Opinion
VIEWPOINT
John E. McDonough, DPH, MPA Department of Health Policy and Management, Harvard School of Public Health, Boston, Massachusetts. Eli Y. Adashi, MD, MS The Warren Alpert Medical School, Brown University, Providence, Rhode Island.
Realizing the Promise of the Affordable Care Act— January 1, 2014 Along the arduous, confusing, and contentious road to theenactmentandimplementationoftheAffordableCare Act (ACA), no single date stands out as more consequential for the health and well-being of the US public as does January 1, 2014. Barring unforeseen circumstances, this date will stand out as transformational in the annals of US health care reform. On that day, 4 fundamental provisions of the ACA will take effect. First, extension of the “guaranteed issue” provision to all individual health insurance policies inclusive of the elimination of “medical underwriting” in the face of a preexisting condition. Second, implementation of the “individual shared responsibility” provision also known as the “individual mandate.” Third, provision of tax credits and cost-sharing subsidies to middle- and lower-income adults for the purchase of individual health insurance. And fourth, expansion of Medicaid coverage in participating states to include previously ineligible low-income adults. Most Americans, including physicians and other health care professionals, may not appreciate the profound nature of these new realities. This oversight could be attributable to the daily dramas and controversies of the government shutdown, the woes of the HealthCare.gov website, the cancelation of individual health insurance policies, and the establishment of limited physician networks. In this Viewpoint, we assess the significance of the reforms in question and the implications thereof for the US health care system.
Extending the “Guaranteed Issue” Provision
Corresponding Author: Eli Y. Adashi, MD, MS, Department of Obstetrics and Gynecology, The Warren Alpert Medical School, Brown University, 101 Dudley St, Providence, RI 02905 (eli_adashi @brown.edu).
Prior to January 1, 2014, only 6 states required health insurance companies to comply with the “guaranteed issue” principle, that is, the issuance of individual health insurance policies to all applicants regardless of the absenceorpresenceofpreexistingmedicalconditions.However, as of January 1, 2014, all 50 states and the District of Columbia will enter into compliance. As a corollary, the practice of selective “medical underwriting”—the rating of individual health insurance policies based on medical history or status—will become illegal. The extent to which premiums charged for individual health insurance policies can still vary will henceforth be limited to geography, tobacco use, and age.1 This new regulatory framework initially will affect only approximately 5% of US residents younger than 65 years (about 15 million) who currently purchase health insurance through the individual market as well as those who newly enter the market to obtain individual coverage through the new federal and state health insurance exchanges. Beyond them, any US resident younger than 65 years may at some future point find himself or herself in need of these safeguards. Moreover, all individual polices will, for the first time, include 10 defined categories of “minimum essential benefits” (Box). In addition, the imposition of life-
Box. Minimum Essential Benefits Ambulatory patient services Emergency services Hospitalization Maternity and newborn care Mental health and substance use 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
time limits on health insurance policies (except those grandfathered since 2010) will be fully impermissible.
Implementing the Individual Shared Responsibility Provision To satisfy the actuarial requirements of a functional health insurance market, the ACA required that by January 1, 2014, most US citizens and legal residents purchase a qualified health insurance plan or else incur a tax penalty. Although commonly referred to as the “individual mandate,” this ACA provision does not in effect mandate the purchase of health insurance. Instead, this provision establishes a new tax penalty ($95 or 1% of household income in 2014, whichever is greater, increasing to $695 or 3% in 2016 and beyond) for those who can afford to purchase health insurance but choose not to do so. For most eligible adults, the ACA establishes annual open enrollment periods of 2 months during which individual health policies can be purchased. However, those experiencing loss of employer-provided coverage, divorce, or other significant life events will be allowed to purchase individual health insurance policies at any given time. The so-called individual mandate has proven to be the most controversial and unpopular element of the ACA and the target of unsuccessful legal challenges to its constitutionality. In a closely watched decision, this provision of the ACA was upheld by a 5-4 majority of the Supreme Court of the United States.2
Instituting Insurance Purchase Support The core reason for uninsurance in the United States is the unaffordability of health insurance. Beginning on January 1, 2014, individuals whose annual household income falls between 133% and 400% of the
jama.com
JAMA February 12, 2014 Volume 311, Number 6
Copyright 2014 American Medical Association. All rights reserved.
Downloaded From: http://jama.jamanetwork.com/ by a Ndsu Library Periodicals User on 05/18/2015
569
Opinion Viewpoint
federal poverty line (between $15 282 and $45 960 for a single adult) who lack access to other forms of health insurance will be eligible to receive income-based federal tax credits. These credits are designed to reduce the cost of health insurance premiums purchased through new federal or state health insurance exchanges. Individuals whose income falls below 250% of the federal poverty line will also qualify for federal cost-sharing subsidies, thereby limiting (and in some cases capping) cost-sharing in the form of deductibles, coinsurance, and co-payments. Heretofore, individually purchased health insurance stood out for the complete absence of any federal financial support. In this regard, individually purchased coverage contrasts sharply with Medicare and Medicaid, for which federal financing plays a central role. Moreover, private employer-sponsored health insurance is associated with significant federal tax deductions that effectively lower the cost to employees by a third or more for the highest-income Americans. The ACA-established tax credits and cost-sharing subsidies make, for the first time, federal support available for individually purchased health insurance, and in a progressive manner that is distinct from the regressive nature of current tax deductions. The Congressional Budget Office estimates that by 2018, 25 million US residents will obtain individual health insurance through the new exchanges, of whom 20 million will receive premium tax credits.3
On January 1, 2014, for the first time, Medicaid constitutes the health insurance option of last resort for nearly all low-income citizens—in participating states. This is not the case at this time. Since its enactment in 1965, Medicaid eligibility has been limited to select segments of the low-income spectrum. For example, able-bodied, lowincome adults younger than 65 years without dependent children are ineligible for Medicaid in most states. This group represents the largest category of uninsured Americans. As of early November, only 25 states and the District of Columbia elected to implement the Medicaid expansion provision of the ACA.4 However, given the generous financial terms involved (100% federal financing in 2014-2016, dropping to no lower than 90% by 2020), other states are likely to follow suit before too long. Until such time, 5.4 million US residents with incomes below 100% of the federal poverty level and who live in nonparticipating states will remain uninsured, while 4.6 million Americans in participating states are expected to gain access to health insurance through Medicaid.5 Never has the landscape of US health care changed so dramatically in a single day as on January 1, 2014. The challenges facing the HealthCare.gov website notwithstanding, the implementation of key provisions of the ACA will proceed apace in the upcoming year. Whether one cheers or jeers the transformational events of January 1, 2014, the US health care system will never be the same again.
ARTICLE INFORMATION
REFERENCES
Published Online: January 2, 2014. doi:10.1001/jama.2013.286067.
1. Jennings CC, Hayes KJ. Health insurance reform and the tensions of federalism. N Engl J Med. 2010;362(24):2244-2246.
Conflict of Interest Disclosures: The authors have completed and submitted the ICMJE Form for Disclosure of Potential Conflicts of Interest. Dr McDonough reports that he contributed to the reelection campaign of President Barack Obama. Dr Adashi reports no disclosures. Correction: This article was updated for verb tense in several paragraphs to align with the event date of January 1. The corrections were made online on January 8, 2014.
570
Expanding Medicaid
2. Gostin LO. The Supreme Court’s historic ruling on the Affordable Care Act: economic sustainability and universal coverage. JAMA. 2012;308(6): 571-572. 3. Congressional Budget Office. CBO’s May 2013 Estimate of the Effects of the Affordable Care Act on Health Insurance Coverage. http://www.cbo.gov /sites/default/files/cbofiles/attachments/44190
_EffectsAffordableCareActHealthInsuranceCoverage _2.pdf. May 2013. Accessed December 14, 2013. 4. The Advisory Board Co. Where the states stand on Medicaid expansion. http://www.advisory.com /Daily-Briefing/Resources/Primers/MedicaidMap. November 6, 2013. Accessed December 14, 2013. 5. The White House. 24 States Are Refusing to Expand Medicaid. Here’s What That Means for Their Residents. http://www.whitehouse.gov/share /medicaid-map. November 6, 2013. Accessed December 14, 2013.
JAMA February 12, 2014 Volume 311, Number 6
Copyright 2014 American Medical Association. All rights reserved.
Downloaded From: http://jama.jamanetwork.com/ by a Ndsu Library Periodicals User on 05/18/2015
jama.com
VIEWPOINT
John E. McDonough, DPH, MPA Department of Health Policy and Management, Harvard School of Public Health, Boston, Massachusetts. Eli Y. Adashi, MD, MS The Warren Alpert Medical School, Brown University, Providence, Rhode Island.
Realizing the Promise of the Affordable Care Act— January 1, 2014 Along the arduous, confusing, and contentious road to theenactmentandimplementationoftheAffordableCare Act (ACA), no single date stands out as more consequential for the health and well-being of the US public as does January 1, 2014. Barring unforeseen circumstances, this date will stand out as transformational in the annals of US health care reform. On that day, 4 fundamental provisions of the ACA will take effect. First, extension of the “guaranteed issue” provision to all individual health insurance policies inclusive of the elimination of “medical underwriting” in the face of a preexisting condition. Second, implementation of the “individual shared responsibility” provision also known as the “individual mandate.” Third, provision of tax credits and cost-sharing subsidies to middle- and lower-income adults for the purchase of individual health insurance. And fourth, expansion of Medicaid coverage in participating states to include previously ineligible low-income adults. Most Americans, including physicians and other health care professionals, may not appreciate the profound nature of these new realities. This oversight could be attributable to the daily dramas and controversies of the government shutdown, the woes of the HealthCare.gov website, the cancelation of individual health insurance policies, and the establishment of limited physician networks. In this Viewpoint, we assess the significance of the reforms in question and the implications thereof for the US health care system.
Extending the “Guaranteed Issue” Provision
Corresponding Author: Eli Y. Adashi, MD, MS, Department of Obstetrics and Gynecology, The Warren Alpert Medical School, Brown University, 101 Dudley St, Providence, RI 02905 (eli_adashi @brown.edu).
Prior to January 1, 2014, only 6 states required health insurance companies to comply with the “guaranteed issue” principle, that is, the issuance of individual health insurance policies to all applicants regardless of the absenceorpresenceofpreexistingmedicalconditions.However, as of January 1, 2014, all 50 states and the District of Columbia will enter into compliance. As a corollary, the practice of selective “medical underwriting”—the rating of individual health insurance policies based on medical history or status—will become illegal. The extent to which premiums charged for individual health insurance policies can still vary will henceforth be limited to geography, tobacco use, and age.1 This new regulatory framework initially will affect only approximately 5% of US residents younger than 65 years (about 15 million) who currently purchase health insurance through the individual market as well as those who newly enter the market to obtain individual coverage through the new federal and state health insurance exchanges. Beyond them, any US resident younger than 65 years may at some future point find himself or herself in need of these safeguards. Moreover, all individual polices will, for the first time, include 10 defined categories of “minimum essential benefits” (Box). In addition, the imposition of life-
Box. Minimum Essential Benefits Ambulatory patient services Emergency services Hospitalization Maternity and newborn care Mental health and substance use 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
time limits on health insurance policies (except those grandfathered since 2010) will be fully impermissible.
Implementing the Individual Shared Responsibility Provision To satisfy the actuarial requirements of a functional health insurance market, the ACA required that by January 1, 2014, most US citizens and legal residents purchase a qualified health insurance plan or else incur a tax penalty. Although commonly referred to as the “individual mandate,” this ACA provision does not in effect mandate the purchase of health insurance. Instead, this provision establishes a new tax penalty ($95 or 1% of household income in 2014, whichever is greater, increasing to $695 or 3% in 2016 and beyond) for those who can afford to purchase health insurance but choose not to do so. For most eligible adults, the ACA establishes annual open enrollment periods of 2 months during which individual health policies can be purchased. However, those experiencing loss of employer-provided coverage, divorce, or other significant life events will be allowed to purchase individual health insurance policies at any given time. The so-called individual mandate has proven to be the most controversial and unpopular element of the ACA and the target of unsuccessful legal challenges to its constitutionality. In a closely watched decision, this provision of the ACA was upheld by a 5-4 majority of the Supreme Court of the United States.2
Instituting Insurance Purchase Support The core reason for uninsurance in the United States is the unaffordability of health insurance. Beginning on January 1, 2014, individuals whose annual household income falls between 133% and 400% of the
jama.com
JAMA February 12, 2014 Volume 311, Number 6
Copyright 2014 American Medical Association. All rights reserved.
Downloaded From: http://jama.jamanetwork.com/ by a Ndsu Library Periodicals User on 05/18/2015
569
Opinion Viewpoint
federal poverty line (between $15 282 and $45 960 for a single adult) who lack access to other forms of health insurance will be eligible to receive income-based federal tax credits. These credits are designed to reduce the cost of health insurance premiums purchased through new federal or state health insurance exchanges. Individuals whose income falls below 250% of the federal poverty line will also qualify for federal cost-sharing subsidies, thereby limiting (and in some cases capping) cost-sharing in the form of deductibles, coinsurance, and co-payments. Heretofore, individually purchased health insurance stood out for the complete absence of any federal financial support. In this regard, individually purchased coverage contrasts sharply with Medicare and Medicaid, for which federal financing plays a central role. Moreover, private employer-sponsored health insurance is associated with significant federal tax deductions that effectively lower the cost to employees by a third or more for the highest-income Americans. The ACA-established tax credits and cost-sharing subsidies make, for the first time, federal support available for individually purchased health insurance, and in a progressive manner that is distinct from the regressive nature of current tax deductions. The Congressional Budget Office estimates that by 2018, 25 million US residents will obtain individual health insurance through the new exchanges, of whom 20 million will receive premium tax credits.3
On January 1, 2014, for the first time, Medicaid constitutes the health insurance option of last resort for nearly all low-income citizens—in participating states. This is not the case at this time. Since its enactment in 1965, Medicaid eligibility has been limited to select segments of the low-income spectrum. For example, able-bodied, lowincome adults younger than 65 years without dependent children are ineligible for Medicaid in most states. This group represents the largest category of uninsured Americans. As of early November, only 25 states and the District of Columbia elected to implement the Medicaid expansion provision of the ACA.4 However, given the generous financial terms involved (100% federal financing in 2014-2016, dropping to no lower than 90% by 2020), other states are likely to follow suit before too long. Until such time, 5.4 million US residents with incomes below 100% of the federal poverty level and who live in nonparticipating states will remain uninsured, while 4.6 million Americans in participating states are expected to gain access to health insurance through Medicaid.5 Never has the landscape of US health care changed so dramatically in a single day as on January 1, 2014. The challenges facing the HealthCare.gov website notwithstanding, the implementation of key provisions of the ACA will proceed apace in the upcoming year. Whether one cheers or jeers the transformational events of January 1, 2014, the US health care system will never be the same again.
ARTICLE INFORMATION
REFERENCES
Published Online: January 2, 2014. doi:10.1001/jama.2013.286067.
1. Jennings CC, Hayes KJ. Health insurance reform and the tensions of federalism. N Engl J Med. 2010;362(24):2244-2246.
Conflict of Interest Disclosures: The authors have completed and submitted the ICMJE Form for Disclosure of Potential Conflicts of Interest. Dr McDonough reports that he contributed to the reelection campaign of President Barack Obama. Dr Adashi reports no disclosures. Correction: This article was updated for verb tense in several paragraphs to align with the event date of January 1. The corrections were made online on January 8, 2014.
570
Expanding Medicaid
2. Gostin LO. The Supreme Court’s historic ruling on the Affordable Care Act: economic sustainability and universal coverage. JAMA. 2012;308(6): 571-572. 3. Congressional Budget Office. CBO’s May 2013 Estimate of the Effects of the Affordable Care Act on Health Insurance Coverage. http://www.cbo.gov /sites/default/files/cbofiles/attachments/44190
_EffectsAffordableCareActHealthInsuranceCoverage _2.pdf. May 2013. Accessed December 14, 2013. 4. The Advisory Board Co. Where the states stand on Medicaid expansion. http://www.advisory.com /Daily-Briefing/Resources/Primers/MedicaidMap. November 6, 2013. Accessed December 14, 2013. 5. The White House. 24 States Are Refusing to Expand Medicaid. Here’s What That Means for Their Residents. http://www.whitehouse.gov/share /medicaid-map. November 6, 2013. Accessed December 14, 2013.
JAMA February 12, 2014 Volume 311, Number 6
Copyright 2014 American Medical Association. All rights reserved.
Downloaded From: http://jama.jamanetwork.com/ by a Ndsu Library Periodicals User on 05/18/2015
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