ACA Repeal Could Raise Deficit by Billions

A new report from the Congressional Budget Office (CBO) says repealing the Affordable Care Act (ACA) would increase the budget deficit by $353 billion over the next decade and eliminate health coverage for 19 million people in 2016 and 24 million more from 2016 to 2025.

The new deficit estimate from the non-partisan CBO and the Joint Committee on Taxation is a dramatic increase over the 2012 report, which forecast a $109 billion deficit if the ACA was abolished.

For the first time, the CBO used a calculation method that factors in the effects of repeal on the overall economy, as favored by Congressional Republicans. Under that technique, and assuming slightly higher national unemployment, the federal deficit increases by $137 billion (instead of $353 billion).

The CBO report came just days before the U.S. Supreme Court ruling in King v. Burwell, the challenge to the advanced premium tax credit offered under the Affordable Care Act (ACA). Justices ruled last week that the ACA does not bar financial assistance to low- and moderate-income residents of states that rely on the federal health insurance marketplace, healthcare.gov, rather than a state-run health exchange.

Republicans have been pushing for repeal of the ACA almost since it was signed into law by President Obama in 2010. The latest Centers for Disease Control and Prevention’s National Health Interview Survey says about 36 million people, 11.5 percent of the entire population, were uninsured in the U.S. last year. That number was down 4.5 percent since 2010.

“Implementing a repeal of the ACA would present major challenges,” the CBO report said. “In the five years since the enactment, nearly every key provision of the law has taken effect and has been incorporated into the final rules and other administrative actions. Undoing the ACA would thus be quite complicated.”

The CBO says repeal of the health care law would initially reduce federal deficits, but then cause them to increase steadily beginning in 2021. The initial savings would result from a reduction in government spending on subsidies and the nation’s expanded Medicaid program. However, an ACA repeal would eliminate cuts in Medicare payment rates to hospitals and other providers as well as new taxes on medical device makers and pharmaceutical firms. While repeal is being advocated by many in the GOP, a presidential veto is all but assured if the proposal makes its way to the White House. 

Supreme Court Upholds ACA Subsidies

In a victory for the Obama Administration, the U.S. Supreme Court rejected a challenge to the Affordable Care Act (ACA) on Thursday, June 25, 2015. The justices ruled in a 6-3 vote that premium subsidies are available to all Americans, regardless of whether they live in a state with a state-established health insurance exchange or one that uses the federal exchange, healthcare.gov.

Chief Justice John Roberts said it is not the court’s responsibility to try to read into inconsistencies in the law and find for one side or the other. The challenge to the ACA was based, at least in part, on four words – “established by the state” – in referring to the availability of premium subsidies for qualifying individuals.

Writing for the majority, and as reported by ABC News, the Chief Justice said, “In a democracy, the power to make law rests with those chosen by the people, the Congress. In every case, we must respect the role of the legislature and take care not to undo here what is done there.”

“Congress passed the Affordable Care Act to improve health insurance markets, not to destroy them. The combination of no tax credits and an ineffective coverage requirement could well push a State’s individual insurance market into a death spiral. It is implausible that Congress meant the Act to operate in this manner.”

Of the more than 10 million Americans with ACA coverage at the end of March 2015, 85 percent (or more than 8.7 million consumers) were receiving an advanced premium tax credit to help make their health care premium more affordable. If the nation’s highest court had ruled against the U.S. Department of Health & Human Services in King v. Burwell, subsidies would have been cut-off for more than 7.5 million residents of states without their own health insurance exchanges, according to the Kaiser Family Foundation. That, in turn, some experts warned would have made coverage unaffordable and created a price spiral for those who kept their policies.

Chief Justice was joined in the majority opinion by justices Stephen Breyer, Ruth Bader Ginsburg, Elena Kagan, Anthony Kennedy, and Sonya Sotomayor. Justice Antonin Scalia wrote an angry dissent, saying the Supreme Court’s part of decisions over ObamaCare will “surely be remembered through the years” as evidence the court does “whatever [it] takes to uphold and assist its favorites.” 

CVS Pharmacies and Clinics Coming to Target Stores

CVS Health Corporation and Target Corporation announced last week that they have entered into an agreement for CVS to acquire Target’s pharmacy and clinic businesses.  Through the new agreement, valued at approximately $1.9 billion, CVS Health will acquire more than 1,660 Target pharmacies across 47 states and operate them through a store-within-a-store format, branded as CVS/pharmacy. In addition, a CVS/pharmacy will be included in all new Target stores offering pharmacy services.

Target’s nearly 80 clinic locations will be rebranded as MinuteClinic, and CVS Health will open up to 20 new clinics in Target stores within three years following the close of the transaction. The new clinics are part of CVS MinuteClinic plan to operate 1,500 clinics by 2017. In addition, CVS Health and Target plan to develop five to 10 small, flexible format stores over a two-year period following the close; each will be branded as TargetExpress and include a CVS/pharmacy.  

“This strategic relationship with Target supports the highly complementary customer base, brand, and culture we share,” said Larry Merlo, CVS Health President and CEO. “When we introduced the new name for our company, CVS Health, we began a new era of growth with a broader health care focus and an appreciation of the rise of health care consumerism with consumer choice and accountability growing. This relationship with Target will provide consumers with expanded options and access to our unique health care services that lead to better health outcomes and lower overall health care costs.” 

This deal will expand CVS Health’s retail presence in new markets, such as Seattle, Denver, Portland, and Salt Lake City. The transaction enables CVS to reach more patients, adding a new retail channel for its offerings, and expanding options for consumers. CVS Health has also committed to having a low-cost generic drug option available to Target’s cash-paying guests.

Target and CVS Health will carefully evaluate and select locations best suited for new small format Target stores with a CVS/pharmacy inside. Additionally, the two firms will explore innovative, new market offerings that have the potential to generate strong returns on investments and offer long-term benefits for customers and communities. 

States Act to Set Up Exchanges in Advance of ACA Ruling

The U.S. Department of Health & Human Services has given approval to Arkansas, Delaware, and Pennsylvania to set up their own state-run public health insurance exchanges for 2016. The announcement on the federal okay came just a few days in advance of the expected ruling by the U.S. Supreme Court in case of King v. Burwell, a challenge to premium subsidies offered under the Affordable Care Act (ACA).

Justices will rule in the case by the end of June. At issue is whether the ACA bars financial assistance to low- and moderate-income residents of states that rely on the federal health insurance marketplace, healthcare.gov, rather than a state-run health exchange.

According to a letter from HHS Secretary Sylvia Mathews Burwell, Arkansas will be allowed to set up an exchange for small groups in 2016, followed by an exchange for individual consumers in 2017. Delaware and Pennsylvania have both received approval for state-based exchanges for both individuals and small groups for 2016.

Absent any actions by other states, 15 states and the District of Columbia will operate state-based exchanges for 2016. Thirty-five other states will give their residents access to ACA-compliant coverage through an exchange operated with support from the federal government. Nevada, New Mexico, and Oregon are authorized to operate state-based exchanges, as defined by HHS, but they use the healthcare.gov technology platform to enroll residents for coverage.

Modern Healthcare reported on June 6 that elected officials in most of the states using the federal exchange don’t know or won’t say what they plan to do if the U.S. Supreme Court rules in favor of those challenging the premium subsidies.

A hospital group in Illinois is urging officials to work out a “lease arrangement” with the federal government, so states could use federal government technology to enroll residents who qualify for premium subsidies. Such an agreement, where HHS and healthcare.gov become exchange service providers, could be attractive to other states if the ACA challenge is successful.

Health Insurer Consolidation Back in the News

With news that Anthem has now surpassed UnitedHealth as the nation’s largest health insurer, and increasing buzz about a possible merger of Anthem with another of the nation’s leading health plans, California Insurance Commissioner Dave Jones has weighed in – and he is not a fan of any proposed merger.

“Generally speaking, further consolidation in the health insurance industry is not a good thing for consumers, employers, or medical providers,” Jones said in an interview with the Los AngelesTimes. “It means the potential for future price increases as a result of less competition.”

The state’s leading insurance regulator’s remarks echo concerns raised last week by the Pacific Business Group on Health, an alliance of large employers including Boeing Company, CalPERS (the California Public Employees’ Retirement System), Chevron, Comcast, Levi Strauss, McKesson Corporation, Pacific Gas & Electric, Safeway, Target Corporation, Tesla Motors, the University of California, Walmart, Walt Disney, Wells Fargo & Company, and others.

Rumors, which have been swirling during the past several weeks about a possible merger between Anthem and Cigna, were confirmed over the weekend. However, Cigna formally rejected the proposed $47 billion offer on June 21. The Wall Street Journal has also published several stories about UnitedHealth’s interest in acquiring Cigna as well as Aetna’s and Cigna’s interest in buying Humana.

“Like many industries, we think the managed care industry will evolve to a Big 3,” Ana Gupte, a health care analyst at Leerink Partners, told the Los Angeles Times. “One of the reasons that we think a wave of consolidation is overdue is we view the industry as being too fragmented.”

Anthem is California’s largest for-profit health insurer, and the company does business in more than one dozen other states. Any consolidation in the health marketplace would likely enable large firms like Anthem and UnitedHealth to exercise more market power across the country.

Of course, any possible merger would be subject to antitrust scrutiny. Brian Wright, an analyst at Sterne Agee CRT, says the combination of UnitedHealth and Aetna would have a market share of more than 20 percent in 24 states. An Anthem and Humana combination would control more than 20 percent of the market in 14 states. Interviewed by LifeHealthPRO, an insurance industry newsletter, Wright forecast that if Anthem were to buy Humana, it would likely have to sell its’ commercial insurance operations.

Consumers in Grandfathered Plans Face Possible Higher Costs

The non-partisan Kaiser Health News reported this month that individuals covered under so-called grandfathered health plans could face higher costs for preventive health benefits. A grandfathered plan is a health plan created and purchased before the provisions of the Affordable Care Act (ACA) took effect in March 2010. Grandfathered plans, which some insurers have permitted to be renewed without significant benefit changes since the ACA became law, are exempted from federal benefit mandates under the ACA.

The difference in benefits between ACA-compliant plans and grandfathered plans means some consumers are finding they have to pay for things that their co-workers or spouses – who may be insured under a different plan – are not required to pay. Many grandfathered plans do not pay for an annual physical without charge, nor do some cover birth control pills, which are both part of the benefit requirements of the ACA.

In addition to not providing benefits for some preventive health services without a cost to the patient, grandfathered plans are exempt from some other health law requirements. They do not have to comply with the ACA limit on annual out-of-pocket spending (currently $6,600 for an individual plan and $13,200 for families). Grandfathered plans may also charge higher co-pays or coinsurance amounts for emergency services that are out of network. For covered employees, while the grandfathered plans may not offer all of the benefits of the ACA, they may offer reduced cost sharing. Grandfathered plans are limited in how much they raise co-payments and deductibles; that means a person with a $20 co-payment and $500 deductible in 2010 could have no more than a $26 co-pay and $652 deductible next year.

After the health care law became effective, 72 percent of companies offering health insurance had at least one grandfathered plan. Last year that number declined to 37 percent, according to the Kaiser Family Foundation’s annual employer benefits survey. About 25 percent of insured workers remain covered by a grandfathered plan today. According to human resources consulting firm Mercer, smaller employers are more likely than larger ones to have a grandfathered plan now. Individual plans can also be grandfathered. 

GOP Introduces Plan to Replace ACA

Republicans in the U.S. House of Representatives have introduced a plan to replace the Affordable Care Act (ACA). H.R. 2653, the American Health Care Reform Act, was drafted by the Republican Study Committee’s Health Care Task Force, which is co-chaired by U.S. Representatives Phil Roe (R-Tenn.) and Austin Scott (R-Ga.).

The new measure would fully repeal the ACA and eliminate the tax exclusion for employer-paid health insurance and the health deduction for the self-employed. It would instead create a standard above-the-line tax deduction of $7,500 for individuals or $20,500 for families, according to reporting by Best’s New Service.

The new measure is opposed by the benefits industry. A spokesperson at the National Association of Health Underwriters (NAHU) says the proposed changes would weaken the current employer-sponsored health care system.

“NAHU has always been a very strong advocate for the employer-based system,” Jessica Waltman, senior vice president of government affairs, told a reporter at the insurance industry news organization. “NAHU believes this provision would cause many employers to drop their employer-sponsored health insurance arrangements, undermining a system that covers that vast majority of Americans efficiently and cost-effectively today.”

Other provisions in the proposed new law would: eliminate the mandate that health insurance companies cover all pre-existing conditions; broaden federal support for state high-risk insurance pools; expand portability so consumers could retain coverage regardless of their location; permit shopping for insurance across state lines; and allow small businesses to form negotiating pools for the purpose of purchasing health insurance for employees.

A U.S. Supreme Court ruling on the challenge to the ACA is expected later this month.

New Poll Finds Public Behind Affordable Care Act

As the country waits for a ruling this month by the U.S. Supreme Court in the challenge to the Affordable Care Act (ACA), a new Washington Post-ABC News poll finds a majority of Americans say the court should not take action to prohibit federal subsidies in states that did not set up their own public health exchanges.

At issue in the case of King v. Burwell is whether the ACA bars financial assistance to low- and moderate-income residents of states that rely on the federal health insurance marketplace, healthcare.gov. The plaintiffs in the case say the premium assistance is intended only for those persons living in states that set up their own exchanges rather than the federal marketplace.

In the new poll, which was released June 8, 55 percent of respondents said the justices should not block subsidies for those Americans enrolled through the federal health exchange.

If the justices agree with the challengers’ argument, more than six million people across as many as 37 states could lose their health insurance premium subsidy. In response to the court ruling, a state could restore the aid to its residents if it establishes its own exchange, as the District of Columbia, California, and 12 other states have done. As reported by Kaiser Health News on June 9, Delaware and Pennsylvania have already proposed strategies for preserving subsidies for their residents.

In a somewhat surprising twist, the ABC-Washington Post poll also found a majority of those surveyed oppose the ACA, 54 percent to 39 percent. Opposition has increased six percentage points from a year ago, while support ties the record low in April 2012. However, these numbers conflict with recent polling from the Kaiser Family Foundation that shows about three in 10 would like to see the entire law repealed (rather than scaled back, kept as is, or expanded).

Political independents and Republicans drive the split in opposition to the law and support for keeping the premium subsidies, regardless of whether a state has its own exchange. Independents oppose the ACA 56 percent to 35 percent, but also support the subsidies by the same margin. Just 19 percent of Republicans support the law, while 34 percent favor keeping the premium subsidies. 

Health Costs Vary Regionally and Nationally

The Niagara Health Quality Coalition recently released its first regional ranking of what commercial health insurance companies pay for members’ medical care. What it found were significant variances, including a spending difference of 29 percent between the lowest-cost region and the highest-cost region.

In a comparison of 274 regions, the 10 most costly locations are Santa Cruz, California; Huntington, West Virginia; Charleston, West Virginia; Gulfport, Mississippi; Wausau, Wisconsin; Contra Costa County, California; Green Bay, Wisconsin; Anchorage, Alaska; Sacramento, California; and Marshfield, Wisconsin. Some of the regions with the lowest costs were surprising, including Honolulu, New York; Bronx, New York; and Washington, DC. Others low-cost regions are Buffalo, New York; Rochester, New York; Tacoma Park, Maryland; Dubuque, Iowa; Tucson, Arizona; Baltimore, Maryland; and Dearborn, Michigan.

Rankings came from an analysis of millions of claims paid by health insurers nationwide. The study found cost variations even when adjusting comparisons for patients’ age, gender, and health status. Low- and high-cost areas for commercial insurers don’t match up with data for Medicare. Baltimore and Dearborn rank as high spending areas for Medicare, but not in the Niagara analysis.

The Los Angeles Times reported last week that costs for common surgeries in the metropolitan area can vary widely. Data from Medicare shows Inglewood’s Centinela Hospital Medical Center billed the federal program $237,063, on average, for joint replacement surgery in 2013. Centinela, which is owned by Prime Healthcare Services of Ontario, billed the highest charge nationwide, which was more than six times the $39,059 charged by Kaiser Permanente West Los Angeles. Medicare paid Centinela an average of $17,609 and Kaiser Permanente an average of $12,457.

CMS Delays Online Enrollment Requirement for SHOP

The Centers for Medicare & Medicaid Services (CMS) will continue to let some states manually operate their Small Business Health Options Program (SHOP) exchanges until 2017. The requirement to put SHOP enrollment online is being pushed back to the 2017 plan year. CMS will also permit state-based SHOP exchanges without online enrollment capabilities to enroll employers directly through insurers or through agents and brokers.

The delay was announced as part of a new set of answers to frequently asked questions (FAQs) released last week by officials at the Center for Consumer Information and Insurance Oversight (CCIIO), the arm of CMS that is in charge of health exchange operations.  As originally enacted, the Affordable Care Act (ACA) would have required SHOP exchange programs to be online for the 2014 plan year. However, implementation was delayed and was expected to take effect in 2015.

A total of 17 states and the District of Columbia operated their own SHOP exchanges in the first year of the ACA. While CMS has not released any SHOP enrollment figures, it’s generally believed that participation has been low nationwide. Unlike the individual insurance exchange operated by the U.S. Department of Health & Human Services, which has a fixed open enrollment period, employers using the small business exchange may enroll at any time during the year. The Washington Post reported in 2014 that fewer than 600 employers signed up in the District of Columbia for SHOP coverage, and about 10,000 took part in the New York state-run exchange. Covered California Executive Director Peter Lee was quoted last year as saying the Golden State’s SHOP exchange had 5,000 enrolled.