|"We do not consider whether the Act embodies sound policies. That judgment is entrusted to the Nation's elected leaders. We ask only whether Congress has the power under the Constitution to enact the challenged provisions." ---Chief Justice John Roberts, writing for the majority in HHS v. Florida|
Now that the U.S. Supreme Court has upheld the Affordable Care Act almost entirely, states, insurers, employers, providers, hospitals and pharma have a great deal of work to do.
The court, in a 5-4 majority, held that Congress has the power to levy a tax on those who do not carry health insurance, and upheld the ACA's transformative insurance reforms entirely. The ruling's single major effective change to the ACA and a major one for states, hospitals, Medicaid plans, and the working poor is that states can decline to expand their Medicaid programs without losing their existing Medicaid funding.
The key language of the ruling is this:
We'll leave it to the constitutional scholars to praise the Court's judicial restraint, pick apart the legal reasoning, or analyze each justice's motives.
The bottom line for the healthcare business is that there's no going back: beginning in 2014, millions of Americans will have guaranteed access to healthcare coverage regardless of their preexisting conditions, and will have to pay a tax if they opt not to carry coverage. This transformative health policy can now only be undone by Congressional action and presidential assent.
So what now?
States are on the hot seat. The Supreme Court's action means states must now decide whether to expand their Medicaid programs with 100 percent federal funding in the first years to virtually all uninsured legal residents with incomes below 133 percent of the poverty level. An estimated 16 million to 20 million people are in this category, and virtually everyone in the healthcare industry benefits from their having coverage.
State legislatures nationwide will decide on Medicaid expansion next year, with many conservative states likely to keep the status-quo or even reduce Medicaid eligibility, despite the 100 percent federal funding for the expansion population.
It may not seem rational for a state to deny Medicaid coverage to citizens if the feds are picking up the entire tab, but states are wary that the federal support could get cut and they'd be on the hook for the added cost.
Hospitals in conservative states have good reason to worry. Perhaps more than any other healthcare constituency, hospitals have the most to lose if their state refuses to expand the Medicaid program as called for in the ACA. Expanding coverage to include the working poor reduces hospitals uncompensated care and reduces hospitals need to shift those costs to insurers. After the ruling, the National Association of Public Hospitals and Health Systems pointed out that in the 26 states that participated in the federal lawsuit, more than 27 million people have no insurance and many who would have been eligible for Medicaid in 2014 might no longer have that option.
Pharma and Medicaid MCO health plans should worry as well. Pharma and Medicaid plans stand to benefit if this mostly-adult population has Medicaid coverage.
In Texas alone, nearly 2 million uninsured people stand to qualify for Medicaid under the expansion, and Texas newly-contracted Medicaid MCOs were relying on that influx of membership when they made their bids. Generally, the politically conservative red states who are most likely to decline Medicaid expansion are also the ones with the strictest Medicaid eligibility and the greatest numbers of uninsured poor.
Insurance limbo in non-expansion states It is not clear whether those under 133 percent of poverty in the non-expansion states would be allowed to qualify for exchange subsidies, or would be exempt from the federal tax if they could not afford to purchase insurance for themselves.
Exchanges may have to be delayed. Most states are woefully behind on their preparations for the healthcare exchanges called for in the ACA, and more than 20 have not yet acted to create an exchange. Exchanges are the virtual insurance marketplaces set up to help uninsured people determine their eligibility for Medicaid or for premium subsidies, and then help them choose a standardized insurance package from among various options. Under the law, states that fail to enact a state-run exchange would have a federally run one in its place. But HHS officials now admit they don? t have the resources and time to create so many exchanges at once.
The states likely to have exchanges ready to go in January 2014 are Maryland, California, Utah, Connecticut, Hawaii, Minnesota, New York, Oregon, Washington and Vermont. Massachusetts, of course, has had its exchange in operation since 2006. States that have done little or nothing include all of the southern states, Texas, Kansas, Pennsylvania, North Carolina, Ohio, Wisconsin.
The mandate is really just a tax, legally speaking. Some argue that many uninsured Americans will choose to pay the federal tax (something for nothing) rather than purchasing insurance (something for health coverage). Fortunately for the health plan industry, most Americans are smarter than that. In Massachusetts (home of Romneycare, lest we forget), very few of its citizens have opted to pay the tax rather than purchase coverage. According to Massachusetts Health Connector officials, only 1 percent of filers were assessed a penalty in 2010.
The real game-changers are still the measures preventing sick people from being denied or charged more for insurance coverage. In 2014, individuals and small businesses that had been effectively shut out of the insurance market will be able to purchase coverage, many with the help of premium subsidies. Affordable coverage options will likely include high deductibles and substantial cost-sharing that will inhibit utilization somewhat, but they will have meaningful health coverage.
Insurers will continue to invest in care coordination to effectively manage risk. Because the ACA makes it harder for insurers to avoid covering the sick, insurers will accelerate their investments in identifying high-risk patients and making sure they get cost-effective care and stay on their medications. Insurers who do this well will profit in the post-ACA environment.
Consolidation will continue among health plans, hospitals. With the Supreme Court challenge removed, expect another flurry of health plan and hospital consolidations, accountable care organization announcements, and collaborative agreements as providers and insurers prepare for 2014.
Politically, the ACA is as strong as the sum of its parts. With the coverage mandate upheld, the other more popular provisions of the ACA will be very difficult to tear down politically, short of a GOP juggernaut in 2014. Strong popular support exists for guaranteed issue, for copay-free preventive care, coverage of children on parents policies until age 26 and coverage of children with pre-existing illness.
In August, $1 billion reasons to like the ACA. In August, the insurance industry will mail out roughly $1 billion in ACA-required rebate checks to insurance purchasers, effectively reminding them that they were overcharged for their health insurance in 2011. That will bolster public support for controls on premiums.