Welcome back! We’ve gotten through the general reforms and are ready to tackle the exchange. As always, you can follow along at congress.gov, which offers a (very dry) summary and a (even drier) full text version.
Today we’re talking about the exchange. Obama called this out early as being akin to what Congress already had for themselves: a one-stop shop for healthcare, to make sure everyone knew what was available. This was originally designed to be a single federal exchange, with a single-payer option provided by the government to help anchor prices and prevent collusion, but the Senate refused to ratify that. You’ll remember, the Republicans are very much in favor of states rights, and insisted that all states be able to run their own exchanges how they like, without the federal government getting involved in either a national exchange or a single-payer system. Their alternative to a federal exchange is allowing state exchanges to sell across state lines, giving you 50 marketplaces instead of 1.
Anyway, that’s enough of theory for the moment. On to the act!
Qualified Health Plans
This section’s title is “Available Coverage Choices for All Americans – Part I: Establishment of Qualified Health Plans”. Now, when legal language such as an act talks about “establishing” something, what they mean is really “defining what it is”. So this is the definition of what plans can be sold at the exchange.
To be sold in a state exchange, plans must:
- Offer a silver plan and a gold plan. There are four categories of plan: Bronze, Silver, Gold, and Platinum. You have to at least offer the middle two options if you want to participate.The categories are based entirely on how the payment is split up, with Bronze being 60-40 (as in, you pay 40% of the costs), Silver being 70-30, Gold being 80-20, and Platinum being 90-10. In addition, deductibles go down as you go up the ladder. However, premiums go up as you go up the ladder. I suppose they figure most people will want one of the middle options, so that’s where the most choice should be. The deductibles and premiums are set by the insurance company, but the level of coverage is set by the act itself.
- Cost the same as they would if you bypassed the exchange. This is a no-brainer; you can’t charge people extra for using the exchange or it’ll never work.
- Offer a child-only version, as we discussed in Part 1.
- Offer essential health benefits. We talked about this in Part 1 also; it’s defined here. In order to be offered on the exchange or to private individuals, plans must cover, at minimum:
- ER visits
- Maternity and newborn care
- Mental health
- Prescription drugs
- Lab services, like bloodwork
- Preventative services
- Chronic disease management
- Pediatric care
- The Health Secretary will also define other essential benefits to be updated as time goes on. The law doesn’t care to define everything itself, but the above are considered the bare minimum of what you have to cover to be a health insurance plan and not some elaborate scam.
Then there’s some general improvements here, that only apply to plans offered on the Exchange:
- The maximum deductible is capped at $2,000 for an individual and $4,000 for a family.
- The out of pocket maximum appears to be capped. I am not 100% sure I’m reading this right, so I’ll paste the relevant section here in case I misinterpreted:
(A) 2014.--The cost-sharing incurred under a health plan with respect to self-only coverage or coverage other than self-only coverage for a plan year beginning in 2014 shall not exceed the dollar amounts in effect under section 223(c)(2)(A)(ii) of the Internal Revenue Code of 1986 for self-only and family coverage, respectively, for taxable years beginning in 2014.
If I read this right, and understand correctly what they mean by “cost-sharing”, this means you cannot be charged more than what you can contribute to an HSA in a year. Meaning if you have a HSA, you don’t need to chip in any extra. Of course, HSAs are hard to get (you have to have certain kinds of plans to qualify), but that’s pretty neat.
- The act also created an extra category for emergency-only coverage, or “catastrophic coverage” in their terms. If you’re under 30, you can choose to roll the dice, covering your own routine care but having coverage in case of emergency.
Then finally we have “special rules”. These are all regarding a particular hot-button issue: abortion coverage. They’re surprisingly fair:
- Plans are not required to pay for abortions. It’s written right there in black and white: regardless of whether public funds are allocated, no plan is forced to cover abortion. Abortion can never be considered an “essential service”.
- States are allowed to require that plans pay for abortions, but if they do, no federal funds can be used to pay for those plans in any way, shape, or form.
- States are required to ensure that in their exchange, at least one plan covers abortion, and at least one plan does not. That allows people to choose a plan based on their own feelings about abortion. Because of the way these plans group people into a purchasing block, this allows people to verify that their premiums don’t pay for anyone else’s abortion if they’re against abortion. It also ensures that people who want an abortion can have one if they choose.
- There is no discriminations against providers based on whether they do or do not offer abortions. If doctors aren’t comfortable performing abortions, they’re not allowed to be dropped from a network based on that. If they are, they’re not allowed to be dropped for that, either.
In short, aside from the abortion stuff, this is all pretty boring to us now, in 2017. We all have had a chance to see Healthcare.gov, read through the plans presented there, and understand what the coverage looks like. If you haven’t taken the time to do so, please do; there’s some good information there aimed at helping people understand what is and isn’t covered by each plans and estimate how much they’ll pay.
The Exchanges Themselves
Now we’re looking at “Part II: Consumer Choices and Insurance Competition Through Health Benefit Exchanges”. This is where the exchanges are formally created, now that we have plans to go in them.
- States have to create an exchange where individuals can buy insurance. Federal money is granted to them for this purpose.
- They also have to make one for small business owners to buy insurance for their employees. This can be the same exchange or a different one.
- The Regulations Secretary has to create guidelines the exchanges obey, and ensure that they obey them. This is where we get into the downside of having 50 exchanges: someone has to oversee them all and ensure no state is cheating their residents out of their share of the act.
- The bare minimum requirements in the act itself are that an exchange must:
- be run by the government or a nonprofit
- not offer any plan that doesn’t meet the requirements above
- certify whether plans meet the guidelines or not
- require insurers to justify any premiums increase they have in a given year
- offer a website
- offer a toll-free hotline to help people understand the website and plans
- present all plans the same way so you can compare easier
- offer a means calculator to help you figure out what your actual costs are
- offer some way to certify that you are exempt from the tax penalties defined later on (for bookkeeping purposes, so the federal government doesn’t have to do it)
- be self-sustaining, probably by charging insurance companies for certification
- publish on the website how much it charges for various services to pay for itself
- States are allowed to mandate higher minimum standards than the act itself puts out, but they are not allowed to lower the standards. If they require additional benefits be offered, the state has to pay for it, since there won’t be federal funding available.
- Exchanges are already allowed to cross state lines. The only restriction is that both states have to agree to allow the exchange to operate, and so does the Secretary who regulates them. I had no idea! So the existing bill is already more in favor of states rights than the proposed replacements?
- States are also allowed to have more than one exchange if they feel that different regions need different exchanges.
- The Secretary is allowed to reward States for meeting goals like improved enrollment, reduced medical transcription errors, or decreased prevalence of a given illness.
- Money is also set aside for paying people to help people use the exchange as long as they stay impartial and speak the appropriate languages.
- Rather than offer their own plans, employers are allowed to send their employees to the exchange. Effectively, how this works is that employers say “Pick out any plan of X level and I’ll pay Y% of it”
- You are not required to buy from the exchange. Companies are still allowed to sell you insurance the old fashioned way.
- You are allowed to buy any plan in the exchange.
- Effectively, everyone buying insurance from the exchange is treated the way employer insurance treats everyone in the company: as a single “risk pool”, where the premiums collected from everyone pay for everyone’s coverage before the company determines profit. Every small company is treated as a separate risk pool, but it could be the same risk pool as individuals.
- You must live in the state whose exchange you buy insurance from. Kind of a no-brainer.
Part 3, “State Flexibility Relating to Exchanges”, gives the states extra flexibility, benefitting those states who can’t get an exchange up and running rapidly:
- If a state cannot have their exchange running by Jan 1 2014, the Secretary can set one up for them to cover until they get it running
- If a state already had an exchange, that exchange is assumed to be “good enough” and they don’t have to build another one
It also allows the creation of a grant to assist nonprofits who want to offer health insurance plans. The list of awardees is available on their website; however, two years in, over half of them had closed down. Part of this is due to policy: the law forbids them from using the federal funds on marketing, for example, which makes it difficult, because without marketing you have trouble getting donations to grow. Another challenge is that the final budget was cut by two thirds from the initial proposal. Finally, all that “you can keep your current plan” talk led people to, ya know, keep their current plan, meaning less money went to new plans.
(For all the Republicans talk about people not getting to keep their plans, about a quarter of people who get their plans through their employers kept their grandfathered plans.)
The next section, “State Flexibility to Establish Alternative Programs“, gives the states more options outside the exchanges. Firstly, it allows for a basic health program to be created if the state so decides. Two states have done this: New York and Minnesota. This creates an alternative option for the poor; in New York, to be eligible you have to be below 200% of the federal poverty level. It’s essentially an expanded version of Medicaid that the states run with federal oversight.
This section also outlines a process where states can apply to get out of some requirements, in case they think of something better later. And finally, it expands upon a point I noticed earlier: states can already cooperate to make mutually beneficial exchanges, or (in this section) to allow one plan to be in as many exchanges as the states care to approve.
The final section in this subtitle outlines how the state and federal funds will be allocated to help offset the money lost by insuring high-risk individuals. In essence, because people who were considered too risky to insure before are now required to be insured, the government will supply money to the insurance companies to cover their losses on the high-risk individuals. This is called “reinsurance”: insuring the insurance companies. Again, I’m not 100% sure I understand this concept fully, but it seems to be a way to help pay for the risks so that everyone can become more healthy overall and we stop having such high-risk individuals going into debt and overtaxing the ER systems.
And that’s it! That’s the section creating the exchange. That’s sort of pillar two of this ACA; we’ve talked about the general reforms that benefit everyone, and we’ve talked about the exchanges that allow people to buy insurance. Stay tuned for part 3, where we’re discussing the third major pillar of the ACA: the tax parts that fund the act.