Tag Archives: Affordable Care Act

2012 is the start of new fees and taxes on health care organizations…what are the possible consequences? First up, a new excise tax on pharmaceutical companies

18 Jan
English: Novamoxin Prescription Drug - Amoxici...

First target

One of the criticisms of the Affordable Care Act has been that few people actually know what is contained in the Act.  Having spent untold hours reading the Act along with various independent assessments of the Act, I can testify to its immense complexity.   

For example, in order to pay for the expansion of subsidized health insurance to millions of Americans, the Affordable Care Act adds numerous new fees and taxes on individuals’, employers and the health insurance industry.  In 2010, there was a new tax on indoor tanning facilities (ok, so that is not a big deal, anyone who uses one of those deserves to be taxed). In 2014 there are new fees on employers and insurance companies, all of which have the potential of being passed along to consumers.  In 2012 pharmaceutical companies that sell to the federal government are assessed what is called an annual fee (excise tax). 

The various fees and taxes contained in the Act are among the few elements that are reasonably quantifiable.  Other elements of the Act that are to reduce costs rely on assumptions of long-term success for well-meaning, but untried programs generally related to Medicare.  To be successful, hospitals, physicians, other health care providers and Medicare beneficiaries must all work in a coordinated effort under new paradigms for providing health care.

Taking billions of dollars each year in new taxes impacts these organizations which then must find ways to mitigate this loss.  It is tempting to simply dismiss such taxes as justified on highly profitable organizations.  However, we should never forget that everything we do is connected to something else and every action has its consequences (think housing crisis).  Generating revenue for some means a loss for others, a savings here means less revenue there and in some cases that may mean a loss of jobs, less invested in research or simply passing costs along to another party. When additional costs are imposed on employers, especially related to health benefits, it generally means greater cost sharing for employees and a shift in compensation from cash to employee benefit programs.  Good benefits are valuable, but they don’t buy groceries or pay college tuition.

The following is excerpted from the IRS regulations with regard to the new fees on drug manufacturers (a very small sample of the hundreds of thousands, ultimately millions, of pages of regulations implementing the Affordable Care Act). 

The aggregate fee amount each year for all covered entities (referred to as the applicable amount) is $2.5 billion for fee year 2011; $2.8 billion for fee years 2012 and 2013; $3 billion for fee years 2014 through 2016; $4 billion for fee year 2017; $4.1 billion for fee year 2018; and $2.8 billion for fee year 2019 and thereafter. The applicable amount for each year is allocated, using a specified formula, among covered entities with aggregate branded prescription drug sales of over $5 million to specified government programs or pursuant to coverage under such programs.

The specified government programs are the Medicare Part B program, the Medicare Part D program, the Medicaid program, any program under which branded prescription drugs are procured by the Department of Veterans Affairs, any program under which branded prescription drugs are procured by the Department of Defense, and the TRICARE retail pharmacy program (collectively, the Programs).

The annual fee for each covered entity is calculated by determining the ratio of (i) the covered entity’s branded prescription drug sales taken into account during the preceding calendar year to (ii) the aggregate branded prescription drug sales taken into account for all covered entities during the same year, and applying this ratio to the applicable amount. Sales taken into account means branded prescription drug sales after the application of the percentage adjustment table.

Increased number of adult children covered by health insurance as a result of the Affordable Care Act

12 Jan
This image shows the income distribution of Am...

If there is one thing that the Affordable Care Act does well it is expanding health insurance coverage, much like what happened in Massachusetts. In the case of PPACA one goal was to expand coverage available to adult children. Some measure of additional coverage has been accomplished as reported below.  Keep in mind that these children do not have to be dependent on the parent (employee) in order to be covered, may be married and cannot be charged an extra premium for the coverage. In addition, beginning in 2014 these children can be employed and have other coverage available and will still be eligible for their parent’s plan.  Prior to that an employer may deny coverage to an employed adult child.

All this is a good thing if you are one of the families affected, but remember this additional cost is carried by employers and all other insured members of a group.

New Health Law Increased Insurance
Coverage of Adult Children

WASHINGTON—The new federal insurance law has increased the health insurance coverage of adult children between 2009 and 2011, according to a new report by the nonpartisan Employee Benefit Research Institute (EBRI).

The Patient Protection and Affordable Care Act (PPACA) enacted March 23, 2010, requires that group health plans and insurers make dependent coverage available for children until they attain the age of 26, regardless of tax or student status, or dependent status as it relates to financial support. The mandate to offer coverage to adult children ages 19‒25 took effect for policy years that began on or after Sept. 23, 2010, but since January is the beginning of the plan year for many employment-based health plans, many insurers adopted the requirements of the law before the effective date.

To determine whether the coverage mandate had an effect, EBRI examined data from two U.S. Census Bureau surveys (the Current Population Survey, CPS, and the Survey of Income and Program Participation, or SIPP), as well as from the National Health Interview Survey (NHIS) by the Centers for Disease Control. The data indicated:

  • The percentage of persons ages 19‒25 with employment-based coverage as a dependent increased from 24.7 percent in 2009 to 27.7 percent in 2010, according to the CPS. 
  • The percentage of individuals ages 19‒25 with employment-based health coverage as a dependent averaged 26.9 percent during January‒September 2010, and increased to an average 27.1 percent during October and November, per SIPP. 
  • The percentage with private insurance increased from 51 percent to 55.8 percent, and the percentage uninsured fell from 33.9 percent during 2010 to 28.8 percent during the first half of 2011 among those ages 19‒25, according to data from the NHIS. 

“Data from these three surveys show that PPACA has had a positive effect on the percentage of young adults with employment-based coverage as a dependent,” said Paul Fronstin, director of EBRI’s Health Research and Education Program and author of the report.

Full results of the report are published in the January 2012 EBRI Notes, “The Impact of PPACA on Employment-Based Health Coverage of Adult Children to Age 26,” online at www.ebri.org

The Employee Benefit Research Institute is a private, nonprofit research institute based in Washington, DC, that focuses on health, savings, retirement, and economic security issues. EBRI does not lobby and does not take policy positions.

Related articles

Accountable Care Organizations (ACO) and the promise of savings without managed care or patient limitations.. I wish you all the best.

20 Dec

 Here is a text of an e-mail I received from HHS:

 Affordable Care Act helps 32 health systems improve care for patients, saving up to $1.1 billion

12/19/2011 12:01 AM EST

Thirty-two leading health care organizations from across the country will participate in a new Pioneer Accountable Care Organizations (ACOs) initiative made possible by the Affordable Care Act, HHS Secretary Kathleen Sebelius announced today.  The Pioneer ACO initiative will encourage primary care doctors, specialists, hospitals and other caregivers to provide better, more coordinated care for people with Medicare and could save up to $1.1 billion over five years

That headline really grabs you doesn’t it.  Seems like it’s a done deal and the savings are in the bank.  That’s far from the truth, of course. There is no new information here other than we know the names of some health care systems that will participate in this trial (“Pioneer”) effort for Accountable Care Organizations.  

Don’t get me wrong, this is a good idea because if there is one thing we need, it is more coordinated care, but we have a long way to go before we start patting ourselves on the back with a success under the Affordable Care Act.  We need it to work in terms of saving money and improving the care people receive.  That’s a tall order even for spin doctors.

I have one major reservation on the ability for this program to succeed and that is the limited involvement by the patient and the limited ability for the ACO to manage all of a patient’s care.  Working efficiently, the process should be virtually invisible to the patient, but that assumes the patient only uses health care providers within a given ACO.  Will the ACO that receives financial incentives to provide efficient care be reluctant to make outside referrals thereby losing some of the control over patient care?  In the long run there is no benefit to the ACO to do so, but this is one of the criticisms made of HMOs.  Here is what HHS says about patient rights.  I am concerned that we are again trying to have it both ways; efficient management of care and total freedom when seeking care.  I don’t think that can work, let’s hope I am wrong.

Beneficiary Participation

Under the Pioneer ACO Model, beneficiaries do not enroll in an ACO.    Primary care providers and other healthcare providers make the decision to participate in ACOs, meaning a beneficiary will not need to take proactive action to receive the benefits offered through an ACO.  ACOs are required to notify beneficiaries of their participation, ensuring the beneficiary is aware of the new arrangement, and his or her rights described in this document.  In addition, beneficiaries may affirmatively attest that their primary provider is in a Pioneer ACO, and can then be aligned with the ACO and benefit from the enhanced care coordination that it offers.

Beneficiary Rights and Protections

A beneficiary aligned to an ACO maintains complete freedom to visit any healthcare provider accepting Medicare, just as all Medicare beneficiaries participating in original, fee-for-service Medicare do.  These beneficiaries do not need a referral to see a specialist outside the ACO.   Unlike a managed care arrangement, like an HMO or a Medicare Advantage plan, a beneficiary aligned to an ACO is free to see any healthcare provider accepting Medicare at any time.  In addition, beneficiaries maintain all the benefits to which they are entitled in original, fee-for-service Medicare. 

Beneficiaries will have direct channels of communication to CMS to ask questions and relay concerns.  Through the initial notice of participation, beneficiaries will be informed that they can call 1-800 MEDICARE at any time to ask questions about the program,   alert CMS of any concerns they may have about the ACO.  Beneficiaries will also be surveyed each year to assess their experience with the new program.

 Here is a link to the list of the 32 organizations

Essential health benefits for exchanges left to states to determine

19 Dec

When ERISA was enacted a provision was included to exempt employer self-insured health plans from state regulation and mandates. This was done so that employers who operate in multiple states would not have to comply with scores of different regulations and mandates. There are about 1600 different state mandates related to coverage of health care services. Each of these adds to the cost of health insurance. Now the Obama administration has decided to take the opposite approach and allow each state to determine the essential health benefits to be used by plans within its exchange effective January 2014.

States will be allowed to base their essential coverage on one of several benchmarks.

Given the track record of enacting mandates promoted by special interest groups along with providing benefits to state workers considerably above competitive levels followed by private sector employers, this decision to defer to each state may well be a recipe for higher health care premiums.  That in turn translates to higher federal costs when providing the subsidies that are available to most families that will be used in exchanges.  In addition, the cost of mandates in excess of the essential health benefits must be defrayed by the state.  All of this is counterintuitive to affordable health care.

In effect, we are saying that government decisions on essential health benefits reflect what is essential to individuals, but that is not the always the case.  We are making this process  way too complicated.  Very basic, nearly catastrophic coverage should be the  standard. From there allow insurers to build higher level plans demanded by consumers who can then decide the coverage they need and can afford.  This is not the same as the current approach of starting with generous coverage and varying reimbursement levels.

Exactly what are we attempting to make affordable?  We appear to be starting with the Cadillac of coverage and working our way up.

Four Benchmark Plan Types

Our analysis of offerings that exist today suggests that the following four benchmark plan types for 2014 and 2015 best reflect the statutory standards for EHB in the Affordable Care Act:

(1)  the largest plan by enrollment in any of the three largest small group insurance products in the State’s small group market;26

(2)  any of the largest three State employee health benefit plans by enrollment;

(3)  any of the largest three national FEHBP plan options by enrollment; or

(4)  the largest insured commercial non-Medicaid Health Maintenance Organization(HMO) operating in the State.

HHS intends to assess the benchmark process for the year 2016 and beyond based on evaluation and feedback.

To reflect the State flexibility recommended by the IOM, under our intended approach, States are permitted to select a single benchmark to serve as the standard for qualified health plans inside the Exchange operating in their State and plans offered in the individual and small group markets in their State. To determine enrollment in plans for specifying the benchmark options, we intend to propose to use enrollment data from the first quarter two years prior to the coverage year and that States select a benchmark in the third quarter two years prior to the coverage year. For example, enrollment data from HealthCare.gov for the first quarter of calendar year 2012 could be used to determine which plans would be potential benchmarks for State selection and the benchmark plan specified during the third quarter of 2012 for coverage year 2014. If a State does not exercise the option to select a benchmark health plan, we intend to propose that the default benchmark plan for that State would be the largest plan by enrollment in the largest product in the State’s small group market.

 
 
Related articles
Health Care Law Will Let States Tailor Benefits – New York Times (nytimes.com)

Essential Benefits — Who Decides? – Huffington Post (huffingtonpost.com)

Early Retiree Reinsurance Program (ERRP) money is gone. Five billion dollars from the federal to state governments. What did we get for our money?

12 Dec

The Early Retiree Reinsurance Program was supposed to reimburse employers for some of the health insurance claim costs for retirees through 2013 until the Affordable Care Act exchanges were in place.  CMS has announced that $5 billion allocated for the program has run out and that claims incurred after 2011 will not be accepted. It appears the administrations earlier estimate how long the funds would last was off just about a year.  Here is the CMS release:

The Early Retiree Reinsurance Program (ERRP) was established by section 1102 of the Affordable Care Act enacted on March 23, 2010. Congress appropriated $5 billion for this temporary program and directed the Secretary of Health and Human Services (HHS) to set up the program within 90 days of enactment. By law, the ERRP is scheduled to end when its resources have been used to pay claims. Due to the significant response among the employer community, the Administration’s budget released in February 2011 projected that the funds would last through fiscal year 2012, which started on October 1, 2011. The program ceased accepting applications for participation in the program on May 6, 2011. On November 18, 2011, CMS notified plan sponsors that total payments reached $4.1 billion. On December 9, 2011, CMS notified plan sponsors that $4.5 billion had been paid and issued further guidance informing plan sponsors that claims incurred after December 31, 2011 will not be accepted.

Where did the money go? It went to a wide variety of employers of all sizes, but interestingly, if you scan the list of recipients you will find that most of the money went to state and local governments, including school districts (reflecting their large numbers and generous early retirement programs).  A few very large corporations such a Verizon, Prudential and Johnson & Johnson received sizeable checks as well.

The City of Minot in North Dakota has over 2000 plan participants and has received $112,933 in ERRP reimbursements. As a direct result of these reimbursements the City was able to reduce 2012 premiums by 17 percent.

And what will happen in 2013 when the premium increases will have to cover the shortfall created by artificially reducing premiums in 2012 in addition to the increases being generated over the next year? Wait until these organizations see a compounding of their premium increases in 2013, it will be like the middle class receiving a tax increase because the Social Security payroll tax is reinstated.

In the final analysis, what did the American tax-payer get for his money?  The purpose of the ERRP was to encourage organizations to retain early retiree coverage.  However, state and local government plans and large corporations, especially those heavily unionized, are very unlikely or completely unable to cease providing early retiree health care coverage, certainly not  before 2014.  So what we have is a transfer of federal (borrowed) money to the states, local government and mostly large corporations creating a windfall serving a very questionable purpose.  It is true that some retirees also saw a small benefit in all this, but that too is temporary and any reduction in their cost will quickly disappear.

That $5 billion could have been spent in more productive ways.

Cash flowing to states to implement health insurance exchanges, but how will they control costs? Ability of state health insurance exchanges to “drive costs down” seems rather optimistic

2 Dec
Secretary of Health and Human Services Kathlee...

Ladies, remember, never let the facts get in the way of a good political goal

There coming, barely two years away and counting; that’s state health insurance exchanges by the way.

Federal money continues to flow to the various states to help them establish their exchanges. Initially the exchanges will be primarily for individuals and small businesses, but over time employers are expected to shift workers into the exchanges simply because there are financial incentives for employers and many workers to obtain health insurance through an exchange. Only time will tell.

What is interesting is that policy makers and bureaucrats still believe that the exchanges will somehow create new competition among insurers that will restrain costs. That is an interesting assumption since insurers already compete with one another with no positive effect on costs and by adding more insurers into a market their individual leverage to negotiate with health care providers is reduced. In addition, all insurers will be subject to the same mandates and minimum benefit packages. There will be little room to maneuver. We seem to keep missing the point that premiums are not the issue, underlying costs of health care are. Federal officials should articulate exactly what they expect insurers to do to hold down health care costs so we all have that information.

After you read the optimistic view of the world from the bureaucratic point of view in the following press release, read this:  Study: Employers Could Dump Sickest Employees On Public Health Care

News Release   FOR IMMEDIATE RELEASE   November 29, 2011
Contact: HHS Press Office
States receive more flexibility, resources to implement Affordable Insurance Exchanges.  More than half of states now creating marketplaces to help millions of families and small businesses buy insurance

The Department of Health and Human Services (HHS) today awarded nearly $220 million in Affordable Insurance Exchange grants to 13 states to help them create Exchanges, giving these states more flexibility and resources to implement the .  The health care reform law gives states the freedom to design Affordable Insurance Exchanges – one-stop marketplaces where consumers can choose a private health insurance plan that fits their health needs and have the same kinds of insurance choices as members of Congress.

The Department also released several Frequently Asked Questions providing answers to key questions states need to know as they work to set up these new marketplaces. Critical among these are that states that run Exchanges have more options than originally proposed when it comes to determining eligibility for tax credits and Medicaid.  And states have more time to apply for “Level One” Exchange grants.

Today’s awards bring to 29 the number of states that are making significant progress in creating Affordable Insurance Exchanges.  States receiving funding today include: Alabama, Arizona, Delaware, Hawaii, Idaho, Iowa, Maine, Michigan, Nebraska, New Mexico, Rhode Island, Tennessee, and Vermont.

“We are committed to giving states the flexibility to implement the Affordable Care Act in the way that works for them,” HHS Secretary Kathleen Sebelius said.  “Exchanges will give consumers more choices and make it easy to compare and shop for insurance plans.”

In the new Exchanges, insurers will provide new information such as an easy-to-understand summary of benefits and costs to consumers. The level of detail will sharpen competition between carriers which will drive costs down.  “OMG,” rdq

HHS also released today a set of Frequently Asked Questions (FAQs) in anticipation of state legislative sessions beginning in January. Answers will help advance state policy development for Exchanges.  For example, they clarify that Exchange grants can be used to build a state Exchange that is operational after 2014; that state-based Exchanges will not be charged for accessing Federal data needed to run Exchanges in 2014; and that state insurance rules and operations will continue even if the Federal government is facilitating an Exchange in the state.  HHS will also allow greater flexibility in eligibility determinations, allowing, for example, a state-based Exchange to permit the Federal government to determine eligibility for premium tax credits.

Of the 13 states awarded grants today, 12 are receiving Level One grants, which provide one year of funding to states that have already made progress using their Exchange planning grant.  The 13th state, Rhode Island, is receiving the first Level Two grant, which provides multi-year funding to states further along in the planning process.
Forty-nine states and the District of Columbia have already received planning grants, and 45 states have consulted with consumer advocates and insurance companies.  Thirteen states have passed legislation to create an Exchange.

Related articles