Pennsylvania Homecare Association Annual Conference & Exposition May 3, 2017 The Affordable Care Act: Where it Stands Now, and What the Future May Bring Thomas G. Collins, Esq. Buchanan Ingersoll & Rooney PC 409 N. Second Street, Suite 500 Harrisburg, PA 17101 Overview Taking a step back What was the purpose of the ACA? How did the ACA go about expanding coverage? Was the ACA successful in expanding coverage? Were there any negative consequences? The American Health Care Act (Trump/Ryan Plan). Challenges in Replacing the ACA. 2 1
Taking a step back What was the purpose of the ACA? The Patient Protection and Affordable Care Act (ACA) had two central purposes: 1) To make health insurance more affordable. 2) To reduce the number of uninsured Americans. To a lesser extent, the ACA was intended to shore up the Medicare system for older Americans through implementation of the Medicare Surtax. 3 How did the ACA seek to Expand Coverage? The Patient Protection and Affordable Care Act (ACA) expanded health insurance coverage in a number of areas: 1) Expansion of Medicaid for the poorest Americans. 2) Subsidies to Reduce the Cost of Coverage for Americans participating in the ACA exchanges. 3) Coverage for Children Until 26 through their parents plans. 4) Elemination of preexisting condition exclusions. 5) Requiring that group health plans provide Minimum Essential Coverage. 6) Coverage Mandates (Individuals and Employers). 4 2
Medicaid Expansion What did Medicaid Expansion entail? Before the ACA, in order for an adult to qualify for Medicaid in Pennsylvania (by way of example) they had to be disabled or very low-income parents of dependent children (eligibility varied by state). In states that have expanded Medicaid coverage under the ACA (which includes Pennsylvania), all low-income adults are eligible for Medicaid. 5 Medicaid Expansion As an example, in Pennsylvania, before Medicaid expansion, a family of 3 could not qualify if they earned more than $7,420. Now, after Medicaid expansion in Pennsylvania, that same family can make up to $27,821 and still qualify for Medicaid. This is generally true for all states that have expanded Medicaid. For the majority of state Medicaid expansions, individuals generally qualify if they have a household income below 133% of the federal poverty level (which for 2017 is $16,645 for a single person, and $33,948 for a family of 4). Because of the way this is calculated, it turns out to be 138% of the federal poverty level. 6 3
Medicaid Expansion More than 700,000 Pennsylvanians receive health insurance coverage through the Medicaid expansion, which was implemented in January, 2015. As of 2015, Pennsylvanians obtained their health insurance as follows: 18%-Medicaid. 16%-Medicare. 1%-Military & Veterans. 55%-Employer Provided. 6%-Uninsured (down from 10.2% in 2010; lowest it has ever been). 7 Medicaid Expansion 8 4
Subsidies to reduce costs of coverage are provided through Marketplaces/Exchanges in two forms: 1) Premium Tax Credit (PTC). 2) Cost-sharing subsidy (sometimes called additional savings ). 9 Health insurance marketplaces, also called health exchanges, are organizations set up to facilitate the purchase of health insurance in each state in accordance with the ACA. 10 5
The ACA offers subsidies to reduce monthly premiums and out-of-pocket costs in an effort to expand access to affordable health insurance for moderate and low-income individuals particularly those without access to affordable coverage through their employer, Medicaid, or Medicare. There are two types of subsidies available to marketplace/exchange enrollees. The first type of assistance, called the premium tax credit, works to reduce enrollees monthly payments for insurance coverage. The second, additional type of financial assistance, the cost-sharing subsidy, is designed to minimize enrollees out-of-pocket costs when they go to the doctor or have a hospital stay. 11 The premium tax credit (PTC) reduces marketplace enrollees monthly payments for insurance plans purchased through the Marketplace. Health insurance plans offered through the Marketplace are standardized into four metal levels of coverage: bronze, silver, gold, and platinum. Bronze plans tend to have the lowest premiums, but leave the enrollee subject to higher out-of-pocket costs when they receive health care services, while platinum plans tend to have the highest premiums but have very low out-of-pocket costs. The premium tax credit can be applied to any of these metal levels, but cannot be applied toward the purchase of catastrophic coverage. Catastrophic health plans typically have a lower monthly premium than other Qualified Health Plans in the Marketplace, but generally require beneficiaries to pay all of their medical costs until the deductible is met. To qualify for a catastrophic plan, an individual must either be under 30 years of age or eligible for a hardship exemption. 12 6
An individual is eligible for the PTC if he/she meets all of the following requirements: Household income must be at least 100 percent but no more than 400 percent (which in 2017 for a family of four, is $24,600 and $98.400, respectively) of the federal poverty line. Does not file a tax return using the filing status of Married Filing Separately. Cannot be claimed as a dependent by another person. Meets these additional requirements (all in the same month): Has health insurance coverage through a Marketplace/Exchange. Is not able to get affordable coverage through an eligible employer-sponsored plan that provides minimum value. Is not eligible for coverage through a government program, like Medicaid, Medicare, CHIP or TRICARE. Pays the share of premiums not covered by advance credit payments. 13 When an individual enrolls, the Marketplace will determine if the individual is eligible for advance payments of the PTC, also called advance credit payments. Advance credit payments are amounts paid to the insurance company on the individual s behalf to lower the out-ofpocket cost for the health insurance premium. If a taxpayer gets the benefit of advance credit payments in any amount, they must file a federal income tax return and attach IRS Form 8962, Premium Tax Credit, to their return. Taxpayers claim the premium tax credit and reconcile the credit with the amount of their advance credit payments for the year on IRS Form 8962. 14 7
In addition to the premium tax credit, the second form of financial assistance available to Marketplace enrollees is a cost-sharing subsidy (sometimes referred to as the cost-sharing reduction, CSR and/or additional savings ). Cost-sharing subsidies work by reducing a person or family s out-ofpocket cost (OOP) when they use health care services, such as deductibles, copayments, and coinsurance. Unlike the PTC (which can be applied toward any metal level of coverage), cost-sharing subsidies can only be applied toward a silver plan. In essence, the cost-sharing subsidy increases the actuarial value (protectiveness) of a silver plan, in some cases making it similar to a gold or platinum plan. 15 Who is eligible for the cost-sharing subsidy? People who are (1) eligible to receive a premium tax credit and (2) have household incomes from 100% to 250% of the federal poverty lines (which, in 2017, for a family of 4, is $24,600 and $61,500, respectively). The cost-sharing subsidies are in addition to the PTC, and are available only to the lowest-income Marketplace enrollees who meet all of the other criteria for receiving the PTC. 16 8
When an individual fills out a Marketplace application, they ll find out if they qualify for premium tax credits and the CSR/extra savings. They can use a premium tax credit for a plan in any metal category. But if they qualify for the CSR/extra savings too, they ll get those savings only if they pick a Silver plan. If they qualify for cost-sharing reductions/additional savings, they also have a lower out-of-pocket maximum the total amount they d have to pay for covered medical services per year. This means that the silver plan they choose will already have a lowered out-of-pocket maximum than the same plan would in the absence of a cost-sharing subsidy. The federal government pays cost-sharing subsidies directly to the insurer. (Unlike the premium tax credit, there is no option for cost-sharing subsidies to be paid to the enrollee). 17 Example of the Cost-Sharing Subsidy at work in 2017: 18 9
Actuarial Values: In the table above, based on an average person s expected use of healthcare services, Silver Plans have the insurance company pay 70% of covered healthcare expenses. This is referred to as the actuarial value. The remaining 30% of expenses are paid out-of-pocket by the policyholders. These out-of-pocket expenses include deductibles, copayments, and coinsurance. However, the plan s monthly premium is not included as one of these outof-pocket costs. 19 What s the point? Subsidies to make insurance more affordable and increase insurance coverage are a key element of the ACA. Premium and cost-sharing subsidies of varying levels are available to individuals and families with low to moderate incomes, making coverage and care more affordable. These subsidies which represent a substantial share of the federal cost of the ACA provide assistance for low to moderate income families, enabling them to purchase coverage and gain better access to care. Query what is happening in the market for those of us operating outside of the ACA? 20 10
Has the ACA driven up the cost of insurance for the rest of us? Minimum Essential Coverage benefits driving up costs or having other unintended consequences? Larger deductibles and out-of-pocket expenses driving down usage or increasing expense for those operating outside the ACA? 21 Coverage of Children until Age 26 22 11
Coverage of Children until Age 26 The young-adult provision went into effect in September, 2010, and families put it to use quickly, with many young adults leaving their own insurance plans. A report published by the Centers for Disease Control and Prevention in 2013 found in this regard that the percentage of adults ages 19 to 25 with personal plans fell from nearly 41% in 2010 to just over 27% in 2012, while the ratio of those covered through a family member s plan rose by 14 percentage points. And the Department of Health and Human Services said last year that final 2016 marketplace enrollment numbers showed more than 6 million people ages 19 to 25 gained insurance through the health law, including 2.3 million who went onto their family health plan between September 2010 and when online marketplaces began operating in 2014. 23 Coverage of Children until Age 26 Some believe that the ability for young adults to stay on family plans until 26 years of age represents a critical mistake within the ACA, cutting off insurers from a large, healthy demographic. Perspective often driven by family circumstance. Increasing or decreasing cost of employer provided plans? 24 12
Coverage of Children until Age 26 Public support for the young-adult provision makes it difficult to take away. A survey conducted by the Kaiser Family Foundation in December 2016 found that 8 in 10 Republicans and 9 in 10 Democrats favored the benefit. Likely, here to stay. Kaiser Health News, 2017. 25 Elimination of Preexisting Condition Exclusions As a general rule, the ACA eliminated an insurer s ability to deny coverage to individuals with preexisting conditions. As a counter to increased risk, individual and employer mandates put into place. Clearly a positive development for impacted individuals and popular with the public at large. Costly, however, and only works if healthier individuals are brought into the system through the individual and employer mandate. Other solutions to this difficult issue? 26 13
Minimum Essential Coverage Minimum Essential Coverage is a set of 10 categories of services health insurance plans must cover under the Affordable Care Act. 1) Ambulatory patient services (outpatient care you get without being admitted to a hospital). 2) Emergency services. 3) Hospitalization (like surgery and overnight stays). 4) Pregnancy, maternity, and newborn care (both before and after birth). 5) Mental health and substance use disorder services, including behavioral health treatment (this includes counseling and psychotherapy). 6) Prescription drugs. 7) Rehabilitative and habilitative services and devices (services and devices to help people with injuries, disabilities, or chronic conditions gain or recover mental and physical skills). 8) Laboratory services. 9) Preventive and wellness services and chronic disease management. 10) Pediatric services, including oral and vision care (but adult dental and vision coverage aren t essential health benefits). 27 Minimum Essential Coverage Plans must also include the following benefits: Birth control coverage. Breastfeeding coverage. Plans must offer dental coverage for children. Dental benefits for adults are optional. Increasing or decreasing the cost of employer provided coverage. 28 14
Coverage Mandate; Employers and Individuals The Individual Mandate Individuals must have coverage: If an individual can afford health insurance but chooses not to buy it, they must pay a fee called the individual shared responsibility payment. (The fee is sometimes called the penalty, fine, or individual mandate. ) Individuals owe the fee for any month that they, their spouse, or their tax dependents don t have qualifying health coverage (sometimes called minimum essential coverage ). Individuals were to pay the fee when they file their federal tax return for the year they don t have coverage. In some cases, individuals may qualify for a health coverage exemption from the requirement to have insurance. 29 Coverage Mandate; Employers and Individuals The Employer Mandate: Employers must offer health insurance that is affordable and provides minimum value to 95% of their full-time employees and their children up to age 26, or be subject to penalties. Full-time employees are those that work 30 hours or more per week. Employer-provided coverage is considered affordable if it meets one of the three IRS safe harbors for determining that the employee s contribution for self-only coverage doesn t exceed 9.5 percent of the employee s household income. 30 15
Coverage Mandate; Employers and Individuals Penalties for not complying with the Employer Mandate 31 Coverage Mandate; Employers and Individuals 32 16
Coverage Mandate; Employers and Individuals On January 20, 2017, President Trump issued an Executive Order instructing his administration specifically, the IRS to not enforce the individual mandate. Accordingly, individuals were not required to report their healthcare coverage on their tax return for 2017. Trump s executive order has made it nearly impossible for the IRS to collect the individual mandate penalty or to concretely verify an individuals health insurance status. By, by, individual mandate? How will that impact other aspects of the ACA? 33 Coverage Mandate; Employers and Individuals Has the employer mandate imposed an artificial e.g., nonmarket driven limitation on employee hours? In other words, have some employers limited workers to part-time hours to avoid having to provide coverage? Related, are some employees choosing to work less hours because coverage is now available to them at low or no cost at low or no costs through the exchanges? In other words, employees don t have to work the traditional 40 hours to have access to coverage. Is all this good for the national economy? 34 17
Has the ACA achieved its purpose? At least on one metric, the ACA seems to be working: More people are getting coverage. According to Census Bureau data released in late 2016, 4 million people gained insurance last year alone. Overall, about 29 million Americans still don t have insurance but that is down from 42 million uninsured before the ACA took effect (i.e., 13 million uninsured Americans have obtained health insurance since the ACA took effect). 35 What were the positive impacts of the ACA? Expanded coverage / per capita. Lower costs for those who previously may not have been able to afford coverage. Expanded benefits (Minimum Essential Coverage). Preexisting exclusion limitations. Coverage on parent s plan through age 26. Medicare solvency. 36 18
Were there any negative consequences of the ACA? 1) Cost to Federal Government. Growing. 2) Higher premiums for those outside of the exchanges. 3) Higher deductibles/out-of-pocket costs for those outside of the exchanges. 4) Insurers pulling out of exchange markets. Less choice. 5) Employers reducing employee hours. 6) Employees reducing hours. 7) Medicare Surtax (if you are paying it). 37 Negative Consequences: Higher Premiums (But higher subsidies, too) For 2017, the Pennsylvania Insurance Department approved a rate increase of 30 percent for individual plans in the marketplaces/exchanges. However, most as many as 83 percent of exchange enrollees will also see their tax subsidies increase to counter the increases in premiums. As many as 77 percent of enrollees will pay less than $100 a month for minimum essential coverage. Good deal for those folks who are eligible. 38 19
Negative Consequences: Higher Premiums (But higher subsidies, too) Silver Plan Premiums and PTC amounts from 2016-2017: Who is covering the difference? 39 Negative Consequences: High deductibles/out-of-pocket costs 40 20
Negative Consequences: Insurers are pulling out of exchanges Insurance companies are losing money on plans sold in the marketplaces/exchanges. As a result, some insurers like UnitedHealth and Aetna have announced their withdrawal from the marketplaces or the individual market in some states. In states that use Healthcare.gov (the federal exchange), the average number of insurers participating in the marketplace will be 3.9 in 2017 (down from 5.4 companies per state in 2016, 5.9 in 2015 and 4.5 in 2014). 41 Negative Consequences: Insurers are pulling out of exchanges Insurers are pulling out of the Exchange in Pennsylvania 42 21
The American Health Care Act Congress effort to repeal and replace the ACA: The American Health Care Act (AHCA) 14 key objectives: 1. Repeal ACA mandates (2016), standards for health plan actuarial values (2020), and, premium and cost sharing subsidies (2020). 2. Modify ACA premium tax credits for 2018-2019 to increase amount for younger adults and reduce for older adults, also to apply to coverage sold outside of exchanges and to catastrophic policies. In 2020, replace ACA income-based tax credits with flat tax credits adjusted for age. Eligibility for new tax credits phases out at income levels between $75,000 and $115,000. 3. Retain private market rules, including requirement to guarantee issue coverage, prohibition on discriminatory premiums and pre-existing condition exclusions, requirement to extend dependent coverage to age 26. Modify age rating limit to permit variation of 5:1, unless states adopt different ratios, effective 2018. Requires States to define the essential health benefits for purposes of the individual premium tax credit beginning in 2018. 43 The American Health Care Act Congress effort to repeal and replace the ACA: Key objectives (cont d): 4. Retain health insurance marketplaces, annual Open Enrollment periods (OE), and special enrollment periods (SEPs). 5. Impose late enrollment penalty for people who don t stay continuously covered. 6. Establish State Patient and State Stability Fund with federal funding of $115 billion over 9 years. States may use funds to provide financial help to high-risk individuals, promote access to preventive services, provide cost sharing subsidies, and for other purposes. In 2020, $15 billion of funds shall be used only for services related to maternity coverage and newborn care, and mental health and substance use disorders. In states that don t successfully apply for grants, funds will be used for reinsurance program. 44 22
The American Health Care Act Congress effort to repeal and replace the ACA: Key objectives (cont d): 7. Repeal funding for Prevention and Public Health Fund at the end of Fiscal Year 2018 and rescind any unobligated funds remaining at the end of FY 2018. Provide supplemental funding for community health centers of $422 million for FY 2017. 8. Encourage use of Health Savings Accounts by increasing annual tax free contribution limit and through other changes. 9. Limit enhanced FMAP for Medicaid expansion to states that adopted the expansion as of March 1, 2017, and sunset enhanced FMAP for those states as of January 1, 2020 except for beneficiaries enrolled as of December 31, 2019, who do not have a break in eligibility of more than 1 month. 45 The American Health Care Act Congress effort to repeal and replace the ACA: Key objectives (cont d): 10. Convert federal Medicaid funding to a per capita allotment and limit growth beginning in 2020, using 2016 as a base year with state option to receive block grant for nonexpansion adults and children or only nonexpansion adults. 11. Add state option to require work as a condition of eligibility for nondisabled, nonelderly, nonpregnant Medicaid adults. 12. No change to Medicare benefit enhancements or provider/medicare Advantage plan payment savings. 13. Repeal Medicare HI tax increase and other ACA revenue provisions. 14. Prohibit federal Medicaid funding for Planned Parenthood clinics. 46 23
The American Health Care Act On March 24, 2017, House GOP leaders, with support from President Trump, withdrew the American Health Care Act (AHCA) from further consideration in an acknowledgement that they had been unable to find sufficient votes to repeal and replace the Affordable Care Act (ACA). ObamaCare will remain the law of the land. We re going to be living with ObamaCare for the foreseeable future. House Speaker Paul Ryan, R-Wis. March 24, 2017. 47 Challenges in Replacing the ACA The ACA has provided a number of benefits (many of which are recognized as universally good even if financially impractical). Once benefits are given especially to many millions of Americans they are very difficult to take away. The Trump administration likely does not want that stigma. Any repeal and replace of the ACA will necessarily involve diminishing benefits that current Americans receive. The ACA may be here to stay. Maybe not. We will all have to stay tuned. 48 24
Challenges in Replacing the ACA On April 27, 2017, White House officials notified lawmakers that President Trump would not end subsidy payments under the Affordable Care Act, a concession to Democrats that is expected to clear the way for a bipartisan budget agreement. With the ACA remaining as law, employers should plan to continue complying with its wide-ranging coverage mandates and all employee tracking and reporting requirements. For now. 49 Thank you! Questions? Thomas G. Collins (717) 237 4843 thomas.collins@bipc.com 50 25