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Health Reform’s First Steps - Improvements & Challenges for the PSC-CUNY Welfare Fund

As the Supreme Court ponders the legal fate of the 2010 health-care reform, implementation of the first parts of the Affordable Care Act continue to move forward. For the PSC-CUNY Welfare Fund, these initial changes have meant some improvements in member benefits, and some challenges for the Fund.

A positive feature of the new law has been an improvement of Part D drug coverage for Medicare recipients, along with changes that allow groups like the Welfare Fund to pass the Part D improvements on to Medicare-eligible members as part of their own plan. What this means for retirees who are Medicare-eligible is that they no longer have to pay an annual deductible for drug coverage, they don’t have to pay a premium for Medicare Part D, the Fund’s $10,000 annual cap on drug benefits is eliminated, and after a total annual drug expenditure (by a member and the plan combined) reaches $8,000, the co-pay is lowered from 20% to 5%.

CHANGES IN DETAIL

All Medicare-eligible participants in the Welfare Fund Medco prescription drug benefit were enrolled in this new prescription drug plan on January 1, 2012. The plan includes substantial new regulations imposed by Medicare, which can be challenging. But as the Fund learns how to best adapt to these new rules, we have been able to make retiree members’ experience with the new drug benefit very close indeed to the original Medco drug plan, while saving money for the Fund and our members – and complying with the Affordable Care Act’s demands.

The Welfare Fund was able to implement these improvements in Medicare drug coverage because the Act provides new resources through significant cost-sharing between Medicare and entities like the Fund. Other parts of the Act require an expansion of benefits but provide no new resources to make this possible – a less sustainable proposition.

The first major change that the Affordable Care Act brought to the PSC-CUNY Welfare Fund was adding coverage for dependent children up to age 26 (see tinyurl.com/WFage26). This change went into effect last July 1,2011, and our rolls were increased by about 800 as a result. Unfortunately, no additional contribution from the employer was required by the new law and none was forthcoming. Fortunately, however, people this age are a low-utilization group for dental, optical and prescription coverage, so in this case the Fund was able to cope with the resulting rise in costs. Insurance programs for City of New York employees estimated their increase at less than 2% of total costs, and even that estimate may turn out to be high.

A more difficult challenge is posed by another provision of the health reform law, the removal of annual and lifetime caps on essential benefits for all members. Existing plans must remove such caps between 2010 and 2014, including the Welfare Fund’s current $10,000 annual limit on drugs under the Medco program for active full-time employees.

ANNUAL CAPS

An end to annual caps will mean a more humane health care system, and the Fund supports this as a goal – but unfortunately, the 2010 law does not provide for any additional resources to cover the resulting increase in costs. Since the law provides for no additional funding nor does it require the employer to increase contributions, the only way to pay for lifting this cap – absent new resources – would be to impose cuts elsewhere in the Fund’s coverage. For that reason, the Fund applied for and received waivers that allow it to defer lifting the cap until 2014. Waivers were requested by virtually every other municipal union welfare fund in the City, and together the municipal labor unions are demanding more City contributions to cover increasing union welfare fund costs.

‘A STARTING POINT’

Caps on coverage are one of many problems in the US health-care system that the Affordable Care Act takes up but does not really solve. The Act is far from a full answer to the US health-care crisis – at best, it is a starting point. The many problems it leaves unresolved can be expected to create pressure for further reform.

Many ideas debated in 2010 might provide ways to close some of the gaps in the Affordable Care Act – employer mandates, a public option, single-payer plans (which Vermont may enact). Policy solutions are available, and Congress has time to act.

It is to be hoped that further legislative action will address some of the Affordable Care Act’s problems before it takes full force in 2014. The biggest question mark about the future of the Act, of course, is the pending Supreme Court decision. But whatever the legislative landscape, the Welfare Fund will do its best to navigate the currents of health-care reform in ways that serve all members as well as possible.