o The interim high risk pools won't accept applicants until they have been uninsured for at least six months, regardless of individual circumstances
o The popular "mini-meds" (plans with limited annual benefits) covering more than one million workers, including 30,000 just at McDonald's, need a waiver to continue operating; and since the expense structure on these plans isn't workable within the new MLR minimums, they will need to apply with federal officials for a "methodological adjustment" to their reported claims and quality improvement expenses
o The cost of mandated benefit provisions most certainly is being passed in full to consumers in the form of higher premiums; and some consumers will be subjected to rate hikes prior to the expiry of original contractual rate guarantee periods
Burdensome employer penalties and obligations starting in 2014 could end up leading to a dismantling of employment-based health insurance in the U.S.:
o Employers with 50 or more FTE employees that do not offer "minimum essential coverage" will pay $2,000 for each employee over the first 30 employees if one of their employees gets a tax subsidy to buy insurance under an exchange
o Employers with 50 or more FTE employees that do offer "minimum essential coverage" but have at least one employee receiving subsidized coverage under an exchange will pay the lesser of $3,000 for each employee receiving a premium credit or $2,000 for each full-time employee
o While at first glance it seems these requirements would increase the number of employers offering health insurance, it's entirely possible that employers will opt to pay penalties and refer their employees to the exchange marketplace
There will be an individual coverage mandate starting in 2014, which arguably shouldn't be permissible under the U.S. constitution:
o In 2014, an individual without insurance must pay whichever amount is greater: $95 of 1% of income
o For 2016 and beyond, that penalty rises to $695 or 2.5% of income, whichever is greater (the $695 is indexed from 2016 on)
o Families will pay half the penalty for children, with a cap of $2,085 per family
o Subsidies to buy insurance in new state exchanges will be available in the form of tax credits and cost-sharing assistance for people above Medicaid eligibility but below 400% of the federal poverty level (Medicaid eligibility will be increased to 133% of the federal poverty level)
o There are so many unintended or adverse consequences of PPACA:
o Due to the restrictive framework in which small businesses get tax credits, it would seem that firms are being discouraged from hiring or giving raises
o Since nothing is being done to rein in costs, we can pretty much count on employment-based health insurance becoming less available and more expensive
o The elimination in 2013 of the tax exemption for employers that receive the Retiree Drug Subsidy (RDS) for providing prescription drug coverage to Medicare-eligible retirees is causing an immediate hit to earnings as companies must create a deferred tax liability (for instance, AT&T estimated the change costs the company $1 billion)
o The $5 billion allocated to subsidize new interim high risk pools is not shared with states that already had laws ensuring access to healthcare, effectively penalizing those residents by excluding them from any proportionate share of the premium subsidy
o The narrow list-based approach to the MLR definition (rather than functional) may preclude the development of new innovations or exclude activities that improve care quality and help to contain costs, causing deterioration of quality of care delivery
o Higher MLR requirements without exemption for advisor fees will reduce agent commissions, causing many insurance brokers to be just plain broke
o Health underwriters should begin planning for a new career in 2014
o We estimate that for every one person that "wins" with health care reform by gaining improved access and/or receiving premium subsidies, there will be five people facing higher costs for their healthcare
There are multiple revenue-raising provisions that seem burdensome and in some cases completely unrelated to healthcare expenditures:
o A new 10% tax on tanning services started on July 1, 2010
o Beginning in 2011, businesses are required to file 1099 forms on all transactions exceeding $600
o Beginning in 2011, the pharmaceutical industry will pay annual industry fees phasing into $2.8 billion per year
o Beginning in 2013, manufacturers of medical devices will pay a 2.3% excise tax on sales of medical devices
o Beginning in 2013, the Medicare payroll tax rate will increase by 0.9% for individuals making over $200,000 and couples making over $250,000
o A new 3.8% tax will be added on income from interest, dividends, annuities, royalties and rents for those at the same income threshold
o Beginning in 2014, a non-deductible premium tax will be imposed on insurers
While CLASS clearly increases public awareness of the LTC risk, and it's fiscally responsible that CLASS is funded by enrollee premiums rather than taxpayer dollars, the program in its current form has many shortcomings:
o Cash benefits provided seem insufficient (as low as $50/day, plus annual CPI increases, for as long as the individual remains disabled) to meet the needs of most people needing LTC services, with current average cost of care in the U.S. ranging from around $100/day for home health care to over $200/day for nursing facility care
o CLASS monthly premium has been estimated to be in the $150/month range, which likely will lead to the overwhelming majority of people opting out of this LTC plan
o There are no options for an enrollee to take a shorter benefit period in exchange for lower premium; and while the unlimited benefit period provides long-tail protection, the five year wait before any benefits are payable doesn't seem suitable for anyone
o CLASS seems most likely to appeal to the working disabled (people who are not able to qualify for private Long Term Care Insurance coverage), which certainly helps that group but not the general public for which this program was conceived
The Unknown
Will lawmakers questioning the constitutionality of the individual mandate in the health care law be successful in overturning this aspect of health reform?
As lawmakers have stated -- and President Obama has hinted -- will the provision requiring businesses to issue 1099 tax forms if they purchase more than $600 annually in goods (not just services) be dropped by Congress?
Is it possible that the whole of PPACA (colloquially known as "Obamacare") could be repealed and replaced?
If Republicans cannot overturn PPACA, will they try to use the appropriations process to choke off implementation (more than 100 provisions of the law require appropriations, with the biggest being Medicaid expansion in 2014)?
What will become of Medicare Part C (Medicare Advantage plans) with substantial funding slated to be diverted away from this popular program?
Will CLASS protect meaningful numbers from the Long Term Care risk?
So, dear reader, how do you feel about PPACA? If you've been denied access to health insurance in the past, you may be in the camp that believes PPACA is healthy medicine. Or if you're like us, you appreciate the good intentions but can't help reflecting on how much longer the "Bad" list is compared to the "Good."
Rather than approach reform with a heavy stick and impose mandates, we feel it would be more productive to focus on improving access, spurring competition and finding ways to contain escalating costs. Just a few ideas that come to mind are:
- Allow employers the option to buy individual health policies for their employees (with untaxed dollars), so that workers could have portability
- Allow insurance carriers to sell across state lines
- Permit limited benefit plans instead of prohibiting them (how are ten-dollar-an-hour employees and their employers supposed to afford insurance that costs upwards of $5,000 for individuals and $12,000 for families?)
- Mandate that insurance carriers offer coverage to people losing their Medicaid eligiblity, including immediate coverage for pre-existing conditions
- Encourage carriers to change their corporate structure and become mutual companies, a system in which the policyholders own the company shares
