Affordable Care Act: Where We Stand

Review

As we enter the New Year, it is important to review where we stand on several key issues related to the affordable care act:

Promises VS the Law

President Obama has made a lot of promises that are in conflict with the express language of the Affordable Care Act.  The President has the power to refuse to enforce the law; but he does not have the power to unilaterally change the law.  When he makes promises, essentially he is saying he will not enforce penalties for breaking the law.   That is all he can do.  If his promise requires changes in the law or changes in agreements made with other parties, all parties involved must agree to the changes.  Legislative changes require Congressional approval.  Changes in agreements require consent of all the parties involved, which may include Congress, insurance companies, the IRS, the INS, and any other regulatory agency that would be responsible for enforcement.

Deadline Extensions

President Obama cannot unilaterally extend sign-up deadlines.  To extend the deadline, each insurance company offering   policies through the exchange has to agree.  They must agree to extend their deadline and, more importantly, they must also agree to incur any penalties that may arise from not meeting the extended deadlines.   The insurance companies have said that the risk of failing to comply with letter of the law is too great.  If they comply with the terms of the Affordable Care Act, no one can sue.    They may agree to a “best efforts” extension; but, this does not guarantee coverage to a person who submitted their application by the extended deadline.  Only if the insurance company is able to process their application will they be covered.

Even If you signed up for a policy before the initial December 15th deadline, you May Not be Covered

Technically, you are not covered until you have paid your first premium.  If you haven’t paid you are not covered.  If you signed up for a policy and have not yet received a bill, it is imperative that you verify coverage with the insurance company from which you believe you have acquired a policy.    All companies have a toll free number you can call to verify coverage.  To do this you will need certain information, including such things as the names, addresses, social security numbers of the applicants, policy type your acquire (i.e. their  Enhanced Silver 73 Plan).    You can contact www.affordablehealthcarerevewi.com  to request a form that will provide the information you will need when you make your call.

Many people who thing they have insurance are not insured.  In order for the insurance company to issue a policy the information they require must be exact and verifiable.  If any information is transmitted incorrectly, a policy will not be issued.  There is not communication link set up so the insurance company can notify the Exchange of rejected submissions.  There is no follow up on the exchange side if your submission has been rejected and there is no plan to add this feature at this time.

Policy Cancellations for Lack of Essential Benefits

Over 7 million adults were sent notices of cancellation if they had policies that did not meet the legal requirement that all policies offered beginning January 1, 2014 must contain the essential health benefits.  Most people were able to get replacement policies but the cots were generally greater, the benefits were generally less, and deductibles and co-pays were certainly higher.

If your plan was cancelled and feel you can’t afford a Marketplace plan to replace it, you can apply for a hardship exemption. This will allow you to buy a catastrophic plan. A catastrophic plan generally requires you to pay all of your medical costs up to a certain amount, usually several thousand dollars. These policies usually have lower premiums than a comprehensive plan, but cover you only if you need a lot of care. They basically protect you from worst-case scenarios.  The truth is most healthy people would prefer to have such a plan, but they are only allowed to be offered to people under 30.

The applicants also have to realize that they do not have coverage under one of these policies until they have been approved AND they have made the first payment on the policy.  This policy is only good for 2014.

Incorrect Estimation of Income

If you have purchased insurance from the Exchange and you are getting a subsidy, then you must keep track of your income throughout the year.  If at any point, it looks like your income will be more than the amount you disclosed to the exchange, you should notify the exchange of the increase.  That way the subsidy you receive can be adjusted to reflect the additional income.

You cannot rely on the government of verify your income when you applied for subsidies.   The government is not able to verify whether or not applicants for Obamacare’s insurance exchange subsidies are actually qualified for the aid nor are they able to verify if the income you state is correct.

If, at the end of the year, you received more subsidy than you were entitled to, based upon your actual income, you must pay the additional subsidy back to the government.  If you don’t, the consequences are quite serious.  A judgment can be obtained against you; your bank accounts can be attached.  It is easier to overestimate your income than suffer the consequences of underestimating and failing to return the amount you received above the amount you were entitled to.

New Taxes will continue to Affect Your Income

Two Medicare-related taxes, impacting high earners in 2013, will continue to effect earners in 2014. Individuals earning over $200,000 (or $250,000 for couples who file jointly) will see their Medicare payroll tax rate increase from 1.45 percent to 2.35 percent. They’ll also pay a new 3.8 percent Medicare tax on unearned income, including investments, interest, dividends, annuities, rent, royalties, certain capital gains and inactive businesses. Read more about Medicare.

Second, taxes on insurance companies, insured’s and individual policy holders designed to help defray the costs of the Affordable Care will add up to $25 per month to the cost of a policy.  These taxes and other pass through costs are expected to continue to increase the costs of policies.

Postponement of Caps and Out of Pocket Maximums

First, there was the delay of Obamacare’s Medicare cuts until after the election. Then there was the delay of the law’s employer mandate. Then there was the announcement, buried in the Federal Register, that the administration would delay enforcement of a number of key eligibility requirements for the law’s health insurance subsidies, relying on the “honor system” instead. Now comes word that another costly provision of the health law—its caps on out-of-pocket insurance costs—will be delayed for one more year.

According to the Congressional Research Service, as of November 2011, the Obama administration had missed as many as one-third of the deadlines, specified by law, under the Affordable Care Act. Here are the details on the latest one.

Postponement of Caps on Out of Pocket Insurance Costs

Starting in 2014, annual limits on cost-sharing were set.  Section 1302(c) of the Affordable Care Act set deductible limits at $2,000 per year for individual plans, and $4,000 per year for family plans.  The limits on out-of-pocket costs for 2014 were $6,350 for individual policies and $12,700 for family ones.  In February, 2013, in a rule issued by the Department of Labor, the Obama administration postponed until 2015, the limit on out-of-pocket expenses, including co-pays and deductibles, that a consumer might have to pay.

Out-of-pocket caps drive premiums upward.  The imposition, in 2015, of lower deductibles and the cap out-of-pocket costs, premiums have to go up to reflect these changes.   And unlike a lot of the “rate shock” problems we’ve been discussing, these limits apply not only to individually-purchased health insurance, but also to employer-sponsored coverage. (Self-insured employers are exempted.)

Upcoming Issues of Significant impact:

  1.  Supreme Court –Healthcare, Anti-Trust & Merger, & Birth Control

Two cases will have significant impact.  The first one, which has been decided, but whose full impact is not yet determined is how intrusive the Federal Government can be in matters historically left to the state.  The second case, which is anticipated to be decided in 2014, will look at whether private companies of a certain size, on the claim it violates their religious beliefs, can violate certain provisions of the Affordable Care Act by refusing to offer birth control and other reproductive health services without a co-pay.

In FTC v. Phoebe Putney Health System, Inc., on February 19, the Supreme Court awarded the Federal Trade Commission (FTC) a major victory in its case challenging a now-consummated hospital merger in Georgia. The unanimous opinion of the Court, authored by Justice Sotomayor, held that the state-action doctrine, which affords states immunity from the federal antitrust laws, did not shield a Georgia hospital merger from federal antitrust scrutiny.

The Supreme Court, in its first antitrust merger case in nearly 30 years, reversed the lower courts’ dismissal on state-action grounds of an FTC suit against a merger between the only two hospitals located in Dougherty County, Georgia. The decision allows the FTC to proceed in its suit. Notably, the Court’s decision clarifies and arguably narrows the scope of antitrust immunity provided by the state-action doctrine by explaining that to be afforded immunity, states must “clearly articulate” and “affirmatively contemplate” that they are permitting anticompetitive conduct.

Secondly, the U.S. Supreme Court has agreed to take up Sebelius v. Hobby Lobby Stores Inc., a landmark case addressing the constitutionally guaranteed rights of business owners to operate their family companies without violating their deeply held religious convictions.  The nation’s highest court accepted the federal government’s appeal of a June decision by the U.S. Tenth Circuit Court of Appeals that a U.S. Department of Health and Human Services (HHS) mandate to provide potentially life-terminating drugs and devices in employee insurance plans places a substantial burden on the religious freedoms of Hobby Lobby Stores Inc., which is solely owned by founder David Green and his family.

  1. ACOs

Accountable Care Organizations will change how medical services will be delivered.  In theory, Accountable Care Organizations provide coordinated care and chronic disease management while lowering costs.    Groups of doctors, hospitals, and other health care providers come together voluntarily to coordinate their patient care.  The goal of coordinated care is to ensure that patients, especially the chronically ill, get the right care at the right time, while avoiding unnecessary duplication of services and preventing medical errors.    There are economic incentives for saving money, especially for Medicare patients.  Whether or not the savings will be gained at the expense of personalized, quality care delivery is yet to be seen.

  1. IPABs

The Independent Patient Advisory Board is a 15 member government board appointed by the President.  It is anticipated to be staffed next year.  Beginning with fiscal 2015, if Medicare is projected to grow too quickly, IPAB will make binding recommendations to reduce spending.   The President is responsible for making appointments.  There is no requirement that any of the members have had direct patient care experience.  The Board is responsible for making sure Medicare meets their budget and, in the event costs are projected to exceed revenues, the Board recommends cuts.  It takes a 2/3 vote of Congress to override a cost control recommendation

Conclusion

The key take aways are 1) if you signed up for a policy, if you haven’t gotten a bill you must verify your coverage; 2) if you receive a subsidy, you must accurately report your income, including raises, or face significant hardship; 3) delays have pushed back policy cost increases that are associated with inclusion of essential health benefits and establishment of limits on out of pockets insurance costs; and 4) government is getting more involved in establishment of benefits and healthcare.