This is another installment of an ELGL original content series titled “Taking Triple Aim on Health Care” by Josh Schultz. Josh is a Client Services Associate at Medicare Rights Center, New York
Talking About Obamacare’s Costs
The Health Insurance Marketplaces created by the Affordable Care Act (ACA) opened for business this week. We’ve seen some preliminary technical glitches related to determining a person’s eligibility for insurance affordability tax credits and signing up for coverage. These difficulties may persist for the first several weeks of enrollment, and some individuals and small businesses will end up applying for Marketplace or small business coverage in-person with the help of a “navigator” or other health insurance counselor, rather than completing the process online. But the Marketplaces opened on schedule, even as the United States federal government shut down due to a lapse in Congressional appropriations. According to its contingency plan, the Department of Health and Human Services (HHS) is ensuring the ACA goes into effect even though the government has shut down. Funding to roll out the ACA isn’t subject to the Congress’ annual appropriations process and spending money to implement the ACA and operate the Marketplaces and Medicaid has already been authorized.
The ACA’s costs to consumers
Congress has shut the government down over a program that Congress can’t shut down – you just can’t make this stuff up. With the cost of rolling out the ACA already okayed, some people may be curious about an aspect of the ACA that the U.S. House of Representatives loves to talk about: the costs of the law. Over the past several months, policy experts and consumers have seen news stories about the cost an individual must pay for Marketplace coverage. Kaiser Health News reviewed what Marketplace coverage costs in the 34 states where HHS will run all or part of the Health Insurance Marketplace. A so-called bronze plan expected to cover 60% of a typical enrollee’s medical costs, would cost a 21 year-old $96 per month in Comanche County, OK, and the same type of policy would cost $301 per month in St. Paul, MN. These prices are before affordability tax credits come into play and push costs down for people with lower incomes.
Other reports have focused on the costs associated with Marketplace coverage after somebody has already enrolled in coverage, paid his or her premiums, and then needs to access medical care. These costs include co-pays, co-insurance, deductibles, and annual out-of-pocket maximums. A co-pay is the fixed dollar payment (e.g. $25) you owe for a covered medical service; co-insurance is the percentage of a covered medical service you are responsible for paying after your plan pays its share based on a percentage (e.g. you pay 20% co-insurance after the plan pays 80%); a deductible is the amount of money you must pay before the plan starts paying its share (e.g. $2,000) and you only owe co-pays or co-insurances; and, the out-of-pocket maximum is the total amount of co-pays, co-insurances, and deductible costs you must pay before the plan pays claims at 100%.
What about the other health insurance taxes?
Business groups also have concerns about their own costs. America’s Health Insurance Plans (AHIP), the powerful industry lobby that intermittently backed the ACA while Congress debated the law, is blasting the cost of the ACA’s tax on health insurance plans and even launched a campaign to repeal the tax. (This tax provides funding for the Marketplaces and will drive millions of new customers to buy private health insurance policies, both in and outside of the Marketplace.) Medical device companies somewhat infamously walked away from the Congressional negotiating table during D.C.’s back-and-forth over what the ACA would or would not do. When the device companies walked away, Congress levied a big tax on them, which they’ve been trying to repeal the tax ever since. Medical device makers want the tax repealed because (they say) it will increase costs to consumers. Other people talk about the cost of the ACA’s individual mandate, which functions as a tax on people who can afford to purchase health insurance but choose not to. In 2014 – the first year the individual mandate applies – not having health insurance will cost $95 or one percent of an individual’s income, whichever is greater.
The ACA costs money for some people and some companies, but it also brings in money to companies and provides long-needed benefits to people in exchange. Coverage for preventive services like routine check-ups and certain types of screenings are covered at no cost to consumers under the ACA. For example, flu shots are free under the ACA. What this means, of course, is that your health insurer pays 100%, and your plan premium is rated to include the free flu shot. Under the ACA, Marketplace and employer provided plans alike must cover certain cholesterol tests, diabetes screenings, and women’s preventive health services at no (out-of-pocket) cost to the plan enrollee. We know that covering preventive services such as flu shots without cost sharing (e.g. a co-pay) encourages people to take advantage of the service. By encouraging preventive care, the ACA may decrease costs to health plans and people alike by encouraging a healthier population.
Health insurance affordability tax credits and Medicare taxes
In exchange for requiring health insurance companies to issue policies to anybody regardless of pre-existing conditions, and providing affordability tax credits to certain people and families with lower incomes, the ACA will cost some younger, healthier people more money when they purchase health insurance. In addition, the ACA causes people with very high incomes to pay more for the Medicare portion of their FICA taxes, and it means that Medicare recipients with higher incomes will pay slightly more for their Medicare prescription drug insurance. In return, the ACA closes the Medicare prescription benefit’s “donut hole” meaning that out-of-pocket costs are lower for everyone – including the wealthy.
In states choosing to expand Medicaid to cover more people with low incomes, hospitals will save on the costs of treating uninsured patients who show up at the hospital seeking medical care. Under a 1986 federal law, hospital emergency departments must see patients regardless of their ability to pay. This type of care is sometimes called “uncompensated care” and its cost is shifted to patients with private insurance. In return for the ACA’s promise to expand Medicaid meaning fewer uninsured patients would turn up at hospital emergency rooms, hospitals agreed to a reduction in payments from the federal government made under a different federal law that compensates them for providing care to the poor and uninsured. The Supreme Court said states could choose whether to expand Medicaid, and hospitals in states that don’t expand the health insurance program for people with low incomes will be stuck with the costs of treating uninsured low-income patients and they will lose some of the federal government’s compensation for treating those people.
ACA’s net benefit
When it comes to health insurance and health care costs, the ACA has winners and losers. There are many types of costs associated with various aspects of the ACA; taxes and fees are key to funding and operating this very important and complex program. Costs to some people and providers will decrease (e.g. somebody gets Medicaid who wouldn’t have been eligible before), and they will increase for others (e.g. a wealthy person whose Medicare taxes have gone up). Overall, the ACA is a very important program with a net benefit to every American.
Supplemental reading – Obamacare Begins
- POLITICO’s guide to understanding the ACA
- Cover Oregon: New health exchange swamped by 80,000 online visitors
- Washington Post: Rush of interest continues on insurance Web sites
- Washington Post: Insurers’ new health repeal campaign
- Seattle Times: D.C. warfare fails to stop launch of health-insurance exchanges
Policy wonks only
Note: only my views here.