Benefits and Compensation

The ACA After Five Years: Disasters Did Not Materialize, But More Change Is Needed

Five years ago, in March 2010, the Affordable Care Act was signed into law by President Obama to resolve problems in the U.S. health system, including: the high number of uninsured Americans; Americans unable to get coverage due to pre-existing conditions; the high cost of care; and suboptimal care as a result of poor incentives and coordination.

Now today, due to the law, more than 10 million more people have health insurance than did five years ago, partly because of state-based health insurance exchanges selling coverage to individuals, universal issue of individual policies and rules requiring longer coverage of dependents. Exclusions due to pre-existing conditions are prohibited. Those are the main positive points.

On the other hand, the price of health care is still advancing at a rate higher than that of the consumer price index, many companies and individuals have had large premium increases and progress on care coordination under the law remains to be seen, experts say.

A number of experts described good and bad impacts caused by the law since it took effect five years ago. They agreed that law has spurred more consumerism, more higher-deductible health plans, and held the promise of a better shopping experience for health plans.

Law Nudged Cost of Care Upward

Bob Kocher, a partner with Venrock in Palo Alto, Calif., said the law is doing better than expected; in spite of the way it was written, and in spite of the horrible rollout of the exchanges in late 2013.

  • The law resulted in more people being covered than forecast.
  • Health care cost inflation has tapered off, although that is not directly traceable to the reform law.
  • In response to the law, health plans focus more on value and better use of data.

Avik Roy, a senior fellow with the Manhattan Institute said the law caused some damage and spurred some progress. He made the following observations:

  • Individual premiums went up sharply in its first year in anticipation of cost controls in 2011.
  • Enrollment on exchanges is tapering off, because when consumers purchase coverage on an exchange without a subsidy, the plans are expensive. On the other hand, people with subsidies are pretty satisfied with the law.
  • The Cadillac tax is pushing people toward defined contribution and away from defined benefit plans.

Roy and Kocher spoke at the World Health Care Congress March 24 in Washington, D.C.

Employer-sponsored health plans continued after reform, without dumping many of their employees into the individual market, remarked attorney Michael Laffey, Carnegie, Pa. Also, insurance rates remained relatively stable and massive rate increases did not materialize as feared, an outcome supposed to be caused by insurers having to provide a broad array of essential health benefits and losing the ability to turn away sicker lives, Laffey said.

The ACA did not do much to reduce the cost of claims — in fact claims costs are rising, said attorney Adam Russo, president and CEO of the Phia Group in Braintree, Mass.

Russo says the exchanges have a voracious need for customers, and have been at odds with self-insuring employer plans in a bid to secure more lives to cover. As a result, federal insurers, supported by state insurance commissioners and large insurers, attempted to limit the ability to purchase stop-loss as a way to slow down self-funding. In spite of this, the ACA promoted growth of the self-funded industry, because self-funding helps employers avoid insurers’ premium increases, he said.

The cost of insurance policies increased in large part due to reform taxes to stabilize the individual market and reform-mandated universal issue and restricted rating bands. Health insurers increased premiums in response to: (1) removal of coverage maximums; (2) forced coverage of pre-existing conditions; (3) limits on medical loss ratios; (4) premium rate controls; (5) new taxes for patient centered care research; (6) new comparative effectiveness fees; and (7) the new health insurers’ fee. Policy holders found themselves sharing some of the burden, Phia Group attorney Ron Peck says.

An article in the National Journal said the ACA did not turn out to be the job killer, enemy of free markets and government takeover of health care that Republicans predicted. Nor did it fulfil the promises of Democrats, such as making health care more affordable and allowing people to keep the coverage that they had before the law. Republicans failed to kill the law despite repeated attempts to do so legislatively. But the law did not become popular among a majority of Americans, especially after more than a million people lost inexpensive individual coverage in late 2013, and were forced to buy more expensive coverage, the article stated.

One of the major impacts of the ACA is that it imposes millions of additional hours of paperwork on business, by requiring them to report to the IRS which employees are covered by insurance and what kind of coverage the employer offers.

Looking Forward

In upcoming months, private exchanges will get a boost if the U.S. Supreme Court rules against the government in King v. Burwell, Avik Roy noted at the WHCC. Plaintiffs in that case seek to end subsidies going to states that chose not to run their own exchanges. Also if plaintiffs prevail in King, Congress will need to put a patch to keep coverage in place, Roy said. Republicans will feel some responsibility for what happened, and will try to do something to replace the coverage that they just caused their constituents to lose; and this could be a back door for improving reform, allowing a wider choice of plan designs, many of which are less prescriptive than the ACA exchanges. The new benefit designs and value combinations can then be used as a model for Medicare and Medicaid, Roy suggested.

Kocher said the experience of increasingly expensive care could prompt those in charge of Obamacare to allow issuance of more catastrophic-only “copper” plans, which could offer price relief to people while bringing some more into coverage who were previously opting to pay tax penalties.

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