July 16, 2013
Delay of the Employer Mandate In early July, the Obama Administration announced a delay of the 2014 employer mandate that would require companies with more than 51 full-time workers to offer their employees health insurance or face a penalty. The Assistant Treasury Secretary for Tax Policy , Mark Mazur, confirmed that the mandate was being delayed until 2015 in order to provide additional time to simplify the reporting requirements and to adapt health coverage and reporting systems. Some political commentators have noted that this delay of one of the key provisions of the ACA that is most unpopular with industry and business groups will now be postponed until after the 2014 congressional elections. Other analysts have downplayed the import of this delay noting that more than 90% of employers with 51 or more employees already offer health benefits to full-time employees and still others are now speculating that a delay of the individual mandate is sure to follow.
Evolving Dynamics of Health Insurance Exchange Models/ Implementation Under the Affordable Care Act (ACA), open enrollment in the Exchanges is slated to begin on October 1, 2013. Since the Enactment of the ACA, the roles of states and the federal government in creating the various marketplaces where individuals can shop for health insurance have changed considerably. The law originally stipulated that states could choose to run their own exchanges or default to a federally facilitated exchange. However, there now exists a number of additional choices in which the state and the federal government share responsibilities for various core aspects of the exchanges including eligibility and enrollment, plan management, consumer assistance and financial management.
o Sixteen states and the District of Columbia have opted to establish a state-based exchange. These states will assume responsibility for all core exchange functions but may use federal services to assist with certain activities, such as determining eligibility for subsidies. These states are: CA, CO, CT, HI, ID, KY, MD, MA, MN, NV, NM, NY, OR, RI, VT, WA and (DC).
o Seven states have opted for a State Partnership Exchange. AR, DE, IL, IA, MI, NH and WV. These states can choose to conduct plan management activities and/or consumer assistance, outreach and education functions o Seven states have chosen the Marketplace Plan Management Option. Under this option, a state must conduct the same plan management activities as in a state partnership exchange—but the exchange is otherwise federally run. To date, these states are KS, ME, MT, NE, OH, SD, and VA.
o In a proposed rule released on June 14, 2013, HHS formalized its acceptance of yet another exchange model—Utah’s “bifurcated exchange. While Utah initially elected to run a state-based exchange–Under the new model, the state will operate a small business exchange while the federal government will operate an exchange for individuals. Similar to the Marketplace Plan Management Option, Utah will conduct plan management activities on behalf of the federally run individual exchange.
o The remaining states (AK, AL, AZ, FL, GA, IN, LA, MS, MO, NJ, NC, ND, OK, PA, SC, TN, TX, WI and WY) have not opted to for a formal role in exchange operations. Although these states have not opted for the state partnership, plan management or “bifurcated” model, HHS has indicated its intent to incorporate where possible, the results of certain reviews already conducted by these states’ insurance departments into its health plan certification decisions for the federal facilitated exchanges in these states.
o It is also important to remember that although state decisions regarding exchanges appear to be set for 2014, states will have another opportunity to transition between models for the second year of exchange operations.
Parallels Seen Between the Rollout of Medicare Part D and Exchanges Michael Leavitt, former Secretary of HHS under President George W. Bush, recently authored an editorial in the Washington Post in which he likened the rollout of the state exchanges under the ACA to the rollout of the Medicare Part D program. Mr. Leavitt highlighted the fact that both Part D and the ACA resulted from “contentious negotiations and fierce legislative battles” and both charged HHS with creating an insurance marketplace in which people could choose among competing private plans. “Both involved new regulations and information-technology systems, approval of insurer bids and plans, coordination with federal departments and state governments, and the education of millions of Americans.” Mr. Leavitt also expresses his assessment that the ACA’s challenges are even greater than those faced by Part D, given the law’s complexity, size and scope. The article also goes on to identify three key areas of concern that the Administration should be mindful of given the lessons learned during the rollout of Part D.
o Insufficient Education—The article notes that with open enrollment for the state exchanges slated to begin October 1, 78% of Americans lack awareness about the new law and what it will mean for them. He notes that with Part D, the hurdles were also daunting. Prior to the implementation of Part D, only 21% of seniors had a favorable opinion of it and 66% did not understand what the program would do for them. Mr. Leavitt notes that with Part D, HHS launched a comprehensive education program to educate seniors as well as critical community partners (such as pharmacies). The article also notes that compared with Part D, ACA implementation and messaging is behind schedule.
o Technology Breakdowns—the success of the exchanges will depend in large part on the technical infrastructure the government has built that will be used to connect and transfer data between the in-house systems of numerous government agencies and private entities. A GAO study issued in June highlighted the fact that many aspects of the ACA’s information technology effort are behind schedule. Mr. Leavitt reveals that the IT system for Part D also linked numerous databases with insurers, drug plans, pharmacies and beneficiaries. For the Part D program, the IT infrastructure was created in nine months although normally a system of this complexity would normally take three years to create. Mr. Leavitt encourages the Obama team to “learn from our mistakes” and put together a dedicated unit to respond to IT problems.
o Subsidy Errors—One of the ways that the ACA strives to make health insurance affordable is to provide subsidies to individuals whose income falls between 100% and 400% of the poverty line. However, there are challenges with regard to determining and delivering these subsidies. Decisions on 2014 subsidies will be based on 2012 tax data—information that could very well be out-of-date. Also, the delay of the employer mandate creates additional challenges as well. If you turn down employer based coverage, you do not qualify for a subsidy at taxpayer expense. However, now that employers do not have to report their insurance offerings until the following year, the administration will be unable to verify whether workers will have access to employer based insurance in 2014. Looking ahead, former Secretary Leavitt encourages the Obama Administration to fully own emerging problems and recognize industry participants as partners rather than potential scapegoats. Mr. Leavitt also encourages the creation of a joint crisis-management center with Industry partners to solve emerging problems and establish metrics.
Update on Medicaid Expansion The Supreme Court upheld all provisions of the Affordable Care Act except that it did restrict the ability of the federal government to withhold federal Medicaid funds if a state elects not to implement the Medicaid expansion proposed under the Act. Essentially, individual states have a choice whether to expand Medicaid coverage. Even though the federal government will pick up nearly all of the costs of the expansion (100% for the first three years, phasing down to 90% in 2020 and all subsequent years), some governors and state legislatures have either been hesitant or outfight oppose the expansion. Below is the latest (July 1, 2013) tally on where states stand on the issue. In some states it is unclear where they stand at this point in large part due to fundamental disagreement between the governor and the state legislature.
o 24 states have indicated that they are expanding Medicaid—AZ, AR, CA, CO, CT, DE, DC, HI, IA, IL, KY, MD, MA, MN, NV, NJ, NM, NY, ND, OR, RI, VT, WA, WV,
o 21 states are not moving forward at this time with Medicaid expansion—AL, AK, FL, GA, KS, ID, LA, ME, MS, MO, MT, NE, NC, OK, SC, SD, TX, UT, VA, WI, WY
o 6 states are still actively weighing their options—IN, MI, NH, OH, PA, TN