The Affordable Care Act, One Year Later, 0115 ALBJ, 76 The Alabama Lawyer 40 (2015)

• Author: Michael J. Velezis.
• Position: Vol. 76 1 Pg. 40

The Affordable Care Act, One Year Later

Vol. 76 No. 1 Pg. 40

Alabama Bar Lawyer

January, 2015

Michael J. Velezis.

More than four years after the Affordable Care Acts (ACA)¹ passage, two years after the United States Supreme Court upheld its constitutionality² and one year following initial open enrollment, the spirited debate on the ACA continues.³ After all that time, it is still too early to understand fully the ACAs long-term impact on the delivery and payment of American healthcare. It will take more time to receive the statistically meaningful data necessary to determine the ACAs lasting effects on healthcare costs, uninsured levels and healthcare providers' ability to service the increased demand for care.

This article addresses the more immediate effects on healthcare of the ACA and its implementation, utilizing the ACAs objectives of increased affordability and access to healthcare to guide the discussion, while addressing employer reactions and Alabama specific impacts.

Premium Impact and Accessibility

The ACA reduced health plan premiums for some individuals and families, and increased premiums for others. The ACAs impact on premiums varies based on several factors, including: • Preclusion of waiting periods and health underwriting for pre-existing medical conditions. Consumers now have access to healthcare coverage regardless of their health conditions, and premiums cannot vary based on an individuals health status.

• Premiums under the ACA are determined by the metallic plan you choose-bronze, silver, gold or platinum-county of residence, the number and ages of your family members and whether they use tobacco.

• The ACA requires member-level rating. Pre-ACA, Blue Cross* and Blue Shield* of Alabama⁴ offered one single premium and one family premium no matter the number of family members. The ACA now requires that each family member on a policy be rated based on age, address and tobacco use. These individual rates are then added together to calculate the family's premium. As a result, larger families may experience higher premiums.

• The ACA limits how much insurers can vary premiums based on an individual's age to a ratio of 3:1, down from a typical pre-ACA ratio of 5:1. This means that the premium rates for older adults cannot exceed more than three times the rate of a younger person.

• The ACA requires the inclusion of additional benefits. Nationally, less than two percent of pre-ACA plans covered all of the ACAs 10 essential health benefits.^[5]

• The ACAs medical loss ratio rule (MLR) requires health insurers to spend at least 80 percent (individual and small employer health plans) or 85 percent (large employer health plans) of premium dollars on patient care and initiatives to improve quality of care, or refund the difference to customers.

• Provision of premium cost subsidies under the ACA for those who qualify

• The ACA also imposes a number of new fees and taxes.

A. Premium subsidies and affordability

The ACAs subsidies, in the form of tax credits, significantly offset 2014 health plan premium costs for some Alabama consumers and families. Upon the conclusion of the ACAs first open enrollment period, around 97,870 Alabama residents enrolled in health insurance marketplace plans. About 85 percent of those consumers received financial assistance.⁶ To be eligible to receive premium tax credits in 2014, an individuals annual income had to be less than S46.680 and a family of fours annual income less than S95.400.

The Alabama residents who received 2014 tax credits had a premium that averaged 77 percent less than the full premium.⁷ Tax credits reduced their premiums, on average, from S334 to $76 per month⁸ -the eighth-lowest premium cost of the 36 Federally Facilitated Marketplace (FFM)⁹ states, which include Alabama. After the application of tax credits, 73 percent of Alabama exchange consumers had premiums of SI 00 or less, while 53 percent had premiums of S50 or less.¹⁰ Alternatively, unsubsidized health plan premiums were found to have increased nationally from 2013 to 2014 for all age groups studied.¹¹ Younger men received a 78.2 percent premium increase, the largest among the groups analyzed, while older men experienced the smallest increase, 22.7 percent.¹²

Whether subsidies will continue to reduce premiums in the future for FFM plan holders is currently in question. On July 22, 2014, in Halbigv. Burwell," a three-judge panel of the United States Court of Appeals for the District of Columbia Circuit ruled that the ACA, by its terms, limits subsidy offerings to "state-run exchanges," not those run by the federal government. At the time of this articles writing, this 2-1 ruling is on appeal by the government to the full court, with argument scheduled in December 2014.

Contradicting the Halbig courts ruling just two hours later, a second three-judge panel of the United States Court of Appeals for the Fourth Circuit, in King v. Burwell,¹⁴ unanimously ruled that consumers may receive subsidies from the Federally Facilitated Marketplace. Plaintiffs decided not to appeal en banc to the Fourth Circuit but instead appealed directly to the United States Supreme Court. On September 30, 2014, in a third subsidy challenge case, Pruittv. Burwell,¹⁵ the United States District Court for the Eastern District of Oklahoma sided with Halbig and ruled that providing tax credit subsidies to FFM plan recipients goes beyond the ACAs authority. Finally, the United States District Court for the Southern District of Indiana, in Indiana v. IRS,¹⁶ has a similar subsidy challenge pending.

As these divergent rulings work through the legal system, they may contribute to a circuit split that may make the Supreme Court more likely to accept the issue. If so, the Supreme Courts ultimate decision will have significant consequences for the ACA. If the Court upholds Halbig, around 4.6 million people in the 36 FFM states, including Alabama, who received subsidies in 2014, would lose them, at least going forward.¹⁷ If the subsidies fall, thereby reducing health insurance affordability for some, the viability of the individual mandate may come into question.

B. Narrowing provider networks

One strategy that some insurance carriers implement to reduce premiums under the ACA is to utilize limited or narrow provider networks. The theory goes that the more patient volume a carrier sends its network, the less the providers charge for their services. While the ACA did not birth this practice of narrowing networks, it appears to have accelerated...