AFFORDABLE CARE ACT
It has been nearly four years since the passage of the Patient Protection and Affordable Care Act (PPACA), and the Health Care Education Reconciliation Act (HCERA), which together form the massive health care reform law now commonly called the Affordable Care Act (ACA).
Almost immediately upon passage, the ACA resulted in some very important health coverage protections. The ACA currently prohibits insurance companies from imposing lifetime dollar limits on health benefits, restricts the use of annual limits on essential health benefit services until they are eliminated in 2014, prohibits insurance companies from denying coverage to children because of a pre-existing condition and allows children to stay on their parent's health plan until they turn 26 years old.
Still, the most wide-reaching and ambitious provisions in the ACA begin in 2014 with the implementation of the individual mandate and coverage under the health insurance exchanges. In addition, beginning in 2014, health insurers will no longer be able to charge more or deny coverage to anyone because of a pre-existing condition.
The law requires most people to maintain a minimum level of health insurance coverage beginning in 2014 (commonly referred to as the "individual mandate") or to face a tax penalty for failing to do so.
Nevertheless, nearly 24 million Americans are exempt from the requirement to carry insurance, including members of certain religious groups, Native American tribes, undocumented immigrants, people who are incarcerated, and people whose incomes are below 133% of the Federal Poverty Level.
HEALTH INSURANCE MARKETPLACE
A central goal of the ACA is to significantly reduce the number of uninsured by providing affordable coverage options through Medicaid and the new Health Insurance Exchanges. Health Insurance Exchanges, or Marketplaces as they are commonly called, opened for enrollment on October 1, 2013 and coverage under the exchanges is effective as early as January 1, 2014.
The Centers for Medicare and Medicaid Services (CMS) is the primary Health and Human Services (HHS) department in charge of the implementation of the ACA, and is responsible for developing and maintaining the official site of the Health Insurance Marketplace.
In this article, we will explore the main concepts, implementation and challenges of the new Health Insurance Marketplaces.
What is an Exchange?
The Health Insurance Exchange (also called Marketplace) is an online marketplace where individuals and small employers will be able to shop for health insurance coverage.
The exchanges also help people find out if they are eligible for federal subsidies to help cover the cost of coverage or if they are eligible for Medicaid. Ideally, with one Marketplace application, applicants can learn if they can get lower costs based on their income, compare their coverage options side-by-side, and enroll in their chosen plan.
The online Marketplaces are not yet free of glitches and the Marketplace run by the federal government is experiencing numerous issues including the misidentification of individuals qualifying for Medicaid or federal subsidies. In order to allow individuals to continue to enroll until the website is fixed, CMS has implemented several temporary processes.
Will Every State Have an Exchange?
Yes. If states do not establish their own exchange, the federal government will set them up. Currently, more than half the state exchanges will be run either by the federal government or in partnership with them. You can get details on the federal exchanges and links to state-run exchanges at www.healthcare.gov.
Who Can Use the Individual Insurance Marketplace?
Most US citizens & lawful residents may purchase their health insurance through the Marketplace.
Eligible individuals may qualify for tax credits to help offset the cost of purchasing coverage in a Federal or State Health Insurance Marketplace. To qualify for a tax credit, household income must be between 100% and 400% of the federal poverty level.
Individuals who have access to employer-provided health care are not eligible for tax credits unless the employer plan is unaffordable. An employer plan is deemed unaffordable if the cost exceeds 9.5% of household income or does not provide minimum value. To be considered as providing minimum value the plan must cover at least 60% of covered expenses.
When is the Enrollment Period?
For 2014, there will be an extended enrollment period, enrollment begins Oct. 1, 2013 and ends on March 31, 2014. In 2015 and beyond, open enrollment will run from Oct. 15 to Dec. 7.
Those enrolling in a plan through the Health Insurance Marketplace must have enrolled by December 24, 2013 and paid their premium by December 31, 2013 in order to have coverage by January 1, 2014. However, some health insurers have announced they will extend the deadline for the first month’s premium payment to January 10, 2014.
If an individual does not enroll during the regular enrollment period and they do not qualify for the special enrollment period, they will have to wait for the next open enrollment period to enroll, and in addition, they may face penalties for not enrolling.
Individuals who do not have insurance by January 1, 2014 or obtain an exemption may be charged a per month fee on their year-end tax returns.
What is the Special Enrollment Period?
After open enrollment ends, individuals will not be able to get health coverage through the Marketplace until the next annual enrollment period, unless they have a qualifying life event.
Under certain circumstances, individuals may change health plans, add, or drop someone from coverage outside the regular annual enrollment period. The list of qualifying life events for the special enrollment period includes:
- Losing a job;
- Getting married or divorced;
- Giving birth to or adopting a child; or
- Moving to a different state.
Any of these life events triggers a special 60-day enrollment period during which time an individual can change or buy health insurance through the Marketplace.
What is the Penalty for Not Obtaining Insurance?
In 2014, individuals who do not sign up and do not qualify for an exemption, will be subject to a penalty that will be calculated either by a percentage of household income or a flat per person fee whichever of these amounts is higher:
- 1% of their yearly household income, or
- $95 per person for the year ($47.50 per child under 18) with a maximum penalty per family at $285.
The penalty increases every year. In 2015, it is 2% of income or $325 per person. In 2016 and later years it is 2.5% of income or $695 per person. After that, the penalty is adjusted for inflation.
Is Medicare Included in the Health Exchange Marketplace?
No. Medicare is not a part of the Marketplace. Most Medicare eligible beneficiaries will be better off signing up for Medicare as coverage may cost them more in the Marketplace. In fact, it is illegal for someone to sell Marketplace coverage to someone who is currently enrolled in Medicare, even if the individual only has Medicare Part A or Part B.
In addition, individuals may have to pay a penalty for Medicare Parts A, B, and D if they sign up for Medicare later and they will not be eligible for lower costs to help pay premiums or cost-sharing in the Marketplace.
What are the Qualified Health Plans “Essential Health Benefits”?
The ACA mandates that Qualified Health Plans (QHPs) offered in the individual and small group markets, both inside and outside of the Health Insurance Marketplace, offer a comprehensive package of essential health benefits.
Essential health benefits must include, at a minimum, items and services within the following 10 categories:
- Ambulatory patient services;
- Emergency services;
- Maternity and newborn care;
- Mental health and substance use disorder services, including behavioral health treatment;
- Prescription drugs;
- Rehabilitative and habilitative services and devices;
- Laboratory services;
- Preventive and wellness services and chronic disease management; and
- Pediatric services, including oral and vision care.
What Are the Standardized Tiers of Coverage?
Plans in the Marketplace are generally separated into four health plan categories, Bronze, Silver, Gold, and Platinum. These categories are based on the percentage the plan pays of the average overall cost of covered essential health benefits for members.
Percentages the plans will spend, on average per category:
As mentioned earlier, one of the goals of the ACA is to make available affordable health care. This was to be accomplished through a combination of a competitive marketplace and financial assistance to qualifying individuals. Yet, a certain percentage of people are finding that they cannot afford coverage under the available plans and yet they do not qualify for tax credits or cost-sharing subsidies. While others are having to decide if they should pay significantly higher premiums for a silver, gold or platinum policy which have lower deductibles and coinsurance or risk purchasing the lowest level bronze plan with the lowest premium and a high deductible and coinsurance. If they choose a bronze plan, they risk paying more if they end up needing a lot of care. In addition, cost-sharing subsidies for deductibles do not apply to bronze policies.
Certain individuals may qualify to purchase a catastrophic health plan rather than one of the four tiers of QHPs listed above. Catastrophic health plans must meet all of the requirements applicable to other QHPs. However, when purchased through the Insurance Marketplace, these plans only cover three primary care visits per year and certain preventative care services before the plan's deductible is met.
While the premium for catastrophic health plans are lower than for other QHPs, the out-of-pocket costs for deductibles, copayments, and coinsurance are higher.
Originally, to qualify for a catastrophic plan, individuals had to be under 30 years old or qualify for a "hardship exemption" because the Marketplace determined that they are unable to afford health coverage. However, on December 19, 2013, in response to the outcry from individuals whose insurance policies have been canceled because of new requirements under the ACA, President Obama announced an expansion of the hardship exemptions to include individuals whose policy will be canceled. In a recent letter, CMS details the process the affected individuals must follow to be able to purchase catastrophic coverage.
Who Qualifies for a Tax Credit?
Those making between 100% and 400% of the federal poverty level will be eligible for tax credits to buy insurance. However, the tax credit only applies to those who purchase their insurance through the Health Insurance Marketplace.
Once the Marketplaces are working properly, those who apply for health insurance through the Marketplace will see the amount of savings they are eligible for when they fill out the online application. To date there have been numerous glitches with both federally run and state run Marketplaces. In some cases, individuals who should qualify for a tax credit have been told they did not and in other instances, those who do not qualify for a tax credit were erroneously told that they do.
Do Individuals Have to Buy Insurance Through the Marketplace?
The federal law does not require anyone to purchase health insurance through the Health Insurance Marketplace. Health insurance can be purchased through the Health Insurance Marketplace, directly from an insurance company, with the help of a health insurance agent or broker or from an online health insurance seller.
However, it is important to note that individuals will not qualify for lower costs based on their income unless they purchase insurance through the Health Insurance Marketplace.
What is the Small Business Health Options Program (SHOP)?
Each state exchange operates a SHOP to enable small employers to offer their employees a choice of health plans similar to those offered by large employers. The premise behind the SHOP is that small businesses can come together to provide a bigger risk pool and as a result gain greater bargaining and cost advantages.
In 2014, the SHOP Marketplace is open to employers with 50 or fewer full-time-equivalent employees (FTEs) and beginning in 2016, all SHOPs will be open to employers with up to 100 FTEs. Small businesses that purchase health plans through the SHOP Marketplace may qualify for a small business health care tax credit worth up to 50% of the employer paid premium costs.
In the SHOPS, employers choose the coverage they want to offer their employees and the contribution they will make toward the coverage. Employers with 50 or fewer FTEs are not required to provide health care coverage, but if these employers purchase coverage through the SHOP they are required to offer coverage to all employees working 30 or more hours per week on average.
In another setback for the federal healthcare website, HealthCare.gov, CMS recently announced a one-year delay in the online enrollment function in federally run SHOP Marketplaces. The online application and enrollment process for these SHOP Marketplaces is now scheduled to be available by November 2014. In the meantime, small employers will have the option to enroll their employees in coverage through an agent, broker or insurer that offers a certified SHOP plan and has agreed to conduct enrollment according to HHS standards.
The ACA provides States that run their own SHOP flexibility in how they run and implement their Insurance Marketplaces. More information and a list of frequently asked questions on the SHOP Marketplace are available at www.healthcare.gov.
OTHER PROVISIONS OF THE AFFORDABLE CARE ACT
With some exceptions, the ACA limits the cost-sharing individuals and families will pay for health care. Under the ACA non-grandfathered health plans must limit the total out-of-pocket costs enrollees pay for in-network, essential health benefits. For 2014, the maximum out-of-pocket limit for in-network, essential health benefit expenses is $6,350 for self-only coverage and $12,700 for family coverage.
Out-of-pocket limits do not apply to services that are not covered by the plan, essential health benefits which are incurred for out-of-network expenses (except emergency care), or services determined to be not “medically necessary.”
For 2014 only, some prescription drug plans may have a separate out-of-pocket limitation. This 1-year exception was implemented to allow insurers and employers time to upgrade computer systems to coordinate benefits out-of-pocket costs when separate companies administer medical coverage and drug benefits.
Guaranteed Issue and Renewal
Beginning January 1, 2014, insurers are prohibited from denying coverage or charging a higher premium based on “pre-existing” conditions.
While the ACA prohibits insurers from charging higher premiums based on pre-existing conditions, they are allowed to adjust premiums based on the following factors:
- Self-only or family enrollment
- Tobacco status
- Geographic location
Under the ACA, insurers can charge smokers and other tobacco users as much as 50 percent more on their premiums than non-tobacco users. The “tobacco surcharge” is allowed because tobacco users are high-risk health insurance patients who have higher health care costs than non-tobacco users.
Some insurers have chosen to charge a lower surcharge on tobacco users. Meanwhile, several states have lowered the maximum surcharge allowed and others including Washington D.C., Massachusetts, Rhode Island, and Vermont have prohibited insurers from applying a tobacco surcharge.
Older people also tend to use more health services and more costly services. For this reason, insurers may continue to charge older individuals higher premiums. However, the ACA prohibits insurers from charging elderly individuals more than three times the premium rate for young people.
CHALLENGES AND UNCERTAINTY
New Patient and Payer Demographics
As the new health care consumer protections and coverage options are implemented, providers will have to prepare for new challenges such as changing payer and patient demographics including the new plans available on the Insurance Marketplaces and an expected increase in underinsured patients.
By late December, enrollment in the new Health Insurance Marketplace is well below expectations. The early trend showed that the majority of those who enrolled early qualified for Medicaid or premium subsidies.
The expansion of the Medicaid rolls may provide challenges for providers and hospitals as states try to reign in the costs of the Medicaid program by lowering reimbursement, shrinking benefits and implementing tighter formularies.
Employers too are looking for ways to control health care costs.
Starting in 2015, large employers with 50 or more workers will have to offer full-time employees (those who work 30 or more hours per week) health coverage or they may face fines. In response, employers continue to increase the deductibles and co-insurance paid by employees and some employers have reduced the numbers of full-time employees.
Small businesses are not required to provide health insurance coverage to their employees, but those that do are also trying to lower their health care costs. These employers may look to lower their costs by purchasing employees’ coverage on the SHOP Marketplace or they may stop offering health care to employees instead referring them to the individual Marketplace where the employee can purchase their own coverage.
Recent reports of “sticker shock” state that approximately 29% of individuals who purchase their own health care insurance will see their premiums rise and will not qualify for subsidies or tax credits. It is expected that a significant number of these people will choose a lower level of health care coverage in an effort to lower their premium costs. In some areas, early retirees, the self-employed and middle-income individuals and families are finding the premiums in the Health Insurance Marketplace to be unaffordable.
In the Health Insurance Marketplace, some individuals who would prefer to purchase a higher coverage plan will be unable to. In the Marketplace, patient co-insurance runs from 10% - 40% based on the four metal tiers, the plans with lower premiums generally have higher co-insurance and hefty deductibles.
However, insurers are only required by the ACA to offer Gold and Silver plans and in some areas there are no plans offered at the Platinum level (the level with the lowest co-insurance percentage), leaving individuals to have to choose a plan with a minimum co-insurance of 20%.
In spite of the ACA’s yearly out-of-pocket limit, cancer patients and others with chronic health care issues may find themselves with mounting medical bills if they choose plans with a lower level of coverage.
In turn, providers may have increased difficulty in collecting patient accounts for these underinsured patients.
90-Day Grace Period
The ACA contains a provision to protect patients from having their coverage dropped when they are late on their monthly health insurance premium. Effective January 1, 2014, individuals who enrolled through the Health Insurance Marketplace and who have paid at least one premium will have a 90-day grace period to pay the next one.
While in the grace period, the insurer is only required to pay health care providers for the services provided during the first 30-days of the 90-day grace period and they may pend the claims for services rendered in the second and third month of the grace period.
If the enrollee fails to pay their premium after 90 days, the insurer can drop the enrollee from the plan and the insurer is not responsible to pay for services provided to the patient during the last two months of the grace period. Under this scenario, the provider would have to collect the payment for services provided in the last two months directly from the patient.
Medical societies including the American Medical Association (AMA) and the American Hospital Association (AHA), have expressed their concerns to CMS citing the inability for the provider to know if an enrollee’s premiums are paid or will be paid before the end of the grace period.
HHS acknowledged that this would “increase uncertainty for providers and increase the burden of uncompensated care.” They said they will “monitor this issue moving forward and will continue to work on the development of policies to prevent misuse of the grace period.”
CMS requires insurers on the exchanges to notify providers “as soon as practical” when a beneficiary falls behind on payments thus triggering the grace period. However, CMS does not provide a firm deadline or methodology for notifying providers.
In response to this potential for significant financial risk, some physician groups and medical groups have stated they will not be participating as providers in the Health Insurance Marketplace.
Drug Co-Pay Cards
Currently, a significant number of cancer patients with commercial insurance coverage benefit from drug co-pay cards that help qualified patients with the drug costs associated with their treatment. These drug co-pay cards are not available to individuals who are covered under a Federal health care program such as Medicare and Medicaid.
There has been much concern and uncertainty as to whether the co-pay assistance can be extended to individuals who have coverage through the Federally-facilitated Marketplace. On October 30, a letter from HHS Secretary Kathleen Sebelius to Representative McDermott appears at first glance to answer this question as Secretary Sebelius states that the HHS does not consider the ACA qualified health plans (QHPs) purchased through the Health Insurance Marketplaces to be federal health care programs.
Yet, in a statement on November 4, CMS clearly states that they have concerns about support for premium payments and cost-sharing obligations. CMS responded to the question of whether a third-party would be permitted to make premium payments to health insurance issuers for QHPs on behalf of enrolled individuals by stating the following:
“The Department of Health and Human Services (HHS) has broad authority to regulate the Federal and State Marketplaces. (e.g., section 1321(a) of the Affordable Care Act). It has been suggested that hospitals, other healthcare providers, and other commercial entities may be considering supporting premium payments and cost-sharing obligations with respect to qualified health plans purchased by patients in the Marketplaces. HHS has significant concerns with this practice because it could skew the insurance risk pool and create an unlevel field in the Marketplaces. HHS discourages this practice and encourages issuers to reject third party payments. HHS intends to monitor this practice and to take appropriate action, if necessary.”
This will be an issue to watch carefully as we move forward and providers should carefully review their contracts with insurers for any restrictions on premium and copay assistance.
Under the ACA, all health plans in a Marketplace must include prescription drug coverage. However, each state sets the list of covered medicines and plan formularies must include the greater of one drug in every USP drug category and class or the same number of prescription drugs in each category and class as covered by the benchmark plan chosen by the state.
Insurers are permitted to change their formularies throughout the year as long as those formulary modifications remain compliant with the ACA’s Essential Health Benefit requirements. They may also institute cost tiers with different levels of co-insurance or copayments. Specialty drugs are often included on the highest cost tier.
As of late December, many of the Marketplace plans had not yet published provider networks. In addition, in some cases, the list of participating providers and hospitals has been determined to be inaccurate.
Outreach from the insurers offering plans in the Health Insurance Marketplaces to providers has also been less than optimal. Across the country, providers are reporting that they have not received information about reimbursements and whether or not they are included in the insurer’s network. While other providers who have received reimbursement information state that the payment rate for plans in the Marketplace are well below what the insurer pays in other commercial contracts.
Finally, some insurers are attempting to contain their costs by significantly narrowing their provider networks in the plans offered on the Marketplace. In Washington State, Seattle Children’s Hospital recently filed a lawsuit because it is not included in most of the Marketplace plans’ networks. While the hospital is included in most commercial plans’ networks, a representative for the pediatric specialty hospital expressed concern that this exclusion from the plans’ Marketplace networks could significantly disrupt and delay care for children in need of the hospital’s services.
One thing is certain, the ACA is still a moving target and physicians will need to keep abreast of changes that will affect their practice and patients. With the advent of the new Health Insurance Marketplaces, physicians will have to carefully review contracts and contract amendments and develop policies and processes for tracking patients and payments in the exchange plans.