1 Robert Semro - Policy Analyst, The Bell Policy Center The Affordable Care Act as of 2013 The...

1

Robert Semro - Policy Analyst, The Bell Policy Center

The Affordable Care The Affordable Care Act Act

as of 2013as of 2013

April 26-27, 2013

2

The Legal and Political Status of the Affordable

Care Act (ACA)

3

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Payment Advisory Board and the 2.3% excise tax on medical device manufacturers may be repealed or significantly changed

.

THE ACA DOES NOT REPRESENT THE END OF HEALTH CARE REFORM !

The ACA in 2013

4

A Brief Summary of Insurance Reforms in the

Affordable Care Act

5

Insurance reforms – 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)– 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

6

Insurance reforms (Cont.) – 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 Private Insurance Reforms

7

Medicare– 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)

Expansion of Medicaid – 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.

ACA – Medicare and Medicaid

8

Reform Details

9

The Individual Mandate

10

The Affordable Care Act requires that:– 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

The Requirement to Have Minimum Health Insurance Coverage

Source: FY2012-13 JBC Staff Budget Briefing, December 15, 2011, page 43

11


The minimum coverage provision would not apply to:– 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

12


How the minimum coverage provision is enforced:– 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.

13


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:

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

14

Medicare and Seniors

15

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

– 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

Summary of ACA Provisions

16

Closing the Medicare Part D Coverage Gap (Donut Hole) – 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

Annual Wellness Visits for Seniors as of January 1, 2011, the annual wellness visit benefit includes the following services:

– 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

17Source: http://familiesusa2.org/assets/pdfs/health-reform/Consumer-Guide-Medicare-Preventive-Care-Benefit.pdf

Specific Provisions Affecting SeniorsMedicare Preventive Services

18Source: http://familiesusa2.org/assets/pdfs/health-reform/Consumer-Guide-Medicare-Preventive-Care-Benefit.pdf


19 Source: http://familiesusa2.org/assets/pdfs/health-reform/Consumer-Guide-Medicare-Preventive-Care-Benefit.pdf


20

Changes in Medicare Spending Due to the ACA

21

Under the Affordable Care Act spending will be reduced by over $716 billion dollars between 2013 and 2022. Those spending reductions come from:

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 )– 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

22

Possible Impact to MA Plans– 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.

To date the impact on MA plans has been minimal – 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


23

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:– Reduce traditional existing benefits– Reduce eligibility– Increase taxes, premiums or co-pays

Establish an Independent Payment Advisory Board – 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:

– rationing care, increasing revenues, changing benefits, eligibility, co-pays, premiums, subsidies

Congress can change any of the boards recommendations


24

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: – 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?


25

Medicaid Eligibility Expansion

Low Income Coloradans

26

Expanding Medicaid Eligibility

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.

– 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

All applicants are presumed eligible and do not have to wait for the application to be approved

The Colorado Health Institute estimates that:– 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

27

Expanding Medicaid Eligibility

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:– 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)

28

Health Insurance Exchanges and Subsidies

29

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 Benefits ExchangeConnect for Health Colorado

30

Metal Tiers —Four Levels of Coverage:– 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

Colorado Health Benefit Exchange

31

Advanced Premium Tax Credits: You are eligible for an APTC if: – 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

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

32

The tax credit will be based upon your annual income:

Average credit $5,320 in 2014; $7,500+ in 2022 To claim an APTC you must:– 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


33

Family size and income can change:– 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


34

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).


35


36

Potential issues with subsidies– 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


37

Employers / Employees and Health Insurance

Coverage

38

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

39

Employer coverage penalties (Effective January 1, 2014)– Employers that do not offer health insurance coverage:

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

40

– Employers that offer coverage: 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 full-time 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

41

Potential Issues with Employer penalties – 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)

Employer Sponsored Insurance – future coverage trends – Moving to defined contribution as opposed to defined benefit plans– Less benefits, higher employee contributions, higher deductibles and out-of-pocket costs

Employer Penalties

42

Taxes

43

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

44

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).

– 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


45

“Cadillac” or High Value Plan Tax (Effective January 1, 2018)– 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


46

THANK YOU

Robert Semro

Policy Analyst

Bell Policy Center

[email protected]

1 Robert Semro - Policy Analyst, The Bell Policy Center The Affordable Care Act as of 2013 The...

Documents

Transcript of 1 Robert Semro - Policy Analyst, The Bell Policy Center The Affordable Care Act as of 2013 The...