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Health Affairs article finds ACA saves individual market consumers significant out-of-pocket costs

Posted on May 17, 2012 | No Comments

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Implementation Briefs

According to an article recently published in Health Affairs, if the Affordable Care Act (ACA) had been in place in 2001-2008, people in the individual insurance market would have saved about $280 per year on out-of-pocket costs. These savings would have been even more significant for people aged 55-64, as this age group racks up higher medical bills, but is still ineligible for Medicare.

The root of the savings under the ACA is in the creation of the new health insurance exchanges, which make coverage more accessible for consumers in the individual market. Plans distributed through exchanges must cover essential health benefits, which include benefits such as prescription drugs and certain preventive services without copayments. The essential health benefit requirement in the exchanges will make the individual policies more generous and will create significant annual out-of-pocket savings for consumers. In addition, the study reports that the ACA reduces the risk of incurring high out-of-pocket costs. The likelihood of having out-of-pocket expenditures on care exceeding $6,000 would have been reduced for all adults with individual insurance, and the likelihood of having expenditures exceeding $4,000 would have been reduced for many.

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A new study published in Health Affairs this week says that some insurance plans cancelled under the Affordable Care Act (ACA) may have been cancelled regardless by policyholders. The study, Insurance Cancellations In Context: Stability Of Coverage In The Nongroup Market Prior To Health Reform, uses Census data to assess the individual insurance market prior to ACA implementation and reported three key findings:
  • There was high turnover in the market;
  • 80% of those in the market acquired another form of coverage within in the year, mainly from an employer; and
  • turnover varied among groups (age, employment status, etc.)
As a result, the study purports this market experienced disruption well before the implementation of the ACA's insurance reforms.
A new report released by the Government Accountability Office (GAO) aggregates the baseline premium prices available through each state's individual market. The values presented were self-reported by insurance companies and were retrieved from the Plan Finder during January 2013. The report, requested by Senator Orrin Hatch (R-UT), will likely be used to see exactly how much premiums will change for individuals across the country as a result of the various provisions of the Affordable Care Act (ACA).
According to the 2012 Health Confidence Survey published by the Employee Benefit Research Institute (EBRI), confidence regarding the various aspects of today's health care system has remained fairly level before and after the passage of the Affordable Care Act (ACA), and has not been significantly impacted by the June 2012 Supreme Court decision. Asked to rate the health care system, Americans offer a diverse perspective: 28 percent consider it to be “good,” 28 percent say “fair,” and 26 percent rate it “poor,” while 12 percent rate it very good and 5 percent say it is “excellent.” However, the 2012 Health Confidence Survey finds that the percentage of Americans rating the health care system as poor doubled between 1998 and 2004 (rising from 15 percent to 30 percent). Dissatisfaction with the health care system appears to be focused primarily on cost.
The Robert Wood Johnson Foundation and the National Academy of Social Insurance recently released "Building a Relationship between Medicaid, the Exchange and the Individual Insurance Market," which examines the practical and conceptual factors that underlie the federal/state relationship in dealing with the alignment of Medicaid and the State Health Insurance Exchange policy. The report lays out dimensions of collaboration between states and the federal government that could help establish a seamless continuum of coverage for those who may move between eligibility for Medicaid and for tax subsidies in the Exchange.
The Centers for Medicare and Medicaid Services (CMS) released several sample letters that may be used to notify plan members of their options in regards to the transitional policy announced last week. The transitional policy effectively states that individuals or small businesses currently enrolled in plans that would be cancelled by the Affordable Care Act (ACA) may remain in or re-enroll in these plans. CMS provided three documents concerning this issue: a sample letter to be sent to individuals that have already received a cancellation notice for their coverage, a sample letter to individuals that have yet to receive a cancellation notice, and a document containing standard language that will satisfy the notification requirement under the transitional policy.
A letter written to state insurance commissioners from Gary Cohen, Direct of the Center for Consumer Information and Insurance Oversight (CCIIO), encouraged states to adopt a transitional policy concerning cancellation of health plans as a result of the Affordable Care Act (ACA). The letter states that active plans in the individual and small group markets may be renewed for the 2014 plan year if (1) the plan was in effect as of October 1st, 2013 and (2) the insurance issuer sends a letter to plan members that have or will have their plans terminated. The letter should describe:
  • changes in available insurance options;
  • how the plan member's current plan deviates from the market reforms instituted by the ACA (i.e. no coverage of individuals with pre-existing conditions, no guaranteed issuance, etc.);
  • the right and ability of a plan member to enroll in a plan through the ACA's health insurance marketplaces;
  • how a plan member may enroll in a new plan through the ACA marketplaces; and
  • the ability of the plan member to enroll in another plan outside of the marketplaces that adheres to ACA market reforms.
On December 16, 2011, the Department of Health and Human Services (HHS) released a Bulletin describing the approach it intends to take in future rulemaking to define the essential health benefits (EHB) under the Affordable Care Act. This document of frequently asked questions (FAQs) is intended to provide additional guidance on HHS’s intended approach to defining EHB. This bulletin describes a comprehensive, affordable and flexible proposal and informs the public about the approach that HHS intends to pursue in rulemaking to define EHB.  HHS intends to propose that EHB are defined using a benchmark approach. Under the department’s intended approach, states would have the flexibility to select a benchmark plan that reflects the scope of services offered by a “typical employer plan.” This approach would give states the flexibility to select a plan that would best meet the needs of their citizens.
The Affordable Care Act (ACA) identified ten categories of services and items to be included in essential health benefits (EHBs), and specified that the scope of EHBs must be equal to the scope of benefits provided under a typical employer plan. The ten categories include: 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; and pediatric services, including oral and vision care. A white paper issued in December by the Department of Health and Human Services's Office of the Assistant Secretary for Planning and Evaluation (ASPE) found...
On November 14th, 2013, the Obama Administration announced a plan to address a situation that began to emerge in earnest a number of weeks ago and that finally exploded into view within the past couple of weeks: people covered by individual insurance plans who were receiving notices from their insurers that their policies would be cancelled at the end of 2013 because they did not meet new coverage requirements set to take effect in January 2014. The number of people affected by policy cancellation notices is not clear, but most estimates suggest that one half or more of the 15 million people in the individual market could be affected. Manhattan Institute scholar Avik Roy placed the number at 4.8 million (so far). Washington Post reporter Sarah Kliff noted that the figure is hard to calculate but is likely to affect between 7 and 12 million people.
In February 2012, CMS issued a supplemental document entitled Frequently Asked Questions on Essential Health Benefits Bulletin. This supplement to the December 16th Bulletin provides answers to 22 questions arising from the December 16th Bulletin itself. Highlights are as follows: