Kansas State University


Issues in Health Reform

Category: ACA and business

The ACA’s first five years

Recent testimony to the Senate shows different perspectives on the success and continuing challenges of the Affordable Care Act.

The Commonwealth’s testimony provides a well documented report on the different ways in which the ACA has changed health care delivery in the US. The Commonwealth used Congressional Budget Office figures, usually considered an unbiased source.

Basically, the good news for consumers:

  • more people, of all races and ages, are insured
  • most of those people are satisfied with their insurance
  • less people report being unable to get needed care because of costs…a reflection of lessening financial difficulties due to medical care costs
  • people have found paying for insurance easier in the Marketplace (subsidies have gone a long way…and yes, a pending King v Burwell judgment may change all of that)
  • the markets themselves have proved quite stable
  • states that have not expanded Medicaid (including Kansas) continue to have higher rates of uninsured
  • the rate of growth of health care spending has slowed allowing reduction in projected costs
  • young adults remaining on parents’ plans is significant

Know that other testimony was not as positive. Small businesses find that they are still struggling to provide insurance, sometimes in a volatile market. (See the testimony from the National Federation of Independent Business.) Note though that since the ACA does not mandate small businesses to provide insurance, many of those workers are able to seek insurance in the Marketplaces.  So while it may impact the small businesses in that being able to provide employer sponsored coverage is a currently a marketing and recruitment tool for the best and most skilled workers, those workers still have options.  It will be interesting to watch how this part of the market responds, especially as the SHOP (Small Business Health Options Programs) becomes more popular. The SHOPs offer businesses under 50 employees a marketplace of their own to find plans at better rates. Those under 25 employees are also eligible for subsidies to assist them in paying for premiums for their employees.

And testimony from the Mr. Holtz-Eakin, President of the American Action Forum,was most negative of all:

“The main promise that we heard repeated over and over again was that the ACA would provide universal access to affordable coverage of high-quality health care. In these remarks I will discuss (1) coverage, (2) affordability, (3) quality, and (4) access to care under the ACA.

The ACA has been riddled with wasted money and broken promises. It has proven to be poor growth policy, red-ink budget policy, flawed insurance policy, and poor health care policy. Instead of growth, it has contributed to a mediocre recovery. Instead of fiscal responsibility, it has exacerbated the red ink that plagues the government. Instead of universal coverage for the uninsured, the retention of valued policies and lower premiums, it has produced spotty, uneven coverage expansions, the forcible loss of valued polices and higher premiums for all. And instead of bending the cost curve and raising quality, it has delivered limited access to doctors and the loss of preferred providers.”

This testimony seems focused more on technical glitches and precise wording of promises, rather than an ability to understand the major successes that have accrued to millions of Americans as noted in the CBO figures and Commonwealth report. Mr. Holtz-Eakin speaks to premium increases without regard to the significant impact the tax subsidies are having on the actual out of pocket costs to consumers of those premiums. He complains that Medicaid is not doing as it had intended, yet it was the Supreme Court’s decision that limited significantly the impact Medicaid expansion could have on decreasing the numbers of uninsured, not the ACA itself. Mr. Holtz-Eakin seems concerned with not having access to preferred providers but those decisions are really within the realm of the insurance plans, and they have been changing those, without any laws, for years. Suffice it to say that I find this testimonial to be mostly emotionally charged, focused on specifics of language, rather than seeing the millions who have been helped by ACA consumer protections (including no exclusions for pre-existing conditions, no annual or lifetime maximums of coverage, no non-issuance of plans, and coverage of preventive service, free at time of service).

There are problems with ACA, as noted by the business community, and there is still a long way to go on reforming the system of health care delivery. But as noted by the Commonwealth testimony:

“ At the five-year mark, there is strong evidence that the Affordable Care Act has resulted in gains in coverage, affordability, and access to health care services. It may also have created the foundation for significant changes to the way we deliver and pay for care. Taken together, a promising picture emerges. Five years, however, is a short time in the life of legislation as ambitious and sweeping as the ACA. Additional studies and evaluations will be necessary to paint a fuller picture of the law’s impact on Americans and their health care system.”

SCOTUS decision on birth control increases inequities between employer based and Exchange health insurance policies

A less talked about impact of the Supreme Court ruling about employer based insurance and birth control coverage is the widening gap of freedom of choice between those locked into employer based insurance and those able to purchase insurance available in the Marketplace/Exchanges.

In the past, most employer based insurance has been among the most comprehensive, especially compared to plans many individuals were able to afford on their own in the private market.  Because of ACA however, now all plans cover at minimum the same set of essential benefits…until this ruling.  Now some employers will be able to limit coverage.  (Note, some grandfathered plans aren’t yet up to date on all preventive benefits but they are set to sunset as soon as those plans make a change.)

So can affected employees shop in the Marketplaces for coverage they may prefer? Yes, but because they have an employer based option they are not eligible for tax credits if they do so. These workers would basically be turning down the employer-supported plan and going solo on costs.

Giving less freedom of choice to workers was rational within the broader intent of ACA to expand, rather than supplant, the current insurance market that relied heavily on employer based plans.  To keep the balance weighted with employers as major providers of insurance, there is both the large employer mandate (delayed until January 2015) and the rule that makes workers who are offered affordable and adequate health insurance through their employer ineligible for the tax premium credits in the Marketplace.

Therefore, the SCOTUS decision intensifies this inequity between those who can freely go to the Exchanges and those who are locked into employer based plans.  This becomes acute as women may now have even more reason to want to make their own choices as to their best insurance options.  Women who would prefer their plans to cover a full range of contraceptives will be at a financial disadvantage to those without employer based options who get premium assistance.  Over 80% of people purchasing Marketplace policies qualified for such assistance.

Smaller large employers (50-99) are now being given until Jan 2016 to come into compliance with ACA employer mandate

The Obama administration has made what many consider a political move by extending the deadline for compliance with the employer mandate for smaller large employers (50-99).  The Kaiser Foundation has rounded up several news article that have covered the story.

Previous blogs (July 4, 12, August 20, 2013) discussed how the original delay in the employer mandate really didn’t matter much in terms of getting Americans insured.  That argument is still relevant here. It’s the Individual Mandate that matters…even if some may prefer the idea of having employers be more responsible for offering health insurance as a benefit to their employees.

As we may remember the original employer mandate was to apply Jan 1, 2014 for all businesses with over 50 employees.  These businesses were going to be required to offer insurance to all of their full time employees (defined as 30 hrs week or more).

The other requirements were that the insurance must be

  • affordable, defined as premiums that cost no more to the worker than 9.5% of annual household income AND
  • adequate, an insurance term that categorizes the type of shared costs of the plan.  To be adequate, the plans must overall pay for about 60% of the annual costs of care on average for their workers. These plans in the Marketplace are categorized as Bronze plans.

The first delay was giving those businesses until Jan 1, 2015.  This extended that delay for the smallest of those larger businesses til Jan 1, 2016. 

While trying to quell one political concern (having insurance policies cancelled or changed around November election time 2014) it raises a new one:  why do businesses keep getting a delay in their mandate but not individuals?  The answer to that may have to do more with the economics of how ACA is designed rather than political expediency or out-right unfairness. (And this was addressed in that Aug 20 blog.)

The goal of the ACA was to get as many people insured, as fully as possible.  Even if employers aren’t mandated to provide insurance to their workers there are now alternatives with relatively affordable plans:  the Marketplaces.

The plans being offered in the Marketplaces are both “affordable” and at least “adequate” as defined above.  That is, they are much better than many of the plans that people in the private market, and even those in employer-sponsored plans, were holding.  While some have complained that the premiums of the policies in the Marketplaces are too high, there are tax credits to help share the cost of those premiums for individuals and families under 400% of poverty (roughly $94,200 for a family of four).  BUT those Marketplace plans are really very affordable for people who had previously been locked out of insurance all together, usually because they had pre-existing conditions.

So, even though many may be bothered by not requiring employers to offer insurance, others will see that as long as there are policies that cannot turn away seekers, and policies that are relatively affordable, then ACA can continue to march toward fuller insurance for all Americans.

It could also be that one of the ACA best assets is that it frees Americans from relying on the workplace for insurance.  That is, as we delink insurance from the workplace it will free up a lot more opportunities for people to work where and for whom they choose.(see blog dated Nov 12.)  The Marketplaces offer the group rated premiums that previously were only available to the largest of businesses.  Now individuals can get those policies on their own.  In fact, this latter issue is one that caused a stir last week.  A CBO report was issued that said 2 million people would leave the workforce.  Republicans claimed this was because of employers laying off workers.  The CBO actually attributed most of this chance to choices people would be making to leave jobs they no longer wanted.  Apparently many are working solely to maintain health insurance coverage which they would not be able to purchase elsewhere (or be eligible for Medicaid in states where eligibility criteria was expanding to include all who were under 138% of the poverty line).

As a reminder, businesses with less than 50 employees were NOT mandated to offer insurance and those under 25 employees were offered financial tax incentives if they were to choose to do so.



Delinking health insurance from the workplace

I’ve been speaking to one main advantage of Obamacare being the lifting of job lock, where folks get to choose to work where they want and not be afraid of being cut off from health insurance. Thomas Friedman’s opinion in the New York Times adds a particular urgency to this issue…that new jobs being creating are going to be less and less those that will come with insurance as a fringe benefit, so that the new economy dictates the need for delinking insurance from the workplace or at the least, having affordable options for workers and their families.

Job lock is lifted because now no one can be denied health insurance because of pre-existing conditions, there is place to purchase health insurance that offers large group level premiums similar to those in workplace (that’s what the Exchanges are about), and where feds operate similarly to employers by helping folks pay for those plans.  With the feds, they help those with less than 400% of the federal poverty line pay for insurance by way of the tax credits.  Employers usually paid a portion of the premium as well but rarely based on salary level of employee.

Delay in employer mandate may not impact number of people insured nor costs

NEW STUDY by Rand verifies basic findings from Urban Institute report original July 18 posting as below, THOUGH it does point to a significant loss of federal income due to expected penalties not being collected.

“In July 2013, the Obama administration announced a one-year delay in enforcement of the Affordable Care Act’s (ACA) penalty on large employers that do not offer affordable health insurance coverage. To help policymakers understand the implications of this decision, RAND analysts employed the COMPARE microsimulation model to gauge the impact of the one-year delay of the so-called employer mandate. They found that the delay will not have a large impact on insurance coverage: Because relatively few firms and employees are affected, only 300,000 fewer people, or 0.2% of the population, will have access to insurance from their employer, and nearly all of these will get insurance from another source. However, a one-year delay in implementation of the mandate will result in $11 billion dollars less in federal inflows from employer penalties for that year. A full repeal of the employer mandate would cause revenue to fall by $149 billion over the next ten years (10% of the ACA’s spending offsets), providing substantially less money to pay for other components of the law. The bottom line: The one-year delay in the employer mandate will have relatively few consequences, primarily resulting in a relatively small one-year drop in revenue; however, a complete elimination of the mandate would have a large cumulative net cost, potentially removing a nontrivial revenue source that in turn funds the coverage provisions in the ACA.”

A report issued by the Urban Institute states that “The one-year delay in ObamaCare’s employer mandate won’t have much effect on the law’s costs nor the number of people it covers.”  The report summarizes though that a change in the individual mandate will have a significant impact.  Having a parallel delay in the implementation of the individual mandate is something currently being considered by Congressional Republications, though like their attempts at full repeal of the law, it is not destined for any traction.

The analysis in the report predicts a decline from 19% to only 15% without the individual mandate, down to 10% with the individual mandate.  Without the employer mandate this model predicts the number of uninsured to go to 10.2% uninsured rather than 10.1% with the mandate. That is, the difference with or without the employer mandate is pretty insignificant in terms of impacting the numbers of newly insured.


How the Marketplace works even in spite of delayed employer mandate

Much has been made about the Obama administration’s recent decision to delay till Jan 1, 2015 the implementation of the employer mandate (requirement that all businesses over 50 full time employees provide adequate and affordable health insurance to their workforce).  This thoughtful piece from Wendell Potter (former insurance company CEO) of the Center for Public Integrity states well how this issue is being overblown from the perspective of having insurance available for citizens.  Many believe that the Marketplace will be ready to open in October for plans to begin January 1 and it is that marketplace that offers new potentials for consumers:  anyone can purchase insurance regardless of a pre-existing condition and workers will no longer be job locked because of health insurance benefits leading to the potential for more small business start ups (covered in an earlier blog).

Wendell does not deal with the individual mandate and how that will “encourage” the purchase of insurance (weak disincentive in the form of relatively minimal fines if one does not participate).  Not surprisingly, we are now seeing calls to delay the individual mandate timing to balance the delay in the employer mandate.  The NY Times had this to say about those Republican efforts.

I agree with Wendall that many of the few who work for large firms that will take advantage of this delay will welcome having an alternative Marketplace where they can go to purchase insurance and, depending on income, receive tax credits (basically have Uncle Sam share the premium bill with them).

One issue that I’ve not yet seen discussed has to do with how this is likely to increase the costs borne by the federal budget.  All along ACA has been predicated on the success of three different legs of the stool that make up how Americans are to be insured: employer-based insurance, public insurance, and now the Marketplace.

Employer-based insurance is a major leg of that stool.  Part of ACA’s success in reining in costs was the expectation that larger employers would help foot the bill by offering insurance as a work benefit.  Prices of products and services those businesses sell have always been impacted by how much their insurance costs are.  That will continue, unless and until health care prices are better controlled.

However, if some of this leg is less strong because some of the businesses over 50 don’t have to participate for another year, that means that workers may be looking to another leg of the stool, the Marketplace.  How much that Marketplace may cost the federal government may now be a heightened concern.

The initial ACA cost estimates for the federal portion of Marketplace costs were based on a certain number of individuals using the Marketplace and being eligible for tax credits.   The delay in the employee mandate is likely to increase the numbers looking to the Marketplace (after all, most Americans would have been buying insurance if it had been affordable and they had not been denied coverage).  And many of those new ones in the Marketplace will be eligible for tax credits where they would not have been had they be in employer sponsored plans.  So the costs of the delay of implementation of the employer mandate may result in a larger burden for cost sharing on the part of the federal government.

An interesting benefit of all of this is that we will be able to see more clearly just how much is really being spent on health care, at least as much as we translate the cost of premiums to be a reflection of the cost of care.  Right now many of the costs for the uninsured, the uncompensated care, get built into the cost of premiums for those of us who do purchase insurance.  And the costs borne by businesses are buried in the costs they charge for their products and services.  Perhaps more transparency of what it really is costing us for health care, and what we are really getting for those dollars (not very good population health outcomes) will help us ask the more difficult questions about the quality of what we are buying.  All thoughts for another day.


Delay in implementing large employer (over 50) requirement for offering adequate and affordable health insurance


Breaking news these past few days has been the delay til Jan 2015 in the requirement (and concomitant penalty tax) that large employers (over 50 FTEs) have to offer adequate and affordable insurance to their employees.  I’ve read several takes on this.  Most are political though they do include some truisms.  This one from Nancy Benac of Associated Press has the basics right…though I’d start from her last paragraph that explains what’s still left. 


The Baltimore Sun ran an editorial that focused on the political fallout being worse than the reality.  I think that is likely to be true.


That editorial highlights that only 5% of businesses are over 50 FTEs (most American businesses are apparently relatively small enterprises), and of those over 50 FTE already almost 95% of those offer insurance (and are likely to continue to do so since it is the way to recruit and retain the best and the brightest).  I am not sure if all of those plans would meet the affordable (less than 9.5% of the worker’s income toward premiums for a single plan) nor the adequacy provisions (no more than 40% of the total expected costs of health care out of pocket are to be paid by the worker in a given year).  So, there may be some trickiness here.

As for Extension, I believe that we still need to prepare folks to be ready for Jan 1 start date for the marketplace, and perhaps to remind folks of all of the other consumer protections already built into health  insurance that they can feel more secure about…and that if they aren’t offered health insurance at work, they will now be mandated to purchase it, and that the Marketplace with options is the place to go to find those plans.

Will companies stop offering health insurance because of ACA?

This Wall Street Journal article poses this interesting question to three expert: Kevin Kuhlman, a manager of legislative affairs at the National Federation of Independent Business, a research and lobbying group for small business; Christine Eibner, an economist at RAND Corp. who has studied the possible effects of the law on health-insurance markets; and David Marini, managing director, strategic advisory services, at Automatic Data Processing Inc.,ADP +0.52% who also has studied the law’s effects.

They speak to the potential for some employers to decrease work hours to avoid the penalty for not offering insurance to all workers, but note that this is not a certainty.  Kuhlman notes that employer based insurance had already been declining significantly pre ACA.   Their discussion is worth a read.  Eibner presents more data to back up her assertions.

Here is a journal article by Arthur Tacchino that covers much of the same topic but really challenges: A new way to think about employer-sponsored health care coverage strategies.