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April 12, 2013

Implementing the Affordable Care Act

Affordable Care Act search

With the reelection of President Obama and the upholding of most provisions of the Affordable Care Act by the U.S. Supreme Court, the path for continued implementation of the act has been cleared, although implementation is likely to take longer than originally hoped by the Obama administration.

A key feature of the act is expanding health insurance for more than 30 million people who are currently without health insurance. This will be accomplished in several ways.

Individual health insurance mandate of 2014

The individual mandate for persons to acquire health insurance if it is not provided by their employers or other sources is scheduled to take effect January 1, 2014. The mandate applies to persons who are required to file federal tax returns. (In 2012, that threshold was $9,000 for individuals under 65, and $19,000 for married persons under 65 filing jointly.)

The penalty for people who do not obtain health insurance starts low and grows higher. In 2014, the penalty will be $95 per adult or 1 percent of family income, whichever is greater. In 2016, the penalty will be $695 per adult or 2.5 percent of family income, whichever is greater. The penalty was upheld by the Supreme Court in 2012 as a constitutional use of Congress’ taxing power. A potential problem for effective implementation of the act is that the penalties are low enough that some people may choose to pay the penalties rather than spend a larger amount on health insurance.

Employers of more than 50 people also are required to provide health insurance to their employees or pay a penalty of $3,000 per worker per year for each employee that received a tax credit for purchasing the employee’s own insurance.

Medicaid expansion

The Medicaid program will be expanded to cover individuals and families who are at 133 percent of the poverty level. In 2012, 133 percent of the poverty level is $14,856 for an individual and $30,657 for a family of four in the 40 contiguous states - and higher dollar amounts for Alaska and Hawaii. The expansion of the Medicaid program will cover about 17 million more people and also is scheduled to take effect in 2014.

Republican governors in six southern states (Florida, Georgia, Louisiana, Mississippi, South Carolina, Texas) have threatened to block Medicaid expansion in their states, even though the federal government will pay the added costs of expansion until 2016. It is possible that state legislatures in those states may override the governors or induce the governors to change their minds.

For people with incomes above the eligibility level for Medicaid, tax credits will be available to help pay for health insurance. The tax credits apply to persons with incomes up to 400 percent of the poverty level. (In 2012, 400 percent of the poverty level is $44,680 for an individual and $92,200 for a family of four.)

Establishing insurance exchanges

The uncertainty of whether President Obama or Mitt Romney would win the election caused a showdown in implementation of some parts of the Affordable Care Act. States were supposed to decide in November whether they would establish their own insurance exchanges, establish exchanges in cooperation with the federal government, or leave the establishment of exchanges to the federal government.

Insurance exchanges would facilitate purchase of health insurance by individuals and small employers by spreading the risk to larger groups and (hopefully) making insurance less expensive than it would be under the current system of purchasing insurance for individuals and small employers.

Approximately one-third of states have announced plans for establishing insurance exchanges. For the remainder of states, the Obama administration has granted an extension of time to decide whether to establish insurance exchanges. Generally, Republican states are more likely to be undecided or not willing to establish their own exchanges. If a state does not establish its own exchange, the federal government will.

ACA implementation and more changes

Implementing the Patient Protection and Affordable Care Act (or any complex new law) requires a lot of regulations to work out the details. Since health care reform was a highly controversial issue in the election, the Obama administration slowed down the release of new regulations in the months prior to the election, probably to avoid yet more controversy.

Now that the election is over, the pace of new regulations and proposed regulations will increase. Subjects of the regulations will include the specific "essential benefits package" that health insurance plans must cover, exceptions to the insurance mandate for individuals and employers, excise taxes on medical devices, and the requirements of non-for-profit hospitals to maintain tax-exempt status.

Payments to physicians

Payments to physicians for primary care will rise under the Affordable Care Act. Effective January 1, 2013, Medicaid payment rates for primary care providers will be set at 100 percent of the Medicare rates. The increased payments will apply to family medicine, general internal medicine and pediatric medicine. The federal government will pay all of the added costs from the increased rates through the end of 2014 at which time some of the added costs may shift to the states.

Although there is added emphasis on primary care and increased payments to primary care providers, cost containment is a high priority under the Affordable Care Act. Methods for containing costs while promoting quality care include increased use of bundled payments and payments to accountable care organizations (ACOs).

With bundled payments, groups of providers - including hospitals, physicians and home care agencies - will receive a fixed sum for a patient’s inpatient care and post-acute care services rather than individual payments for each service performed. Depending on the plan to which providers agree, payments may be increased or decreased depending on whether the providers meet quality and cost-containment goals.

A Medicare pilot program for bundled payments will begin in 2013. One of the challenges will be to develop equitable systems for dividing the fixed payments between providers. If the bundled payments work out, their use will be expanded, both by the government as well as private insurers.

Jeff Atkinson (JAtkin747@aol.com) teaches health care law at DePaul University College of Law in Chicago.



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