Assessing the Future of the Affordable Care Act

Assessing the Future of the Affordable Care Act

Last week, we were reminded of the partisan nature of healthcare reform when Congress adopted HR 3762 to repeal the Affordable Care Act and then Obama vetoed the legislation.  By rejecting the legislative measure, President Obama noted:

This legislation would cost millions of hard-working middle-class families the security of affordable health coverage they deserve.  Reliable healthcare coverage would no longer be a right for everyone:  it would return to being a privilege for a few.

The legislation's implications extend far beyond those who would become uninsured.  For example, about 150 million Americans with employer-based insurance would be at risk of higher premiums and lower wages.  And it would cause the cost of health coverage for people buying it on their own to skyrocket.  

Of course, Republicans are saying the opposite as the ACA makes fundamental shifts to the insurance marketplace that continue to disrupt health coverage arrangements that have been in place for years.

One blogger, Bob Laszewski, summarizes the situation clearly when he writes:

Obamacare is not sustainable politically or financially in its current state if only because of how far short it is falling for those subsidy eligible people over 200% of the poverty level and for the 50% of the individual health insurance market that does not get a subsidy….During the election season Democrats can't admit Obamacare is broken and Republicans can't admit it won't be repealed. The big question that will remain is: Who will fix Obamacare?  

With this in mind, let’s review some of the trends from last year and begin to look forward to 2017 where some key questions may be answered. 

2015 Year in Review

Last year, we posted a blog looking at five issues that would make headlines in 2015.  Let’s see how we did. 

Republican Congress: GOP Seeks to Modify ACA. 

Interestingly, even though the Republicans took control of both houses of Congress in 2015, very little was done in terms of adopting meaningful changes to the ACA.  Outside of the recent repeal measure, which was more symbolic in nature than an actual threat, the ACA’s status did not change significantly. As we head into the Presidential election cycle over the next 12 months, more proposals will be made by Republican congressional members to modify the ACA but any real changes would only occur if the Republicans either take over the White House or they secure a veto proof majority in Congress. 

U.S. Supreme Court Reviewing ACA Subsidy Options:  King v. Burwell

We predicted that the U.S. Supreme Court would review the legal merits of King v. Burwell and make a decision last summer. We were right on target on this prediction.  However, the ruling was a surprise to some when the Court decided in June to uphold the offering of subsidies in exchanges that are run by the federal government.  In a 6 to 3 vote, Justice Roberts wrote the majority opinion upholding the right of the federal government to grant subsidies to individuals in states that rely on federal Exchanges to offer health coverage through the ACA.  At this point, no major court decisions are slated to be made in 2016 addressing a fundamental element of the ACA.  But of course, things could change later in the year. 

Updates to the Employer Mandate: Assessing the Impact on Large Employers

After several false starts, we noted that 2015 would see the official implementation of the first phase of the employer mandate, which requires large employers to offer affordable, minimum value health insurance to full-time employees. This in fact did happen after several delays. 

However, we recently posted a blog regarding another delay relating to some of the reporting requirements due some of the on-going bureaucratic hoops that employers need to address.  Furthermore for some individuals and employers, the “mandates” have been softened this year by the IRS due to some of the ongoing compliance challenges.  As a result, the IRS has stated it would not impose penalties on reporting entities that attempted to comply with requirements in good faith but that had furnished or filed incomplete or incorrect information last year. The IRS also has gone on record noting that tax penalties may be waived if a reasonable cause for noncompliance can be demonstrated. 

ACA Subsidies May Be Misallocated for Millions of Americans: A Look at the Exchanges

With the third round of open enrollment underway for the 2016 season, the allocation of ACA subsidies continues to be a hot button issue as it was last year.  We did report on some glitches, including some Medicaid recipients inadvertently received tax credits to purchase their insurance through the ACA marketplace, which now need to return those funds.  We also posted a more detailed blog about abuses in the tax filings generating both by overpayments and underpayments to consumers.  Among other issues, concerns were expressed by Republicans about reports announcing that 700,000 ACA consumers who claimed tax credits (but didn’t file their returns) created a cost to the government of $2.4 billion in bogus payments.  The IRS is still sorting through this mess. 

Expanding Coverage: State Medicaid Programs and Mental Health Parity


Although there appeared to be broad-based expansion of Medicaid coverage due to the ACA in at least 27 states in previous years, researchers and public policymakers began to look at emerging coverage gaps in 2015 due to funding and eligibility limitations.  For example, the Kaiser Family Foundation reported on this trend: 

As of September 2015, 20 states were not expanding their programs. Medicaid eligibility for adults in states not expanding their programs is quite limited: the median income limit for parents in 2015 is just 44% of poverty, or an annual income of $8,840 a year for a family of three, and in nearly all states not expanding, childless adults will remain ineligible…Nationally, more than three million poor uninsured adults fall into the “coverage gap” that results from state decisions not to expand Medicaid, meaning their income is above current Medicaid eligibility but below the lower limit for Marketplace premium tax credits. These individuals would have been newly-eligible for Medicaid had their state chosen to expand coverage.

Kaiser also reported that when states more forward and expanded Medicaid coverage, 40% of the nonelderly uninsured population are now eligible for Medicaid; but just 13% are eligible in states that have not expanded Medicaid.

Mental Health Parity

Last year, we noted that the Mental Health Parity Act will go into full effect.  As a result, a number of enforcement actions were implemented.  In addition to several lawsuits, the New York Attorney General’s office levied fines against five health organizations.  We predict that more enforcement actions will continue to be enforced by regulators and the courts heading into 2016.  

Looking Forward

In terms of 2016 and future years, here are some key issues to monitor:

  • Health Plans
    • Will the majority of health plans continue to limit or exit key exchange markets?
    • How will the key health plan mergers that are currently under consideration by state and federal regulatory agencies impact the insurance market? 
    • How much longer will the ACA co-ops survive? 
    • Cost/Funding
      • Will the rise in health insurance premiums slow down over the coming years? 
      • How will the move to high deductible plans and more aggressive utilization management impact how consumers receive and pay for coverage?
      • How do we realistically pay for some of the unfunded mandates that are required by ACA and other laws in the longer term? 
      • Will the insurance risk pools stabilize through younger adults enrolling in the exchange plans?
      • Will the IRS be able to get a better grip on enforcing the subsidy and reporting provisions under ACA?
      • Exchanges
        • Will the number of state-based exchanges continue to shrink as some states have switched to rely on the federal government exchange system (or key parts)?
        • What about the business of SHOP exchanges – will they ever get traction? 
        • Politics
          • What will be the outcome of the 2016 elections both at the federal and state levels and their impact on the ACA?
          • If the Republicans take the White House in 2017 or gain a veto-proof majority in Congress, how will the Republicans modify or replace the ACA?
          • Brokers
            • Will Brokers still be given meaningful opportunities to help their clients make informed decisions about their healthcare options?
            • Will commission rates continue to be reduced or have the finally leveled off?


Stay Tuned

The next two years should really shed light and help answer all of these questions.  Stay tuned as we continued to report on emerging issues related to the ACA, as well as any issues affecting Brokers and their clients.  

The views expressed in this post do not necessarily reflect the official policy, position, or opinions of BenefitMall. This update is provided for informational purposes. Please consult with a licensed accountant or attorney regarding any legal and tax matters discussed herein.


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