JAMA Forum: Bye, Bye Employer-Sponsored Health Insurance?

Stuart Butler, PhD

Stuart Butler, PhD

The hullabaloo following the US Supreme Court’s ruling in the Hobby Lobby case has prompted a timely debate about the role of employers in providing health insurance. Some critics of the decision demand that employers be stopped from “interfering” with a worker’s insurance for certain services, such as contraception, even if the employer has profound religious objections to sponsoring such coverage. That  in turn led to efforts to pass legislation that would block privately owned firms from using religious beliefs as a reason not to provide certain features of health insurance.

Putting aside the legal technicalities, critics of the Hobby Lobby decision are right to be concerned about employers essentially controlling the health coverage of their workers. But most critics have the wrong solution.

The answer is not to start interfering with religious liberty, or engage in an arcane legal dispute about whether a private corporation is a “person,” or to strengthen mandates on employer coverage. The correct strategy is to push forward with tax reforms and other steps that would lead to the disappearance of most employer-sponsored insurance. That’s actually something both advocates of single-payer systems and conservatives should agree on.

Health economists of all stripes, as well as employers and benefits managers, recognize the notion that employers “pay for” health benefits is a myth. In truth, health insurance is just a part of an employee’s total compensation, like cash income or a payroll deduction for a 401(k) retirement plan.

Employers are not charities, and total compensation is determined by local labor market conditions. But under Internal Revenue Service (IRS) tax rules, if the employee lets his or her boss make the crucial decisions over the part of their pay involving health insurance, it becomes free of tax.

While tax-free employer-sponsored health insurance is familiar and popular, it has many problems, besides those at the center of the Hobby Lobby case. For one thing, the tax benefit is very regressive, with highly paid employees in the top brackets gaining most from the tax breaks and lower-paid workers receiving the least. That’s exactly the opposite of good public policy aimed at helping people afford insurance.

In addition, the illusion that the employer pays has long been criticized as encouraging overuse of care and fanning cost escalation. That’s a major reason why many employers have been decreasing the share of compensation paid in the form of “employer-paid” insurance, so that employees have more skin in the game in controlling costs. Add to those concerns the worry that employment-based insurance often results in “job-lock”— where a worker is reluctant to move to a better job or become self-employed”— because moving could result in a change or loss of coverage.

These problems have spurred many proposed reforms aimed at modifying the employer’s role in health insurance. The most recent is of course the Affordable Care Act (ACA). By establishing health exchanges—a mechanism widely advocated for many years—the ACA provides for some Americans an alternative platform to employment-based coverage for organizing health insurance. And by combining a cap on the tax-free status of employer-sponsored insurance with tax credits and subsidies for exchange plans, the ACA takes some steps down the road of reducing the tax bias associated with employer-controlled coverage.

But the design of the ACA falls short of what is needed. In an unwise effort to prop up the employment-based system and to contain the program’s budget cost, the ACA’s sponsors flinched from equalizing the tax breaks and subsidies for exchange plans and employer-sponsored health insurance. Yet that tax and subsidy disparity actually threatens to undermine employer-sponsored coverage in firms with many lower-paid workers. That’s because the government subsidies available for many such families enrolling in exchange plans are much larger than the tax benefits of employer-sponsored insurance , encouraging employers and workers to drop employer-sponsored insurance in favor of extra cash earnings. Meanwhile the delay of the ACA’s mandate on employers, triggered by concerns of hiring cutbacks, underscores the fact that trying to force employers to provide government-designed coverage is likely to fail.

Some have argued that employer-sponsored insurance will continue to erode, in part because of the ACA. Former Obama health advisor Ezekiel Emanuel, MD, PhD, an architect of the ACA, predicts that by 2025, fewer than 20%  of private-sector workers will have traditional employer-sponsored insurance. He could be right. Like conservative health economists, he has long criticized tax-exempt health insurance.

But rather than allow a transition to occur in a haphazard way, it would be wiser to have an open and thorough debate about the importance of moving away from employer-based insurance. Such a discussion hopefully would avoid a clumsy and likely damaging “fix” for the Hobby Lobby decision.

Back in 2007, I proposed a strategy for an orderly transition, called the Health Exchange Plan. That plan envisioned state-chartered exchanges. There would also be a cap on the tax-free status of employer-sponsored coverage, in conjunction with a refundable tax credit for lower-income families. The cap would be indexed to grow more slowly than the expected increase in employer-sponsored insurance, thereby gradually reducing the tax bias in favor of such coverage.

Importantly, the Health Exchange Plan still envisioned a continuing role for employers but not the role of picking coverage. The place of employment would continue to be where the transactions took place, with employers arranging payroll deductions for plans and helping employees sign up for plans. No doubt many larger firms would continue to offer wellness plans and take other steps to promote a healthy workforce. Some might continue to offer coverage, and would be allowed to do so, but most would transfer the control of coverage to their employees.

The result of the plan would be that the vast majority of employers would become facilitators of exchange-based coverage and no longer the sponsors or controllers of coverage. It seems to me that’s a result both Hobby Lobby and its critics would applaud.

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About the author: Stuart M. Butler, PhD, is Director of the Center for Policy Innovation at the Heritage Foundation in Washington, DC, where he focuses on developing new policy ideas. Previously he served as Vice President for Domestic and Economic Policy Studies. He is also an adjunct professor at Georgetown University’s Graduate School, and serves on the board of trustees for the Convergence Center for Policy Resolution.

About The JAMA Forum: JAMA has assembled a team of leading scholars, including health economists, health policy experts, and legal scholars, to provide expert commentary and insight into news that involves the intersection of health policy and politics, economics, and the law. Each JAMA Forum entry expresses the opinions of the author but does not necessarily reflect the views or opinions of JAMA, the editorial staff, or the American Medical Association. More information is available here and here.

 

JAMA Forum: Reading the Tea Leaves on Proposed Health Insurance Premium Hikes in a Post-ACA World

Gail Wilensky, PhD

Gail Wilensky, PhD

Health economists and other experts generally expect that consumers will pay more for health insurance premiums year after year. That’s because 1 or more of the components of premiums—the cost of medical claims, administrative costs, or profits—are usually anticipated to increase at least as fast as the rate of medical inflation.

Just how big the premium increases are likely to be each year is the great unknown—and for 2015, there are more uncertainties than usual. There’s been intense speculation about potential increases for next year’s premiums in the new federal and state insurance exchanges, partly because so little is known about (particularly regarding the health status of) those newly insured under the Affordable Care Act (ACA) and partly because of the potential political implications that 2015 premium increases might have for the 2014 midterm congressional elections.

What Do We Know Now?

Just as premium prices for 2014 varied widely, the proposed increases in premium rates for 2015 vary substantially across plans, within a state, and across states. Figures have been released for about a dozen states plus the District of Columbia. In most of the states, the health insurer with the largest number of newly insured under the ACA exchange, which frequently had offered the lowest or second-lowest premiums in their states in 2014, are proposing larger increases—either because they charged too little in 2014 or they feel they can tolerate some drop in enrollment. Plans that ended up with smaller enrollments in 2014 are requesting small increases and sometimes decreases in premiums.

Here’s a sampling of proposed increases:

Maryland. In Maryland, CareFirst, the dominant insurer in the state’s exchange in 2014, proposed a premium increase for the BlueChoice plan of almost 23%, compared with a proposed increase of 12% by Kaiser, which enrolled a relatively small number of people in 2014. Two new insurers, Cigna and UnitedHealthcare, are planning to offer plans in Maryland for 2015. Increased competition in other states has usually resulted in lower premium options being available; one would expect the same will happen in Maryland as well.

Virginia. The increases proposed for Virginia also vary significantly. Humana has proposed the highest increase (22.4%). Overall, the proposed increase in Virginia (when weighted by 2014 enrollment) is 11.7%. As in Maryland, 2 new insurers are planning to enter in 2015.

Washington: For Washington State, the weighted average increase is 9.6%.

Oregon. In Oregon, the health plan that had enrolled approximately three-fourths of the new enrollees has requested an increase of 12.5%.

District of Columbia. Most of the proposed increases for plans offered by CareFirst BlueCross, the largest insurer in the nation’s capital, range from 10% to 15%. However, the company is proposing a 25% increase for its bottom-level, catastrophic coverage plan.

What Happens Next?

The process by which health insurance rate increases are reviewed varies by state. In most states (35 states plus the District of Columbia as of 2012), prior approval is required by the insurance regulators before the insurer can raise rates. In Maryland, for example, a prior-approval state, the state’s insurance administration can ask insurers to lower their rates before it agrees to approve them. That’s what happened last year: CareFirst had initially proposed a 25% rate increase, but regulators cut the final rates by 10%—which may in part explain the large increase CareFirst has requested for 2015.

Other states may simply review rates or allow rate changes to go into effect after a certain period of time, with the state acting later if the rate is found to be unreasonable, but these types of reviews are becoming less common. Under the ACA, the Department of Health and Human Services (HHS) is authorized to review premium increases for states that are regarded as having ineffective review processes. Five states are in this category.

The ACA also authorizes HHS to review any rate increases that it regards as “unreasonable,” which the agency has defined to be increases exceeding 10%. The expectation had been that most insurers would keep their premium increase requests just below 10% to avoid HHS review—but obviously, that has not been the case for many of the proposed increases.

New Dynamics Being Played Out

Several types of responses by insurers are beginning to play out in response to the “first year” of experience with enrollees in plans offered by the health exchanges (in reality, only 2-3 months’ experience for many of the new enrollees). Some of the new entrants offering plans in the health exchanges in 2015 are some of the country’s largest insurers. Aetna, WellPoint, UnitedHealthcare, and others were deliberately very selective about the number of markets they entered in 2014, and planned to enter additional markets in 2015, when more information about enrollees was expected to be available. But most had not anticipated the size of the enrollment surge that occurred in late March nor the extension of the enrollment period to mid-April to accommodate glitches in the exchanges.

That means these insurers have less information for 2015 than they anticipated; most are submitting bids with little information on existing enrollees’ use of health care services and no information about how the enrollee numbers and mix might change with the next open enrollment period. Information reported to date indicates that the early enrollees attracted to the exchanges were sicker than average. This is not surprising, because the ACA doesn’t allow insurers to charge more for those who have a higher expected use (other than for age, and that variation is limited to a 3:1 price differential between the oldest and youngest enrollees).

Another wrinkle is that insurers are currently permitted to continue existing individual plans that do not offer the ACA’s specified “essential health benefits” (in states willing to allow this extension) until 2016. This further segmented the market, with younger and healthier enrollees likely to stay in their more limited plans. What is less clear is whether the surge of reportedly younger (and presumably healthier) enrollees who waited until late March to enroll will balance out the health status of the earlier enrollees.

Another uncertainty involves how the exchanges will affect costs related to Part D Medicare (Medicare Prescription Drug Coverage). Part D Medicare plans that propose the highest premium rate increases tend to lose enrollment to plans that have small ones, which has kept cost increases well below projections. But in the health insurance exchanges (where most plans have narrow physician networks), enrollees who switch plans are likely to lose access to the physicians in their previously held plan. On the other hand, because most people enrolled through the exchanges may not have had long-term relationships with the physicians in their plan, the barriers to switching may be lower than for other insured populations. Time will tell whether plan-switching in response to premium increases will also occur in the exchanges.

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About the author: Gail Wilensky, PhD, is an economist and Senior Fellow at Project HOPE, an international health foundation. She directed the Medicare and Medicaid programs, served as a senior adviser on health and welfare issues to President George H. W. Bush, and was the first chair of the Medicare Payment Advisory Commission.  She is an elected member of the Institute of Medicine.

About The JAMA Forum: JAMA has assembled a team of leading scholars, including health economists, health policy experts, and legal scholars, to provide expert commentary and insight into news that involves the intersection of health policy and politics, economics, and the law. Each JAMA Forum entry expresses the opinions of the author but does not necessarily reflect the views or opinions of JAMA, the editorial staff, or the American Medical Association. More information is available here and here.

 

JAMA Forum: The Moral Case for Affordable Coverage and How Obamacare Fails To Live Up to It

Austin B. Frakt, PhD

Austin B. Frakt, PhD

Some health policy commentators have claimed that President Obama and Affordable Care Act (ACA) supporters have not made a convincing moral case for coverage expansion. Scholars suggest that support for the law could turn, in part, on the moral argument for it. What is that argument, and is implementation of the law consistent with it?

We can make some headway by turning to Norman Daniels, PhD; Brendan Saloner, PhD; and Adriane Gelpi, who articulate one possible moral case for universal coverage. Their key assumption is that there is a “social obligation to protect opportunity.”

From this, a lot follows. One’s opportunity is threatened by poor health. In sickness, one cannot learn or earn as efficiently, let alone enjoy the same length or quality of life. Therefore, protecting opportunity implies protection of access to health care services that promote and preserve health. And, it’s hard to argue with the notion that such access should be protected equally.

Access to health care is enhanced by health insurance. As Daniels, Saloner, and Gelpi argue, universal health insurance is a means to this end. But it’s not the only way. The key is to recognize that equality of access is not equality of receipt. The authors are not suggesting that we have a moral obligation to ensure that everyone receive the same amount of health care, merely that everyone have the same degree of access to it.

This more modest obligation would be met in a system that does not cover everyone but extends equal opportunity of access to affordable coverage to everyone. That is, equal opportunity to obtain coverage is a necessary condition for equal access to health care, though some may choose not to avail themselves of that care or that coverage. Put another way, if we are morally satisfied with a regime under which people can choose whether to receive care, we ought to be morally satisfied with one under which people can choose whether to obtain coverage for it, so long as there is equal opportunity of access to that coverage and the care it facilitates.

The distinction is crucial because the ACA was not designed for universal coverage, and it will not achieve it. However, it was passed with the more modest ambition to provide universal access to affordable coverage, the very thing we’re morally obligated to provide.

But, when you go beyond the law’s ambition and consider its actual implementation, there are some problems. It has failed to provide universal access to affordable coverage in at least 2 ways. First, the Supreme Court ruled to permit states to opt out of Medicaid expansion without penalty. Though gradually, more states are expanding their programs, many states still have not. In those states, millions of poor residents lack access to affordable coverage. No matter what institution one wishes to blame, this is a moral failing.

Second, for some consumers, the products offered in the new exchanges are unaffordable, even with subsidies. This is a serious ethical concern, as addressed by Saloner and Daniels.

[T]he exchanges leave families vulnerable to burdensome out-of-pocket spending for treating health conditions that are costly but not necessarily catastrophic. For example, 25 percent of individuals in the United States have a major chronic condition such as a mood disorder, diabetes, heart disease, asthma, or hypertension. The annual cost of treating such conditions, including visits with specialists and payments for medications, can exceed several thousands of dollars, even with health insurance (Soni 2009). Under the ACA, a family of four with an income around 275 percent of the [federal poverty level] ($64 000 in 2010) would be responsible for premium costs of around $5600 and would not experience relief from cost sharing until it had reached half the family cap, around $6000 in 2010 (KFF 2010b).

Jed Graham of Investor’s Business Dailyrecently reported that such affordability concerns have become reality. He documents that some families covered by exchange plans could face out-of-pocket costs as high as 40%. By any reasonable definition of affordable, this is not. This is another moral failing.

So, what can be done to bring policy into better alignment with morality? First, all states could expand Medicaid. Second, Saloner and Daniels suggest that subsidies could be increased for families with higher health care burdens, such as chronic conditions. Third, tax credits, (which now kick in when premiums are higher than a specified percentage of income) could take into account other out-of-pocket costs. Saloner and Daniels offer a final suggestion:

[E]xchanges could be redesigned to protect specific types of investments by providing income disregards for money that low-income families set aside for paying children’s college tuition, opening a small business, or saving for retirement. An added benefit is that such a proposal would encourage families to increase their assets and to build financial stability.

All of these approaches would make coverage expansion more expensive, unless they could be offset by policies that would make health system delivery or health insurance more efficient.

Perhaps the moral argument for the ACA was not made fully or loudly in years past. That’s a failing we can now easily remedy. I’ve just done my part. But, having done so, it’s now clear that as designed and implemented, the law is not consistent with what that moral reasoning demands. That too can be remedied, but it will require some changes, potentially at some cost. Do we have the moral fiber to make them?

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About the author: Austin B. Frakt, PhD, is a health economist with the Department of Veterans Affairs and an associate professor at Boston University’s School of Medicine and School of Public Health. He blogs about health economics and policy at The Incidental Economist and tweets at @afrakt. The views expressed in this post are that of the author and do not necessarily reflect the position of the Department of Veterans Affairs or Boston University. 

About The JAMA Forum: JAMA has assembled a team of leading scholars, including health economists, health policy experts, and legal scholars, to provide expert commentary and insight into news that involves the intersection of health policy and politics, economics, and the law. Each JAMA Forum entry expresses the opinions of the author but does not necessarily reflect the views or opinions of JAMA, the editorial staff, or the American Medical Association. More information is available here and here.

JAMA Forum: On its Merits, the Affordable Care Act Should Be at Least as Popular as Medicare’s Prescription Drug Program

Austin B. Frakt, PhD

Austin B. Frakt, PhD

In the past decade, 2 new, large federal health insurance programs have been implemented: Medicare’s prescription drug program (Part D) and the Affordable Care Act’s (ACA’s) coverage expansion. These programs have some similarities, but have received very different public and political treatment. Although both were controversial at time of passage, only the ACA remains as controversial, if not more so, than it was on the day it was signed into law. Is this disparate treatment warranted by the evidence on the merits of the 2 programs?

Part D and its Costs

The Part D benefit is administered entirely through private plans. Although the federal government negotiates lower drug prices for all its other large health care programs (such as Medicaid and the Veterans Health Administration), it is prohibited from doing so in Part D. Instead, plans negotiate—often through pharmacy benefits management organizations—with drug manufacturers and compete with one another in a market.

Beneficiaries pay a discounted premium, with subsidies established through a competitive bidding process. In 2012, 63% of the nation’s 49.7 million Medicare beneficiaries were enrolled in a Part D plan, and 86% of Medicare beneficiaries had drug coverage through Part D or an actuarial equivalent, up from 76%with any prescription drug coverage before Part D was implemented.

The entire arrangement will cost taxpayers an estimated $1.11 trillion from 2015-2024, according to the Congressional Budget Office (CBO), minus the cuts from sequestration, and is financed with debt (contemporaneous taxes will not actually increase).

The ACA and its Costs

The CBO estimates that the ACA’s coverage expansion will cost about the same amount as Medicare Part D—$1.38 trillion—and is financed through reductions in other health spending (such as Medicare cuts) and tax increases. It is also implemented, in part, in a fashion similar to that of Part D.

For individuals not eligible for Medicaid or without an affordable, employer-based plan, coverage expansion will largely occur through subsidized private plans competing in state exchanges (many run by the federal government). Subsidy levels are established through a competitive bidding process, different in detail but not in spirit to Part D.

By year 2024, 25 million people are expected to be enrolled in an exchange plan, according to CBO estimates. Under the ACA, the percentage of US individuals with health insurance is expected to grow from to 89% by year 2024, up from 84.6% in year 2012.

 

A Look at Outcomes

So much for structural similarities; what about outcomes? What will these 2 programs do? What they will not do is pay for themselves—not by a long shot. It’s folly to think that by increasing access to preventive care through expansion of insurance coverage, fewer acute hospitalizations or reduced use of emergency care will fully offset the ACA’s costs. Almost no preventive care pays for itself. Likewise, Medicare Part D’s expansion of drug coverage for Medicare beneficiaries didn’t pay for itself either.

To be sure, coverage expansions provide access to care that is valuable (although not all of it is) and improves the lives and financial well-being of the newly covered. So, it’s a question of value for money. Coverage expansions—Part D and the ACA—cost money and in return some Americans have better lives. How much better?

This is a difficult question to answer comprehensively, but recent work provides some clues. In what is, to my knowledge, the only study of the association of prescription drug insurance and mortality, Robert Kaestner, PhD, MA; Cuiping Long, MA; and G. Caleb Alexander, MD, MS, examined Medicare data from 2002 to 2009 to assess the effect of Part D. Although they found evidence that Part D is associated with decreases in hospital admissions and the severity of admissions, they found no evidence of an association with reduced mortality. However, the hospital admissions and severity results suggest reduced morbidity.

Earlier this month, a study by Benjamin Sommers, MD; Sharon Long, PhD; and Katherine Baicker, PhD, published in the Annals of Internal Medicine examined the association of Massachusetts’ coverage expansion with mortality. (I wrote an editorial on their article that appeared in the same issue.) They found a statistically significant reduction in mortality of 2.9% associated with reform in Massachusetts counties, relative to control counties in other states. Mortality amenable to health care interventions decreased by 4.5% relative to control counties.

Because the ACA’s coverage expansion is modeled on Massachusetts’, this provides some early support for the hypothesis that the ACA will be associated with mortality reductions as well. These findings add to a body of evidence that generally (though not universally) finds insurance coverage associated with lower mortality and morbidity.

From this evidence alone, it would seem that there’s at least as good a reason to view the ACA as favorably as Medicare Part D. They cost about the same, they share some similar design features, and based on work to date, the former is more likely to reduce mortality than the latter. And yet, though Part D is now as American as apple pie, the ACA remains hotly contested. If you could prescribe either Part D or the ACA to a patient but not both, which would you choose?

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The author thanks Daniel Liebman for tracking down some of the references cited in this post.

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About the author: Austin B. Frakt, PhD, is a health economist with the Department of Veterans Affairs and an associate professor at Boston University’s School of Medicine and School of Public Health. He blogs about health economics and policy at The Incidental Economist and tweets at @afrakt. The views expressed in this post are that of the author and do not necessarily reflect the position of Boston University. 

About The JAMA Forum: JAMA has assembled a team of leading scholars, including health economists, health policy experts, and legal scholars, to provide expert commentary and insight into news that involves the intersection of health policy and politics, economics, and the law. Each JAMA Forum entry expresses the opinions of the author but does not necessarily reflect the views or opinions of JAMA, the editorial staff, or the American Medical Association. More information is available here and here.

 

 

JAMA Forum: Time to Reconsider the ACA’s Employer Mandate?

Aaron Carroll, MD, MS

Aaron Carroll, MD, MS

When the Affordable Care Act (ACA) was passed in March 2010, it contained within it 2 mandates. The first, the individual mandate, was integral to the law’s success. It was intended to overcome the rational incentive for healthy people to opt out of buying insurance after key ACA provisions went into effect—provisions that prevented insurers from excluding people with preexisting conditions or charging them more for health insurance. Large numbers of healthy people opting out would increase the cost of insurance significantly, and cause a death spiral for the private market.

The second mandate, aimed at businesses, served an entirely different purpose. The employer mandate was intended to shift some of the cost of insuring everyone onto businesses. It has nothing to do with the structure of the exchanges or the new regulations the law imposes on insurance companies.

According to the ACA, businesses that employ 50 or more people must pay a penalty if just 1 of their workers buys insurance from an exchange and qualifies for a subsidy from the federal government. If you have a large company, this could turn out to be a lot of money. Of course, providing insurance to many employees is expensive, too. So it wasn’t entirely clear what businesses would choose to do.

We still don’t know. In July of 2010, the employer mandate was delayed a year. In February of 2014, it was delayed again for businesses with fewer than 100 employees, and some rules were changed for larger companies.

Businesses have collectively issued a sigh of relief with each delay. They really don’t like the employer mandate. For many of them, it will cost a lot of money to provide qualifying insurance, especially high-volume, low-wage employers (think restaurant chains) that would have to pay a penalty if any of their workers purchase health insurance through an exchange and receive a subsidy because of their low earnings. It might make a number of businesses much less competitive in the economy. Many have already been struggling, and the last thing they need is a new “tax” on doing business.

Many economists hate the mandate as well. For businesses, the mandate is an incentive to hire more part-time workers for whom they aren’t required to provide benefits. It also incentivizes businesses to hire workers from more affluent families, because companies don’t have to pay a penalty on families that purchase insurance on the exchanges as long as those families don’t qualify for a subsidy.

A recent report from the Urban Institute put some numbers to these suppositions, however. Based on the insurance component of the Medical Expenditure Panel Survey, an annual set of surveys of US families and individuals, their medical providers, and employers, the report estimates that large employers who were not offering insurance before the ACA will likely be the employers not offering insurance after the employer mandate kicks in. Because these firms are predominately employing low-wage workers, it’s those at the low end of the socioeconomic spectrum who will bear the brunt of the pain.

Moreover, the report makes the case that eliminating the mandate entirely will do little to change the number of people who have insurance in the United States. If you eliminate the individual mandate, estimates have shown the number of uninsured Americans could increase by 13 million or more. But projections show that eliminating the employer mandate might decrease the number of insured (excluding those covered by by Medicare) in the United States from 251.1 million to 250.9 million, or about 200 000 individuals. In other words, the rate of insured would hold at 90.6%.

So projections suggest that eliminating the employer mandate would result in a slight drop in employer-based coverage from 58.1% to 57.9% of Americans, but most employees who offer insurance already did so before any mandate existed. They did it to be competitive employers, and there’s little incentive for them to abandon that stance now. Of the 0.2% who lose their job-based health coverage, half would likely purchase insurance on the exchange and half would qualify for coverage through Medicaid (at least in states that agreed to the Medicaid expansion) or the Children’s Health Insurance Program, CHIP.

This decrease in employer-based coverage would add an expense to the federal cost of the ACA: about $4.3 billion a year (for people seeking coverage through Medicaid or a subsidy for purchasing insurance), for a total of $46 billion between 2014 and 2023, the report estimates. This is significantly less than the Congressional Budget Office’s estimated $130 billion to cover costs for employers dropping health coverage for their employees. Still, it isn’t an insignificant amount of money, and it would need to be replaced.

There are many ways to do that. All have trade-offs. But eliminating the employer penalty would remove a number of labor market distortions and would reduce business opposition to the law.

And it wouldn’t really change the number of people who are insured in the United States. That’s what the law was about. The employer mandate isn’t a critical part of it, and it may be time for us again to consider eliminating it entirely.

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About the author: Aaron E. Carroll, MD, MS, is a health services researcher and the Vice Chair for Health Policy and Outcomes Research in the Department of Pediatrics at Indiana University School of Medicine. He blogs about health policy at The Incidental Economist and tweets at @aaronecarroll.

About The JAMA Forum:  JAMA has assembled a team of leading scholars, including health economists, health policy experts, and legal scholars, to provide expert commentary and insight into news that involves the intersection of health policy and politics, economics, and the law. Each JAMA Forum entry expresses the opinions of the author but does not necessarily reflect the views or opinions of JAMA, the editorial staff, or the American Medical Association. More information is available here and here.

Community Health Centers and Their Patients Take a Big Hit in Medicaid Opt-Out States, Report Says

About 1.1 million community health center patients living in states that forgo Medicaid expansions will go without health insurance, according to a new report. (Image: The George Washington University/RCHN Community Health Foundation)

About 1.1 million community health center patients living in states that forgo Medicaid expansions will go without health insurance, according to a new report. (Image: The George Washington University/RCHN Community Health Foundation)

An estimated 1.1 million people who use community health centers for their medical needs will go without health insurance because they live in 1 of the 24 states without current plans to expand their Medicaid programs under the Affordable Care Act (ACA), according to a new report.

The analysis is based on information from the 2012 Uniform Data System, which tracks patient demographics, services provided, clinical indicators, utilization rates, revenue, costs, and quality performance in community health centers supported by the US Health Resources and Services Administration and other public and nonprofit organizations.

In 2012, community health centers served 20.7 million patients in 8000 medically underserved areas, according to the report from the Geiger Gibson/RCHN Community Health Foundation Research Collaborative at George Washington University in Washington, DC. Of the 7.5 million patients who were uninsured, 3.2 million lived in states that have opted out of the Medicaid expansion.

The new report indicates that about 5.2 million uninsured community health center patients would have been eligible for Medicaid or subsidized coverage if the Medicaid expansion was available nationwide. But 2.3 million of the patients live in opt-out states. Among them, 1.2 million would qualify for subsidies and 1.1 million would be eligible for Medicaid.

But because they live in opt-out states, those 1.1 million patients fall into the coverage gap between traditional Medicaid eligibility and the lower income eligibility limit for premium subsidies in the state exchanges. Traditional Medicaid eligibility covers very low-income residents and usually excludes childless adults without disabilities; the lower eligibility limit for premium subsidies is 100% of the federal poverty level.

What’s more, the report also shows that community health centers in opt-out states likely will forgo $569 million in revenues they would have collected under expanded Medicaid programs. In contrast, community health centers in opt-in states are expected to generate about $2.1 billion in revenue from increased Medicaid payments.

Of the 1.1 million patients likely to remain uninsured, 71% live in 11 Southern opt-out states; 35% of the total are concentrated in 5 states: Alabama, Florida, Georgia, Louisiana, and Mississippi.

“Health center patients living in the South remain disproportionately affected by the failure to expand Medicaid,” Sara Rosenbaum, JD, of the Milken Institute School of Public Health at George Washington University, said in a statement. Poor, minority patients in opt-out states already face troubling health disparities, and the decision to reject the Medicaid expansion threatens to worsen those disparities, according to the report.

 

JAMA Forum: What Do We Now Know About the Affordable Care Act?

Gail Wilensky, PhD

Gail Wilensky, PhD

Now that the 2014 enrollment period has (finally) ended for signing up for a plan in the Affordable Care Act’s (ACA’s) health insurance exchanges, many of us policy analysts and political observers are trying to figure out what we know about the ACA’s early effects and what else we need to know to begin a reasonable assessment of the law.

Here’s my take.

About 7.5 million people had signed up for coverage in the exchanges by the end of March, following a late surge in enrollment during the second half of the month. A surge had been expected, although the number that would result was unknown. Because the exchanges had trouble accommodating the large number of people trying to enroll on the last weekend, the Obama Administration decided to allow anyone who said they had tried unsuccessfully to enroll to do so through April 14—a rather generous extension of time with no proof of prior enrollment attempts required.

This additional 2-week extension pushed the enrolled number to 8 million, with almost 200 000 of the latecomers reportedly coming from California. I assume that if the administration had decided to leave the enrollment period open another 2 weeks, the number would have gone higher still.

In addition, approximately 3 million more people enrolled in Medicaid through the end of February compared with enrollment before the ACA’s Health Insurance Marketplace opened last October. Because of the normal churn that happens with Medicaid enrollment and the need to periodically reenroll, the number of additional people covered by Medicaid is only an approximation. And because Medicaid enrollment (unlike the enrollment in private insurance through the exchanges) is allowed to continue throughout the year, the ultimate 2014 number is not yet known.

Exceeding Expectations?

What do these numbers mean?

Getting more people covered with insurance is one of the ACA’s major goals, along with stabilizing the availability of insurance for those without an employer-sponsored plan and moderating health care spending. So, more coverage is better.

Some have described the 7.5 million enrolled by March 31 (and then the 8 million by April 14) as “exceeding the goal” for the first year’s enrollment. But this is a misunderstanding of the number that the Congressional Budget Office (CBO) offered as an estimate of how many people would enroll in the exchanges in 2014. Such a figure was needed to determine the estimated cost of the program for 2014. So the CBO said it “expected” 7 million, a figure that was later revised downward to 6 million after the disastrous rollout of the exchanges last fall (and it’s not surprising the CBO didn’t propose an enrollment of 8 million; the CBO wouldn’t have anticipated the administration’s “flexibility” in the enrollment end date). Even so, the 7.5 million enrolled was a little better than the expected 7 million.

Little Data About Enrollees

Beyond the total number, however, we know almost nothing about those who’ve enrolled, not even the most basic demographic data. This lack of information is frustrating and has led many to wonder why the administration has only chosen to dribble out favorable information while refusing to make basic facts easily available.

For example, enrollment of young adults has been a key concern because they tend to have lower health care use and are therefore important for keeping health insurance premiums affordable. Previous estimates have indicated about 25% of the enrolled were between the ages of 18 and 35 years, lower than the desired 38% to 40%. In announcing the 8 million number on April 17, President Obama mentioned that 35% were younger than 35 years, but offered no other details. If the 35% includes those younger than 18 years, it is consistent with previous estimates and remains less than the desired share. Otherwise, it is a big increase from previous estimates. At this point, who knows which is the case?

Unfortunately, a decision by the Census Bureau to change how the Current Population Survey (CPS) asks about insurance status will make it more difficult to analyze the effects of the ACA’s insurance expansion. Although there are other or better sources of information on insurance coverage, the appeal of the CPS has always been its frequency and availability every September. I agree that the wording needed to be changed—people appeared to be responding to whether they were uninsured at the time of the interview although the wording referred to any time during the whole year—but this is a problem that has existed for years. If the Census Bureau decided that the wording change was absolutely needed for the 2014 survey, it should have used a strategy that would clearly show the effects of the wording change (by doing split samples using the old and the new questions for different parts of the sample for the next few years, a strategy it is using for collecting data on income and poverty).

Not surprisingly, some Republicans are questioning the timing of the Census Bureau’s decision as an attempt by the administration to manipulate information. I disagree with that conclusion and agree with Michael Strain (an American Enterprise Institute Resident Scholar and previously a researcher at the Census Bureau) that this change doesn’t signify  a conspiracy, just a dumb decision.

At some point, I assume we will know more about the enrollees, including information about income, age, and  health status. How many were previously insured and enrolled either because their insurance was cancelled or because they chose to avail themselves of the plans and subsidies in the exchanges? How many enrollees have paid their first month’s premium and how many continue to pay their monthly premiums? All of these are key issues to understanding the ACA’s most basic effects.

What remains surprising to me is how negative the country remains towards the legislation. In polling data recently released by Gallup, 54% continue to disapprove vs 43% approving of the law—essentially unchanged from November. I agree with President Obama’s assertion that this legislation is not going to be repealed. If and when it will be embraced by the American people is another matter.

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About the author: Gail Wilensky, PhD, is an economist and Senior Fellow at Project HOPE, an international health foundation. She directed the Medicare and Medicaid programs, served as a senior adviser on health and welfare issues to President George H. W. Bush, and was the first chair of the Medicare Payment Advisory Commission.  She is an elected member of the Institute of Medicine.

About The JAMA Forum: JAMA has assembled a team of leading scholars, including health economists, health policy experts, and legal scholars, to provide expert commentary and insight into news that involves the intersection of health policy and politics, economics, and the law. Each JAMA Forum entry expresses the opinions of the author but does not necessarily reflect the views or opinions of JAMA, the editorial staff, or the American Medical Association. More information is available here and here.