Healthcare Leaders React to Decision on Affordable Care Act

For the most part, the health insurance industry felt relieved when the Supreme Court upheld the Patient Protection and Affordable Care Act (ACA) on June 28. Companies had been preparing for the law’s implementation for more than 2 years despite the numerous lawsuits challenging its constitutionality. Starting over would have created more anxiety in an already challenging economic time.

Although the ACA placed new restrictions on insurers, they had embraced the requirement that most Americans must either purchase health insurance or pay a tax. By penalizing people without coverage, it is likely that younger, healthier people will enroll, which will lead to more affordable premiums for customers and less risk for insurers than if the individual mandate was not part of the law.

Still, some major issues remain for insurers and all people involved in healthcare, foremost among them the challenges associated with implementing major ACA provisions and dealing with rising costs that many deem unsustainable.

Less than 3 weeks after the Supreme Court’s ruling, industry leaders gathered in Washington, DC, for a Health Affairs-sponsored conference titled After the Supreme Court: Moving Ahead to Implement the Affordable Care Act, Improve Health and Health Care, and Lower Costs.

Even though the panelists had differing views on solving the problems, they all agreed on the impact of the law.

“This is the most important, major social legislation passed since the mid-1960s,” said Jim Guest, president of Consumer Reports.

Mr. Guest and others applauded the ACA for providing more transparency to ensure people can make informed decisions. Mr. Guest said “consumers have no clue what they are getting” when they purchase insurance; however, new regulations, intended to explain the convoluted jargon by using easier-to-understand laguage, are being put into place.

For example, with the creation of insurance exchanges in 2014, individuals and small businesses will be able to log onto a website and compare the features and costs of plans. Beginning in September, insurers will also be required to publish and distribute a summary of plan benefits and coverage to all members as well as a glossary of common terms such as deductible and co-payment, which many people do not understand.

People who do not have employer-based coverage will welcome the changes, according to Karen Pollitz, a senior fellow at the Kaiser Family Foundation, who said “the individual market is not working for people.”

Ms. Pollitz cited a Kaiser Family Foundation report released in April titled Patient Cost Sharing Under the Affordable Care Act that indicated the average deductible for an individual was $2498 in 2010. In 2011, the average deductible was $675 for an employer-sponsored preferred provider organization plan, $911 for workers in health maintenance organization plans, $928 for workers in point of service plans, and $1908 for workers in high-deductible plans with a tax-preferred savings option.

Most nonelderly people (those <65 years of age) have insurance through their jobs or via public programs such as Medicaid. Both options are subsidized and do not discriminate based on health status. In the individual market, people pay the entire premium, which increases if they become ill.

However, the ACA mandates that insurers can no longer discriminate based on pre-existing conditions or impose lifetime coverage limits and must justify any large rate increases. Ms. Pollitz said a recent study showed that individuals buying insurance faced an average 20% rate increase when they renewed their insurance. In addition, beginning in 2014, insurers must offer plans that include essential health benefits for all people in the individual and small business marketplace.

People who have trouble affording insurance will receive subsidies, which will be available to those with incomes <400% of the federal poverty level. Karen Ignagni, president and chief executive officer of America’s Health Insurance Plans, said the subsidies are “very, very important to get people” to purchase insurance.

Ms. Ignagni, the top lobbyist for the health insurance industry, said she would spend the next year extolling the importance for younger, healthier people to buy insurance. She did admit that some people might decide to pay a tax that is lower than what they would spend on premiums.

If more of that population has coverage, the risk pool is broader, which Ms. Ignagni said would benefit insurers. She praised other ACA initiatives, as well, including accountable care organizations and patient-centered medical homes and the adoption of quality metrics.

“We are not there yet, but I see signs of significant change in the market,” Ms. Ignagni said.

Rising costs, however, remain a major topic. After the Supreme Court’s decision, the nonpartisan Congressional Budget Office (CBO) released an updated report on the budgetary effects of the ACA’s coverage provisions. From 2012 through 2022, the CBO estimates the net cost of the provisions to be $1.168 trillion, $84 billion less than it had projected in March. The CBO emphasized that the projections do not include other ACA provisions.

As part of its ruling, the Supreme Court said that states choosing not to participate in Medicaid’s expansion in 2014 will continue to receive their current funding. Under the original rule, they would have been penalized for refusing to expand the program. According to the CBO, the change will lead to 3 million fewer people gaining insurance and will contribute to the lower cost projections.

Some of the people denied Medicaid coverage will purchase insurance on the new exchanges, but the CBO believes the savings from a smaller Medicaid population will be greater than the costs associated with more enrollees on the exchanges.

The CBO also indicated that if the ACA was repealed beginning in 2013, federal budget deficits would increase $109 billion from 2013 through 2022. The organization based its estimates on legislation passed in the House of Representatives on July 11 that would repeal the ACA. The bill will not be enacted because Democrats control the Senate; however, Mitt Romney has vowed to repeal the ACA if he is elected president.

Regardless of the ACA’s future, the consensus among industry veterans is that change is inevitable. Bill Kramer, executive director of National Health Policy for the nonprofit Pacific Business Group on Health, said many large employers are “fearful” and “fed up” with healthcare costs.

Some pilot programs have been successful, according to Mr. Kramer, such as a program in which Safeway only pays $1500 for a colonoscopy for its workers in the San Francisco Bay Area. He noted that the California Public Employees’ Retirement System has a similar program for orthopedic hip and knee surgeries.

Mr. Kramer advised paying for value rather than for volume, a theory found in “reference pricing” when a manufacturer must prove a new technology leads to better outcomes than an existing technology before increasing its price. The widespread adoption of these innovations is lacking, according to Mr. Kramer.

“It is pretty clear the things we have done [traditionally] have not worked,” Mr. Kramer said.

Helen Darling, president and chief executive officer of the nonprofit National Business Group on Health, said that the biggest problem is the “economy has basically collapsed” as healthcare costs continue to increase. She said a family of 4 spends an average of nearly $21,000 in medical costs per year, while wages remain stagnant for most people. Ms. Darling suggested payment reform come first, followed by delivery reform. She would like increased transparency about prices and more value-based purchasing.

Ms. Darling mentioned the nonprofit Patient-Centered Outcomes Research Institute as a step in the right direction. Created through the ACA and authorized by Congress, this organization funds research and promotes evidence-based information that can be used to inform people of available prevention, treatment, and care options.

“We need to get real about costs,” Ms. Darling said.

One way to deal with the issue is overhauling the payment system for providers. As president and chief executive officer of Providence Health & Services, John Koster, MD, oversees a health system of 32 hospitals in 5 states with $10.5 billion in revenue. He understands transitioning away from a fee-for-service reimbursement model is coming soon.

“The physicians and institutions are ready to take on the challenge [of payment reform],” Dr. Koster said. “What I tell [providers] is, 'If you don’t like change, you’ll like irrelevance a lot less.'"