By Kevin W. Ryan JD, MA
On March 23, 2010, the Patient Protection and Affordable Care Act (the “Act”) was signed into law. Comprising of approximately 2,000 pages, the Act, commonly referred to as health care reform, has dozens of programs and initiatives. Some of these began taking effect almost immediately after health care reform was passed with the others becoming operational over the next ten years. Complicated and intricate? Definitely. However, health care reform as legislated in the Act is readily understandable, at least in the broad sense.
Most important to this understanding is the fact that the Act is first and foremost about maintaining health insurance coverage for those presently insured and expanding health insurance coverage to the uninsured. All elements of the Act are directly or indirectly related to this concept and, when viewed through the coverage lens, health care reform becomes easier to comprehend.
On that day in March when President Obama signed the Act, there were an estimated 50 million people in this country without health insurance. To help us understand health care reform, let’s consider the following hypothetical—but very likely—scenarios before and after the Act became law.
First, Debbie and Tom Richardson. They have three gorgeous girls aged 9, 6, and 18 months. Tom is 38 years old and works as a diesel engine mechanic for Griggs Engine Works, a nine person company. Debbie is 36 and works at home, caring for the house and children. She also works part-time at a local big box retailer. Together they make about $28,000 a year. With this joint income, they pay for the mortgage on their modest three bedroom house, monthly payments on Tom’s four year old truck, and other necessities of daily life—food, utilities, clothes, etc. They also are paying on a credit card bill of over $12,000. They used the card to pay for Debbie’s doctor and hospital care when she broke her ankle stepping off the back porch three years ago. While their children have health insurance coverage through the subsidized State Children’s Health Insurance Program (“SCHIP”) plan, neither Tom nor Debbie is insured. Tom’s company offered health insurance at one time, but dropped it several years ago due to the steadily increasing cost of premiums. Due to her part-time status, Debbie does not qualify for the health plan at her job, and because of the economy, there have not been any full-time positions open nor are any expected in the near future. The Richardsons know they need health insurance coverage and would purchase it if they could find an affordable option but, to date, have not been able to do so.
Second, Carmen Rodriquez. Carmen is a 52-year-old human resources manager for a clothing manufacturer with 125 employees. She is divorced and her only child is married and lives out of state. Carmen is grateful that she has health insurance through her job; she was diagnosed with breast cancer four years ago and has had surgery and chemotherapy—all covered by her health plan. She remains cancer free but is very concerned that if the rumored closure of her company occurs, she will no longer have health insurance and will not be able to obtain an individual policy due to her pre-existing condition.
Finally, Laquita and Louis Franklin. Laquita is 45 years old and teaches fourth grade. Louis is 51 and also a teacher. They have one child, Tammy, who is 24 and living at home while attending college. Laquita and Louis have health insurance coverage through the school district, but they had to drop Tammy last year when she no longer qualified for their plan due to age. Tammy has sickle cell anemia that requires that she visit the doctor frequently; she also has to take several daily medications. At present, the Franklin family is paying for this care out of their savings.
The Act consists of over 2,000 pages and will likely result in the promulgation of hundreds of thousands of pages of rules, regulations, and guidance. Many consider this to be the most sweeping change in the health care system since Medicaid and Medicare were enacted in 1965. It is certain that health care reform’s broad reach will impact all of us. While a thorough review of the Act’s many elements is beyond the scope of this article, it is possible to review some highlights and salient points.
As noted above, the Act’s primary focus is on health insurance coverage. Why is coverage important? Numerous studies have shown that health insurance coverage is directly related to our physical and fiscal health; those without coverage tend to be sicker and receive care that is both less effective and more expensive as compared to those with health insurance.
Health care reform works through a combination of new requirements and/or restrictions on individuals, employers, government, and the health insurance and health care industry. Inducements and penalties for each of these groups serve to further the Act’s coverage expansion goals.
Individuals: Beginning January 1, 2014, most Americans will be required to show proof that they have health insurance. If you already have insurance and your plan meets minimum standards set by the government (the standards are still in development at the time of this article), then you will comply with this requirement to have coverage. If you do not have coverage, you will either have to obtain it through your place of employment, through a spouse or parent, or in the individual marketplace.
Under health care reform, low income adults will have another option for coverage through Medicaid; states will be required to expand Medicaid program eligibility to cover uninsured adults less than 65 years old and with incomes below 133% of the Federal Poverty Level (“FPL”). Adults making more than this but still considered poor (between 133% and 400% FPL) will receive a subsidy from the government to facilitate purchase. To ensure that affordable coverage options are available for all persons required to buy health insurance, states will be required to open insurance exchanges or marketplaces, that will offer plans meeting minimum cost and benefit requirements. In order to compel compliance with this new coverage mandate, individuals who do not comply with the purchase requirement will be subject to a penalty of either $750 or 2% of their income, whichever is greater.
Employers: When compared to other countries, the United States’ employer-based health insurance system is singularly unique. Of those with health insurance today, approximately three-quarters receive coverage through their employers. The Act continues this employer-based health insurance model into the future by incorporating employers as a key element of the reform framework.
Beginning in 2014, employers with 50 or more full-time employees will be required to offer health insurance to their employees or pay a penalty of $750 for each worker. To encourage compliance, many businesses, especially smaller ones, will be eligible for tax credits if they maintain or initiate health insurance. As with individuals, employers will have new marketplaces where affordable group health insurance can be purchased. These state, regional, and/or national small business health insurance exchanges will be required to be operational beginning
January 1, 2014.
Government: The impact of health care reform on state and federal government is significant. Among the many changes, perhaps most important is the directive that states will be required to expand Medicaid eligibility for low income adults to 133% of the FPL. While a few states already provide public financed health insurance coverage for these persons, many states do not. This new expansion represents a potentially significant expense for state governments, although the federal government will pay most of the state’s newly incurred costs during the initial years after the Medicaid expansion takes effect in 2014.
As noted above, states will also be required to open or participate in new health insurance marketplaces for individuals and small businesses to guarantee that affordable health insurance options are available for those subject to the new coverage mandates.
New requirements for the federal government include gradual closure of the Medicare prescription drug “donut hole” (beginning in 2011 with complete closure by 2020), supporting research and programs to improve health care quality and efficiency in delivery and in concert with the states expanding access to information for health care consumers.
Health Insurers: Arguably, the majority of new mandates and requirements in the health care reform legislation impact health insurance companies and the health care industry. Many of these elements (eliminating lifetime limits on coverage, prohibiting denial of children’s coverage based on pre-existing conditions, and extension of coverage for children on parents’ health plans to age 26) have already been initiated. Other restrictions on carriers will begin on or before
January 1, 2014. By that date, health insurers will no longer be able to refuse coverage for individuals based on their past medical history, nor charge plan enrollees higher premiums due to gender or health status.
So given all of this, what will happen to health care in this country now that health care reform has been passed? Estimates vary but it is likely that at a minimum over 35 million persons currently without health care coverage will become insured by 2014. Supporters of health care reform also hope that expansion of health insurance coverage will provide stability to the health care system and ultimately lower the steadily increasing cost of care. Of course, political opposition and legal challenges may yet significantly alter the scope and reach of the Act, but assuming that the Act provisions are implemented as originally intended, what would be the result for our three opening scenarios?
Debbie and Tom Richardson. After January 1, 2014, the Richardsons will have several new options to obtain health insurance coverage. Assuming they still have an income less than 133% of the FPL, Debbie and Tom will be eligible to enroll in their state’s SCHIP program. Alternatively, Tom’s employer may take advantage of the newly available tax credits and purchase coverage for its employees through the small business health insurance exchange now in operation. As a result, for the first time, the entire Richardson family will be insured.
Carmen Rodriquez. Should her company close, Carmen will be able to purchase coverage through the individual health insurance exchange that will become operational in her state. By law, the coverage she purchases will be required to be affordable and offer a minimum standards benefits package. The health insurance company will be restricted from using Carmen’s past history of cancer as a reason to not issue her coverage nor will they be allowed to consider her health status in determining her premium.
Laquita and Louis Franklin. The Franklins were able to re-enroll their daughter Tammy onto their health plan in the fall of 2010; she will be able to stay covered until her 26th birthday. She may be able to find work with a company that offers health insurance; she also will be able to obtain coverage through a new high-risk health plan if her state opens one with new federal funding authorized under the Act. After January 1, 2014, Tammy will also be able to purchase coverage through the state’s new health insurance exchange.
So there you have it; health care reform made simple. Many new requirements and inducements, a series of carrots and sticks in the Act all working together to maintain and expand health insurance coverage across the United States. While there is optimism that the goals of health care reform will be achieved, at this point, only time will tell.
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Kevin W. Ryan JD, MA, is an attorney with a focus on public health law and health care finance. He is an Associate Professor in the Department of Health Policy and Management at the Fay W. Boozman College of Public Health at the University of Arkansas for Medical Sciences where he serves as the Assistant Dean for MPH Programs. Professor Ryan also is the Associate Director for Law and Policy at the Arkansas Center for Health Improvement in Little Rock. He can be reached at email@example.com.