A Brief History of the ACA and Questions Ahead
Although I started blogging in order to offer some ideas looking forward about the future of our healthcare system, it’s useful to use the recent past as a starting point. Personally, I am less interested in the argument about whether the ACA was a good idea or a bad idea (or a directionally reasonable idea that’s been implemented badly), and more interested in examining its consequences and implications moving forward.
On March 10, 2010, President Barack Obama signed into law the Patient Protection and Affordable Care Act, which was originally given the clunky acronym “PPACA”, which was subsequently shortened to the catchier Affordable Care Act or “ACA” and sometimes “Obamacare“. The ACA represents the most significant change to federal healthcare laws in nearly a half century, since the introduction of the Medicare and Medicaid Programs in 1965, which I’ll address in a future post.
After the March 2010 enactment, the ACA rollout took place gradually. There are many other provisions of the ACA, but these are the highlights:
In 2011, health plans were subjected to new medical loss ration requirements that required them to spend at least 80% to 85% of premiums paid on healthcare or to send patients refunds.
In the summer of 2012, the Administration confirmed that the ACA would be deemed to have a “contraceptive mandate” (addressed in the Hobby Lobby case above) for women’s preventive services without cost-sharing, including HIV screening, contraception counseling, and domestic violence support services.
In October 2013, the health insurance exchanges opened for enrollment, offering subsidies for qualifying individuals and families (as explained below). In the healthcare.gov debacle, the federal government’s website was not ready until December 2013.
In January 2014, the individual mandate to purchase insurance if you weren’t otherwise covered (e.g. by an employer-sponsored plan), the federal subsidies on the insurance exchanges, and the Medicaid expansion (in states that elected to participate) kicked in. This was also the point at which the ACA prohibited denial of insurance based on preexisting conditions.
In January 2015, the employer penalty (requiring employers with 100 or more full-time employees to offer health coverage with specified affordability and value requirements to 70% of their full-time employees and their dependents or pay a penalty) took effect.
In January 2016, the employer penalty will extend to employers with between 50 and 99 full-time employees, and the percentage of employees who must be covered rises to 95% for all employers of 50 or more.
In January 2018, the “Cadillac” tax provision is scheduled to take effect, imposing an excise tax on employer group health plans that exceed an annual cost of $10,200 per person or $27,500 per family.
The Political Divide
From its enactment until today, the ACA has been politically divisive. In general, liberals and progressives lauded it as a leap forward for expanding access to care for:
-the working class (via the creation of health insurance exchanges and sliding scale subsidies for people between 138% to 400% of FPL –about $47,000 for an individual and $97,000 for a family of 4)
-younger adults (via the newly established right to stay on their parents’ health plans until age 26).
On the other side of the aisle, conservatives derided the ACA as unconstitutional and a disastrously costly new entitlement program. Libertarians also criticized the mandates that required individuals who did not have employer-sponsored coverage or qualify for Medicaid to purchase insurance on the exchanges or pay a tax penalty, and that required large employers (over 50 employees) to provide insurance coverage or face a penalty.
The Supreme Court Battle
Due to the political haste of its enactment, the ACA had a messy reconciliation version between the House and Senate, which did not allow for ordinary legislative “clean-up,” paving the way for ongoing judicial review. For two years after the ACA was signed into law, Americans waited to see if the Supreme Court would declare the law in its entirety unconstitutional. Justice Roberts surprised many observers (and disappointed conservatives) in voting with the more liberal justices to uphold the law, 5-4, in National Federation of Independent Business v. Sebelius, 132 S.Ct. 2566, 567 U.S. ___, June 28, 2012), based on the theory that the individual mandate was permissible when recharacterized as a tax. Conservatives took away a modest consolation in the Supreme Court’s ruling that states could opt of the ACA’s expansion of state-run Medicaid Programs — something that, as of this post, 19 states have done.
The Sebelius case was only the beginning of the Supreme Court challenges to the ACA. In 2014, the Court reviewed the law in the case of Burwell v. Hobby Lobby, (573 U.S. _____). where an employer objected to providing birth control to employees as required under an ACA contraceptive mandate on an employer-sponsored health plan. This time, the Court upheld the right of the for-profit Hobby Lobby to exemption from the ACA mandate based on religious belief, with Alito writing for the Court in a 5-4 decision.
Round 3 of the legislative challenge continued in the summer of 2015 in King v. Burwell (576 U.S. ____, June 25, 2015), where the Court reviewed a Circuit split on the question of whether it was permissible for the federal government to operate the www.healthcare.gov insurance exchange (which has a saga all its own) for roughly 6.4 million people in states that had not opted to build their own exchanges. Without the federal exchange, these working-class individuals whose jobs did not provide employer-sponsored insurance would have no access to the exchange-based subsidies. As of the time of the decision, roughly 23 states had set up their own exchanges or done federal-state partnerships, but the other 27 or so had not done so, leaving their residents to obtain insurance via the healthcare.gov website.
As in the Sebelius case, Justice Roberts wrote for the majority, once again upholding the federal exchange based on a finding of clear intent of the ACA to enable individuals to obtain subsidized insurance. In a colorful dissent, Justice Scalia proposed to rename the law “SCOTUScare” for the “discouraging truth that the Supreme Court of the United States favors some laws over others, and is prepared to do whatever it takes to uphold and assist its favorites.”
The efforts to repeal the ACA and to defund its components are likely to continue, including more “surgical” efforts to undo unpopular components of the law, such as the “Cadillac” tax on plans. At the same time, it appears to be increasingly difficult to imagine that the ACA’s expansion of coverage will be reversed. To date, it appears that the ACA reduced the percentage of uninsured, which had hovered around 15% for many years to 9.2%. As of this fall, the estimates include over 10 million new Medicaid beneficiaries, 10 million newly insured covered through the exchanges, and 3 million young adults covered on their parents’ plans. There are still some questions around these numbers and more precision needed (including the need to sort out movements of patients who already had insurance on employer-sponsored plans and simply shifted to the exchanges or patients newly insured through employer-sponsored plans), but the bottom line is that millions Americans who didn’t have insurance coverage before the ACA have it today, and are likely to fight to keep it.
Big Questions Ahead
At the same time that the ACA has made a dramatic impact on improving access to care and thinning the ranks of the uninsured in most of the country, the jury is still out on the ACA’s other overarching goals of reducing ever rising healthcare costs and improving quality of care. Is the growth curve in healthcare spending moderating? Is underinsurance (high out-of-pocket cost relative to income) any less of a problem? Is quality of care getting better?
All of these questions remain ahead. We’ll be examining those questions in the years ahead. The more immediate and discernible result of the ACA has been an acceleration of many changes in the way that our healthcare system operates. The ACA has spurred significant realignment, disruption, and new models of care delivery and funding that are reshaping the landscape of American healthcare. These changes were not legislated, but represent rather practical responses by healthcare providers, from doctors to hospitals, to transforming reimbursement pressure. The migration of physicians from independent private practice to large-group employment, for example, reflects the way that physicians have responded to changes that were already in motion but were intensified by the ACA. In many cases, changes underway reflect the extent to which the health insurance companies have independently mirrored the direction of the Center for Medicare and Medicaid Services (CMS) in implementing the vision underlying the ACA.
In the weeks and months ahead, I plan to project out how the trends underway will progress and what our system will look like, offering some thoughts about risks and opportunities, winners and losers, and strategies for survival in our system.