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Ready, set, go? Prep for coverage expansions enters final months

From the April ACP Internist, copyright 2013 by the American College of Physicians

By Robert B. Doherty

With fewer than 10 months left until the Affordable Care Act’s coverage guarantees are set to take effect, how prepared are federal agencies and state governments to make the law work?

The policy framework for the Affordable Care Act (ACA) is now pretty much set. A recent cascade of federal rules defines how health insurance will be offered, purchased and paid for effective Jan. 1, 2014. Other federal rules address interactions between clinicians and health plans, physicians and drug companies, and Medicare and Medicaid payment policies. But the states have a major role in implementing many of the policies and regulations, and on this score, many are not yet ready or willing to help.

Federal rules for insurers and clinicians

Since January, the federal government has issued two key final rules regarding coverage. The “essential” benefits rule instructs health plans on what they must offer to be sold, through authorized state or federal exchanges (health insurance marketplaces), to eligible persons or companies. It establishes four tiers of benefits, from a lower-cost “bronze” plan to a more benefit-rich “platinum” plan. Persons choosing the more expensive package will pay more out of pocket.

Meanwhile, the consumer protection rule:

  • requires insurers to offer policies to all consumers without regard to whether they have or had an illness,
  • specifies that insurers may vary premiums only to a limited degree based on age, tobacco use, family size and geography,
  • prohibits insurers from refusing to renew coverage because an individual or an employee has become sick,
  • establishes that insurers no longer can charge higher premiums to higher-cost enrollees by moving them into separate risk pools and
  • requires insurers to offer lower-cost catastrophic-coverage plans for people under the age of 30.
States go their own way

The federal government also has had to rule on whether each state is ready to set up a health insurance exchange to allow eligible individuals and small businesses to choose from a menu of qualified health plans. States must have their exchanges up and running by Oct. 1, 2013, so that they can begin to offer and enroll people in qualified plans that offer one of the required essential benefits packages and meet the federal government’s consumer protection standards. Once people are enrolled, coverage for plans offered through an exchange will become effective on Jan. 1, 2014.

Also, eligible persons with incomes from 133% to 400% of the federal poverty level who buy coverage from an exchange will be eligible for income-based federal subsidies starting on Jan. 1, 2014. But if a state is unable or unwilling to set up its own exchange, the federal government is required by law to run one for it.

As it has turned out, fewer than half of the states have elected to set up a health exchange on their own or in partnership with the federal government; the rest have decided to turn over complete exchange responsibility to the federal government.

States also must decide if they will accept federal dollars to expand Medicaid to persons with incomes up to 133% of the federal poverty level. As of Feb. 27, 13 states have said no to the Medicaid expansion while another 22 states have agreed to it. The rest are undecided. Some states with Republican governors who have said no have signaled that they may yet reconsider and agree to the expansion if the federal government gives them more flexibility in running Medicaid their own way.

What will likely happen?

Now that the rules (mostly) have been written, and the states (mostly) have decided on their level of participation, the biggest remaining question is how well things will actually turn out on Jan. 1, 2014. Will the ACA make affordable coverage available to millions of uninsured persons? The answer depends on the following.

The federal government has to show that it can effectively run the exchanges out of Washington for a majority of states. The administration says that it can and will be ready, but independent observers worry that it has bitten off more than it can chew (admittedly, because nonparticipating states forced their exchanges on it) and won’t be able or ready to offer qualified plans and enroll tens of millions of persons around the country by Oct. 1.

Younger people have to be willing to buy a qualified plan through the exchanges. The health insurance industry is warning of double-digit premium increases for young people because of the federal rule that restricts how much premiums can vary based on age. (Of course, the flip side of this is that older people will pay less.) If large numbers of younger people decide to forgo coverage and instead pay a modest tax penalty, it could leave mostly older and sicker people in the exchanges, driving up costs and making them unworkable.

Industry critics, though, counter that insurers are taking advantage of the new rules to drive through unjustified rate increases. ACA proponents also believe that increased competition between plans offered through the exchanges, the availability of federal subsidies to help people afford coverage, and the low-cost insurance option for people under age 30 will be enough to keep young people in the exchanges.

The ACA’s success will also hinge on how many and how soon more states get on board with the Medicaid expansion. For people with incomes at or below the federal poverty level, Medicaid is the only way to get covered under the ACA. So until or unless their states agree to participate, millions of poor people will be left behind.

It was always going to be a challenge to transition from a health system that denies tens of millions of people access to affordable coverage to one that is intended to provide nearly all legal residents with access to coverage that offers essential benefits and consumer protections. But it has turned out to be even more challenging because so many states decided not to do their parts.

As a result, things may not go all that smoothly in the beginning; there will be bumps and detours along the way. Yet the rules, policies and framework to move the country in the direction of universal coverage are now in place. It is up to everyone who believes, like ACP, in coverage for all to help get us across the finish line rather than allowing the insurance industry and some states to drive us into a dead end.

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