How Did We Get Here? The Accountable Care Act and What It

Means to Health Insurance and the Health Care System

June 14, 2013

Robert LaszewskiHealth Policy and Strategy Associates, LLC

Washington, DC

The health care market is changing.

We are in the midst of a historic shift in the way the business of health care is being done.

It is clear to policymakers, providers, and payers that we are in the last days of fee-for-service reimbursement.

We are moving to a system where providers will be more often at risk for both the cost and quality of care.

We are also moving to a system where individuals will be more responsible and accountable for the cost of their

health care as employers evaluate their historic place in providing benefits.

The Country’s Growing National Debt Will Force Changes in the Way Health Care is Paid

For

On the Current Track, How Federal Resources Would Be Allocated in 2023

And Just As the Health Care Entitlements Become Unsustainable We Have Added to

Them With Passage of the Affordable Care Act (ACA)

• Individuals will be required to purchase coverage.• Medicaid will be expanded for the poorest.• Employers will be required to offer coverage.• Insurance companies will be required to cover

everyone.• There will be minimum standards for health plans.

The Affordable Care Act…

• Will cost $938 billion over 10 years.• Will provide coverage for about 94 percent of

Americans. • 30 million people are eventually expected to gain

coverage––about half in private insurance and half in Medicaid.

• States have the option of running their own health insurance exchange—or letting the feds do it—as well as implementing the Medicaid expansion.

Accountable Care Act (ACA) Implementation:Three Months to Go

• States struggling to make final decisions, or carry out the decisions they’ve already made.

• 17 states were given initial approval to run exchanges—33 either left all of it to the feds or most of it (Partnerships).

• “I am absolutely confident that every state will have an exchange that will be functioning and ready,’ said Gary Cohen [HHS Spokesman], who declined to elaborate on the number or identity of states that could be in for difficulties.”

Insurance Rate Analysis by Actuarial Firm Milliman for Centrist Group “Center Forward”

The Federal Government Provides Families With Health Insurance Exchange Premium

Support Based Upon Their Income as a Percentage of the Federal Poverty Level

Examples of Premium Credits for Single Coverage and a Family of Four

• Subsidies are tied to the second lowest cost Silver plan in each market.

• A single person making 100% of the federal poverty level (FPL), ($11,490) would pay no more than 2% of their income, or $230 per year.

• A family of four at 100% the FPL ($23,550) would be required to pay no more than 2%, or $471 per year, toward the cost of health insurance.

• A single person making 250% of the poverty level ($28,725) would pay no more than 8.05% of their income ($2,312) for single coverage.

Examples of Premium Credits…

• A family of four at 250% of the FPL ($58,875) would be required to pay no more than 8.05% of their income, or $4,739 annually, for a family health insurance plan.

• A single person making 300% of poverty ($34,470) would have to pay 9.5% of their income ($3,274) toward the cost of single coverage.

• A family of four making 300% of poverty ($70,650) would have to pay 9.5% of their income ($6,712) toward the cost of family coverage.

Examples of Premium Credits…

• An individual making 400% of poverty ($45,960) would have to pay 9.5% of their income toward single coverage ($4,366).

• An individual making more than $45,960 would not be eligible for a subsidy.

• A family at 400% of the FPL ($94,200) would have to pay 9.5% of their income ($8,949) toward their premium for family coverage.

• A family of four earning more than $94,200 a year (four times the FPL) would not be eligible for a federal subsidy toward coverage and would pay the full cost of a plan.

Will Employers Remain Committed to Providing Health Benefits?

• Employers with more than 50 employees will pay a fine of $2,000 per worker.

• Any health plan contribution the employer converts to wages would be taxable income (income and payroll taxes) to the worker as well as subject to additional payroll costs for the employer.

• But the wage will increase at the wage rate not at the health insurance cost trend increase which has tended to be two to four times larger.

• The employee will be eligible for premium payment support from the federal government based upon their family income.

Will Employers Abandon Health Benefits?

• Likely no quick or dramatic change.• After adjusting for the fine, increased payroll costs,

and employee income tax consequences an employee with a middle class family income will not be better off—likely far worse off.

• But likely a different conclusion in the small group market that is already shrinking at a rapid rate.

• An employers commitment to benefits will likely have more to do with how competitive their labor market is.

The Supreme Court Decision• A surprise.• Justices Kennedy, Scalia, Thomas, and Alito wanted to throw the

individual mandate and the entire law out.• The four liberals wanted to uphold all of it and eventually joined

Roberts’ interpretation of the mandate as a tax in order save it. • The Roberts Court upheld the ACA but it did narrow the

Commerce Clause for the Congress by calling the mandate penalty a “tax.”

• And, the Roberts Court narrowed Congress’ ability to “coerce” state policy (“unfunded mandates”) by withholding federal money.

• The states will now have the option of participating in the Medicaid expansion.

Only About Half of the States Will Expand Their Medicaid Programs

Number of People That Would Be Covered Under the ACA’s Medicaid Expansion in States That Brought the SCOTUS Suit

Alabama 351,567

Alaska 42,794

Arizona 105,428

Colorado 245,730

Florida 951,622

Georgia 646.557

Idaho 85,833

Indiana 297,737

Iowa 114,691

Kansas 143,445

Louisiana 366,318

Maine 43,468

Michigan 589,965

Mississippi 320,748

Nebraska 83,898

Nevada 136,353

North Dakota 28,864

Ohio 667,376

Pennsylvania 482,366

South Carolina 344,109

South Dakota 31,317

Texas 1,798,314

Virginia 372,470

Wisconsin 205,987

Utah 138,918

Washington 295,662

Wyoming 28,899

2014 to 2019 Cost for Key States to Expand Medicaid and the Federal Share

Source: Kaiser Commission on Medicaid and the Uninsured

State Total State Medicaid Spend

Total Federal Spend

Total State and Federal

Federal Share of Incremental Cost

Florida $1.2 billion $20 billion $21.2 billion 94%

Louisiana $337 million $7 billion $7.4 billion 96%

Texas $2.6 billion $52 billion $55 billion 95%

Wisconsin $205 million $4.2 billion $4.4 billion 95%

Findings of the Wisconsin Legislative Fiscal Bureau

• Governor Walker’s Medicaid plan would offer those above 100% of the federal poverty level coverage in the new federal health insurance exchange rather than in Medicaid.

• Federal Medicaid expansion under the new health law would cover 84,700 more people.

• Governor Walker’s plan would boost the state budget by $119 million over the next two years even after the cost of adding the additional people to Medicaid under the new health law.

• Accepting the federal Medicaid expansion would save the state an additional $340 million through 2021.

The Health Insurance MarketplaceThe Health Insurance Marketplace

New way to buy health insurance when key parts of the health care law take effect

The Health Insurance Marketplace

Even working families can get help through the Marketplace•Enrollment starts October 1, 2013•Coverage begins January 2014

IntroductionIntroduction

04/11/23 Understanding the Health Insurance Marketplace 23

24A New Way to Get Health Insurance05/09/2013

to

Insurance companies compete for business Offers you choices Easy to use – plain language Apples-to-apples comparison of plans

• Compare all your options side-by-sideo Priceo Qualityo Benefits

How does the Marketplace work?How does the Marketplace work?

To be eligible to join a plan in Marketplace you must• Live in the service area of the plan• Be a U.S. citizen or be lawfully present • Not be in prison (incarcerated)

Who can get coverage from the Marketplace?Who can get coverage from the Marketplace?

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05/09/2013 A New Way to Get Health Insurance

LowerIncome

Higher Income

Streamlined Application Streamlined Application

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Same Application – Different ResultsSame Application – Different Results

04/11/23 Understanding the Health Insurance Marketplace 27

A New Way to Get Health Insurance05/09/2013

Based on family income and size• Premium discount

Family of four with annual income $23,550* – $94,200* or less

And not eligible for certain other insurance coverage like Medicaid

• Lower cost-sharing (like copays) Family of 4 with annual income $58,875*

or less (some other restrictions)

*2013 amounts

Help to Pay Qualified Health Plan CostsHelp to Pay Qualified Health Plan Costs

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Qualified Health Plans cover Essential HealthBenefits which include at least these 10 categories

Ambulatory patient services Prescription drugsEmergency services Rehabilitative and habilitative

services and devicesHospitalization Laboratory servicesMaternity and newborn care Preventive and wellness services

and chronic disease management

Mental health and substance use disorder services, including behavioral health treatment

Pediatric services, including oral and vision care

Essential Health BenefitsEssential Health Benefits

04/11/23 Understanding the Health Insurance Marketplace 29

Small Business Health Options Program is a Marketplace for small businesses and their employees• Beginning 2014, small businesses will have more

choice and control over health insurance spendingo Choices among Qualified Health Plans to meet

every budgeto Access tax credits for eligible employerso New consumer protections

Small Business Health Options Program (SHOP)

Small Business Health Options Program (SHOP)

04/11/23 Understanding the Health Insurance Marketplace 30

A New Way to Get Health Insurance05/09/2013

Easy Convenient Streamlined

In Person

By Mail

By Phone

Online

How to ApplyHow to Apply

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A New Way to Get Health Insurance05/09/2013

You can enroll in a Qualified Health Plan during 1. The Initial Open Enrollment Period

• October 1, 2013 – March 31, 2014

2. The Annual Open Enrollment Period• Each year starting in 2014• October 15 – December 7

3. A Special Enrollment Period• Certain situations

Like loss of certain other coverage

When to EnrollWhen to Enroll

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33A New Way to Get Health Insurance05/09/2013

Help will be available in the Marketplace• Toll-free call center • Website• Help in-person

o Navigators and other trained assisterso Agents and brokers (state’s decision)

Assistance – It’s Available If NeededAssistance – It’s Available If Needed

A New Way to Get Health Insurance

Starting October 1, 2013, you will be able to apply through this site

05/09/2013

Consumer Focused In Plain Language

Now - Sign up for Email and Text Alerts and Get Ready

www.HealthCare.govwww.HealthCare.gov

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The Marketplace is a new way to find health insurance There is assistance available to help you get the best

coverage for your needs Insurance will continue to be sold outside of the

Marketplace• Purchase from Marketplace not required

The Marketplace is the only place to get the• New premium discounts and cost-sharing reductions

Key Points to RememberKey Points to Remember

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A New Way to Get Health Insurance05/09/2013

Stay Connected• Sign up to get email and text alerts at

signup.healthcare.gov• Updates and resources for partner organizations

are available at Marketplace.cms.gov• Twitter@HealthCareGov • Facebook.com/Healthcare.gov

Want more information about the Marketplace?Want more information about the Marketplace?

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• Hold for HHS slides

Preparing for the Health Insurance Marketplace:

A View From Wisconsin

June 14, 2013

Wisconsin Entitlement Reforms, Patient Protection, and the Affordable Care Act

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Wisconsin Entitlement Reforms

Governor Walker’s proposed entitlement reforms will: Ensure every Wisconsin resident has access to affordable

health insurance Create a BadgerCare Plus program that is sustainable Help more Wisconsin citizens become independent and rely

less on government health insurance Maintain the health care safety net for those who need it the

most

Current BadgerCare Health Plans

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BadgerCare Health Plan - 2014

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Wisconsin’s Currently Uninsured

The following is Wisconsin’s uninsured population taken from the Current Population Survey (CPS) estimates for 2011.

Uninsured Rates Total Population Uninsured # Uninsured %

Total State 5,658,800 558,400 10%

Non-Elderly Population, Age 0-64 4,829,000 553,600 11%

Children, Age 0-18 1,404,900 76,500 5%

Adults, 19-64 3,424,000 477,100 14%

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Wisconsin Entitlement Reforms

Governor Walker’s proposed entitlement reforms will specifically: Reduce the number of uninsured non-elderly adults by 50%, from 14% to

7%

Provide an estimated 259,198 childless adults and parents and caretaker coverage in BadgerCare Plus

Provide an estimated 692,308 childless adults and parents and caretaker relatives will be covered in the Marketplace

Current Population

Current Uninsured

BC+ Enrolled

Exchange Enrolled

Total Enrolled

Uninsured Post ACA

3,424,000 477,100 92,556 132,025 224,581 252,519

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PPACA - MAGI

Requires that states use the IRS’ methodology for determining Modified Adjusted Gross Income (MAGI), with certain exceptions, to determine household composition, family size, and income eligibility, thereby eliminating most income deductions and disregards

Will be used as the basis for determining Medicaid, CHIP, and Exchange eligibility for certain populations starting in 2014

MAGI will not be used for determining eligibility for the elderly, blind, and disabled (EBD) population MAGI introduces tax filing status and tax relationships as new factors in determining how households are

tested for eligibility The new rules are highly complex and will require massive systems and operational changes by state

Medicaid agencies between now and January 2014 DHS is developing MAGI based training material and will deliver using a variety of media and face-to-face

meetings DHS enrollment and budget impacts assume that MAGI will have a relatively small impact on the program

The greatest impact related to MAGI for existing members is the introduction of tax relationships into how their household sizes are determined and whose income will be considered. For some families, this will result in greater eligibility, while for others, it will result in loss of eligibility.

In addition, child support payments will no longer be counted as income in the eligibility determination process. About 15 percent of our cases currently have child support income.

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Overview of Projected Impacts to Medicaid/BadgerCare Plus

BadgerCare Plus Enrollment Impacts An estimated 87,000 parent and caretaker relatives and 5,000 childless

adults will transition to coverage in the new federal marketplace An estimated 84,000 childless adults and 9,000 parent and caretaker

relatives that are currently uninsured will be enrolled in BadgerCare Plus Overall BadgerCare Plus enrollment is projected to stay between 770,000

to 800,000 over the next biennium DHS assumed that the uninsured rate for non-elderly (non-pregnant)

adults would be reduced by 50% - from 14% to 7%. The following take-up rates were used in our modeling: Parents/Caretakers – 25% Childless Adults (new adult group) – 65%

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Overview of Estimated Marketplace Enrollment

Marketplace Enrollment Estimates An estimated 232,000 parent and caretaker relatives and 460,000

childless adults will enroll in Marketplace Includes transition of people in the current non-group and small group markets Includes transition of existing state and federal high risk pool (HIRSP) members Includes employees from large employers that are estimated to drop coverage

(10% of current ESI coverage) Includes take-up of the currently uninsured (using the same take-up

assumptions as previously noted for BadgerCare Plus) Includes the transition of an estimated 95,000 adults from BadgerCare Plus

Small take-up of children assumed; current uninsured rate for children is 5%

Looking Ahead…

Governor Walker is committed to two goals when it comes to ensuring all Wisconsin citizens have access to affordable coverage:

1. Ensure that existing BadgerCare Plus members that will be eligible to enroll in a QHP have a smooth transition to the Marketplace

2. Reduce the uninsured rate for non-elderly adults by 50% over the next two years

DHS will work side-by-side with all of our existing community partners as well as new partners, Navigators and Certified Application Counselors (CACs).

DHS is already working with Enrollment for Health Wisconsin, Inc. (e4Health) on this front, along with other provider organizations and insurers on ideas for outreach to both of these populations.

DHS is also working closely with CMS on the transition for the BadgerCare Plus members and ways that we can monitor and track members’ transition and enrollment into the qualified health plans offered in the marketplace.

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Looking Ahead…

Implementation DHS is working closely with the Office of the

Commissioner of Insurance on transition. Key components:

Income Maintenance Offices– Milwaukee Enrollment Services Center

Certified Application Counselors– stakeholders, provider and advocate engagement

Navigators

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Looking Ahead…

Key Dates: Summer 2013 – Qualified Health Plans in place Late Summer 2013 – “The Marketplace” is unveiled August/September 2013 – DHS and CMS finalize

waiver for childless adults under 100% FPL October 1, 2013 – enrollment in “The Marketplace”

begins

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Questions