The passage of the Patient Protection and Affordable Care Act (PPACA) in March 2010 was regarded as a turning point in U.S. history. However, the law was challenged in the nation’s highest court. Consequently, on June 28, 2012, the U.S. Supreme Court voted to uphold the PPACA by a vote of 5-4. Why is healthcare so important? Everyone would probably agree that healthcare is extremely important for 3 main reasons:

  • Everyone wants health care when they need it;
  • Everyone wants to be spared financial devastation from the cost of that care; and
  • Health care accounts for 17% of the total U.S. economy, and is growing at a faster rate than the rest of the economy–straining the other sectors of the economy.
  • So, what does the Supreme Court’s decision mean? For one, more people would have health insurance. An estimated 33 million more Americans could have health insurance. Part of the law that the Court upheld requires all individual to buy health insurance–the “individual mandate“–or pay a tax. And those who cannot afford to pay for insurance could qualify for Medicaid–a government program that helps the poorest Americans get health care. To qualify for Medicaid, the new income threshold would be set at 133% (currently, at 100%) of the federal poverty level. Currently, for a family of four, the annual income level is $23,050. The new law at 133% would bump that up to $30,657. The Court’s ruling did, however, limit the federal government’s ability to require states to expand their Medicaid programs. The decision allows the federal government to provide substantial financial support to the states that choose to expand their Medicaid programs beginning in 2014, but prohibits the federal government from penalizing states that choose not to. The Court’s decision could have unintended consequences. Since the states cannot be forced to participate in the Medicaid expansion program, an estimated 17 million low-income people–about half of all those projected to come off the uninsured segment–could still not have health insurance!

    So, how much would the states stand to lose if they decide not to participate in the Medicaid expansion? 10% Here is how it works. From 2014 to 2016, the federal government pays the entire cost of the Medicaid expansion. After 2016, the portion of the costs paid by the federal government begins to decline. By 2020, states would have to kick in 10%. Although 10% may not sound like much, some states are already in the red, so a 10% is a big deal.

    What provisions of the law are in effect now:

    • Insurance Denial: Health insurance plans cannot cancel health coverage once an insured gets sick–a practice known as “rescission”. Although, the exception to this is if the person committed fraud or intentionally withheld facts on their insurance application.
    • Coverage for Children: Children under 26 are covered under a parent’s plan.
    • Children with Preexisting Conditions: Children with preexisting conditions cannot be denied coverage.
    • Lifetime Maximum Benefits: There aren’t any lifetime maximum on benefits.
    • Medical Loss Ratio: If consumers spend less than 80-85% of premium dollars on medical care, insurers are required to give consumers rebates. The first round of rebates is due August 1, 2012.
    • Preventive Services under New Health Plans: Health plans created after September 23, 2010, are required to cover certain preventative services without requiring co-pays, deductibles and coinsurance.
    • Medicare Preventive Services: The law also expanded Medicare’s coverage of preventive services, such as screenings for colon, prostate and breast cancer, which are now free to beneficiaries. Medicare also pay for an annual wellness visit to the doctor.
    • Payment Reduction to Medicare Advantage Plans: The law cuts payments to the private Medicare Advantage plans. This has placed constraints on the private plans because they may not be able to offer many extra benefits which were previously offered, such as free eyeglasses, hearing aids and gym memberships.
    • Medicare Prescription Savings for Seniors: The law is also narrowing the gap in the Medicare Part D prescription drug plan known as the “doughnut hole” for people over 65. That gap applies to seniors who have paid a certain initial amount in prescription drug costs and must then pay the full cost until they spend a total of $4,700 for the year. Then the plan coverage begins again. By 2020, the “doughnut hole” will be closed entirely.
    • Birth Control: Starting August 1, 2012, employers must provide health insurance plans that offer birth control as part of their preventative service.

    What is coming in 2014:

    • Adults with Preexisting Conditions: Adults with preexisting conditions will not be denied coverage (this already applies to children). Preexisting conditions are chronic diseases that need lifelong care, like diabetes, rheumatoid arthritis, allergies, or asthma. They could even be anything from a past episode of sinusitis to an old sports injury. [box type=”note” style=”rounded” border=”full”]Although, the preexisting exclusions for adults will dissipate in 2014, currently, people with preexisting conditions can already obtain insurance. As long as a person can prove that an insurance company has denied coverage, and that the person has been uninsured for at least 6 months, he/she can apply for health insurance through a high-risk pool, which is also called a Preexisting Condition Insurance Plan, or PCIP. The plan premiums vary by age and state. The Department of Health and Human Services (HHS) provides additional information on the cost of the plan. Those plans will be phased out after the law takes effect in 2014.[/box]
    • Individual Mandate: Most people will be required to have health insurance starting in 2014 or pay a fine. That penalty for individuals starts at $95 or up to 1% of income and grow in later years. For families it would start at $2,085 or 2.5% of household income. The Supreme Court noted in its decision that Americans could choose to ignore the mandate and instead pay the penalty, which they deemed a tax.
    • Insurance Exchanges: People who do not qualify for Medicaid but still cannot afford insurance may be eligible for government subsidies. The subsidies would be used to help pay for private insurance sold in the state-based insurance market places, called exchanges, slated to begin operation in 2014.
    • Coverage Denial: Applicants will not be rejected for insurance because of health status once the exchanges will begin operations in 2014.

    The Court’s ruling clarified the muddy terrain of healthcare, nevertheless, uncertainties remain:

    • Timely federal guidance will be needed if states are to meet the 2014 implementation goal. States have to address important questions, including the definition of “essential health benefits” and whether or not to pursue the PPACA’s Basic Health Program option.
    • The results of the 2012 Presidential elections could alter the future of the law. If Republicans gain control of the White House and/or Congress, there is a good chance that they would overturn the law.
    • What will be done, if anything, to provide insurance for the millions who will remain uninsured even after the full implementation of this law?
    • At over 17% of the nation’s GDP, health care spending continues to rise faster than the rest of the economy. Unless this issue is addressed, any gains in coverage and access under the PPACA will be short-lived–even if it protects more people from personal financial ruin.

    In summary, the decision of the Supreme Court means that more people will have health insurance. It also means that there are still enormous uncertainties for individuals, employers and the states. Nonetheless, we can now move forward.

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