Mission: To promote responsible and equitable fiscal policies

through research and education

Joy Smolnisky, Director 808 N. West Ave., Sioux Falls, SD 605-367-9667 joys@sdbudgetandpolicyproject.org

The Affordable Care Act (ACA) in South Dakota

• Concepts

• Coverage

• Costs

• Choices

• Consequences

How will ACA affect South Dakotans’ access to and cost of health insurance?

Federal law includes:

regardless of state decision to expand Medicaid

1. Coverage guarantees

2. Insurance exchanges

3. Federal tax credits to pay for insurance

4. Individual mandate

5. Funding provisions

Medicaid

Expansion

Coverage Guarantees

• Young adults can stay on parents plan until age 26 (2010)

• Eliminates life-time limits on coverage (2010)

• Guaranteed availability of insurance

• Minimum medical loss ratio for insurers

state-based American health benefits exchange

1. “essential health benefits” packages

2. Four categories of plans

3. Limited annual cost-sharing

How will affect South Dakotans’ access to and cost of health insurance?

Federal law includes:

regardless of state decision to expand Medicaid

1. Coverage guarantees

2. Insurance exchanges

3. Federal tax credits to pay for insurance

FEDERAL TAX CREDITS

92,800 South Dakotans* will be eligible for Premium Subsidies

*Data Source: Research using Lewin Group economic models: http://www.familiesusa.org/assets/pdfs/health-reform/premium-tax-credits/South-Dakota.pdf

FEDERAL TAX CREDITS – Cost Sharing

1/3 of out-of-pocket cap

1/2 of out-of-pocket cap2/3 of out-of-pocket cap

Small Business Tax Credits

2010 to 2013: 35% credit / 25% NFP

2014 and after 50% credit / 35% NFP

http://www.irs.gov/uac/Small-Business-Health-Care-Tax-Credit-for-Small-Employers

Dollars (in millions) available to help South Dakotans pay

health insurance premiums in 2014

Federal Spending on Exchange Subsidies in SD, 2014-2019

Million $ in South Dakota

Premium Subsidies

Cost Sharing Subsidies

Total

876 $ 876 $ 106 $ 983Source: Urban Institute

Funding mechanisms

2013

•New limits on itemized medical deductions & flexible spending accounts ($2,500/yr)

•Medicare Tax increase (individual incomes over $200,000/families over $250,000)

•Tax on Medical Devices (2.3%)•Eliminates tax-deduction for employers receiving Medicaid retiree drug subsidy

2014 Employer requirements

2018 Excise tax on “cadillac” employer provided health plans

How will ACA affect South Dakotans’ access to and cost of health insurance?

Federal law includes:

regardless of state decision to expand Medicaid

1. Coverage guarantees

2. Insurance exchanges

3. Federal tax credits to pay for insurance

4. Individual mandate

5. Funding provisions

Medicaid

Expansion

How does this decision affect healthcare in South Dakota?

138% FPL

100% FPL

Medicaid Expansion Bridges the Gap

30,000 uninsured

South Dakotans

49,000 uninsured South Dakotans below 138% federal poverty level

Medicaid Expansion

FMAP (federal share)

for newly eligible

parents and childless

adults

Another concern….

1. Will Federal Government continue commitment to 90% FMAP rate after 2020 for Medicaid Expansion?

How much will Medicaid Expansion cost South Dakota?

Cost projections arebased on assumptions

• Projected eligibles• Participation rates• Crowd-out rate • woodwork effect • Per enrollee cost

How much will Medicaid Expansion cost South Dakota -

the first 6 years?Governor – $99.7 million• 5.5% increase in state Medicaid costs 2014-19 • 48,564 new eligibles from expansion & 5,982

existing eligibles

Urban Institute - $112 million

Kaiser: 1.1% increased state spending

Uncompensated care savings estimate change cost to a range of: $15 million total expense to $82 million in state government savings

after 2019 - ballpark calculation:

X

48,564 newly eligible

$4,264 per person

State share of cost

X

State cost for care:48,564 x $4,264 x 10% = $20.7 million

Adding administrative costs:

State cost for care*:48,564 x $4,264 x 10% = $20.7 million

State cost for administration:48,564 x 2.5% = $ 5.2 million

Annual SD cost* estimateafter 2019 = $25.9 million

*based on FY11 cost per eligible - calculations by SD B&PP

HOW MUCH IS $26 million*?

• 8.6% of FY12 state spending on Medicaid to increase coverage by 42%

• $533 per year per person newly enrolled

• $31.41 per year per SD resident in new state spending

*based on FY11 cost per eligible - calculations by SD B&PP

138% FPL

100% FPL

138% FPL

100% FPL

Medicaid Expansion Bridges the Gap

30,000 uninsured

South Dakotans

92,800