Editor’s note: Watch Health Affairs Blog for more analysis of what yesterday’s election means for health policy.
When President Obama signed it into law in 2010, the Affordable Care Act’s 2014 final implementation date seemed a far distant goal. It has not always seemed clear that we would get there. In November 2010, when the tide of Obamacare rejectionists swept the congressional and state house elections, in March 2012 when the Republican–appointed majority of the Supreme Court pummeled the Solicitor General with skeptical questions, and for a number of minutes in June 2012 while the media reported that the Court had held the ACA unconstitutional, the future of the ACA seemed gravely in doubt.
But this morning, with the President reelected and the Democrats strengthening their control of the Senate, it seems possible—indeed likely—that less than a year from now millions of Americans will begin enrolling in qualified health plans expecting that premium tax credits will finally become available on January 1, 2014. Health status underwriting will disappear and pre-existing condition exclusions will be banned. In most states, Medicaid will become a program that covers all Americans with household incomes below 138 percent of poverty, not just favored categories of the poor. Medicare benefits will continue to improve as the doughnut hole is closed, while Medicare costs will be kept in check.
The election is at least in part a referendum on the ACA. Exit polls show that a slim majority of voters support the ACA, and a distinct minority favor full repeal. President Obama did not run away from the ACA in his reelection campaign, and the Republicans continued to attack it, with Governor Romney promising to work toward repeal beginning with his first day in office. The President’s reelection must be seen as a green light to move forward toward 2014.
Rules Implementing The Affordable Care Act Are Needed
Insurers. Between now and then, however, there is a great deal of work to be done. The exchanges must begin open enrollment on October 1, 2013. By that date, the exchanges must have certified qualified health plans. But before health plans can be certified, they must have their rates and forms approved by the states. And before that can happen, insurers must determine what plans they will offer and what premiums they will charge. Yet insurers cannot establish their plans and set their rates until they know a lot more than they do now about the rules they are going to have to play by. If you follow the timeline of these tasks backwards, you get very close to the present.
Insurers need federal rules right now on the 2014 market reforms—how the guaranteed issue and renewal, preexisting condition exclusions, and age and geographic rating are supposed to work, for example. Insurers also need more information about how the reinsurance, risk-adjustment, and risk-corridor payment programs are going to work, as this will affect their marketing and pricing strategies. They need to know how medical loss ratios will be calculated, and whether their reserve and surplus requirements will change.
The insurers need to know as soon as possible what the essential health benefits package will be in each state. The states were supposed to have reported to HHS their EHB package by September 30, 2012. About half the states have chosen a benchmark essential health benefits plan, but the remainder have not. HHS can designate a fallback plan for these states, the largest small group plan in the state, but would prefer that the states designate the benchmark plan. Reportedly HHS will publish a proposed rule including each state’s benchmark, and states will have an opportunity to comment, essentially getting a second bite at the benchmark decision.
The states. The states are demanding more guidance on how the federal exchange will partner with the states. The states must decide by November 16 whether they will operate their own exchange, cooperate with the federal exchange, or allow the federal government to operate the exchange in their state without state involvement. The National Association of Insurance Commissioners Health Care Reform Regulatory Alternatives Working Group—a group of commissioners from states that have decided against operating a state exchange—recently published a list of questions that they believe must be answered by the federal government about how the federal exchange will interact with the states. These are serious questions that must be addressed soon by the federal government if it is to hope for state cooperation moving forward.
Employers. Employers need guidance as well. Beginning with 2014, employers with more than 50 employees that do not offer affordable and adequate health insurance to their employees will face stiff penalties if their employees end up receiving premium tax credits through the exchanges. Employers will also be prohibited from imposing waiting periods of more than 90 days before coverage begins. Rules interpreting these provisions are needed, however, and needed soon. Rules defining how the IRS will enforce the individual responsibility provision are also needed in the very near future.
Rulemaking takes time. Proposed rules must be published for comment for at least 30 days, often longer, and all comments received must be reviewed before a final rule is published. “Significant regulatory actions” must be reviewed by the Office of Information and Regulatory Affairs before a proposal is issued. There are currently no HHS ACA implementation rules pending at OIRA. The ACA implementation agencies appear to have put a hold on rulemaking since the summer. Presumably this was driven by electoral politics, as regulatory action inevitably creates winners and losers and the administration did not need any more enemies going into this election. But time is short given the 2014 deadline, and the administration must—absolutely must—move forward now.
The federal exchange. The administration must also move forward with the implementation of the federal exchange. Currently about a third of the states have established exchanges, with a handful more expressing interest in partnering with the federal government. The federal government will need to operate the exchange in all of the states that do not establish their own. This is going to be a massive job. The federal government has ample experience with operating exchanges with Medicare Parts C and D and the Federal Employee Health Benefit Program, but this will be its biggest challenge yet.
In establishing the federal exchanges, the administration faces three major barriers. First, additional funding is probably going to be needed, just at a time when Congress is trying to cut rather than expand federal funding. Second, there is the nagging question of the authority of the federal exchanges to issue premium tax credits. This issue is currently being litigated in Oklahoma, and I trust will be resolved in the administration’s favor, but the argument that the federal exchange cannot issue tax credits is being pushed aggressively by opponents of the ACA, to significant political effect at the state level.
Third, in the end the states must cooperate with the federal exchange for certain basic functions, such as coordinating Medicaid eligibility determinations and insurance company licensing. The extent to which that cooperation will be forthcoming remains to be seen. In an ominous sign, Missouri passed a ballot initiative prohibiting state officials from cooperating with the federal exchange, and authorizing private lawsuits against any official who cooperates. Whether this is constitutional remains to be seen.
Threats To The ACA
State opposition. Indeed, securing cooperation from the states on health care reform generally promises to be a major headache for the Obama administration going forward. The Republicans appear to have picked up at least one governorship and to have made gains in some state houses. Alabama, Montana, and Wyoming passed anti-Obamacare amendments, although Florida defeated a similar ballot measure. These measures are purely symbolic, with the Supreme Court having decided that the ACA is constitutional and thus the supreme law of the land, but they do symbolize continued resistance in the red states. The administration will have to confront this resistance firmly, but also work with practically-minded officials in Republican state officials to make the ACA work for all Americans.
High on the administration’s agenda must be helping the states to understand why they should embrace the ACA Medicaid expansion, which was made optional through the Supreme Court’s NFIB decision. The states have every reason to expand Medicaid. The federal government initially funds 100 percent of the expansion, and the state’s share will never exceed 10 percent. The ACA provides no other assistance for families under 100 percent of the poverty level, hospitals in rejectionist states will face an unmanageable uncompensated care burden just as their Medicare funding is cut, and managed care companies will lose out on a lucrative Medicaid managed care market in states that reject expansion.
Employers in rejectionist states will face increased penalties if their low-income employees end up in the exchange, and individuals with incomes between 100 and 138 percent of poverty are more likely to face penalties as well. Finally, taxpayers in states that refuse to expand will still have to pay federal taxes to fund the expansion in states that embrace it. Nothing but sheer ideological stubbornness can explain rejection of the expansion, but the administration must work tactfully and patiently with the states to help them understand it. Under no circumstances must it start bargaining with the states for a more limited expansion, which is not permitted by the ACA and would seriously undermine the ACA’s coverage expansions.
Deficit reduction. Another major threat facing ACA implementation is the bargaining the President must engage in with Congress over the budget, tax legislation, deficit reduction, and the Medicare sustainable growth rate fix. Although the Democrats made gains in the Senate, the Republicans have retained firm control of the House, and the evisceration of the ACA is likely to be high on their agenda. Republicans are likely to focus on finding cuts in the ACA to fund Medicare physician payment increases, as they have in the past. There is, frankly, little room to cut in the ACA if it is to accomplish its goal of offering affordable health insurance to the uninsured. The administration must be firm and vigilant in protecting the premium tax credits and Medicaid funding if we are to in fact significantly expand coverage in 2014.
Challenges to the preventive services contraceptive mandate. With the election out of the way the administration should deal with some of the irritants that plague implementation. Over two dozen lawsuits are pending challenging the preventive services contraception mandate. Several of these have been dismissed pending the Administration working out a compromise with religious institutions that object to covering contraception. Such a compromise has been promised, and this promise should be honored. On the other hand, the administration is facing a number of lawsuits brought by for-profit businesses claiming exemption from the mandate because of the religious beliefs of their owners. In two of these lawsuits a preliminary injunction has been issued. These lawsuits raise important questions as to the right of business owners to impose their religious beliefs on employees and need to be taken seriously.
A Technical Corrections Bill: Too Much To Hope For?
Finally, if a new spirit of bipartisanship settles on Washington, it would be nice to finally get a technical corrections bill through Congress to fix a lot of the glitches in the ACA that bedevil implementation. But this would presumably open up the ACA to further special interest pleading and political point-scoring, and is perhaps too much to hope for.
November 6 was a good night for health care reform, and for the millions of Americans who will benefit from it, but a great deal of work needs to be done before reform becomes a reality. It is time for the administration to roll up its sleeves and get to work.