue I havent really seen mentioned in the news much; perhaps because it will only affect a small number of people. But it is pretty bad. Like most American social safety nets, Congress stupidly included a hard cap at 400% FPL for benefits, rather than simply allowing benefits to slowly decrease to nothing. For many people this is a non-issue because as they get closer to 400% FPL, their expected insurance costs will be less than the 9.5% required for subsidies.
However, there are people for whom this is not true. The most obvious example are people in their late 50s to early 60s who dont yet qualify for Medicare, live in an expensive area, but make more than 400% FPL ($46,000). For someone in this situation, the expected health insurance plan cost is $12,206 a year; but they dont qualify for any subsidy. At $46,000 a year, they would receive a subsidy worth $7,800 a year; but if they made an extra $50 for the entire year, the entire subsidy vanishes and theyre left choosing between paying $12000+ for insurance or no coverage.
The good news is that since insurance would cost them more than 25% of their income, theyre exempt from the mandate. Kind of like how getting punched in the face is better than being kicked in the balls.
Optional Medicaid Expansion/People under 100% FPL barred from the Exchanges
In the Supreme Court Case last year, the Supreme Court ruled that the means by which PPACA tried to encourage the states to expand Medicaid was effectively extortion (dont think they used that term), and illegal. PPACA proposed that they could expand Medicaid, or choose not to expand Medicaid. But if the states did not expand Medicaid, they would lose ALL Medicaid funding. The SCOTUS ruled that the Feds still had to provide the current agreed upon Medicaid funding so long as the state continued to meet the original requirements for that funding.
As a result, some states are choosing to not expand Medicaid; effectively cutting off their nose to spite Obama. But it actually gets worse. For people between 100% FPL and 133%, PPACA allows them to choose either Medicaid or use the Exchanges and pay 2% income with the rest subsidized. So for people in states like South Carolina who are between 100% and 133% FPL, they can still get insurance on the Exchanges. But PPACA expressly states, over and over again, that the Exchanges are for people over 100% FPL. Which means that people who are below that point, but live in states who dont expand are out of luck. They are excluded from the mandate though. Ball-kick meet face-punch.
Encourages Part-time jobs
While the business mandate requiring that companies share in the expense of providing health insurance for their employees is pretty much a good thing, there is a weird wrinkle in this portion of the law. The rules for calculating whether or not a business is required to provide insurance includes part-time workers. However, the portion of the law that is used to calculate the penalty for not providing insurance does not include part time workers. As a result, a business with 100 part time employees and 25 full time employees is required to provide insurance, but their penalty for not doing so is $0.
Now, you may be wondering what the fuck they were thinking. I have no idea
Lack of Cost Controls
One of the benefits mentioned earlier was that plans will now have to spend at least 85% (or 80% in some cases) of the money collected from premiums on paying for medical care. This is known as a medical-loss-ratio. Unfortunately, there are very few cost control measures in PPACA. As a result, insurance plans can simply offer to pay providers more money, raise premiums on customers, collect larger revenue, and grow the 15% that they get to keep. In theory the states are supposed to be on guard against this; plans that increase prices too steeply year after year may be removed from the Exchanges. Unfortunately, this relies on having an insurance commissioner with real powers. In some states this is the case, in other states the best you can hope for is a strongly worded letter of disapproval. Similarly, the competition provided by the Exchanges are expected to keep plans from jumping in prices too much. Whether or not this works remains to be seen.
Abortion Bans
There is a clause related to abortion coverage in PPACA. It states that every states Exchange must provide at least one plan that does NOT cover abortion. However, there is no related clause which states they must provide at least one plan which does cover abortions. As a result, some states will likely exclude abortion coverage from their Exchanges. This may have legal impacts, but Im not a legal expert, so Im not sure what kind of legal challenges individuals could bring against a state that did this.
