A new report issued by The Commonwealth Fund this month highlights some of the challenges – and possible solutions – that will arise as we move forward with implementation of the PPACA. The report, titled Realizing Health Reform’s Potential – Maintaining Coverage, Affordability, and Shared Responsibility When Income And Employment Change, discusses the issues that can stem from the fact that many of the health insurance coverage solutions that will be part of health care reform (and indeed, that are part of how our pre-reform health insurance system works too) are based on each individual’s employment situation and income level, both of which can change suddenly.
One of the provisions of the PPACA is to subsidize health insurance premiums for families earning less than 400% of the federal poverty level. That’s $89,400/year for a family of four, so a huge number of families will receive at least some subsidy to help cover the cost of health insurance once the exchanges are up and running. Rather than have people pay the full price for their coverage and then get reimbursed later, the government has devised a system to allow the subsidies to be sent to the exchanges in advance, so that people pay only the non-subsidized portion of their premium each month. But the problem with that system is that the subsidies will be determined based on the most recent tax return that a family or individual has filed. For 2014 subsidies, that means that data would be pulled from tax returns that were filed in April 2013 – for tax year 2012. So when the premiums have to be paid in 2014, the amount a family would be responsible for would be determined based on what their income was in 2012. For people who have very stable incomes, this wouldn’t be a problem. But people with less stable incomes, including a lot of self-employed folks, there could be a lot of changes in income over a two year period. Jay and I have been self-employed for nearly a decade now, and I know that our income has varied quite a bit over that time. I think that’s true of a lot of self-employed people. And as the report points out, it’s also especially true for low income earners (see the chart on page 6), who are most likely to need the subsidies to be able to afford health insurance.
The report poses a few possible solutions, including proving extra support through the exchanges to help people understand the subsidy system if they have recently experienced (or expect to experience soon) a change in income, employment, or family situation. In addition, the report advises that the government should err on the side of giving people too large a subsidy rather than the other way around.
Although Medicaid eligibility will be expanded under the PPACA, with far more people covered by Medicaid, the report also looks at the problems that could arise as eligibility changes from one year to the next for families with incomes on the border of eligibility. The authors recommend “simplified eligibility rules, administrative streamlining, and outreach…” in order to make sure that all eligible individuals are enrolled in Medicaid and child health plan programs, and to minimize the amount of time that families are without coverage as they transition from government health insurance to private coverage in the exchanges and vice versa. They also recommend that there should be coordination between the systems that determine eligibility for Medicaid (and other government-run health insurance programs) and eligibility for private health insurance premium subsidies. That way, people are less likely to fall through the cracks if they have a change in eligibility from one year to the next.
The report also recommends that the private exchange pools should be made as large as possible, combining small business and individuals in one unified exchange. The idea is that this would help to ease the transition difficulties that people will otherwise face when they go from needing to purchase individual health insurance to being covered by a small employer plan, or the other way around.
Page 13 of the report includes specific details on the practicality of how each of the recommendations could be implemented, whether through federal regulations as part of the implementation of the PPACA, state regulations, or new federal legislation (most of the recommendations would not require any new federal legislation).
I’m glad to see this report, and hopefully some of the issues it raises will be addressed over the next few years as we set up the implementation procedures for health care reform. Although it sounds simple enough to just say that we’re going to expand Medicaid eligibility and subsidize health insurance premiums (on a sliding scale) for most Americans, such a program will actually be fraught with complications. Income and job changes are a pretty common fact of life, so subsidy eligibility is likely to change from one year to the next. There’s no simple answer to all of this. We’re trying to create a somewhat universal health insurance system based on a conglomeration of government-run health insurance, private coverage from hundreds of carriers, eligibility for coverage that is tied to employment and state of residence, and also based on income levels… of course it’s going to get complicated. Hopefully the suggestions raised by this report will help to guide regulations that will ensure health insurance coverage that is as gap-free as possible for most Americans.