The Affordable Care Act's First Year: A Few Disappointments, Lots of Progress

Exactly one year ago, President Obama signed into law the Patient Protection and Affordable Care Act - the most sweeping change to US healthcare since the legislation that created Medicare and Medicaid in 1965. The law's most important achievement is its creation of a system that will slash our nation's shameful uninsurance rate by an estimated two-thirds once it's fully implemented.

Public opinion on the law is still mixed, and that's likely due to two things. First, many of the law's provisions won't kick in until 2014. Second, for those of us with a reliable source of affordable health coverage (like employer-sponsored insurance or Medicare), we might never realize how it helps us - but we're probably well aware that part of the law is a requirement that we have health coverage or else pay a fine.

Personally, I'm glad to know that if I lose my job in 2014, I'll be able to buy an insurance policy that will cover hospital services, preventive care, and prescription drugs without demanding cost-sharing that eats up half my income or cutting off coverage after I get in a damaging accident or develop a costly chronic condition. Since not everyone is thinking ahead to such eventualities, though, I thought I'd highlight a few of the Act's provisions that may be affecting some of you already, depending on your insurance situation (details are from the Kaiser Family Foundation's handy Implementation Timeline):

• Individual and group health plans with policy years beginning on or after September 23, 2010 can no longer place lifetime dollar-value limits on health coverage, deny coverage to children based on their pre-existing conditions, or rescind coverage from those who have it (except in cases of fraud). Annual limits on the dollar value of coverage will not be allowed starting in 2014.
• Adult children can remain their parents' individual and group health insurance policies until age 26.
• New health plans must cover preventive services rated A or B by the US Preventive Services Task Force without requiring cost-sharing. Depending on a patient's age, these services can include blood pressure and cholesterol checks, cancer screenings, routine vaccinations, and counseling on quitting smoking, reducing alcohol use, eating healthfully, and treating depression.
• Health plans must spend at least 85% of their premium dollars on clinical services and quality (80% for plans in the individual and small-group markets) in 2011, or provide rebates to consumers. This "medical loss ratio" requirement worried the insurance industry initially, but insurers seem to be adjusting to it well.
• Employers with 25 or fewer employees and average annual wages of under $50,000 are receiving tax credits for up to 35% of the cost of their contributions.
• Medicare beneficiaries who reach the "doughnut hole" coverage gap in their Part D drug benefits have been receiving rebates and 50% discounts on brand-name prescriptions filled while they're in this coverage gap. According to the Department of Health and Human Services, three million Medicare beneficiaries have received tax-free $250 rebate checks.
• Cost-sharing is no longer required for Medicare-covered preventive services rated A or B by the US Preventive Services Task force, and Medicare beneficiaries can now get annual wellness exams at no cost. According to HHS, more than 150,000 Medicare beneficiaries received an annual wellness visit in the two months after this provision took effect.
• States can begin offering Medicaid coverage to adults whose incomes are up to 133% of the federal poverty level - something all states will have to do starting in 2014, but aren't required to start until then. Connecticut, the District of Columbia, and Minnesota have received approval to offer this coverage.
• People with pre-existing medical conditions who have been insured for at least six months are eligible to enroll in temporary programs that offer health coverage while health insurance exchanges are being developed.

And here are some of the provisions designed to improve overall healthcare quality and public health that are already being implemented:

• The nonprofit Patient-Centered Outcomes Research Institute has been established to conduct research on medical treatments' clinical effectiveness.
• Funding has been appropriated for the Prevention and Public Health Fund, whose initial priorities will include improving the supply of primary care providers and working to prevent tobacco use, obesity, heart disease, stroke, and cancer.
• The National Prevention, Health Promotion and Public Health Council is developing a National Prevention Strategy. (See Celeste's post on the Council's draft framework for more.)
• The Department of Health and Human Services is developing a national quality improvement strategy to improve healthcare services and the health of individual patients as well as the population as a whole.

In 2014, bigger changes will take effect. States will offer Medicaid coverage to those up to 133% of the federal poverty level, and provide health-insurance exchanges where individuals and small employers can buy coverage. Federal subsidies will be available for those whose income is between 133% and 400% of the FPL and who purchase plans through these exchanges. Federal - and potentially state - requirements will spell out what these plans must cover and what kind of cost-sharing will be allowed.

Of course, these improvements don't come free. The individual mandate is a necessary tradeoff for requiring the insurance industry to provide more better, affordable products (read more about why we need the individual mandate here). And some tax benefits for individuals that will be reduced, affecting many individuals directly:

• Those of us who reduce our taxes by putting money into flexible spending accounts will face a lower limit on contributions (the max will drop to $2,500 annually for 2013) and can no longer use that money for over-the-counter drugs not prescribed by a doctor.
• Earnings over $200,000 for individuals ($250,000 for married couples filing jointly) will be subject to an extra 0.9% Medicare tax, increasing the rate on that income from 1.45% to 2.35%; also, high-income tax payers will see an additional 3.8% Medicare tax on unearned income (e.g., investments).
• Issuers of employer-sponsored health insurance with aggregate values of more than $10,200 for individual coverage and $27,500 for family coverage will pay taxes equal to 40% of the value of the plan that exceeds the threshold amount. (The value is essentially the total premium cost, and in 2010 average total premiums for employer-sponsored plans were $5,049 for individuals and $13,770 for families.) The issuers of these high-value plans may pass that cost along to employers, or employers may choose to offer less-generous plans. Implementation will start in 2018; the threshold value will be indexed to the Consumer Price Index and will be higher for firms whose healthcare costs are higher due to the composition of their workforce.

Personally, I'm happy to see a reduction in my tax breaks in exchange for all the positive changes the law makes. (And note that these aren't new fees - they're reductions in tax breaks that cost the government a lot of lost revenue.)

There are plenty of legitimate criticisms of this law and its implementation. I'd have preferred a Medicare-for-all system, but since there evidently weren't enough votes for that in Congress, the Affordable Care Act was far better than the status quo. As requirements are starting to take effect, the administration is providing waivers that exempt some health plans from the requirement of providing at least $750,000 in health benefits. These waivers have been granted to some employers and labor unions and to some states (Florida, New Jersey, Ohio, and Tennessee). Maine has received, and five other states have requested, a lower medical loss ratio (65%) for three years, based on the "reasonable likelihood" that requiring insurers to spend at least 80% of premium dollars on medical care and quality would cause one major insurance carrier to stop offering individual policies to state residents. Such waivers seem like a reasonable response to the fact that some employers, industries, and states will require more time to meet strong requirements - but if lots of employers and states are still getting waivers in 2014, then the Act won't be living up to its promise.

There are also concerns about whether Congressional opponents of the legislation will withhold the funds needed to implement it without passing a credible alternative for improving insurance coverage to the extent of this Act.

Looking at the big picture, though, I think the Affordable Care Act has had an impressive first year, and those who made it happen have a lot to be proud of. And I still have hope that what I wrote one year ago will prove true in another two decades:

[I hope] that 20 years from now it will astonish me to recall that there was a time when 15% of the US was uninsured, people were routinely bankrupted by healthcare costs, and small businesses couldn't afford employee health insurance.