Archive for July, 2014

Federal Court Rulings Could Threaten ACA Subsidies

Wednesday, July 30th, 2014

Two divergent Circuit Court rulings last week on the legality of ACA subsidies could spur the Supreme Court to consider the case, with potentially lethal implications for the law’s mandates.

The Affordable Care Act provides for subsidies, or tax credits, to qualifying individuals purchasing healthcare plans on an online exchange. These subsidies have since been given to consumers on both state-run and federal exchanges, greatly increasing the ability of those individuals to purchase coverage that would otherwise be too expensive.

In two separate cases, Halbig v. Burwell (D.C. Circuit panel) and King v. Burwell (Fourth Circuit, Texas), judges considered whether the ACA’s rule on subsidies is applicable to all qualifying individuals or only those who purchased their insurance on state-run exchanges. Last Tuesday, each court handed down a decision based on its interpretation of the rule in question.

The Fourth Circuit ruled that the subsidy should be available to all consumers, whether their state’s exchange was state-run or federally administered. Their ruling is based on the legal doctrine of deference, which allows federal agencies to carry out a law as it sees fit if the language is ambiguous. The D.C. Circuit, however, relied on a literal reading of the law’s text to limit subsidy qualification to only the states that run their own exchanges.

Before the issue proceeds to the Supreme Court, the Department of Justice will request a review of the ruling by D.C.’s three-judge panel by the entire D.C. Circuit bench. It is possible that an en banc review will overturn the panel’s decision and bring the ruling in line with the Fourth Circuit.

This ruling has critical implications for not only the availability of subsidies, but also the individual and employer mandates of the ACA. Only 14 states chose to create their own healthcare exchanges; if the Supreme Court steps in and upholds the original D.C. ruling, as many as 90 percent of individuals in the other 36 states lose access to an affordable health care option.

Those who will be unable to purchase an affordable plan will also be exempt from the individual mandate, including the significant demographic of young and healthy consumers that are necessary to balance insurance costs. Furthermore, employers in the affected states may be exempt from their mandate.

As with other provisions of the ACA in dispute, it will likely be some months before there is a concrete decision. We will provide updates as they become available.

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Would “Copper” Healthcare Plans Actually Be Worthwhile?

Friday, July 11th, 2014

Several months ago, Senator Mark Begich (D) of Alaska proposed that the Obama administration add a new tier to the Affordable Care Act’s available healthcare plans. While the administration and other legislators weigh the benefits, significant potential issues have presented themselves.

The new “copper” plans would feature lower premiums than those for bronze plans – currently the least expensive full coverage available – and would cover 50 percent of consumers’ health costs. Patients would be required to pay the balance out of pocket. Copper plan subscribers would likely have a higher spending limit on out-of-pocket expenses than the current $6,350 individual/$12,700 family cap but would also be eligible for tax credits and subsidies.

Higher out-of-pocket costs are just one major concern with the idea of copper-level plans. Another associated issue is whether copper plans would be able to offer lower prices and still offer the comprehensive coverage required by the ACA. Jay Angoff of the Department of Health and Human Services questions whether passing on half of the cost of care to consumers can legitimately constitute “decent coverage”.

Furthermore, enrollment statistics through the March 31 deadline this year indicate that consumers are not particularly fond of low premium-high deductible plans. Approximately 65 percent of consumers chose subsidized or unsubsidized silver plans in the marketplace, while only 20 percent enrolled in bronze plans. Enrollment in catastrophic plans was even lower, at only two percent.

Copper plans would also pose a threat to healthcare spending in facilities and systems, turning back the reductions in spending reported by many systems thanks to newly enrolled patients. As copper plans are meant to attract young adults and others who have found even the bronze plans to be unaffordable, the risk of defaulting on higher deductibles is akin to the risk of non-payment by uninsured patients.

If the administration allows the creation of copper plans, consumers should expect to wait until at least the 2016 enrollment period to see these plans for purchase on the marketplace.

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2015 Health Insurance Rates Vary by State

Wednesday, July 9th, 2014

As health insurance companies begin establishing premium rates for the 2015 enrollment year, some insurers are pursuing substantial hikes while others are proposing modest increases and even some reductions.

Increases proposed by CareFirst in Washington, D.C. range from as little as four percent for higher-tier plans to more than 24 percent for a catastrophic plan. Other providers are also proposing mixed updates to increase certain plan premiums and reduce others. At the same time, UnitedHealthcare is proposing a reduction in all of their rates. Meanwhile, the average increase in New York is around 13 percent according to the state’s Financial Services Department.

Rate proposals in these and other states appear to be heavily tied to a number of factors, including the number of buyers who chose plans on different tiers during this year’s open enrollment period and the rising cost of medical care. Many insurers are attempting to compensate for larger populations of sick patients who use more care and for differences in health care markets.

However, some states’ proposals are more encouraging for consumers. Georgia, for example, has one statewide provider on their healthcare exchange but will welcome two more for the 2015 enrollment period. In addition, the current provider – Blue Cross and Blue Shield – has proposed statewide rate decreases.

Initial rate proposals are typically revised downward during pre-approval reviews by state regulators, so it is unlikely that the highest rates among those reported will go through as proposed. Also, patients who qualify for federal insurance subsidies through the healthcare marketplace will likely see those subsidies rise to match any rate increases.

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