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Implementation of the Affordable Care Act
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The Patient Protection and Affordable Care Act, also referred to as the Affordable Care Act or Obamacare, was signed into law by President Barack Obama on March 23, 2010. The law is "widely considered the most far-reaching health care reform act since the passage of Medicare" and Medicaid. The law contained many complex provisions, and during its implementation, a number of issues arose.[1]
These issues prompted debates regarding the merits of the law, the administration's handling of the rollout, and how the law's provisions should be interpreted. Some issues, such as the technical problems with the launch of Healthcare.gov, led the administration to take direct action to modify aspects of the law or delay deadlines. Many critics of the ACA pointed to these issues as evidence of the law's failure. The administration and its supporters, meanwhile, countered that the law has been a success, allowing millions of people to get health insurance.
- Click here to learn more about the various effects of the Affordable Care Act nationwide.
Key features of the law
Summary
The aim of the law was to provide an expansion of health insurance coverage to more Americans through both individual health insurance marketplaces as well as through employer-provided plans. Minimum requirements of coverage were established and both individual and employer mandates, enforced by tax penalties, were established over a period of years in order to achieve the goal of expanded coverage. Subsidies and tax credits are provided to individual consumers based on income level and dependents, and existing programs such as Medicaid and the Children's Health Insurance Program (CHIP) were expanded to increase reach. Small businesses were given tax credits based on the level of insurance offered to employees, as well.[2]
Ten essential benefits for coverage
The law specified ten essential benefits that plans created after the law's passage need to include. Existing plans were grandfathered in, but few of the grandfathered plans remain due to frequent changes to health insurance policies.[3] The ten essential benefits outlined by the law are[4]
- Ambulatory patient services
- Emergency services
- Hospitalization
- Maternity and newborn care
- Mental health and substance abuse disorder services, including behavioral health treatment
- Prescription drugs
- Rehabilitative and habilitative services and devices
- Laboratory services
- Preventive and wellness services and chronic disease management
- Pediatric services, including oral and vision care
Implementation timeline
The following is a timeline of the implementation dates of key aspects of Obamacare:[5]
2010
- January 1: Small business tax credits provided for small businesses offering health insurance to employees
- July 1: Pre-existing Condition Insurance Plans offered by either the federal government or individual state governments
- July 1: Healthcare.gov minimal functioning website established to educate consumers on coverage options
- July 1: Tax of 10 percent on indoor tanning services implemented
- September 23: Adult children are permitted to remain on a parent's healthcare plan until age 26
- September 23: Insurance plans prohibited from setting lifetime coverage limitations
- September 23: Insurance plans required to allow appeals with an external review process
- September 23: New plans required to cover the established minimum coverage
2011
- January 1: Insurers required to provide rebate the following year if a minimum proportion of premiums were not spent on medical services
- January 1: Limitations placed on uses for tax-free health accounts such as HSAs, FSA and HRAs
- March 23: Grants awarded for the establishment of state health insurance exchanges
2012
- September 23: All insurance providers must provide a uniform summary of care and benefits to consumers
2013
- January 1: States required to notify the U.S. Department of Health and Human Services whether they would form their own exchanges or join the federal exchange
- July 1: Consumer Operated and Oriented Plan (CO-OP) put into action to encourage nonprofit, member-run health insurance companies
2014
- January 1: Medicaid coverage expanded to those under 65 with income levels up to 138 percent of the federal poverty level
- January 1: Minimum medical coverage required for people with individual insurance plans
- January 1: Annual coverage limits on insurance plans prohibited
- March 31: Individuals lacking healthcare coverage must pay a tax penalty for each month spent uninsured
2015
- January 1: Employers with more than 100 employees assessed fees, per employee, for not providing health insurance options
2016
- January 1: Employers with 50-99 employees assessed fees, per employee, for not providing health insurance options
Major issues
Health plan cancellations
- See Ballotpedia's full page on health insurance policy cancellations since Obamacare to learn more.
When the Affordable Care Act (ACA) was signed into law by President Barack Obama on March 23, 2010, there was much debate about what would happen to citizens' existing plans under the new healthcare reform. One statement made repeatedly by the President, administration and congressional supporters, was some form of the line Obama gave in an August 22, 2009, internet address, stating, "If you like your private health insurance plan, you can keep your plan. Period." The ACA stated that plans created before the date of the law's enactment would be allowed to remain in effect until they underwent a major change, like a reduction in benefits. These plans were called "grandfathered" health plans.[6][7]
Health plans that were created between 2010 and 2014 and were not compliant with the ACA's requirements were originally supposed to come into compliance with the law at the beginning of 2014. Many of the ACA's major provisions went into effect in January 2014, including the requirement that insurance plans cover a standard set of benefits. In October 2013, many individually insured people began receiving letters from their insurance carriers notifying them that their current plans would be canceled at the end of the policy term. The plans were canceled because they did not meet new minimum coverage requirements set by the law. On October 29, 2013, NBC News reported that 50 percent to 75 percent of the 14 million Americans with individual healthcare plans would receive a cancellation notice in the next year.[8][9]
On November 14, 2013, under pressure from Democratic members of Congress, President Obama announced the administration's intention to allow people whose insurance plans had been canceled to re-enroll in their plans. Insurers would be allowed to continue to offer these plans until 2015. On December 19, 2013, the administration announced that those whose plans were canceled under the law met the Health and Human Services Department's "hardship exemption" from penalties under the individual mandate. The stated exemption covers those who "experienced financial or domestic circumstances, including an unexpected natural or human-caused event, such that he or she had a significant, unexpected increase in essential expenses that prevented him or her from obtaining coverage under a qualified health plan." On March 5, 2014, the administration delayed this requirement for a second time, allowing insurers to continue offering these plans, now referred to as "grandmothered" health plans, until 2017.[10][11][12]
Rollout of Healthcare.gov
- See Ballotpedia's full page on the Healthcare.gov website rollout to learn more.
Healthcare.gov is the website published by the federal government that is intended to serve as the central online hub for the rollout of the Affordable Care Act (ACA). The federal website is intended to provide insurance options and administer government subsidies for residents of 36 states. The website exists in order to enable users to shop for health insurance plans online and determine eligibility for subsidies (or for Medicaid enrollment at lower income levels).[13]
The English-language version of Healthcare.gov website went live on October 1, 2013, and the first open enrollment period began on the same day. The launch of a Spanish-language version was delayed.[14]
The open enrollment period was to last through March 31, 2014. The penalty, payable to the federal government, for not being enrolled in a health insurance plan by March 31 was either $95 or 1 percent of income, whichever was greater. The White House stated anyone selecting a plan before the deadline would not be subject to the penalty.[15][16][17]
The rollout date on October 1, 2013, was met with high demand for the website, both by those seeking insurance and those curious to see how the site worked. Attempts to use the website resulted in errors, including:
- Error messages while creating an account and trying to log in
- Data transfer problems from the exchange to healthcare providers
- Errors in price quotes when not logged in
- Lack of ability to sign up directly through individual insurance providers
In an October 30, 2013, in a hearing before the House Energy and Commerce Committee, Health and Human Services Secretary Kathleen Sebelius stated, "Hold me accountable for the debacle. I’m responsible."[18]
The deadline to complete an application for coverage that would be effective on January 1, 2014, was originally December 15, 2013. On November 22, 2013, the Obama administration announced an eight-day extension on this deadline to December 23, 2013. On the same day, Obama announced that the 2014 open enrollment period was pushed back from the original October 15 start date to November 15, 2014, just after midterm elections. On November 25, 2013, the administration announced the Small Business Health Options Program (SHOP) would be delayed by one year, until November 2014. Employers seeking the tax credit before the federal exchange rolled out SHOP in 2014 had to use an insurance broker to sign up for eligible plans. The small business program delay did not impact states with state-run exchanges.[19][20]
In March 2014, the administration announced that uninsured people would be allowed to enroll in plans into April without being penalized, as long as they had a plan selected on the website by March 31. On April 10, 2014, Kathleen Sebelius resigned from her post as a result of the troubled rollout of Obamacare.[21]
Co-op failures
The Affordable Care Act created a new type of nonprofit health insurance company to offer insurance on the exchanges: the Consumer Operated and Oriented Plan, or co-op. These co-ops would receive funding through low-interest government loans and through risk corridor payments—that is, payments from other insurance companies that were making too high of a profit (legally defined total claims payments amounting to at least 3 percent less than expected).
Twenty-three co-ops were established with federal loans under the law, but many were in a precarious financial position after their first year. By November 2015, 12 of the co-ops had failed. The failed co-ops had received over $1 billion in government loans and subsidies. Individuals who had purchased insurance through these co-ops lost their coverage and had to choose new plans through the health insurance exchanges. Of the remaining co-ops in 2015, only one set up in Maine was operating with a positive net income, thus raising the possibility that more co-ops would continue to fail. By October 31, 2016, all but six of the co-ops had failed.[22][23]
A study by the American Enterprise Institute posited a number of reasons for the co-ops' failure:
- Because the law mandated that no representative from an insurance company or association could serve on the co-op boards, the co-ops did not have a connection to the insurance industry and did not know how to price their premiums.
- They priced premiums so low that they did not cover medical costs (before its failure, the Kentucky co-op had a medical loss ratio (MLR) of 158 percent, meaning that for every dollar of premiums it collected, it spent $1.58 on healthcare costs—a net loss for the company).
- Since they were new, they did not have established networks of physicians and facilities, and had to pay to lease networks from other insurance companies, driving up their costs.
- The money available through temporary risk corridors was less than expected, because most insurance companies were not successful enough to pay into the risk corridor pool.[24]
Lawsuit over tax credits used on federal exchange
- See Ballotpedia's full page on lawsuits against the Affordable Care Act to learn more about legal challenges to the law.
The Affordable Care Act stated that individuals are eligible for tax credits to help pay for plans "which were enrolled in through an Exchange established by the State." However, the Internal Revenue Service (IRS) granted the tax credits "regardless of whether the Exchange is established and operated by a State (including a regional Exchange or subsidiary Exchange) or by HHS [the U.S. Department of Health and Human Services]." Many states objected to the IRS rule of granting tax credits to individuals purchasing on the federal exchange. They found the tax credits objectionable because individuals who received tax credits actually triggered tax penalties for their employers. Furthermore, the availability of tax credits made it harder for individuals to opt out of purchasing insurance on the basis of hardship. In order to shelter their residents from these penalties, many states had chosen not to establish exchanges at all—at the time of the lawsuits, only 16 states had exchanges.[25][26]
A number of lawsuits were filed against the IRS interpretation, claiming that the Affordable Care Act only allowed the IRS to grant tax credits to individuals who purchased insurance through state exchanges. Lawsuits against the tax credits were filed in Oklahoma (Pruitt v. Burwell), DC (Halbig v. Burwell), and Virginia (King v. Burwell).
In Pruitt v. Burwell and Halbig v. Burwell, the U.S. Court of Appeals for the DC Circuit and the U.S. District Court for the Eastern District of Oklahoma both ruled that the tax credit should be restricted to the state exchanges only. In King v. Burwell, the U.S. Court of Appeals for the Fourth Circuit ruled that the tax credit can be provided through both the state and federal exchanges. In order to resolve this discrepancy, the Supreme Court granted certiorari to King v. Burwell on November 7, 2014.
On June 25, 2015, the Supreme Court ruled 6-3 to uphold the tax credits for purchasing on the federal exchange. Chief Justice John Roberts delivered the opinion of the Court, joined by Justices Anthony Kennedy, Ruth Bader Ginsburg, Stephen Breyer, Sonia Sotomayor, and Elena Kagan. Justices Antonin Scalia, Clarence Thomas, and Samuel Alito dissented.[27]
In the opinion, the Court applied a two-part test in interpreting the Affordable Care Act: "we ask whether the statute is ambiguous and, if so, whether the agency’s interpretation is reasonable." The Court found that, when taken in context, the phrase "established by the State" was ambiguous, because other parts of the Affordable Care Act treated the federal and state exchanges as equivalent and assumed that tax credits would be available through either. The Court then turned to the issue of whether the IRS interpretation was reasonable. The Court described the Affordable Care Act as "a series of interlocking reforms" and noted that its other reforms would enter "a death spiral" without the tax credits. Thus granting tax credits to those purchasing on the federal exchange was not only reasonable but "necessary" in order to accomplish Congress' goals in passing the Affordable Care Act.[28]
See also
External links
- Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act
- Congressional Research Service, "Implementing the Affordable Care Act: Delays, Extensions, and Other Actions Taken by the Administration"
- HealthInsurance.org, "Like your grandmothered health plan?"
- Government Accountability Office, "Healthcare.gov: Ineffective Planning and Oversight Practices Underscore the Need for Improved Contract Management"
- American Enterprise Institute, "Obamacare Co-ops: Cause Celebre or Costly Conundrum?"
- Supreme Court of the United States, "King v. Burwell"
Footnotes
- ↑ Encyclopedia Britannica, "Patient Protection and Affordable Care Act (PPACA)," accessed May 18, 2016
- ↑ Kaiser Family Foundation, "Summary of the Affordable Care Act," April 25, 2013
- ↑ Washington Post, "This is why Obamacare is canceling some people's insurance plans," October 29, 2013
- ↑ National Association of Insurance Commissioners, "Patient Protection and Affordable Care Act of 2009: Health Insurance Exchanges," April 20, 2010
- ↑ Kaiser Family Foundation, "Health Reform Implementation Timeline," accessed March 12, 2014
- ↑ Govtrack, "H.R. 3590 (111th): Patient Protection and Affordable Care Act," accessed November 5, 2013
- ↑ Boston Globe, "Obama slams 'outrageous myths' on health care; Republicans say president 'plays fast and loose' with facts," August 22, 2009
- ↑ NBC News, "Obama administration knew millions could not keep their health insurance," October 29, 2013
- ↑ New York Times, "Cancellation of Healthcare Plans Replaces Website Problems as Prime Target," October 29, 2013
- ↑ New York Times, "A Contrite Obama Unveils a Health Fix," November 14, 2013
- ↑ Washington Post, "The individual mandate no longer applies to people whose plans were canceled," December 19, 2013
- ↑ Fox News, "Administration offers 2-year ObamaCare extension for canceled health plans," March 5, 2014
- ↑ NBC News, "Better use the phone: Why Obamacare website is such a fail," October 21, 2013
- ↑ NBC News, "Obamacare's rocky start: What you need to know," October 21, 2013
- ↑ Bloomberg, "Four things we think we know about Obamacare," October 18, 2013
- ↑ NBC News, "Administration to adjust health care penalty deadline guidance," October 23, 2013
- ↑ Fox News, "Surprise, surprise -- ObamaCare deadline extended yet again," March 26, 2014
- ↑ Washington Post, "Sebelius on health-care law rollout: 'Hold me accountable for the debacle. I'm responsible.'," October 31, 2013
- ↑ Fox News, "HHS announces small extension for ObamaCare sign-up, bigger delay next year," November 22, 2013
- ↑ Washington Post, "Obamacare’s online SHOP enrollment delayed by one year," November 27, 2013
- ↑ New York Times, "Health Secretary Resigns After Woes of HealthCare.gov," April 10, 2014
- ↑ The Wall Street Journal, "Obamacare's Failure Contagion," November 9, 2015
- ↑ Healthinsurance.org, "CO-OP health plans: patients’ interests first," accessed August 25, 2016
- ↑ American Enterprise Institute, "Obamacare Co-ops: Cause Celebre or Costly Conundrum?' June 24, 2015
- ↑ 26 U.S. Code § 36B
- ↑ 45 CFR § 155.20
- ↑ New York Times, "Supreme Court Allows Nationwide Healthcare Subsidies," June 25, 2015
- ↑ Supreme Court of the United States, "King v. Burwell (2015)," accessed May 17, 2016
