The Affordable Care Act

1. The Affordable Care Act Part II October 17, 2014 Ross K. Airington, MPA VCU Office of Health Innovation

2. Background

3. Why Is Health Reform Needed? • In 2012, there were nearly 48 million uninsuredAmericans • Since 2003, average health insurance premiums for family coverage have risen 80% • Average annual cost of employer‐sponsored family coverage in 2013 = $16,351 • Average employee contribution: $4,741 • In 2013, only 57% of firms offered employer-sponsored coverage Source: The Kaiser Family Foundation and Health Research & Educational Trust, “Employer Health Benefits: 2013 - Summary of Findings.”

4. Uninsured in DC/MD/VA • DC: 62,900 (12%) • MD: 758,500 (15%) • VA: 1,073,200 (16%) • Approximately 71.1% of uninsured Virginians live in families with a gross income at or below 200% FPL • 200% FPL in 2013 = $47,100 for family of 4 Work Status of the Nonelderly Uninsured Source: Macri, J. Lynch, V., Kenney, G., Profile of Virginia’s Uninsured, 2010, The Urban Institute, Prepared for the Virginia Health Care Foundation, March 2012.

5. Health Insurance Matters! 25% less likely to have an unpaid medical bill 48.3% decrease in average health care costs per year 6.1% relative reduction in mortality rates 40% less likely to borrow money or fail to pay other bills because of medical debt Sources: Health Affairs, The New England Journal of Medicine, National Bureau of Economic Research

6. Overview of the Affordable Care ACT

7. Patient Protection and Affordable Care Act (PPACA) Enacted in March, 2010 with the goals of: Ensuring access to quality health care Providing affordable health insurance to the uninsured By 2024 will expand coverage to ≈ 26 million currently uninsured Americans Net cost of coverage expansion is $1.383 trillion over 10 years (2015-2024) Source: Congressional Budget Office, Updated Estimates of the Effects of the Insurance Coverage Provisions of the Affordable Care Act, April, 2014

8. How is the law paid for? • Individual & Business (> 50 employees) Tax Penalties for failure to purchase insurance • Increased Taxes for High-Income Workers • Annual Fee for Insurance Companies • Tax on “Cadillac” Insurance Plans • Tax on Medical Device & Drug Industries • Provider Cuts • Yearly payment updates to hospitals (“market basket updates”) are reduced • Payment reductions if fail to meet certain quality criteria • Medicaid and Medicare Disproportionate Share Hospital (DSH) payments • Reduced by $14 billion and $22 billion respectively (2014-2019)

9. Consumer Protections

10. Consumer Protections • No one can be denied coverage due to a pre-existing condition • No cancellation of coverage or lifetime benefit limits • Free preventive care services • Allows dependent children age 26 and under to stay on parent’s plan • Limited age/family rating and no gender rating

11. coverage Expansion

12. Coverage Expansion • Enacts an Individual Mandate (Jan 1, 2014) • Enacts an Employer Mandate(Jan 1, 2015 and Jan 1, 2016) • Expands Medicaid to non-elderly population with incomes at or below 133% FPL (Jan 1, 2014) • Creates a Health Insurance Marketplace(Jan 1, 2014)

13. Mandates

14. Individual and Employer Mandates • Starting in 2014, everyone must either: • Have health insurance coverage • Have a coverage exemption • Pay a penalty • Beginning January 1, 2015, employers with 100 or more full-time or full-time equivalent employees must offer affordable coverage • …to full-time employees and their dependent children

15. Individual Mandate: Penalties • Collected through tax returns • Exempted: undocumented immigrants, Native Americans, and those who earn too little to file a tax return Source: The Kaiser Family Foundation

16. Health Insurance marketplace

17. Health Insurance Marketplace • The ACA requires the establishment of state-based or federally facilitated “Health Insurance Exchanges” (2014) • Virginia defaults to a Federally Facilitated Marketplace (FFM) • Health plans in the Exchange must provide coverage for 10 Categories of “Essential Health Benefits”

20. Essential Health Benefits • Ambulatory patient services • Emergency services • Hospitalization • Maternity and newborn care • Mental health and substance use disorder services, including behavioral health treatment • Prescription drugs • Rehabilitative and habilitative services and devices • Laboratory services • Preventive and wellness services and chronic disease management • Pediatric services, including oral and vision care

21. Coverage Levels

22. Insurance Affordability Programs • Premium Tax Credits for individuals 100% to 400% FPL • Individual: $11,490 to $45,960 • Family of 4: $23,550 to $94,200 • Cost-Sharing Reductions (CSR) for individuals between 100% and 250% FPL ($28,725 individual; $58,875 family of 4) • Silver plans only • 3 CSR tiers based on income: • 100%-150% FPL: 94% AV • 150%-200% FPL: 87% AV • 200%-250% FPL: 73% AV

23. Marketplace Plans in Virginia (2014) • Virginia – Federally Facilitated Marketplace • 9 insurers offering 105 individual and family plans Monthly Premiums • Lowest Bronze: $139 • Lowest Silver: $188 • Richmond • Aetna • CoventryOne • Anthem HealthKeepers • Optima Health • Outside Richmond • Anthem BlueCross BlueShield • Kaiser Permanente • Innovation Health Insurance Co. • CareFirst Bluechoice • CareFirst BlueCross BlueShield

24. So how did it go?

25. So how did it go? • Over 8 million people signed up for private insurance on the Marketplace • 2.2 million (28 percent) were young adults (18-34) • 85 percent were eligible for financial assistance • 3 million more people enrolled in Medicaid and CHIP • 5 million people enrolled in plans that meet ACA standards outside the Marketplace Sources: The White House. FACT SHEET: Affordable Care Act by the Numbers. April 17, 2014. HHS. Health Insurance Marketplace: Summary Enrollment Report for the Initial Annual Open Enrollment Period. May 1, 2014

26. Open Enrollment Has Ended

27. Medicaid Expansion

28. Restrictive Medicaid Eligibility in Virginia • Spending • 11thlargest state in terms of population • 7thin per capita personal income • 22ndin Total Medicaid Spending • 25thin Spending per Enrollee • Access • 44thin access to benefits for working parents (30% FPL) • 38th in access to benefits for jobless parents (25% FPL) • Tied for last in benefits for childless adults (no benefits) Source: Kaiser Family Foundation, State Health Facts: Medicaid & CHIP

29. Medicaid Expansion 133% Federal Poverty Level * * * • *Covers up to 200% FPL with FAMIS **http://cciio.cms.gov/resources/files/exchanges-faqs-12-10-2012.pdf. 

30. Projected Medicaid Growth in Virginia • Number is lower than previous estimates, due to the application of expected uptake rate of 69% • The expanded Medicaid enrollment is estimated to result in a savings of $604 million through 2022* • Under the ACA, the increase in Medicaid enrollment could grow by more than 250,000 *Medicaid DSH and Indigent Care, Presentation to the Senate Finance Committee, Health and Human Resources Subcommittee, Scott Crawford, Department of Medical Assistance Services, January 27, 2014,

31. Impact of Supreme Court’s Decision • Decision rendered June 28, 2012 • Major components of decision: • Individual Mandate is constitutional as a tax • Medicaid Expansion itself is constitutional; but the “all-or-nothing” approach is not • Unconstitutionally coercive to tell states they must expand or risk losing all of their Medicaid funding • Medicaid Expansion (from current levels up to 133% FPL) becomes optional for states

33. 2012 Electoral College Map

34. Will the Feds reduce the match? • The FMAP formula has remained basically unchanged since the enactment of Medicaid in 1965, and temporary adjustments to the formula have resulted in FMAP increases, not decreases. • 2001 Recession • April 2003 through June 2004: Every state’s FMAP was increased by 2.95 percentage points • Great Recession of 2007-2009 • Across the board increase of 6.2%. • Increase in FMAP ranging from 1.88 to 5.39 %, based on the increase in a state’s unemployment rate.

35. Medicaid Pays for Itself

36. What’s At Stake?

37. DSH Reductions • Federal requirement that states provide “Disproportionate Share Hospital” (DSH) payments to hospitals that serve a “disproportionate” number of Medicaid patients • Assumption that these facilities also serve large percentages of uninsured • Each state receives an “allotment” of federal DSH funds • States develop guidelines for distribution of DSH funds to hospitals • Between 2017 – 2024 Medicaid DSH allotments to states will be reduced • Up to 50% in the latter years Source: “Medicaid DSH and Indigent Care”, Presentation to the Senate Finance Committee, Health and Human Resources Subcommittee, Scott Crawford, Department of Medical Assistance Services, January 27, 2014,

38. Disproportionate Share Hospital Programs • How Virginia uses its DSH allotment: • Partial financial relief to 33 private hospitals that have a high proportion of Medicaid patients • Maximize use of federal funds to support indigent care at state teaching hospitals (UVA and VCU) • VCUHS and UVA Medical Center receive the majority of the state’s DSH allocation to support their Indigent Care programs Medicaid DSH and Indigent Care, Presentation to the Senate Finance Committee, Health and Human Resources Subcommittee, Scott Crawford, Department of Medical Assistance Services, January 27, 2014,

39. “The growth in Medicaid expansion states starkly contrasts the experience in the 24 states that did not expand the joint federal-state health program. In those states, hospitals continued to see flat or sagging admission rates and little reduction in the number of uninsured, largely non-paying patients.” “While these trends were expected, the gap in Medicaid enrollment between expansion and non-expansion states is greater than most industry analysts predicted.After a strong start to the year, health systems have recalculated their previous estimates to adjust for higher than expected enrollment and revenues. Many have projected a strong finish to the year.” In Medicaid expansion states, the shifts between Medicaid and self-pay admissions were dramatic through the first half of 2014 Source: PwC Health Research Institute. Medicaid 2.0: Health systems have and have notsof ACA expansion. September 2014. http://pwchealth.com/cgi-local/hregister.cgi/reg/pwc-hri-aca-medicaid-expansion.pdf

40. Key Facts about the Uninsured Population, The Henry J. Kaiser Foundation, http://kff.org/uninsured/fact-sheet/key-facts-about-the-uninsured-population/

41. What’s at stake in Virginia if there is no expansion? The Coverage Gap 190,000 Adults in VA 5.2 Million Nationwide Source: Kaiser Family Foundation, The Coverage Gap: Uninsured Poor Adults in States that Do No Expand Medicaid, October 2013

42. On the flip side… • Federal deficit cannot be ignored • Many doubt the feds’ ability to continue funding at the levels outlined in the ACA • Fear that state may get “stuck” with the bill • Medicaid already consumes a large portion of the state budget • Goals of expansion may not be fully achieved if there isn’t sufficient access

43. The Path to Expansion in Virginia

44. Path to Medicaid Expansion in Virginia Budget adopted by the 2013 VA General Assembly included language allowing for Medicaid expansion up to 138% FPL, if and only if certain reforms are made to the existing Medicaid program

45. Oversight of Medicaid Expansion in Virginia • Budget language created the Medicaid Innovation and Reform Commission (MIRC) • Must determine if the appropriate phases of reform have been met • If conditions have been met, then the Commission shall approve Medicaid coverage expansion up to 133% FPL • “…by July 1, 2014, or as soon as feasible thereafter” • Sunset Clause: • If federal commitment drops below levels stated in ACA, then DMAS will dis-enroll the newly covered individuals

46. Marketplace Virginia • Senate budget included language that called for a “Private Option” in lieu of traditional Medicaid Expansion • Based on similar proposals in Arkansas, Iowa, Michigan, and Pennsylvania • Provides premium assistance to the expansion population who buy private plans on the Marketplace • Requires “skin in the game” contributions up to 5% of household income • Requires incentives for job search and work activities • Significantly reduces the authority of the MIRC

47. 2014 Virginia General Assembly Session • January 8, 2014 to March 8, 2014 • March 8: Unable to agree on Medicaid Expansion, the General Assembly adjourns without passing a budget • March 7: Governor McAuliffe announces that he will call a special session – to begin March 24 –to complete the budget and appoint judges

48. 2014 Virginia General Assembly Session • June 9: GOP retakes the majority in the Senate when Sen. Phillip P. Puckett (D-Russell) unexpectedly announced his immediate resignation • Within four days the House and Senate passed a budget without Medicaid expansion • Also included new language (the “Stanley Amendment”) meant to prevent the Governor from expanding via executive action

49. 2014 Virginia General Assembly Session • Sept. 8: Governor McAuliffe announces a comparatively modest plan to help close the coverage gap in Virginia • Includes: • Expanded coverage for those with severe mental illnesses • Increased outreach and enrollment efforts for the Marketplace • FAMIS eligibility for the children of state employees • Dental benefits for pregnant women in Medicaid • Pursuing federal innovation grants

50. 2014 Virginia General Assembly Session • September 18: General Assembly goes BACK into session to debate… …wait for it… …that’s right… Medicaid Expansion!