9/11/2019

Understanding Health Policy: A Clinical Approach, 6e

Chapter 15. Health Care Reform and National Health Insurance

The Pluralistic Reform Model: The Patient Protection and Affordable

Care Act of 2010
Following a year-long bitter debate, the Democrat-controlled House of Representatives and Senate passed
the Affordable Care Act (ACA) without a single Republican vote. President Obama, on March 23, 2010, signed
the most significant health legislation since Medicare and Medicaid in 1965 (Morone, 2010). Although the ACA
was attacked as “socialized medicine” and a “government takeover of health care,” its policy pedigree
derives much more from the proposals of a Republican President (Nixon) and Republican Governor (Romney)
than from the single-payer national health insurance tradition of Democratic Presidents Roosevelt and
Truman. The pluralistic financing model of the ACA includes individual and employer mandates for private
insurance and an expansion of the publicly financed Medicaid program. Ironically, despite the ACA's close
resemblance to the Massachusetts Health Plan of 2006, Mitt Romney, the former Governor of Massachusetts
who supported and signed that state's reform bill, upon turning his sights to his candidacy for the
Republican nomination for the 2012 presidential election, called for repeal of the ACA.

In 2013, Mandy Must is uninsured and works for a small shipping company in Texas that does not offer health
insurance benefits. In 2014, if the ACA survives legal and political challenges, she would be required to obtain
private insurance coverage. Mandy earns about $35,000 per year, and in 2014 would receive a federal subsidy
of about $2000 toward her purchase of an individual insurance policy with a premium cost of $5000.

In 2013, Walter Groop works full-time as a salesperson for a large department store in Miami which does not
offer health insurance benefits to its workers. In 2014, he begins to apply for an individual policy to meet the
requirements of the ACA, but his employer informs him that the department store would start contributing
toward group health insurance coverage for its employees to avoid paying penalties under the ACA.

In 2013, Job Knaught has been an unemployed construction worker in St. Louis for over 18 months and,
aside from an occasional odd job, has no regular source of income. Because he is not disabled, he does not
qualify for Medicaid despite being poor. In 2014, Job becomes eligible for Missouri's Medicaid program.

The ACA has four main components to its reform of health care financing:

1. Individual mandate: Beginning in 2014, the ACA requires virtually all US citizens and legal residents to
have insurance coverage meeting a federally determined “essential benefits” standard. This standard
would allow high-deductible plans to qualify, with out-of-pocket cost-sharing capped at $5950 per
individual and $11,900 per family, in 2010 dollars. Those who fail to purchase insurance and do not
1/4
9/11/2019

qualify for public programs such as Medicaid, Medicare, or veteran's health care benefits must pay a tax
penalty which would be gradually phased in by 2016, when it would equal the greater of $695 per year for
an individual (up to $2085 for a family) or 2.5% of household income. Individuals and families below
400% of the Federal Policy Level are eligible for income-based sliding-scale federal subsidies to help them
purchase the required health insurance.

2. Employer mandate: Also beginning in 2014, employers with 50 or more full-time employees face a
financial penalty if their employees are not enrolled in an employer-sponsored health plan meeting the
essential benefit standard and any of their employees apply for federal subsidies for individually
purchased insurance. While this measure does not technically mandate large employers to provide health
benefits to their full-time workers, it functionally has this effect by penalizing employers who do not
provide insurance benefits and leave their employees to fend for themselves to comply with the
individual mandate.

3. Medicaid eligibility expansion: As discussed in Chapter 2, Medicaid eligibility has traditionally required
both a low income and a “categorical” eligibility requirement, such as being a child or an adult with a
permanent disability. Effective in 2014, the ACA eliminates the categorical eligibility requirement and
allows states to make all US citizens and legal residents below 133% of the Federal Poverty Level eligible
for their Medicaid programs. In 2011, 133% of the Federal Poverty Level was $14,484 for a single person
and $29,726 for a family of 4. The federal government pays states 100% of the Medicaid costs for
beneficiaries qualifying under the expanded eligibility criteria for 2014 through 2016, with states
contributing 10% a er 2016. The benefit package is similar to current Medicaid benefits.

4. Insurance market regulation: The ACA also imposes some new rules on private insurance. One of the first
measures of the ACA to be implemented in 2010 was a requirement that private health plans allow young
adults up to age 26 to remain covered as dependents under their parents’ health insurance policies. The
ACA also eliminates caps on total insurance benefits payouts, prohibits denial of coverage based on
preexisting conditions, and limits the extent of experience rating to a maximum ratio of 3-to-1 between a
plan's highest and lowest premium charge for the same benefit package. The ACA also establishes state-
based insurance exchanges to function as a clearing house to assist people seeking coverage under the
individual mandate to shop for insurance plans meeting the federal standards (Kingsdale and Bertko,
2010). The benefit packages offered by plans in the exchanges would vary depending on whether
individuals purchase a low-premium bronze plan with high out-of-pocket costs, a high-premium
platinum plan with low out-of-pocket costs, or the intermediate silver or gold plans. These regulatory
measures were deemed by many to be essential to the feasibility and fairness of an individual mandate.
For example, mandates cannot work if insurers may deny coverage to individuals with preexisting
conditions or steeply experience rate premiums. The insurance industry, for its part, balks at these types
of market reforms in the absence of a mandate, fearing adverse disproportionate enrollment of high-risk
individuals when coverage is voluntary.

The major coverage provisions of the ACA and their timeline for implementation are summarized in Table 15–
3.
2/4
9/11/2019

Table 15–3. Key Coverage Measures and Implementation Timeline for the Affordable Care Act of 2010

High-risk health insurance pools for individuals with no insurance due to preexisting conditions (2010)
Expansion of dependent coverage for young adults up to age 26 (2010)
Elimination of provisions that allow health insurers to cap lifetime benefits or deny coverage to children
based on preexisting conditions (2010)
Reductions of the coverage gap for prescription medications under Medicare Part D (2011, phased in through
2020)
Expansion of Medicaid to all individuals below 133% of the federal poverty level (2014)
Individual health insurance mandate (2014)
Subsidized health insurance exchanges for the uninsured to purchase insurance (2014)
Elimination of provisions that allow health insurers to deny coverage based on preexisting conditions (2014)
Requirement for employers with 50 or more employees to provide health care coverage or pay a penalty
(2014)

Source: Kaiser Family Foundation. Summary of the New Health Reform Law, available at
[Link]

If the ACA is implemented in its entirety, 32 million of the 51 million uninsured Americans are expected to
receive insurance coverage, an estimated 16 million through Medicaid expansion and 16 million through the
individual mandate (Kaiser Family Foundation, 2010). None of the coverage expansion measures would
benefit undocumented immigrants; they would not be eligible for federal premium subsidies under the
individual mandate nor for Medicaid except for emergency care.

The ACA is expected to cost $938 billion over 10 years, with most of the costs associated with Medicaid
expansion and individual mandate subsidies. The law is financed by a combination of new taxes and fees and
by cost savings in the Medicare and Medicaid programs. Individuals with earnings over $200,000 and married
couples with earnings over $250,000 would pay more for Medicare Part A. Health insurance companies,
pharmaceutical firms, and medical device manufacturers would pay yearly fees. Medicare Advantage
insurance plans and hospitals would receive less payment from the Medicare program. The Congressional
Budget Office estimated that the new law would reduce the federal deficit by $124 billion over 10 years,
though the CBO projection is not universally accepted.

In developing a proposal to expand coverage by building on the existing pluralistic funding model rather than
turning to a single-payer model, President Obama and his congressional allies successfully calculated that
they would be able to garner the political support of some powerful interest groups, such as the American
Medical Association and pharmaceutical industry, that had been stalwart opponents of health reform
proposals in prior eras (Morone, 2010). However, some conservative groups that opposed the ACA did not
relent a er the Act's passage, and the ACA has come under political and judicial threats since its enactment.

3/4
9/11/2019

One of the first acts passed by the House of Representatives in its 2011 session a er Republicans regained a
majority of seats in the House was repeal of the ACA. The ACA remained law because the Senate, with a
Democratic majority, did not vote to repeal. Republican Governors and Attorney Generals in many states filed
suits against the ACA, challenging the constitutionality of the federal government's mandating of individuals
to purchase a private product. In a June 2012 ruling, the Supreme Court upheld the constitutionality of the
individual mandate, but ruled that state participation in Medicaid expansion must be on a voluntary basis.
Because many states are not planning on implementing Medicaid expansion, more Americans will remain
uninsured than initially projected a er enactment of the ACA. 

McGraw Hill
Copyright © McGraw-Hill Education
All rights reserved.
Your IP address is [Link]
Terms of Use   •  Privacy Policy   •  Notice   •  Accessibility

Access Provided by: University of Michigan

Silverchair

4/4