The Employer Mandate: Essential or Dispensable?
Have you wondered how the passing of the AHCA will impact employers? Check out this article by David Blumenthal, M.D and David Squires from Commonwealth Fund and see how employers will affect by the passing of the most recent healthcare legislation.
The Commonwealth Fund’s Sara Collins has blogged that, “Employers are at the heart of the U.S. health insurance system and their ongoing commitment to it will be critical to its success and viability over time.” The point is undeniable. More than 150 million Americans under the age of 65 get their coverage through the workplace, and employer-sponsored insurance remains critical to the success of the Affordable Care Act’s (ACA) coverage plans.
Some may therefore be surprised by the growing talk of repealing the ACA’s requirement that employers cover their employees. To unpack this issue, let’s take a look at the ACA provision itself, why it was enacted, and the potential upside and downside of repeal.
The Employer Mandate
The ACA section under discussion is often called an employer mandate, but that’s an oversimplification. The law says that employers with 50 or more employees have a choice. They can offer health insurance that meets minimum standards for affordability and coverage to employees working 30 or more hours a week. Or they can pay the federal government a penalty if at least one of their employees receives a federal subsidy for a private insurance plan sold through one of the new ACA insurance marketplaces.
You can call this a mandate. Or you can call it a requirement that businesses share responsibility for the costs of covering all Americans, either by helping to buy insurance directly for their own employees, or helping the federal government do so.
The language here matters. The concept of shared responsibility reflects a political calculation and a statement of values. It asserts that for the ACA to be fair and politically viable, all Americans have to do their part. All U.S. citizens are required to have health insurance, and many will have to pay a penalty if they go without it (the individual mandate). Employers must cover workers or help the government financially to do so. Taxpayers have to support the expansion in Medicaid eligibility and marketplace subsidies. Hospitals have to take cuts in Medicare payments, medical device makers need to accept additional taxes, and so on. The most successful American social programs—such as Social Security and Medicare—rely on this concept of shared responsibility.
The Rationale
Whatever you label it, the employer coverage requirement has several rationales beyond the concept of shared sacrifice. Policymakers want to deter employers who now provide coverage to their employees from dumping workers into the marketplaces, either by dropping coverage completely or limiting benefits to the point where workers will chose to buy insurance elsewhere. The requirement also attempts to nudge employers who don’t cover employees into offering health insurance. And on the assumption that some businesses will chose to pay rather than offer coverage, the employer provision provides an important source of revenue to cover the ACA’s expenses: an estimated $139 billion over 10 years.
The Rationale for Repeal
Several arguments are fueling the repeal push. First, implementation will be administratively complex and burdensome. For example, employers will have to report many new details about their workers, including what coverage they have been offered and whether they have received coverage elsewhere.
Second, some economists are concerned that the employer requirements will distort hiring decisions, leading companies to bring on fewer low-income employees who might be eligible for subsidized coverage in the marketplaces. Firms with payrolls near 50 workers might hire fewer workers altogether. Economists also believe that if employers incur penalties for not offering coverage, workers might contribute to the costs of insurance through reduced wages. Other economists, however, believe these effects will be modest.
Third, modeling from RAND and the Urban Institute suggests that when fully implemented in 2016, the employer provisions will increase the number of insured Americans by only a few hundred thousand. The overwhelming proportion of U.S. employers already provides insurance to their employees, and would continue to do so without the penalties in the ACA, the analysts contend.
Concerns About Repeal
Supporters of the employer requirement posit that projections that employers would stay in the health insurance business without the ACA requirements are just that—projections. Balanced against employers’ past record of providing coverage is an increasing tendency for businesses to reduce the generosity of coverage. In fact, the law’s requirements that workplace coverage be affordable and meaningful may be as important as the requirement that employers offer coverage at all.
Eliminating the employer provisions would also leave a big hole in funding for the ACA. The likelihood that supporters and opponents could reach agreement on how to raise the missing cash seems low, especially given the recent history of the congressional effort to replace the Medicare physician payment formula known as the SGR. This year, a bipartisan consensus on policy crashed and burned when Republicans and Democrats could not agree on new sources of revenue to pay for the legislation.
Finally, and perhaps most importantly, repealing the employer mandate would undermine the concept of shared responsibility and potentially add momentum—which could grow in a new Congress or under a new president—to the idea of eliminating the individual mandate as well. After all, why should individuals have to buy insurance when businesses don’t? Virtually all disinterested analysts agree that the individual mandate is critical to the stability of the new insurance marketplaces created under the ACA, and to reducing the number of uninsured Americans.
Proceed with Caution
The full effects of repealing the employer provisions of the ACA remain speculative. A repeal seems unlikely in the short term, in part, because a repeal effort would open the floodgates to partisan warfare over undoing the ACA in its entirety, or to changing other elements of the law that could have more far-ranging consequences.
However, if serious bipartisan discussion of ACA improvement becomes possible, expect to see a repeal of employer coverage provisions front and center on the legislative agenda. Under these circumstances, lawmakers should still proceed with caution. It may be wise to experiment with implementing the employer provisions and to reassess their comparative benefits and costs at a later date. The philosophy of shared responsibility is foundational to the law’s political viability, and should not be discarded without compelling evidence that the employer requirements are not essential to the ACA’s success.
See the original article Here.
Source:
Blumenthal D., Squires D. (2017 June 4). The employer mandate: essential or dispensable [Web blog post]. Retrieved from address https://www.commonwealthfund.org/publications/blog/2014/jun/the-employer-mandate
The Effects of Ending the Affordable Care Act’s Cost-Sharing Reduction Payments
Take a look at this interesting article by Kaiser Family Foundation and see how the cost-sharing mandate under the ACA will be affected in the AHCA.
Controversy has emerged recently over federal payments to insurers under the Affordable Care Act (ACA) related to cost-sharing reductions for low-income enrollees in the ACA’s marketplaces.
The ACA requires insurers to offer plans with reduced patient cost-sharing (e.g., deductibles and copays) to marketplace enrollees with incomes 100-250% of the poverty level. The reduced cost-sharing is only available in silver-level plans, and the premiums are the same as standard silver plans.
To compensate for the added cost to insurers of the reduced cost-sharing, the federal governments makes payments directly to insurance companies. The Congressional Budget Office (CBO) estimates the cost of these payments at $7 billion in fiscal year 2017, rising to $10 billion in 2018 and $16 billion by 2027.
The U.S. House of Representatives sued the Secretary of the U.S. Department of Health and Human Services under the Obama Administration, challenging the legality of making the cost-sharing reduction (CSR) payments without an explicit appropriation. A district court judge has ruled in favor of the House, but the ruling was appealed by the Secretary and the payments were permitted to continue pending the appeal. The case is currently in abeyance, with status reports required every three months, starting May 22, 2017.
If the CSR payments end – either through a court order or through a unilateral decision by the Trump Administration, assuming the payments are not explicitly authorized in an appropriation by Congress – insurers would face significant revenue shortfalls this year and next.
Many insurers might react to the end of subsidy payments by exiting the ACA marketplaces. If insurers choose to remain in the marketplaces, they would need to raise premiums to offset the loss of the payments.
We have previously estimated that insurers would need to raise silver premiums by about 19% on average to compensate for the loss of CSR payments. Our assumption is that insurers would only increase silver premiums (if allowed to do so by regulators), since those are the only plans where cost-sharing reductions are available. The premium increases would be higher in states that have not expanded Medicaid (and lower in states that have), since there are a large number of marketplace enrollees in those states with incomes 100-138% of poverty who qualify for the largest cost-sharing reductions.
There would be a significant amount of uncertainty for insurers in setting premiums to offset the cost of cost-sharing reductions. For example, they would need to anticipate what share of enrollees in silver plans would be receiving reduced cost-sharing and at what level. Under a worst case scenario – where only people eligible for sharing reductions enrolled in silver plans – the required premium increase would be higher than 19%, and many insurers might request bigger rate hikes.
While the federal government would save money by not making CSR payments, it would face increased costs for tax credits that subsidize premiums for marketplace enrollees with incomes 100-400% of the poverty level.
The ACA’s premium tax credits are based on the premium for a benchmark plan in each area: the second-lowest-cost silver plan in the marketplace. The tax credit is calculated as the difference between the premium for that benchmark plan and a premium cap calculated as a percent of the enrollee’s household income (ranging from 2.04% at 100% of the poverty level to 9.69% at 400% of the poverty in 2017).
Any systematic increase in premiums for silver marketplace plans (including the benchmark plan) would increase the size of premium tax credits. The increased tax credits would completely cover the increased premium for subsidized enrollees covered through the benchmark plan and cushion the effect for enrollees signed up for more expensive silver plans. Enrollees who apply their tax credits to other tiers of plans (i.e., bronze, gold, and platinum) would also receive increased premium tax credits even though they do not qualify for reduced cost-sharing and the underlying premiums in their plans might not increase at all.
We estimate that the increased cost to the federal government of higher premium tax credits would actually be 23% more than the savings from eliminating cost-sharing reduction payments. For fiscal year 2018, that would result in a net increase in federal costs of $2.3 billion. Extrapolating to the 10-year budget window (2018-2027) using CBO’s projection of CSR payments, the federal government would end up spending $31 billion more if the payments end.
This assumes that insurers would be willing to stay in the market if CSR payments are eliminated.
Methods
We previously estimated that the increase in silver premiums necessary to offset the elimination of CSR payments would be 19%.
To estimate the average increase in premium tax credits per enrollee, we applied that premium increase to the average premium for the second-lowest-cost silver plan in 2017. The Department of Health and Human Services reports that the average monthly premium for the lowest-cost silver plan in 2017 is $433. Our analysis of premium data shows that the second-lowest-cost silver plan has a premium 4% higher than average than the lowest-cost silver plan.
We applied our estimate of the average premium tax credit increase to the estimated total number of people receiving tax credits in 2017. This is based on the 10.1 million people who selected a plan during open enrollment and qualified for a tax credit, reduced by about 17% to reflect the difference between reported plan selections in 2016 and effectuated enrollment in June of 2016.
We believe the resulting 23% increase in federal costs is an underestimate. To the extent some people not receiving cost-sharing reductions migrate out of silver plans, the required premium increase to offset the loss of CSR payments would be higher. Selective exits by insurers (e.g., among those offering lower cost plans) could also drive benchmark premiums higher. In addition, higher silver premiums would somewhat increase the number of people receiving tax credits because currently some younger/higher-income people with incomes under 400% of the poverty level receive a tax credit of zero because their premium cap is lower than the premium for the second-lowest-cost silver plan. We have not accounted for any of these factors.
Our analysis produces results similar to recent estimates for California by Covered California and a January 2016 analysis from the Urban Institute.
See the original article Here.
Source:
Levitt L., Cox C., Claxton G., (2017 April 25). The effects of ending the affordable care act's cost-sharing reduction payments[Web blog post]. Retrieved from address https://www.kff.org/health-reform/issue-brief/the-effects-of-ending-the-affordable-care-acts-cost-sharing-reduction-payments/