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Affordable Care Act: what Points should I know of

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Cost-share reduction grants

As written, the ACA required insurers to reduce copayments and deductibles for ACA exchange enrollees earning less than 250% of FPL. Medicaid beneficiaries were not eligible for the discounts.

So-called cost-sharing reduction (CSR) subsidies were to be paid to insurance companies to fund the reductions. In 2017, about $7 billion in CSR grants were due, compared to $34 billion in premium tax credits. [78]

These were defined as mandatory expenditures that do not require annual appropriations from Congress. CSR payments were not explicitly defined as mandatory. This led to litigation and disruption later.

Risk management

ACA has implemented several approaches to help mitigate the disruption for insurers that has accompanied its many changes.

Corridors of risk

The risk corridor program was a temporary risk management device. [79]: 1 It was intended to encourage reluctant insurers to enter the ACA insurance market from 2014 to 2016. During these years, the Department of Health and Human Services (DHHS) would cover some of the insurers’ losses including the plans turned out to be less successful than expected. Loss-making insurers would receive payments paid in part by for-profit insurers. [80][81][ attribution needed ] Similar risk corridors had been established for Medicare prescription drug benefits. [82]

Many insurers initially offered exchange plans. However, the program did not pay for itself as expected, losing as much as $8.3 billion for 2014 and 2015. Authorization had to be given for DHHS to pay insurers from “general government revenue”. “. [ attribution needed ] However, the Consolidated Appropriations Act of 2014 (HR 3547) stated that no funds “may be used for Risk Corridor payments”. [83] [ attribution needed ] leaving the government in a potential breach of contract with insurers who offered qualified health plans. [84]

Several insurers have sued the government in the US Federal Court of Claims to recover funds they were supposedly owed under the Risk Corridors program. While several were summarily closed, in Moda Health v. United States , Moda Health won a $214 million judgment in February 2017. Federal claims judge Thomas C. Wheeler said, ” the government made a promise in the risk corridors program that it has yet to keep. Today, the court is ordering the government to keep that promise. After all, telling [Moda], “The joke is on you. You shouldn’t have trusted us,” is hardly worthy of our great government.” [85]Moda Health’s case was appealed by the government to the United States Court of Appeals for the Federal Circuit along with appeals from other insurers; here, the Federal Circuit reversed Moda Health’s decision and ruled in all cases in favor of the government, that the credit endorsements prevented the government from paying the remainder of the money owed to insurers. The Supreme Court overturned this decision in the consolidated case Maine Community Health Options v. the payments were illegal. [86]

Reinsurance

The term reinsurance program aims to stabilize premiums by reducing the incentive for insurers to raise premiums due to concerns about high-risk enrollees. Reinsurance was based on retrospective costs rather than forward-looking risk assessments. Reinsurance was available from 2014 to 2016. [87]

Risk adjustment

Risk adjustment involves transferring funds from schemes with low-risk members to schemes with higher-risk members. It was intended to encourage insurers to compete on the basis of value and efficiency rather than attracting healthier policyholders. Of the three risk management programs, only the risk adjustment was permanent. Plans with low actuarial risk compensate for plans with high actuarial risk. [87]

Medicaid expansion

The ACA revised and expanded Medicaid eligibility starting in 2014. All U.S. citizens and legal residents whose income reaches up to 133% of the poverty level, including adults without dependent children, would be eligible coverage in any state participating in the Medicaid program. The federal government was to pay 100% of the increased costs in 2014, 2015 and 2016; 95% in 2017, 94% in 2018, 93% in 2019 and 90% in 2020 and all subsequent years. [88] [89] [90] A 5% “income disregard” made the effective income eligibility limit for Medicaid 138% of the poverty level. [91] However, the Supreme Court ruled in NFIB v. Sebeliusthat this provision of the Affordable Care Act

 was coercive and that states could choose to continue at pre-ACA eligibility levels.

Medicare savings

Medicare reimbursements were reduced to insurers and pharmaceutical companies for private Medicare Advantage policies that the Government Accountability Office and the Medicare Payment Advisory Commission deemed excessively expensive compared to standard Medicare; [92] [93] and to hospitals that have failed to meet standards of efficiency and care. [92]

Taxes

Health insurance taxes

Self-employment income and single wages over $200,000 annually are subject to an additional tax of 0.9%. The threshold amount is $250,000 for a married couple filing jointly (the threshold applies to their total compensation) or $125,000 for a married person filing separately. [94]

In the ACA’s companion legislation, the Health Care and Education Reconciliation Act 2010, an additional tax of 3.8% was applied to unearned income, particularly the lesser of income investment income and the amount by which the adjusted gross income exceeds the above income limits. [95]

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Excise taxes

The ACA includes a 40% excise tax (“Cadillac Tax”) on total employer premium expenditures in excess of specified dollar amounts (initially $10,200 for single coverage and $27,500 for [ 96 ] ) indexed to inflation. This tax was originally due to come into force in 2018, but was deferred to 2020 by the Consolidated Appropriations Act, 2016. Excise taxes totaling $3 billion were imposed on importers and manufacturers of prescription drugs. A 2.3% excise tax on medical devices and a 10% excise tax on artificial tanning services were also applied. [97]

SCHIP

The enrollment process for the National Children’s Health Insurance Program (CHIP) has been simplified. [98]

Dependents

Dependents were allowed to stay on their parent’s insurance plan until their 26th birthday, including dependents who no longer lived with their parents, are not dependents on their parents’ tax return. a parent, are no longer a student or are married. [99] [100]

Employer mandate

Businesses that employ fifty or more people but do not offer health insurance to their full-time employees must pay additional tax if the government has subsidized a full-time employee’s health care through tax deductions or other means. This is commonly referred to as the employer’s mandate. [101] [102] This provision was included to encourage employers to continue to provide insurance once the exchanges began to operate. [103]

Delivery system reforms

The law includes reforms to the delivery system aimed at containing costs and improving quality. These include Medicare payment changes to discourage hospital-acquired conditions and readmissions, bundled payment initiatives, the Center for Medicare and Medicaid Innovation, the Independent Payment Advisory Board, and Accountable Care Organizations.

Hospital quality

Healthcare cost/quality initiatives included incentives to reduce hospital infections, adopt electronic medical records, coordinate care, and prioritize quality over quantity. [104]

Bulk payments

Medicare moved from fee-for-service to bundled payments. [105][106] A single payment was to be made to a hospital and group of physicians for a defined episode of care (such as a hip replacement) rather than separate payments to individual service providers. [107]

Responsible Care Organizations

The Medicare Shared Savings Program (MSSP) was created by Section 3022 of the Affordable Care Act. It is the program through which an accountable care organization interacts with the federal government and through which accountable care organizations can be created. [108] This is a fee-for-service model.

The law enabled the creation of Accountable Care Organizations (ACOs), which are groups of physicians, hospitals, and other providers who agree to provide coordinated care for Medicare patients. ACOs were allowed to continue using fee-for-service billing. They receive government bonuses for minimizing costs while meeting quality criteria that emphasize the prevention and mitigation of chronic disease. The absence of cost or quality benchmarks subjected them to penalties. [109]

Unlike health maintenance organizations, ACO patients are not required to obtain all ACO care. In addition, unlike HMOs, ACOs must meet quality of care objectives. 

Medicare Drug Benefit (Part D)

Medicare Part D participants received a 50% discount on brand name drugs purchased after they exhausted their initial coverage and before reaching the catastrophic coverage threshold. By 2020, the “doughnut hole” would be completely filled. 

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