Key Issues

Key Issues Affecting Heath Care Coverage

Last week, the Centers for Medicare and Medicaid Services (CMS) awarded $10 million in Navigator grants to 39 organizations in states where the federal government administers the Affordable Care Act Marketplace. Navigators are trained individuals or organizations — not connected to any insurance company — able to help consumers sign up for health insurance on the Marketplace.

Funding for Marketplace Navigators has significantly decreased in the past few years. Some consumer advocates and state administrators have expressed concern that this funding continues to be cut by the federal government and some states have opted to provide additional dollars to support the program. However, it has always been CMS’ intention to decrease funding as consumers become more familiar with the Marketplace and better able to make decisions on their own.

The debate over health care reform in America focuses mainly on insurance reform and access to health care coverage. When signed into law in March 2010, the Patient Protection and Affordable Care Act, also known as the Affordable Care Act, the ACA, or Obamacare, made sweeping changes to the health care system to allow greater access to health care coverage through the individual market, small group market, or Medicaid program. The law required all Americans to have health care coverage or pay a tax. This individual mandate, in effect until 2019, was eliminated as part of the Trump administration’s tax reform bill in December 2017. The ACA prohibits insurers from charging more or denying coverage because of a person’s health status. The law also provides additional funds to states to expand eligibility for Medicaid.

Lawmakers in Washington, D.C., continue to debate eliminating key provisions of the ACA and replacing them with different proposals intended to stabilize the marketplace while promoting improved affordability. Attempts to completely repeal the law failed in 2017, but health care reform remains a priority for legislators.

As a key part of the ACA, all small group and individual health plans must offer a core set of essential health benefits:

  • Preventive, wellness, and disease management services
  • Emergency care
  • Outpatient medical care known as ambulatory services
  • Hospitalization
  • Maternity and newborn services
  • Pediatric services, including dental and vision
  • Prescription drugs
  • Laboratory services
  • Mental health, behavioral health, and substance abuse services
  • Rehabilitation and habilitation services

The Affordable Care Act (ACA) prohibits any annual or lifetime limits on the amount a health plan spends on these essential health benefits. In addition, health plans must cover 100 percent of the cost of many preventive services, such as wellness visits, immunizations, and screenings for cancer and other diseases. However, while the ACA requires that small and individual plans contain these comprehensive benefits, in some cases the law made health care coverage more expensive than health plans offered prior to the ACA.

A preexisting condition is a medical condition that occurred before a person’s health benefits went into effect. Prior to the Affordable Care Act (ACA) insurers were able to vary rates or not offer policies to people with preexisting medical conditions. The ACA changed this and insurers could no longer charge more or deny health insurance based on a person’s health status.

The individual mandate is the requirement under the Affordable Care Act that all Americans must have health care coverage or pay a tax. It was designed to ensure that everyone has coverage when they need care. The individual mandate also helps stabilize the individual insurance market by giving healthy individuals, who might otherwise forego coverage, an incentive to sign up for insurance. Healthy individuals help balance out the cost of health care for those with significant medical needs. The Trump administration’s tax reform bill, signed by the president in December 2017, eliminates the mandate in 2019.

The Affordable Care Act (ACA), created two distinct options for the individual and small group markets. They are sometimes referred to as “on-exchange” and “off-exchange” plans.  On-exchange plans are those insurance policies that are sold on state and federal Marketplaces and meet all of the ACA requirements including essential health benefits and are eligible for tax credits and cost sharing reduction subsidies (CSRs).  Off-exchange plans offer insurance policies that do not need to comply with all of the ACA requirements and do not qualify for any subsidies or tax credits.

In early 2018, the Trump administration proposed rules to expand access to two types of health insurance plans that can be purchased off-exchange and bypass certain ACA-regulated consumer protections. While this enables these off-exchange plans to offer a more attractive price point, enrollees face the financial risks associated with having less comprehensive coverage. In addition, steering healthy people away from the ACA plans could further threaten its stability and drive up costs for those that remain on-exchange. If the on-exchange market is mostly made up of individuals with significant medical costs who rely on the ACA’s consumer protections, the cost of insuring those individuals will rise and negatively impact premiums.

Association health plans (AHPs) allow small businesses and self-employed entrepreneurs to band together, forming an “association,” to purchase health insurance. While these plans currently exist, there are federal and state rules that regulate these associations and require the groups to offer benefits beyond selling insurance.

The administration has recently finalized a new rule to expand AHPs, making it easier to create associations and allowing them to purchase insurance that does not meet many of the ACA requirements, including the ten essential health benefits.  The idea is to help small businesses and the self-employed access health insurance coverage that is usually only offered to large employers, which could mean significant cost savings. However, this could create situations where healthy people choose to leave their current ACA plans which would increase rates for consumers who stay in the individual and small group market. The new rule also allows individuals to form associations in multiple states or for the sole purpose of purchasing insurance, which can be challenging to oversee for state regulators.

Short-term limited duration insurance (STLDI) policies were created for individuals who need temporary insurance to bridge a gap in coverage because they changed jobs, moved, are attending college, or just need coverage until they can obtain comprehensive medical insurance. They have been sold in the United States since the early 1990s and typically offer less expensive policies and limited benefits. In 2016, STLDI policies were limited to three-months and it was required that all policies include a notice that it does not meet the ACA’s requirement for comprehensive coverage.

The administration recently changed the definition of the coverage period to 364 days and will allow the policies to be renewable for up to three years without requiring a new application from the consumer, if the carrier wishes to do so. These changes are likely to make STLDI policies an attractive option for healthy individuals looking for lower premiums. However, STLDI policies are not required to meet all of the ACA’s essential health benefits. Short term plans are not full, comprehensive coverage. An enrollee who has a sudden illness or injury could be responsible for steep medical bills or find that their STLDI policy doesn’t fully cover their ER visit, any follow-up care, or pharmacy needs. It also means that enrollees will need to pass medical underwriting before a policy is offered, and those individuals with a pre-existing condition may not be offered a policy or be offered one with a higher premium.

There are currently four main factors that can affect premiums: the product chosen, age, geography, and smoking.

The Affordable Care Act (ACA) created four basic levels of product in the individual market, platinum, gold, silver, and bronze. Platinum products contain the richest set of benefits and are the most expensive offerings, while bronze products have the highest deductibles and copayments and are therefore, the least expensive.

The ACA strictly limits how much premiums can vary based on a person’s age. The highest premium for the oldest person cannot be more than three times more than the lowest premium for the youngest person. Before the law was adopted, a younger and healthier person typically paid much lower premiums — for example, six or seven times less than an older and sicker person. With the ACA, younger and healthier people have found that they must pay substantially higher premiums for individual health insurance policies.

Geography is also a factor because health care costs vary in different areas of the country and therefore premiums will vary by region. In addition, there is a smoking surcharge, which means that consumers can be charged more if they use tobacco products.

Income does not directly affect premiums, but it does help determine if a person is eligible for financial help from tax credits or cost-sharing subsidies to help pay for his or her health care coverage.

Therefore, it is important that we develop a structure using ratings, tax credits, and subsidies that balances age distribution, geographical differences, and financial support for lower incomes and allows choice of product design.

State insurance departments have long been the primary regulators of insurance and continued to hold that role after the passage of the Affordable Care Act (ACA). States best understand local health care systems, as well as their communities’ specific health care needs. State officials are often in a better position to protect consumers and ensure that insurance options meet the health care needs of their constituents. Today, states have less flexibility to regulate their individual health insurance markets, due to the broad federal rules created by the ACA. Health care continues to be local and each market is unique, with different doctors, hospitals and health systems, all with unique and sometimes competing priorities. Returning flexibility to the states by restoring the ability to regulate their own insurance markets would improve the functioning of the individual market.

Probably not. While there haven’t been any specific proposals introduced, this idea has been discussed as something that could create more national competition, which would lower costs. However, since the key driver of health insurance premiums is the local cost of health care, it’s unlikely that selling insurance across state lines will have much of an impact on premiums.

No one plans to get sick or hurt. It’s just a part of life. But without health care coverage, illness and injury can quickly become devastating. Health insurance also helps people stay healthy — even when they are not sick or hurt. By simply visiting the doctor regularly for checkups and getting recommended screenings, people are more likely to prevent more serious conditions later on.

Also, for the individual insurance market to work well, we need to ensure enough healthy people sign up for individual health insurance. In order to have an insurance system where everyone has health insurance regardless of their medical condition, enough healthy people must sign up to help balance out the cost of health care for those with significant medical needs.

Cost-sharing subsidies (CSRs) and tax credits were introduced under the Affordable Care Act to provide financial assistance for individual health insurance, based on how much money a person makes each year and the number of people in their family.

There is an important difference between tax credits and cost-sharing subsidies. Tax credits are provided directly to consumers to lower the cost of monthly premiums, while CSRs are provided to insurance carriers to lower out-of-pocket costs, such as copays and deductibles, for people with low to moderate incomes.

In 2017, the Trump administration ended payments to health insurance carriers for CSRs. The change required carriers to reevaluate and revise premium rates for 2018. However, lawmakers are considering legislation that would reinstate funding for CSRs. Tax credits have not been impacted.

In many areas of the country, the individual health insurance markets are unstable and nearing collapse because only the sickest people have signed up for individual health insurance. The Affordable Care Act requires insurers to charge the same rates to sick and healthy people. So without enough younger and healthier people, the market can’t balance the cost of caring for those with significant medical needs.

This imbalance in the individual health insurance market pushes up the cost of health insurance for everyone. And the problem only gets worse when prices rise, because those people using the least amount of individual health insurance decide to drop it. 

To keep premiums more affordable for everyone, it is essential to have sustained federal funding to support the cost of caring for individuals with serious health conditions, much like Medicare Advantage has today. Providing federal dollars to help offset the expense of high-cost consumers allows insurers to reduce premiums for everyone, which makes coverage more attractive to healthier people and ultimately creates a more stable and predictable market.

Absolutely. For example, the Health Insurer Tax in the Affordable Care Act adds three to four percent directly to the cost of health insurance for individuals and employers.

Medicaid is a joint state/federal program that provides health care coverage for our nation’s most vulnerable from all backgrounds and geographical regions who meet certain income and other eligibility requirements. Established in 1965, Medicaid was envisioned as a safety-net for those most in need. As of April 2017, more than 70 million Americans receive health care coverage from Medicaid, including children, pregnant women, the elderly, the disabled, the working poor, and those suffering from substance use disorder.

Medicaid managed care is a system widely used by states to administer Medicaid. Under managed care, Medicaid recipients are enrolled in a private health plan that is responsible for covering all or most of the recipient’s medical needs. These health plans — called managed care organizations (MCOs) — receive a fixed per member per month premium from the state and are at full risk if it costs more to provide coverage. MCOs use the premiums they receive from the state to pay for their members’ health care services as well as administrative expenses.

Medicaid managed care has become increasingly popular over the past 30 years. Nationwide, more than two-thirds of Medicaid beneficiaries are enrolled in managed care. Thirty-eight states and the District of Columbia have contracts with MCOs.

Unlike the fee-for-service model which pays for each item or service regardless of the outcome, managed care seeks to align payments to providers in order to promote quality and efficiency. To achieve this, MCOs provide their members with care coordination and other direct health promotion benefits beyond those that they are contractually required to provide. This model has become increasingly popular over the past 30 years. Nationwide, more than two-thirds of Medicaid beneficiaries are enrolled in managed care. Thirty-eight states and the District of Columbia have contracts with MCOs.

A common component of managed care is value-based purchasing. Value-based purchasing is a term that describes any alternative payment model that promotes value, improves health, and reduces cost. Innovative programs are being developed through partnerships between MCOs, providers, and state and federal government that are designed to slow cost growth in Medicaid, promote stewardship of state and federal tax dollars, and enhance patient-centered care. These partnerships are based on nationally recognized quality measures that are designed to mitigate unnecessary or redundant care and address the unique needs of the Medicaid populations.

The key driver of premiums is the cost of health care. So when members spend more on prescription drugs, particularly specialty and high-cost brand-name drugs, health insurance premiums go up. For example, the overall pharmacy costs that Independence paid for members in individual health plans increased by 40 percent in 2015. This is directly related to the rising costs of specialty and high-cost brand-name drugs.