Respond to the question assigned to you. Include the question at the beginning of your post.  Then respond to the initial post of two other students. Ask probing questions. Always include citations and references in correct APA format.  Ensure you reply to any follow-up questions by the professor.
1.  Identify one area in which ACA addresses market failures in the private insurance market, discuss how it works.
2.  Why does ACA require individuals to purchase health insurance?
3.  Why do smaller firms face higher premiums than larger firms? What does ACA do to address this issue?
4.  How does ACA help low income individuals purchase insurance?
5.  What economic issues do the private health insurance exchanges address?
How Affordable Care Act
Addressed Market Failures
Janemarie Mulvey, Ph.D.
DO NOT REPLICATE OR REDISTRIBUTE WITHOUT PERMISSION
1
In Week 6 Discussed “Market Failures” in
Health Care
? Asymmetric Information (quality, treatment options, risk of insured)
? Rising Cost of Healthcare (Public and Private Plans)
? Current growth in health care spending is unsustainable in the long-run
? By 2025:
? Health care is projected to consume $1 of every $5 of our economy
? The public sector will finance nearly half of all health care spending (47%)
? Rising Number of Uninsured and Underinsured
?
?
?
?
Individuals with pre-existing condition cannot get insurance (prior to ACA)
Many “basic” policies did not cover needed care
Premiums unaffordable for lower income households
44 Million Uninsured prior to ACA enactment
Janemarie Mulvey, Ph.D.
DO NOT REPLICATE OR REDISTRIBUTE WITHOUT PERMISSION
2
Intended Goal of ACA
Main Goal: Expand access and improve affordability to health
insurance coverage for the uninsured and underinsured
?Share-responsibility across public and private payers
?Reform insurance markets
?Voluntary expansion of Medicaid
?Premium tax credits for individuals and very small businesses
Actual Impact: Number of uninsured fell by about 18 million
between 2013 to 2016 (some opponents argue improved economy led
to this outcome)
Three-Legged Stool:
Shared Responsibility Across Payers
? Provide financial incentives for
employers with 50+ employees
to provide coverage
Employer
Coverage
? Expand Medicaid to nontraditional populations with
incomes up to 133% of poverty
? Develop health insurance
exchanges to better pool risk in
individual markets
Janemarie Mulvey, Ph.D.
New Health
Insurance
Exchanges
DO NOT REPLICATE OR REDISTRIBUTE WITHOUT PERMISSION
Medicaid
4
Medicaid Expansions
? States can “Voluntarily” expand Medicaid coverage to non-elderly
non-pregnant adults with income up to 133% of poverty (approx.
$15K single)
? Federal government subsidized states who expanded for two years
? Important implications for employer penalty: employers are not
penalized if don’t offer coverage and employee enrolls in Medicaid
? Minimum wage workers more likely to trigger the employer penalty in states that don’t
expand
Janemarie Mulvey, Ph.D.
DO NOT REPLICATE OR REDISTRIBUTE WITHOUT PERMISSION
5
Individual Shared-Responsibility Payment
Important to Deter Adverse Selection
In 2016:
?Greater of:
? $695 per adult and $347.50 per child (limited to family maximum of $2,085)
OR
? 2.5% (Household Modified Adjusted Gross Income(MAGI) – Tax Filing Threshold)
?Total penalty limited to $2,676 per individual in 2016 and $13,380 for a
family of five or more
?Many exemptions based on income and other circumstances
?Problem: Individual penalties small prior to 2016
NOTE: THE RECENT TAX CUT BILL P.L. 115-97 REDUCED INDIVIDUAL PENALTIES TO $0 EFFECTIVE IN 2019
Premium Tax Credits Improve Affordability
Eligibility Requirements
? Income Limit (100% up to 400% federal poverty level (FPL))
? Purchase health insurance through the exchange
? Not eligible for other coverage (e.g. employer, government plan)
Generosity of Premium Tax Credit Declines
Above 300% of Poverty
Percent of Premiums Paid with Tax Credit (Married Couple)
100.0%
95.0%
90.0%
80.0%
69.0%
70.0%
60.0%
50.0%
40.0%
30.0%
30.0%
20.0%
6.0%
10.0%
0.0%
100% FPL ($15,730)
200% FPL ($31,460)
300% FPL ($47,190)
400% FPL ($62,920)
Reprinted from: Health Reform: What Small Businesses Need to Know Now! by Janemarie Mulvey, PhD
Cost-Sharing Subsidies
? Based on Actuarial Value(AV): Plan must cover up to x% of cost of
benefits, the remainder is paid through cost-sharing.
? 100% up to 150% of Poverty*: AV=94% (avg. deductible about $300)
? 150% up to 200% of Poverty*: AV=87% (avg. deductible about $800)
? 200% up to 250% of Poverty*: AV=73% (avg. deductible about $2,900)
? Only temporary and Congress not required to appropriate funding
? Once eliminated, health insurers in individual market expected to increase
premiums
? Uncertainty around continuation causing some insurers to drop out of
regional markets
*Based on Federal Poverty Level
Janemarie Mulvey, Ph.D.
DO NOT REPLICATE OR REDISTRIBUTE WITHOUT PERMISSION
9
Insurance Market Reforms
?Standardization of benefit packages (essential health benefits)
?Guaranteed issue and coverage of pre-existing condition
? Nondiscrimination based on health status
?No cost-sharing for preventive services
?Rating restrictions and rate reviews
Janemarie Mulvey, Ph.D.
DO NOT REPLICATE OR REDISTRIBUTE WITHOUT PERMISSION
10
Affordable Care Act Also Intended to “Bend”
Long-Run Cost Curve
?
Increased incentives toward prevention and wellness programs
?
Transparency/publication of hospital charges
?
$500 Billion cuts to Medicare providers over 5 years
?
Limits on health insurers profits relative to claims (MLR)
?
Expansion of electronic medical records
?
Ability of states to voluntarily develop own health systems
?
Reinsurance program to stabilize premiums (ended in 2016)
Janemarie Mulvey, Ph.D.
DO NOT REPLICATE OR REDISTRIBUTE WITHOUT PERMISSION
11
Concerns About Affordable Care Act
? Rising premium in exchanges (individual market)
?Reflects “adverse selection” due to:
? Young and healthy not enrolling and dependents < age 26 covered by parents plan ? Individual mandates small in first few years ?Rate stabilization programs expired and GOP enacted budget neutrality laws for future programs ?Uncertainty of cost-sharing subsidies going forward ? Limited # of insurers participating in exchanges in rural areas ? Administratively complex for small businesses and individuals ? ? Added 2,400 pages to the tax code Definitions of full-time, income, and affordability differ across provisions Janemarie Mulvey, Ph.D. DO NOT REPLICATE OR REDISTRIBUTE WITHOUT PERMISSION 12 About Janemarie Mulvey, Ph.D. ? Author of Health Reform: What Small Businesses Need to Know Now! ? Developed the Continuing Education Course for the CPAs on Health Reform ? Associate Professor UMUC: Health Care Finance and Health Economics Janemarie Mulvey, Ph.D. DO NOT REPLICATE OR REDISTRIBUTE WITHOUT PERMISSION 13 How Affordable Care Act Addressed Market Failures Janemarie Mulvey, Ph.D. DO NOT REPLICATE OR REDISTRIBUTE WITHOUT PERMISSION 1 In Week 6 Discussed “Market Failures” in Health Care ? Asymmetric Information (quality, treatment options, risk of insured) ? Rising Cost of Healthcare (Public and Private Plans) ? Current growth in health care spending is unsustainable in the long-run ? By 2025: ? Health care is projected to consume $1 of every $5 of our economy ? The public sector will finance nearly half of all health care spending (47%) ? Rising Number of Uninsured and Underinsured ? ? ? ? Individuals with pre-existing condition cannot get insurance (prior to ACA) Many “basic” policies did not cover needed care Premiums unaffordable for lower income households 44 Million Uninsured prior to ACA enactment Janemarie Mulvey, Ph.D. DO NOT REPLICATE OR REDISTRIBUTE WITHOUT PERMISSION 2 Intended Goal of ACA Main Goal: Expand access and improve affordability to health insurance coverage for the uninsured and underinsured ?Share-responsibility across public and private payers ?Reform insurance markets ?Voluntary expansion of Medicaid ?Premium tax credits for individuals and very small businesses Actual Impact: Number of uninsured fell by about 18 million between 2013 to 2016 (some opponents argue improved economy led to this outcome) Three-Legged Stool: Shared Responsibility Across Payers ? Provide financial incentives for employers with 50+ employees to provide coverage Employer Coverage ? Expand Medicaid to nontraditional populations with incomes up to 133% of poverty ? Develop health insurance exchanges to better pool risk in individual markets Janemarie Mulvey, Ph.D. New Health Insurance Exchanges DO NOT REPLICATE OR REDISTRIBUTE WITHOUT PERMISSION Medicaid 4 Medicaid Expansions ? States can “Voluntarily” expand Medicaid coverage to non-elderly non-pregnant adults with income up to 133% of poverty (approx. $15K single) ? Federal government subsidized states who expanded for two years ? Important implications for employer penalty: employers are not penalized if don’t offer coverage and employee enrolls in Medicaid ? Minimum wage workers more likely to trigger the employer penalty in states that don’t expand Janemarie Mulvey, Ph.D. DO NOT REPLICATE OR REDISTRIBUTE WITHOUT PERMISSION 5 Individual Shared-Responsibility Payment Important to Deter Adverse Selection In 2016: ?Greater of: ? $695 per adult and $347.50 per child (limited to family maximum of $2,085) OR ? 2.5% (Household Modified Adjusted Gross Income(MAGI) – Tax Filing Threshold) ?Total penalty limited to $2,676 per individual in 2016 and $13,380 for a family of five or more ?Many exemptions based on income and other circumstances ?Problem: Individual penalties small prior to 2016 NOTE: THE RECENT TAX CUT BILL P.L. 115-97 REDUCED INDIVIDUAL PENALTIES TO $0 EFFECTIVE IN 2019 Premium Tax Credits Improve Affordability Eligibility Requirements ? Income Limit (100% up to 400% federal poverty level (FPL)) ? Purchase health insurance through the exchange ? Not eligible for other coverage (e.g. employer, government plan) Generosity of Premium Tax Credit Declines Above 300% of Poverty Percent of Premiums Paid with Tax Credit (Married Couple) 100.0% 95.0% 90.0% 80.0% 69.0% 70.0% 60.0% 50.0% 40.0% 30.0% 30.0% 20.0% 6.0% 10.0% 0.0% 100% FPL ($15,730) 200% FPL ($31,460) 300% FPL ($47,190) 400% FPL ($62,920) Reprinted from: Health Reform: What Small Businesses Need to Know Now! by Janemarie Mulvey, PhD Cost-Sharing Subsidies ? Based on Actuarial Value(AV): Plan must cover up to x% of cost of benefits, the remainder is paid through cost-sharing. ? 100% up to 150% of Poverty*: AV=94% (avg. deductible about $300) ? 150% up to 200% of Poverty*: AV=87% (avg. deductible about $800) ? 200% up to 250% of Poverty*: AV=73% (avg. deductible about $2,900) ? Only temporary and Congress not required to appropriate funding ? Once eliminated, health insurers in individual market expected to increase premiums ? Uncertainty around continuation causing some insurers to drop out of regional markets *Based on Federal Poverty Level Janemarie Mulvey, Ph.D. DO NOT REPLICATE OR REDISTRIBUTE WITHOUT PERMISSION 9 Insurance Market Reforms ?Standardization of benefit packages (essential health benefits) ?Guaranteed issue and coverage of pre-existing condition ? Nondiscrimination based on health status ?No cost-sharing for preventive services ?Rating restrictions and rate reviews Janemarie Mulvey, Ph.D. DO NOT REPLICATE OR REDISTRIBUTE WITHOUT PERMISSION 10 Affordable Care Act Also Intended to “Bend” Long-Run Cost Curve ? Increased incentives toward prevention and wellness programs ? Transparency/publication of hospital charges ? $500 Billion cuts to Medicare providers over 5 years ? Limits on health insurers profits relative to claims (MLR) ? Expansion of electronic medical records ? Ability of states to voluntarily develop own health systems ? Reinsurance program to stabilize premiums (ended in 2016) Janemarie Mulvey, Ph.D. DO NOT REPLICATE OR REDISTRIBUTE WITHOUT PERMISSION 11 Concerns About Affordable Care Act ? Rising premium in exchanges (individual market) ?Reflects “adverse selection” due to: ? Young and healthy not enrolling and dependents < age 26 covered by parents plan ? Individual mandates small in first few years ?Rate stabilization programs expired and GOP enacted budget neutrality laws for future programs ?Uncertainty of cost-sharing subsidies going forward ? Limited # of insurers participating in exchanges in rural areas ? Administratively complex for small businesses and individuals ? ? Added 2,400 pages to the tax code Definitions of full-time, income, and affordability differ across provisions Janemarie Mulvey, Ph.D. DO NOT REPLICATE OR REDISTRIBUTE WITHOUT PERMISSION 12 About Janemarie Mulvey, Ph.D. ? Author of Health Reform: What Small Businesses Need to Know Now! ? Developed the Continuing Education Course for the CPAs on Health Reform ? Associate Professor UMUC: Health Care Finance and Health Economics Janemarie Mulvey, Ph.D. DO NOT REPLICATE OR REDISTRIBUTE WITHOUT PERMISSION 13 Purchase answer to see full attachment