There is a wide range of opinions about the impact that the Patient Protection and Affordable Care Act (ACA) will have on health care – access, quality and cost. Many who firmly believe in the need for reform breathed a sigh of relief – if not amazement – when the Supreme Court decision validated the legislation. But the ACA’s immediate and longer-term impacts are complex and they are yet to be fully financed.
Misinformation surrounds the new legislation. Very few people, from the left, the right or the middle, believe that this is the final answer to a flailing American health care system. The ACA legislation is the end product of good ideas that were compromised and of continuing decisions to persevere even after partial evisceration.
Because the law is so vast in its scope, this article will focus on the most likely effects for participants in the PSC-CUNY Welfare Fund. Will our basic health insurance or supplemental insurance change? Will more people be covered? Will Medicare and Medicaid be impacted? Will taxes increase?
A Starting Point
Most full-time CUNY employees have basic health insurance as a condition of employment. Most have supplemental benefits through the Welfare Fund. The former covers medical/surgical/diagnostic/hospital care, while drug/dental/vision/disability/extended medical coverage are part of the latter.
Part-time CUNY instructional staff may also be entitled to basic health insurance coverage (currently through the PSC-CUNY Welfare Fund), but only one out of five is eligible.
This conforms to the traditional American way – those who have private health insurance usually have it through their full-time jobs. Statistics confirm that those protected by collective bargaining have a higher probability of being covered and the coverage tends to be more comprehensive. The other side to this is that losing employment often means losing insurance.
The ACA’s approach is to build on the current model, not replace it. The ACA moves to standardize employment-based coverage through some new national rules; these new rules mean some important improvements in coverage, but the ACA does not adequately address how they will be paid for. For those not insured through their jobs, the ACA will expand access to non-employment-based health insurance, providing coverage to many of those who are currently without it.
As implementation of the ACA goes forward, the question of funding will move to center stage. The full cost of the ACA’s reforms could be met by more public funding, more money from employers, or adjustments to existing benefits. As the ACA took shape, more cost-efficient alternatives – such as a “public option” or Medicare coverage for all – were rejected. Whether or not the ACA’s unresolved funding issues will win them a second look remains to be seen.
Will the ACA Change Our Basic or Supplemental Health Insurance?
Benefits through CUNY are not likely to see major changes in the near term. One of the key reforms of the ACA, ending limits on coverage of pre-existing conditions, will have little impact for those entering or already in the CUNY program, since this is a moot concept with most employer-based group health coverage. But the change will mean better protection for those who leave CUNY employment and need health insurance in a different setting.
Under the ACA, insurance plans that had impediments to preventive care or services for women will have to make changes. But again, this will not mean major changes for those covered through CUNY employment.
Children can now remain on a parent’s family coverage up to age 26; this was one of the first parts of the ACA to be fully implemented. As a result, 800 newly eligible dependents through age 26 were added to PSC-CUNY Welfare Fund coverage last year. The Fund was able to absorb this change without an increased employer contribution.
The ACA also requires that annual and lifetime caps on benefits be phased out by 2014. From a social point of view, this is a more rational way to organize health care. For the PSC-CUNY Welfare Fund, it will mean significant additional costs that cannot be absorbed with existing funding. In the Welfare Fund’s current drug benefit, a $10,000 annual cap has meant that the Fund’s limited resources were used to provide broader coverage for most participants. Those who hit this limit sometimes faced severe problems, and removing the annual cap will provide relief. But the costs of this change are not small, and they will have to be met by additional funding, changes in other elements of coverage, or adjusting other cost parameters (e.g., co-payments).
Some of the ACA’s reforms are designed to make sure that more health care dollars go directly to the costs of treatment, with new limits on profiteering and overhead expenses. For example, regulations on “medical loss ratios” mean that insurers will have to show that at least 80% of their expenditures are used to “pay claims.” In the long run, this change should help slow inflation in health care costs and make health care financing more efficient. In the short run, it may lead to some disruptions.
For example, the voluntary (member-paid) catastrophic medical insurance program associated with the Welfare Fund has suspended new enrollment over concerns about how this and other rules, such as required coverage for all pre-existing conditions among new enrollees, will affect its business model. Alternative sources for such coverage are expected to develop as the rest of the ACA is implemented, especially as statewide “insurance exchanges” open for business. But as this example shows, there will be some friction in the transition.
Will the ACA Help CUNY Adjuncts?
While the ACA includes new incentives for employers to offer health insurance coverage, those provisions are focused on “full-time” employees and so is not likely to expand access for CUNY adjuncts. For those adjuncts who do qualify for health insurance via their CUNY employment, the effects of the ACA will be about the same as for others.
Loss of coverage related to loss of employment is a particular problem for contingent workers like adjunct faculty, and here the ACA may bring some improvement in the available options.
For those who lose coverage, the chance to continue coverage through COBRA will still exist and subsidies may become available. Those who use up their COBRA should find – at least by 2014 – that they have other viable insurance options through the state exchanges. These policies may have options for subsidy based on income and family size.
In addition, more people with low incomes will now qualify for Medicaid. The Medicaid portion of ACA expands the covered population by including single or childless adults and by raising the maximum income level. Medicaid is jointly funded by state and federal sources (about 50/50, except in New York City), and some states are declaring their right not to participate – even though as much as 90% of the additional cost would be federally financed. New York is not likely to turn down this expansion of coverage.
Will Medicare Be Impacted?
Much has been said recently about an alleged reduction of $716 billion to Medicare caused by the ACA. In truth, no benefits will be cut to Medicare beneficiaries. The ACA’s provisions are expected to save money by controlling the rate of increase of providers’ fees, as well as reducing waste and abuse.
For example, subsidies for private insurers offering their own versions of Medicare coverage (Medicare Advantage) will be scaled back. Currently these private plans are paid 14% more than it would cost to provide the same benefits through Medicare itself. “In other words, the government is wasting money,” reported Columbia Journalism Review (see full article at tinyurl.com/716-CJR).
Ending such waste does not threaten seniors; in fact, it helps put Medicare on a sounder financial footing. Last April’s Medicare Trustees Report projected that these cost-containment measures will extend the life of Medicare’s Health Insurance Trust by eight years.
Controlling costs, reducing fraud and waste and providing more patients with coverage also reduces “bad debt” born by hospitals, which has been quietly factored into everyone’s current insurance rates.
One facet of Medicare definitely improved under the ACA: Part D drug coverage. The Welfare Fund had not encouraged our members to sign up for the former incarnation: the old version of Part D had dozens of confusing insurance schemes, it had premiums and deductibles and co-pays and a donut hole (a “no-pay zone”) the size of a truck.
With the passage of ACA, that has changed. The donut hole is shrinking: costs in the donut hole are being 50% subsidized by pharmaceutical manufacturers and Medicare is incentivizing generic drugs. The Fund found a way to enroll all Medicare-eligible retirees as a group and pay the difference to provide virtually the same coverage as before. As a result, the Fund can take advantage of new and growing subsidies, while providing participants with a bridge to Part D’s catastrophic coverage that begins after about $8,000 in drug spending per year. Most importantly, the annual cap for this group is gone.
Who Pays? Will Taxes Increase?
There will be a “Cadillac tax” on expensive insurance plans starting in 2014. Not surprisingly, the CUNY options of GHI/Blue Cross and HIP are safe from that surcharge. Whether it applies to other plans will depend on how they respond to the ACA’s new rules.
Higher-income people will be paying 2.35% of their wages toward Medicare in 2013 (without a “FICA” cap), an increase of 0.9%. For someone earning $200,000 per year, the tax will increase by $1,800.
As ACA phases in, the real test will come as we approach 2014 when some of the most universal and most expensive changes take effect. As noted, the outcome is hard to predict.
When basic health insurance costs rise for CUNY and the City of New York, the employer pays. When costs rise for the more than 100 municipal welfare funds in New York City, the employer has not seen fit to increase payments since 2008, even in the face of ACA mandates. As in the past, negotiations between the city and the unions in the Municipal Labor Committee (including the PSC) will find one side looking for givebacks and the other seeking improvements. This was true before the ACA, and it remains true today.
The Affordable Care Act is being phased in over an extended period. Its funding will become a focus of discussion as implementation moves forward. The law is complicated and far-reaching. The Welfare Fund recognizes the need to gather and share information about the effects of the law as it becomes available – and the Fund will work to keep participants informed.