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The late former mayor of New York City, Ed Koch, used to ask people on the streets of NY “How ’m I doin’?” I feel now is the time to look back on the Affordable Care Act (ACA) to see how it is doing. The one thing that needs no discussion would be the failure of the on-line enrollment system for the Federal market place exchanges. Clearly there are other aspects of the ACA that need to be looked at to see if the intention of the act came to fruition; such as coverage for dependent adults to age 26, elimination of the pre-existing condition clause on all health insurance plans, and formal coverage for all U.S. citizens.

Coverage for Young Adults

The first item that was very popular was providing coverage for dependents to age 26 regardless of eligibility for other coverage. This allowed young adults to have medical coverage despite their status as a college student. The impact that it had to the cost of health plans was minimal since young adults typically have relatively minor cost issues when it comes to health care. 

Elimination of Pre-Existing Condition Clause

The next item, elimination of pre-existing conditions on all health insurance plans, was one of the main focuses of the Act. There are horror stories galore of people who had serious medical conditions unable to buy insurance because of pre-existing conditions. The Act gives groups and individuals the ability to purchase insurance without any concern of a pre-existing condition. This provides a person the peace of mind that they are not going to be selected against because of an illness. In order for this provision to be adopted, the government needed to indemnify insurance companies in the event their loss ratios go beyond expected levels.

In 2014, the insurers of insured group health plans and the employers of self-insured group health plans will be required to pay a transitional re-insurance fee to stabilize the marketplace over the next 3 years. It is anticipated that the costs will eventually be borne by the participants in these plans. In 2014, the tax will be $12 billion. It is expected that taxes received in subsequent years will be reduced to $8 billion in 2015 and $5 billion in 2016. This tax as well as others, will drive the cost of coverage upward; however, this guarantees that not one person can be denied health insurance.

Formal Coverage for All

The intention of the ACA was that all citizens of the United States should have formal health insurance. Prior to the ACA, it was estimated that 45 million people were uninsured. It is estimated that approximately 7 – 8 million people enrolled in various ACA plans in 2014. This still leaves a great many people uninsured.

In June of this year, the Congressional Budget Office estimated that even after the law has been in effect for 10 years, there will still be 31 million people uninsured in the U.S. Why is this the case when you consider the amount of money being spent to eliminate the uninsured issue? In part, the uninsured population is being affected by insurance carriers’ future plans when it comes to the complexity of providing care. How does a carrier point the sickest and more costly patients to their competition? Will they reduce cost by eliminating the most expensive doctors from their networks?  

Many insurance carriers are touting that their provider networks are producing the best medical outcomes. There is some truth to this, but realistically providers that have good outcomes at a lower cost point are likely to be recruited by the carriers.  The problem with this philosophy is that patients will have to wait a longer period of time before they can get an appointment to see the doctor.  In essence, doctor rationing reduces the amount of utilization a plan will incur.

Some plan sponsors and insurance companies are disincentivizing people from enrolling in their plans by eliminating expensive treatment centers for cancer, transplants and kidney dialysis. By eliminating these centers of excellence, individuals who need care for these diseases will not enroll in these plans. We have seen several examples of this practice, when both plan sponsors and insurance company plans have stopped offering high cost treatments that some patients were having prior to the ACA. This has forced patients to either stop their treatments or go to a more expensive plan in order to get coverage for their illness.

The high cost of prescription drugs has remained a constant for several decades. Today’s super drugs that are known as specialty or bio-tech drugs have astronomical cost. Plan sponsors and insurance companies in order to deal with this escalating cost have greatly restricted their drug reimbursement policies. Programs such as generic only, higher deductibles and higher co-pays have become the norm. The day of a $5 generic, $20 brand and $40 non-preferred brand copay are long gone; in addition to eliminating coverage entirely for the specialty bio-tech drugs.  Once again, if you require these types of expensive drugs, you will not be inclined to enroll in such a plan.

When the ACA was being drafted, quality and affordability were listed as being crucial to the plan. However, when we see what has happened with plan sponsors and insurance companies in ways to discourage people from enrolling, it is somewhat frustrating. The purpose of this law was plain and simple - everyone should have health coverage in the United States, but the techniques that are employed to discourage participation are puzzling. Insurance companies will be protected against major losses for at least 3 years by the Federal government. Some plan sponsors whose firms work on slim profit margins may be inclined to meet the minimum of the law, yet exposing their employees to less than adequate coverage. The one thing that is a certainty is that the ACA will continue to evolve over the next few years. Certainly some of the things in effect are positive, others are negative. It is hopeful that somewhere down the line an equilibrium will be reached for the plan to reach its intended goals.

For more information regarding this topic, please contact your local UHY Advisors professional or the author of this article:

John DePalma, MPH
Managing Director
Employee Benefits Consulting Services, Inc.