Understanding the Affordable Care Act

Dylan H. Roby, PhDAssistant Professor of Health Policy and Management

UCLA Fielding School of Public HealthDirector of Health Economics and Evaluation Research

UCLA Center for Health Policy Research

September 18, 2013Midday at the Oasis Webinar

Three foci of the law Improve Access

Incentives to purchase insurance Expand Medicaid to include childless adults and make income

eligibility more straightforward Increased regulation of insurance products Added funding and training for primary care

Reduce Costs Potential for payment reform Sustain existing programs (including Medicare)

Improve Quality Research and Coordination Patient Safety and Reducing Readmissions

Enactment vs. Implementation The law was signed on March 23, 2010 as the

Patient Protection and Affordable Care Act “Fixes” were made to the law via a reconciliation bill,

the Health Care and Education Reconciliation Act, signed on March 30, 2010 Public Law 111-148 (PPACA) and 111-152 (HCERA)

Implementation ongoing, changes made in each budget cycle & decisions codified in federal regulations (www.regulations.gov) States use enabling legislation and their own rulemaking

processes to implement changes to state law.

Insurance Status in the U.S., 2009

Note: Percentages exceed 100% because type of coverage is not mutually exclusive; individuals can have more than one category of coverage.Source: U.S. Census Bureau Analysis of March 2010 Current Population SurveyDoes not include military-based insurance

Insurance Status in the U.S., 2012

Note: Percentages exceed 100% because type of coverage is not mutually exclusive; individuals can have more than one category of coverage.Source: U.S. Census Bureau Analysis of March 2013 Current Population SurveyDoes not include military-based insurance

Changes already in effect… Children cannot be excluded from the individual market

due to pre-existing conditions No cost sharing for preventive services Adult children up to age 26 can be added to parent’s

plan Ban on rescissions State high-risk pools Medical Loss Ratio enforcement Reporting on Premium Increases to Federal Government Reduction in Medicare Part D “donut hole”

Biggest Changes in 2014

Core of the ACA’s Access Provisions Expand Medicaid eligibility and income criteria

Childless Adults Modified Adjusted Gross Income w/o Asset Test Up to 138% of Federal Poverty Level (~$15,500)

Requirement for large employers to offer affordable coverage

Creation of Health Insurance Marketplaces Small Business Health Options Program (SHOP) Individual Insurance Marketplace

Current Medi-Cal Eligibility Table

Medicaid expansion is now voluntary, due to Supreme Court Decision. Some states have further to go…

Source: Rosenbaum, NEJM, 10/14/09

The Health Insurance Marketplaces State-based marketplaces for individuals and small group

(SHOP) purchasers No public option, but health insurers can compete in each state or

regional market If state does not create the marketplace, DHHS will Essential Health Benefits package in all individual and small group

coverage (even outside of the Marketplace) Tax Subsidies available to individuals not offered affordable

coverage by employers Income-based Sliding scale cap on out-of-pocket premiums from 2% to 9.5% of

income Out-of-pocket spending caps based on income Out-of-pocket maximum for everyone

Minimum Essential Coverage Requirement - “Individual Mandate” With guaranteed issue coverage comes a risk of

adverse selection Concerns about “free-riders” who would sit on the

sidelines until they were sick, then buy coverage In order to avoid adverse selection, there are

penalties for not carrying qualified coverage Penalties phased in from 2014 to 2016 $95 (or 1%) to $695 (or 2.5% of income) per person

Exceptions for religions, members of Indian tribes, being uninsured less than 3 months, financial hardship, and low-income (below tax filing threshold)

Protections for Consumers The State or Federally-Facilitated Marketplace:

Sells Guaranteed Issue Coverage to individuals, families, and small businesses (50-100 employees, depending on state) By 2016, all states must expand their SHOP to include firms

with 100 or fewer employees Price premiums based on age, location, & policy size Essential Health Benefits based on employer-plans in

the state Set actuarial value and out-of-pocket spending caps

Buying Insurance with SubsidiesIncome for Family of Four

Premium Subsidy Cap: % of Household Income

Original Monthly Premium for Anthem HMO Silver Plan

Advance Premium Tax Credit (fixed)

Final Monthly Premium

$31,809 0% (Medi-Cal) $793 $0 $793 or Medi-Cal

$34,575* 4% $533 $423 $110

$46,100* 6.3% $533 $298 $235

$57,625* 8.05% $533 $155 $378

$69,150 9.5% $793 $256 $537

$92,200 9.5% $793 $63 $730

Prices for Family of Four: Father (42), Mother (40), Son, Daughter* Due to income level, family qualifies for additional cost-sharing subsidies that reduce or remove out-of-pocket deductibles and co-payments; Children are covered by Medi-Cal rather than family plan up to 250% of FPL.Check out your coverage options at http://www.coveredca.com/fieldcalc

Effect on Employers Requires that employers with 50+ Full-Time

Equivalents offer “minimum value” coverage Penalties for not offering coverage to some or all

employees triggered by use of tax credits<50 FTE 50+ FTE

“Offer”50+ FTE

“Don’t Offer”

Number of Full-Time Workers (Full-Time = 30+ hours)

49 49 49

Number of Workers using premium tax credit in Marketplace

20 20 20

Penalty (first 30 full-time employees exempt in non-offering firms)

20 x $0 20 x $3,000 (49 – 30) x $2,000

Total $0 $60,000 $38,000

Reducing Costs and Improving Quality

Reductions in Cost: Reduced cost shifting through insurance mandate

Uncompensated care will be reduced, Disproportionate Share Hospital Subsidies reduced by 75%

Mandated Medical Loss Ratio (80-85% of premiums spent on medical care)

Rate Review Capacity in States and DHHS “Cadillac” Tax on employee plans with rich benefits Reduce waste, fraud and abuse via federal and state

data sharing State insurance compacts to permit purchasing

coverage across state lines

Medicare and Medicaid:Pilots and Demonstrations

Innovation Center within CMS created to test new payment methods

Independent Payment Advisory Board Threshold based intervention in Medicare payment growth

Accountable Care Organizations incentives for integrated delivery (2012) Interim Criteria for participation already released Allow for groups of providers to develop their own budget and

payment mechanisms Encourage state programs for bundled payments and global

capitation to safety net hospitals.

Payment Reform Pay-for-Performance in Medicare Advantage

Plans will receive 5 to 10% bonuses for reaching quality benchmarks Passing on responsibility to providers

Demonstrations of bundled payment, global capitation Medical Errors

No Reimbursement for Healthcare Acquired Infections Hospital Readmissions

Bans states from reimbursing for 30 day readmissions under Medicaid

Medicare reimbursement penalties for high readmission hospitals (1% in 2012-2013; 2% in 2013-2014, and 3% after)

Coordination Team-Based Care

Training the Workforce: MD, NP, PA, Nurses, etc. Best Practices and the Medical Home Community Health Workers

Medical Homes for the Chronically Ill Medicaid “health home” demonstration

Coordinated Care Initiative for Dually Eligible Cal Medi-Connect for people with both Medi-Cal and

Medicare in certain California counties

What to Expect: Access 30 million should gain insurance by 2019 29 states are moving toward expansion, including

Arkansas, Arizona, and Oklahoma. Cost for first three years (2014-2016) are 100%

covered by federal funds, reduced to 90% by 2020 17 states developing their own Marketplace,

others are operating “partnership” or “federally-facilitated” Exchange Tax subsidies start at 100% of FPL, so low-income will

not be eligible if Medicaid not expanded in state

What to Expect: Cost and Quality The Centers for Medicare and Medicaid Services

will continue incentivizing integration and quality Pay-for-Performance Shared Savings and Demonstrations Penalties for Safety Deficiencies

We have seen recent reductions in health care spending growth, is it sustainable?

Pressure to reduce premiums could result in narrow networks and focus on integration in private market as well.

Closing Thoughts Implementation by state

Beyond Medicaid and Marketplace, participation in Accountable Care Organizations and State Innovation Models will vary

In 2017 and beyond, single payer waivers or other innovations allowed.

Other Important Issues: Workforce Expansion Cultural Competency and Outreach Medicaid payment rates Reductions in safety net funding due to expected increase in insured

population Rate Regulation and increased state oversight of premiums

Additional Questions? droby@ucla.edu , 310-794-3953

healthpolicy.ucla.edu/calsim

For information and updates on ACA:http://healthreform.kff.org/www.healthreformgps.comwww.healthreform.govwww.kaiserhealthnews.orgDeloitte Health Solution’s Health Care Reform Memo