Until full implementation of health reform, insurers can consider the health and age of a small firm’s employees before deciding what to charge in premiums. Based on their expected health care costs, younger and healthier firms often pay less than older and less healthy firms.
A key provision of the ACA is to remove this ability of insurers to price-discriminate, instead requiring cost and risk sharing across firms in the small-group market. This change will produce some winners and losers—in healthy years firms may pay somewhat more while in less healthy years firms will save.
After the ACA is fully implemented in 2014, in their healthier years, small firms will have an increased incentive to leave the small-group insurance pools and join the now very small group of small self-insuring firms. Self-insurance, which is excluded from many of the ACA’s market reforms, enables firms to cover their own employees’ health costs while purchasing “stop-loss” coverage to protect themselves from catastrophically expensive claims.
As I testified to the U.S. House of Representatives yesterday, an increase in the number of small firms choosing to self-insure poses two serious risks.
First, self-insurance can put small firms in financially vulnerable positions. Stop-loss coverage is not regulated like insurance, meaning that—among other limitations—policies can be denied outright to less healthy firms, and the policies are not required to cover specific benefits. Further, stop-loss policies may not pay claims until after the first quarter of the following year, leaving small, financially vulnerable firms on the hook for big initial payouts. What’s more, firms may be left entirely liable for very large claims incurred in a year covered by a stop-loss policy but filed in the next year, after that policy ended.
The second serious risk is that a growth in the number of self-insuring firms could remove many young, healthy people from the small-business group insurance pool. A primary goal of the ACA is to bring more people into a unified risk pool, lowering overall average risk, making premiums more stable and predictable, and lowering premiums and increasing access to coverage for less healthy groups. The ACA’s exclusion of self-insured plans from many of its market reforms could incentivize healthy small groups to move out of fully insured products, seriously curtailing that intended effect, and potentially raising the health care costs of millions of people.
In my testimony, I offered lawmakers several recommendations to address these two risks.
First, policymakers could set the attachment point (i.e., the deductible) for stop-loss coverage at a minimum of $60,000 per insured individual, the amount recommended recently by an actuarial subgroup of the National Association of Insurance Commissioners (NAIC). Analysis with the Urban Institute’s sophisticated microsimulation model, HIPSM, suggests that this high threshold would expose small employers to significant financial risk and effectively dissuade the vast majority from self-insuring.
The analysis also suggests that if the NAIC parameters were implemented in a uniform manner nationally, compared with a scenario with no stop-loss regulations, the fully insured small-group insurance market would be about 1.5 times as large, and premiums in that market would be 20-25 percent lower.
Alternatively, the federal government could prohibit the sale of stop-loss insurance to small employers (as some states already do) or require its sale to small employers be regulated by small-group rules.
Recent headlines have focused on the trouble consumers have had trying to enroll on the federal healthcare.gov site in the days following the launch of the Affordable Care Act’s (ACA) health insurance exchanges (or “marketplaces”).
Despite debates over whether these troubles are just “glitches” to be expected of any new IT product launch (think Apple Maps!), or the result of fundamental design flaws, most everyone agrees that consumer interest in the ACA—measured by the heavy traffic to websites during the first week—has exceeded expectations. This provides cause for optimism that the ACA could reach the Congressional Budget Office’s enrollment estimate of 14 million newly insured individuals in 2014.
But the effectiveness of IT systems is just one factor that will affect whether this target is achieved. Other critical factors are the strength of outreach and marketing campaigns designed to raise consumer awareness of new coverage options, and application assistance programs that provide diverse populations with help in getting enrolled.
A new study by the Urban Institute, funded by the Robert Wood Johnson Foundation, describes early efforts in 10 states to design and implement these marketing and application assistance efforts. Our findings suggest that starkly different experiences could unfold across states in the coming year, differences due to the intensity of investment—both creative and financial—between those states that have embraced healthcare reform and established their own “state-based marketplaces” versus those that have resisted healthcare reform and deferred to the federal government to operate “federally facilitated (or partnership) marketplaces.”
For example, we found that state-based marketplaces have created innovative, multi-faceted marketing campaigns, supported by extensive market research and testing, to publicize new coverage programs. Cover Oregon’s TV commercials use a number of amusing folksy and hipster scenes that feel decidedly home-grown, including a plaid flannel-shirted young man strumming a guitar and singing “Long Live Oregonians” by the shore of a pristine lake.
Importantly, these states have also spent considerable time and federal grant money setting up extensive networks of application assistors—often called “navigators”—to help individuals and families sign up for health insurance either online, by phone, or in person. These networks build upon similar ones that have been used for years by state Children’s Health Insurance and Medicaid programs.
In contrast, states that have chosen to let the federal government run their marketplaces are also typically states where political resistance to the ACA has been strong. Not surprisingly, these states have not planned or implemented their own marketing campaigns, nor have they invested much in application assistance. Instead, these states—representing a majority of states across the nation—will rely on more generic national ad campaigns to publicize opportunities under the ACA, along with thinly funded navigator grants and volunteer efforts like Enroll Americato conduct outreach and help consumers apply.
Time will tell how actual enrollment experiences will play out. But right now, it appears that some states are poised to have more positive experiences than others, due to their energetic and proactive investments in planning and implementing state-based marketing and outreach.
On July 2, the Obama Administration announced a one-year delay in imposing employer penalties on large employers (50 or more workers) who do not offer affordable coverage to their full-time workers (30 or more hours per week) under the Affordable Care Act (ACA). Some view this employer mandate requirement as a key part of the ACA and the penalties as an important tool for securing employer-based insurance coverage once other reforms to the nongroup market are in place. In addition, some have suggested that it is unfair to leave the individual mandate in place while delaying the employer mandate.
We use the Urban Institute’s Health Insurance Policy Simulation Model (HIPSM), a state-of-the-art microsimulation model, to compare the distribution of coverage under the full ACA, the ACA without an employer mandate, and the ACA without an individual mandate. We show that delaying the employer mandate has almost no effect on overall coverage under the ACA or the distribution of that coverage across public and private sources of coverage. Delaying the individual mandate, however, would significantly increase the number of uninsured compared to full implementation of the ACA. It would also decrease employer coverage.
These findings are consistent with the evidence in Massachusetts, where coverage reforms were implemented beginning in 2006. The delay of the employer mandate will also have little effect on government spending on subsidies or Medicaid, but does result in a slight reduction in government revenue.
Our analysis shows that the principal objectives of the ACA’s coverage expansion can be met without the employer mandate, and implementation of the law should be made considerably easier without it. The individual mandate, in contrast, is a critical component of the coverage expansion in the ACA.
On Tuesday, the Obama administration announced a 1-year delay in the implementation of employer penalties associated with large employers (50 or more workers) who do not offer affordable coverage to their full-time workers (30 or more hours per week). Our prior analyses show these penalties are not the driving force behind the ACA’s coverage expansions. Nor are the penalties a significant source of federal revenue. Contrary to some initial reactions, the employer responsibility requirement is not a critical factor in meeting the goals of the law.
As we have explained elsewhere, there is very little in the ACA that changes the incentives facing employers that already offer coverage to their workers, and fully 96 percent of employers with 50 or more workers already offer coverage today. Competition for labor, the fact that most employees get greater value from the tax exclusion for employer sponsored insurance than they would from exchange-based subsidies, and the introduction of a requirement for individuals to obtain coverage or pay a penalty themselves, are the major factors that will keep the lion’s share of employers continuing to do just what they do today with no requirements in place to do so.
Lessons from the Massachusetts health reform experience are instructive here as well. The Massachusetts law has substantially lower penalties for non-offering employers than does the ACA – the Massachusetts Fair Share Requirements is a maximum of $295 per worker, compared to a potential ACA maximum of $2,000 per worker. However, nominal as those assessments are, employer-sponsored insurance actually increased post-reform, as our analyses done prior to implementation predicted. This increase in employer based coverage was the consequence of individuals facing a new requirement to obtain insurance coverage and deciding their preferred source of coverage if they had to get it was their employer.
Throughout the development and the implementation of the ACA, there has been more worry than warranted that employers will drop insurance coverage. The current furor over the delay of the employer penalties appears to be more of the same. With or without the penalties, most people will still get coverage through their employers; the fundamental structure of the law will remain intact.
WIC is a federally funded discretionary spending program; therefore, participation may be limited by annual funding established by Congress. Each state’s available annual funding is determined by the state’s share of income-eligible infants and children age 1 to 4. WIC does not require state matching funds and, in recent years, nearly all eligible applicants have received benefits, reflecting Congress’s desire to fully fund the program. However, not all families who are eligible apply for benefits. The U.S. Department of Agriculture, Food and Nutrition Service administers WIC by providing states with grants for supplemental foods and services. States use these grants to supply vouchers that program participants redeem at authorized food stores for certain nutritious foods.
WIC coverage (the number of WIC participants divided by the number of WIC eligible) varies considerably by state. In 2009, state coverage ranged from 45.9 to 76.3 percent, compared with a national average of 60.9 percent. WIC coverage can vary for several reasons, including outreach, stigma, point of access (e.g., are new mothers encouraged to sign up while in the hospital), and ease of access (e.g., location of WIC offices, ease of redemption of benefits), to name a few. The five states with the lowest WIC coverage rates are Montana (45.9 percent), Utah (47.3), Colorado (48.5), Idaho (50.7), and Illinois (50.8). The five states with the highest WIC coverage rates are Vermont (76.3 percent), the District of Columbia (76.2), California (73.7), Minnesota (73.5), and Maryland (70.5). You can scroll over your state on the map below to see what WIC coverage was in 2009. In addition to each state’s WIC coverage rate, the map reports each state’s rank (highest = 1), the number of WIC-eligible and WIC-participating people, and a 90 percent confidence interval for the coverage rate estimate.
Click to view interactive map and examine states' variation in WIC coverage
The Affordable Care Act (Obamacare) has the potential to benefit people in all top 100 metros and across the nation. The Urban Institute’s Health Policy Center summarized its effects: read key excerpts below or see the full report.
The Supreme Court today issued its ruling on the Affordable Care Act. The justices upheld the individual mandate and the attendant health insurance reforms, consumer protections, and new health insurance tax credits and subsidies. These provisions mean that millions of Americans will have access to adequate, affordable coverage regardless of their health status and that the small and nongroup markets for health insurance coverage will be restructured to enhance competition based on price and quality.
However, the justices made the expansion of Medicaid coverage to nonelderly adults with incomes below 138 percent of the federal poverty level optional for states. Before the ACA, few states covered nondisabled parents up to this income level, and even fewer states covered nondisabled adults without dependent children in Medicaid. With full implementation of the Medicaid expansion in all states, the CBO estimates that the enrollment increases in Medicaid would account for about half the total coverage increases projected under the ACA.
If a state does not implement the ACA's Medicaid expansion, some people who would have received Medicaid could instead receive federal tax credits and other subsidies, but cost-sharing requirements would be higher than they would have been under Medicaid. Federal tax credits and subsidies would not be available for most people with incomes below the federal poverty level, however. As a consequence, the uninsured above poverty could receive help, but those below poverty would not.
Under the ACA, the federal government will fully fund Medicaid coverage for these adults through 2016, cover 95 percent of the costs in 2017, and cover 90 percent in 2020 and beyond. This means that many states will face strong incentives to expand Medicaid coverage. In addition, the loss of federal disproportionate share hospital payments and potentially high uncompensated care costs borne by state and local governments on behalf of the uninsured will also motivate states to expand Medicaid under the ACA. On balance, states would experience net budget gains from implementing the Medicaid expansion. States that reject the ACA coverage expansion would turn down significant amounts of federal money, thus forgoing employment increases in the health sector and other industries.
In states that do not implement the Medicaid expansion, many poor people will remain uninsured. Currently, an estimated 27 million uninsured people have incomes below 138 percent of the federal poverty level, more than half the nation's uninsured. Whether or not states expand Medicaid will affect these people, their employers, and the providers who serve them.
Concentrated poverty is on the rise. The population living in extreme poverty neighborhoods—where at least 40 percent of individuals live below the poverty line—has risen more than 30 percent in the past decade. And we know that living in these neighborhoods has adverse consequences for residents, for everything from employment to health and school achievement.
And yet, many Americans’ housing options are already limited because they can barely afford the housing they have. According to the 2009 American Community Survey, more than half of all renters (18.5 million) already spend more than 30 percent of their income on rent and 26 percent of renters shoulder housing costs exceeding half their earnings. To make matters worse, only about a quarter of eligible households can expect to receive any federal housing assistance.
Under these circumstances, families who want to move to better neighborhoods only have a few options: raise their household income, move into a smaller place, or both. “Doubling-up” with a working friend or family member is one way to quickly boost household income and multiply housing options. And many people might consider renting a more modestly sized apartment if it meant living close to work, in a lower-crime neighborhood, or near a school that is a better fit for a child.
Unfortunately, these choices are often not available to low-income folks because of inflexible rental occupancy standards. The two-person-per-bedroom convention, which tends to be more strictly followed in better neighborhoods, essentially denies many families the right to trade off size for location and quality. The only way many low-income families can access better housing options is to pay more, which may make rent burdensome or simply put the unit out of reach altogether.
All things equal, more space is always desirable. But should size always trump affordability, neighborhood quality, or location? Maybe it’s time to better understand what that trade-off actually means for the housing options of struggling Americans.
Journalists and commentators parsing the U.S. Census Bureau’s new Supplemental Poverty Measure (SPM) when it debuted about a month ago missed one surprising result of what happens when the new measure is applied. As most news stories correctly pointed out, the SPM counts as income certain public benefits that the official measure didn’t. Chief among them are the Earned Income Tax Credit (EITC), food stamps (now Supplemental Nutrition Assistance Program-SNAP), and low-income housing assistance. Under the official measure, the roughly $170 billion spent on these programs was totally under the radar, even though these three benefits amount to about $3,700 per low-income person. (That’s over $15,000 annually for a family of four). Under the SPM, these and some other benefits are counted as income, though not fully because people report less in benefits than the government has paid out.
Several headlines highlighted the higher estimated poverty rate yielded by the SPM than by the official measure. The Washington Post’s Michael Fletcher, for instance, claims that the new Census measure “…painted a more dismal picture of the nation’s economic landscape than the official measure from September.”
So how can poverty go up if the new measure raises collective incomes by over $170 billion? As some journalists and experts noted, children fared better when public benefits are counted. But why should extra spending on kids result in higher poverty among the elderly and other groups?
Let me oversimplify a bit to explain. The official measure was set up as an absolute measure—the income needed to achieve a specific unchanging living standard. The threshold set was three times the cost of an economy food budget. Over time, that threshold has risen only to keep pace with inflation, not with rising living standards. In contrast, the SPM threshold is a relative concept. It equals what a family with two children at the 33rd percentile of spending devote to food, clothing, housing, and utilities plus another 20% of this amount. This threshold is then adjusted for family size and local housing costs.
The percentile used to calculate the SPM threshold is somewhat arbitrary. Choose a relatively high percentile (say 50%) and you get a high poverty threshold and higher level of measured poverty. Choose a lower one (say, 25%) and both drop. By selecting 32-34%, the Census Bureau raised the income threshold so now it’s about 10% higher than under the official measure. That statistical move doesn’t mean that the poor’s living standards have dropped, so the SPM doesn’t really “…paint a more dismal picture ” so much as it creates a new benchmark based on a higher standard of living.
A second conceptual shift is that the SPM deducts from income what the Census Bureau terms “necessary expenses.” These include taxes, work expenses, and the amount of child support individuals pay, all of which lower net income. Also deducted are spending on child care and out-of-pocket health expenses. Child care is usually a work expense, but people still have discretion over what quality they buy. Health spending is clearly consumption and differs from income or expenses necessary to generate income. Health services are valuable—sensible uses of income—and more spending presumably raises an individual’s living standards.
Like the official measure, the SPM doesn’t count government-paid health services, even though they can greatly enhance living standards and life itself. So, yes, older Americans spend more out-of-pocket on healthcare, which pushes up their poverty rate. But, the presumed improvements in living standards financed by significant Medicare and Medicaid benefits go uncounted. This approach raises the same concern that led to the SPM—the distorted picture you get when you don’t count government benefits aimed at alleviating hardship.
Certainly, health spending poses a quandary for counting poverty. For an individual, paying more health expenses may reflect poorer health. When unhealthy people must spend more of their own money to achieve the same health status as healthier individuals, they have fewer dollars to spend on everything else and thus have (non-health) living standards as low as individuals who have income levels below the poverty line. On the other hand, when rising Medicaid and Medicare spending makes a population better off over time, they are surely enhancing living standards and should be counted. Moreover, if the improvements from added health spending are not worth the costs, then policymakers should shift spending toward cash or other supports that would benefit recipients more.
I always look for problems. As a policy analyst, I immerse myself in problems, try to determine how big, pressing, and interconnected they are, and then find or compare different ways to solve them. But during Thanksgiving week, I stepped outside the sometimes dispiriting world of medical care policy to look on the brighter side. I found a bit of brightness in an unlikely place: the new United Nations annual report on HIV/AIDS, issued last Monday. Here, it says, in year 30 of this terrible epidemic is hope in falling death rates for the third year in a row. Perhaps we have turned the corner.
The UN report covers international statistics. Closer to home, there are also glimmers of progress in US cities where AIDS has been so prevalent. This graph from the District of Columbia Department of Health publication shows rates of people “living with AIDS” in six major cities – Baltimore, Chicago, Detroit, Philadelphia, New York, and Washington, DC – between 2001 and 2005. The good news in these numbers is that people are living. Medical advances have helped turn AIDS into a chronic disease instead of an immediate death sentence.
Rates for People Living With AIDS in the District of Columbia, Compared to Other Cities
The news is even better if we look at the trends in new cases of HIV and AIDS. Since 2002, their number has been falling in Washington, DC, one of the country’s hardest hit cities.
Number of HIV/AIDS Cases and Deaths Among Adults and Adolescents - District of Columbia 2001-2006
Clearly, over 12,000 people living with AIDS in the nation’s capital is too many. But just as clearly, DC and other cities are making headway against this scourge. A deeper understanding of the epidemic has allowed us to take steps to prevent infection and transmission. Needle exchanges have helped, as has a better understanding and broader acceptance of what epidemiologists call MSM, men sleeping with men, and of the women who sleep with these men.
Medical advances mean that you can live with AIDS; prevention means that don’t have to get it. Even though we know that now, the AIDS epidemic has yet to be tamed. But Thanksgiving week I felt thankful for the progress made so far and what that could mean in the coming years.