Difference between revisions of "Patient Protection and Affordable Care Act"

Latest revision as of 06:24, 29 December 2018

The Patient Protection and Affordable Care Act (ACA) [P.L. 111-148], commonly known as Obamacare, is a federal response to nationwide health care problems in access, cost, and quality. Prior to the Act, private insurance covered 53 percent of the population and public insurance — principally Medicaid, Medicare, and the State Children’s Health Insurance Program — covered 32 percent of the population. Approximately 15 percent of the population, or more than 50 million persons, did not have health insurance, and they often did not receive adequate levels of health, frequently visited emergency rooms with their higher costs, and were likely to file bankruptcy due to medical expenses.

Although the ACA includes provisions to alter the cost and quality of health care, its primary goal is to reduce the number of citizens without health insurance. The Act improves access to health care by creating state and federal health insurance marketplaces (also called exchanges), providing tax subsidies to aid low income persons purchase health insurance, imposing a mandate on individuals to buy health insurance and on businesses to offer health coverage to employees, and by encouraging states to expand Medicaid.

Obamacare required all states to establish by 2014 a health insurance exchange where eligible individuals could compare and select insurance plans. If a state decided not to develop its own marketplace or the U.S. Department of Health and Human Services (HHS) did not approve the state’s exchange, the law required HHS to operate a federally-facilitated exchange in the state. Health exchanges may be administered by states, the national government, or a collaboration of the two. Individuals and small businesses can purchase insurance via exchanges created separately for them. Nonprofit or for-profit insurers can choose to market their plans through the exchanges. State governments approve insurance coverage known as Qualified Health Plans which must meet ACA requirements for essential health benefits as well as others related to marketing, plan networks, and choice of providers. To encourage people to buy insurance, Obamacare offers subsidies to low income individuals and small businesses, and imposes a financial penalty on individuals who do not purchase insurance and on employers who do not make insurance available to employees. As of the end of 2016, 12 states administered a health exchange, 28 states relied on a federally facilitated exchange, six states engaged in a partnership with the national government to operate an exchange, and five states managed their exchange but used the federal information technology platform.

The ACA’s other mechanism for increasing the number of persons with health care is its extension of Medicaid coverage to all citizens and legal residents whose incomes are 133 percent or less of the federal poverty level (FPL) under age 65. To help states with the cost of newly eligible Medicaid participants, the law increased the federal matching funds rate to 100 percent for 2014-2017, followed by a 95 percent rate for 2017-2020, and a 90 percent rate for years after 2020 (compared to the pre-ACA rate range of 50 to 75 percent). The Supreme Court in National Federation of Independent Businesses v. Sebelius (132 S. Ct. 2566 2012) ruled the mandates on individuals were constitutional, but states could choose not to expand Medicaid coverage; in that case, low income individuals could obtain a federal tax credit when they purchased insurance via an exchange. By mid-2017 31 states had expanded their Medicaid program, while 19 did not. Enrollment in ACA insurance plans combined with the expansion of Medicaid increased the number of persons with health care coverage by approximately 25 million, or a 50 percent reduction in the pre-ACA uninsured population.

The ACA has been influenced by federalism in three ways. First, the Act incorporated elements found in previous federal programs that incrementally increased health care coverage to persons who are not enrolled in employer-based insurance. Other ACA provisions came from state government experiences with the regulation of health care providers and health insurance companies – for example, the 2006 Massachusetts Health Care Reform Plan.

Second, the ACA granted state officials considerable discretion over the Act’s implementation. To operate a health insurance exchange state officials must perform numerous activities such as eligibility determination and enrollment processing, assessment of health plan quality, consumer assistance, financial management and record keeping. States also had to decide whether to expand their Medicaid program. Given the diversity among the 50 states, the result has been sizable variation in how states implement ACA exchanges and whether a state expanded Medicaid.

Third, the ACA has been and continues as a source of intense political conflict at national and state levels. Few federal programs have generated the degree of rancor as has Obamacare. Opposition to the ACA contributed to the success of the Republican party in national and state legislative contests as well as in the 2016 presidential election. Despite the Republican party’s efforts since 2010 to repeal and replace the ACA, it has not been able to do so as of 2017. One key aspect of American federalism that poses an obstacle to overturning Obamacare is the geographic distribution of favorable public opinion about the law. Because citizens in more than half the states support the ACA, their congressional representatives have, so far, prevented Obamacare’s demise.

Since the Republican majority in Congress failed to repeal and replace Obamacare, President Trump in his first year moved to alter the ACA using executive orders. His decisions included, among others, reducing the tax credit subsidies to individuals, ending contracts with two private firms that provided in-person assistance in states using the federal ACA website for marketplace enrollment, cutting federal funds for advertising the ACA’s health plans, allowing employers on moral or religious grounds to opt out of including birth control in health plans, stopping federal cost-sharing reduction (CSR) payments to insurers which help insurance companies offer plans with lower deductibles and co-payments, signing an executive order that directed federal agencies to consider options by which persons could buy health insurance that is exempt from the ACA’s provisions such as the list of essential health benefits, and permitting small businesses to form an association to negotiate group health benefits. These decisions had the immediate effect of increasing market uncertainty for insurance firms with the concomitant effect of making coverage more expensive and/or unavailable. Whether the orders would result in less expensive health plans in the future was unclear.

Sometimes American presidents try to hamstring the implementation of laws they do not favor, so Trump’s actions were not unusual, but a debate emerged over whether his orders were constitutional, especially pertaining to the tax credit subsidies and the CSR payments. Opponents of the ACA complained the law only authorized the subsidies to be dispersed through state-based exchanges, not the federally facilitated ones. The Supreme Court in 2015 rejected that argument in King v. Burwell (135 S. Ct. 475) declaring the federal government can provide subsidies to individuals who purchase health insurance through the federal exchanges. Other opponents of the ACA then argued President Obama had violated the Constitution’s “power of the purse” clause that requires legislation to draw funds from the Treasury because the law’s language does not specifically mention the CSR payments. President Obama had issued an executive order allowing the payments. Defenders of the payments argued President Obama had the authority to allow these payments under the Constitution’s “take care” clause which enjoins the chief executive to faithfully execute the law. This debate became the source of lawsuits with the outcomes undecided in 2017. The lawsuits over executive orders relate to the Constitution’s “separation of powers” clause and to which branch of the national government controls spending.

President Trump’s executive orders were primarily “guidance” to federal agencies to engage in certain actions such as reviewing standing regulations. To overturn the extant regulations, the steps outlined in the 1946 Administrative Procedures Act would have to be followed. The key concern arising from the continuing political struggle between opponents and supporters of the Affordable Care Act is whether a given action (e.g., court ruling, executive order, administrative decision) fosters the goal of the Act.

Data from the Kaiser Family Foundation.

Dale Krane

October 2017