Big Benefits could come from Small Changes to Flexible Spending Accounts

One little-known provision of the Affordable Care Act (ACA) surreptitiously penalizes a select group of people – employees who, or whose dependents, require significant levels of health care of types not covered by insurance. This group includes families with children who have certain types of special needs, people with Type I (“juvenile”) diabetes, people with disabilities, and even families with children requiring orthodontic treatment. Also affected are employees facing higher deductibles and co-payments – both of which are encouraged by other provisions of the ACA.

The Regulatory Burden of the Affordable Care Act

The Regulatory Burden of the Affordable Care Act

The Affordable Care Act (ACA) was signed into law nearly six years ago. Since that time, 106 regulations have been finalized to implement the ACA. These regulations will cost businesses and individuals more than $45 billion and will require approximately 165 million hours of paperwork in order to comply. In addition to these regulations, hundreds of guidance documents regarding the ACA have been published by various federal agencies during this time as well. However, more regulations—and additional costs—are still to come. Regulations for one of the most expensive and burdensome provisions of the ACA—the “Cadillac Tax”—have yet to be written. Guidance documents were published last year, but a final rule may not be published for a few more years given that the implementation date of the tax was recently delayed until 2020. The cost of each ACA regulation published so far has averaged $426 million and required 1.6 million hours of paperwork.

The Daily Dish

The problems of the Affordable Care Act’s (ACA’s) exchanges are well-chronicled. Remarkably, new problems continue to arise. Or, perhaps, not remarkably as the Obama Administration continues to let politics lead it to change the rules in midstream. As reported by the New York Times this past Saturday "Eager to maximize coverage under the Affordable Care Act, the Obama administration has allowed large numbers of people to sign up for insurance after the deadlines in the last two years, destabilizing insurance markets and driving up premiums, health insurance companies say.”

The Daily Dish

According to the Hill newspaper former Obama Administration Secretary of State and current presidential hopeful Hillary Clinton made the case about the damaging impact of the Affordable Care Act (ACA) on incentives for full-time employment: “Well that’s why they’re going to part-time, that and also the Affordable Care Act (ACA)…” This concern emanates from an unlikely source, but reflects the incentives created by the employer mandate to provide affordable health insurance and the ACA’s choice of 30 hours as the definition of full-time work. (These are concerns above and beyond the Congressional Budget Office’s (CBO’s) conclusion that the ACA has cost the U.S. economy 2 million jobs or, more generally, the CBO conclusion that "Repeal of the ACA would raise economic output, mainly by boosting the supply of labor; the resulting increase in GDP is projected to average about 0.7 percent over the 2021–2025 period.”)

The Daily Dish

Medicaid — the joint federal-state program to provide health insurance coverage to the low income and disabled populations — is now over 50 years old. The federal government pays from 50 percent to 74 percent of a state’s base Medicaid expenses; the fraction paid is known as the Federal Medical Assistance Percentage (FMAP). In addition, Medicaid expansions are a core part of the Affordable Care Act (ACA). In those states that opted to expand Medicaid (and 17 did not), the federal government is picking up 100 percent of the tab in the near term, and 90 percent of the expansion cost over the long term. The attention paid to Medicaid expansions likely also increased the enrollment of those already eligible for the base program — a phenomenon known as the “woodwork effect."

The Daily Dish

The recently elected government of Finland is proposing to write a monthly check of 800 euros (roughly $865) to every adult regardless of wealth, income, or employment status. This is a fascinating proposal from a number of perspectives. To begin, it gives people money; not food (food stamps), shelter (housing assistance), health care (health insurance) or some other item. Instead, they can use the money to buy the preferred amount of food, shelter, health insurance, or whatever. This is a much more efficient system. Indeed, one explanation of the U.S. reliance on in-kind benefits is that the very inefficiency is required to make the system painful, and thus to discourage fraudulent participation. The Finns are proposing to solve this in two ways. First, it is universal so there is no “welfare fraud.” Second, their system — like ours — is ferociously inefficient. Indeed CNN writes "The government thinks that the move will actually save money. Finland's welfare system is very complex and expensive to run, and the government hopes that simplifying it could reduce costly bureaucracy.”

The Daily Dish

I once had an academic colleague who wrote a paper on taxes and the timing of births. A baby born on December 31, 2015, for example, entitles the parents to one more dependent exemption in 2015. A baby born one day later on January 1, 2016 does nothing to reduce taxes in 2015 and has the same impact on 2016 and thereafter. The win goes to December 31. To the extent that the date of birth is controllable — e.g., planned c-sections — it would make sense to pick December 31 over January 1. Half of her paper was a theoretical justification for the timing of births being influenced by taxes, while the remainder was an examination of the data. If births simply happened randomly, one would expect an equal distribution across Sunday-Saturday. Sure enough, the birth statistics in the National Vital Statistics System (NVSS) showed a spike up in births on December 30 and 31and a corresponding valley on January 1 and 2. (There is also a relative valley on every Saturday and Sunday; Ob-Gyns like their weekends too.)

IPAB: Not the Solution to Health Care Spending Growth

Aware of the unsustainability of rising health care spending, policymakers have sought to implement myriad policies and programs aimed at reducing such spending growth. One such attempt is the Independent Payment Advisory Board (IPAB) authorized under the Affordable Care Act (ACA). However, IPAB’s statute limits its ability to achieve long-term success. For example, requiring all savings to be achieved in a single year will likely cause disruptive changes to the Medicare program. The restrictions imposed on IPAB leave it little authority to make changes except to Medicare Advantage (MA) and Part D—the only parts of Medicare that necessarily must work to improve care and reduce costs because of their competitive nature—or to provider reimbursement rates, which will likely restrict access to care. IPAB is not likely to be successful in sustainably reducing health care costs without having harmful effects on Medicare beneficiaries.

Still Marked by Uncertainty: 2016 Health Insurance Marketplace

Still Marked by Uncertainty: 2016 Health Insurance Marketplace

Nearly two years ago, the Affordable Care Act (ACA) implemented a new individual insurance marketplace, along with the promise of stability and affordability. The new individual marketplace was to rival that of the employer sponsored insurance (ESI) marketplace in stability and predictability, while premiums were to rise at rates much lower than the historical average.

Over Half of the ACA’s Co-Ops Have Failed in Just Two Years, and More Failures are Likely

Over Half of the ACA’s Co-Ops Have Failed in Just Two Years, and More Failures are Likely

The consumer operated and oriented plans (co-ops) created by the Affordable Care Act (ACA) were intended to provide consumers purchasing coverage in the non-large group marketplace an alternative from the traditional insurance companies. The co-ops set low premiums in order to attract customers, but in the first year of operation, all but four co-ops lost more than $1,000 per enrollee, with only one co-op (Maine Community Health Options) having a positive net income in 2014. Accordingly, 12 of 23 co-ops have collapsed so far, resulting in a loss of $1.23 billion of taxpayer funds, as these co-ops were initially seeded with federal loans. The financial losses thus far represent 63 percent of the total loans disbursed to the co-ops, and up to another $1.1 billion in tax dollars may be lost if the other co-ops experience the same fate. Given that the remaining co-ops had claims, on average, 26 percent greater than the income received in premiums in 2014, compared with a ratio of -19 percent for the co-ops that have failed to date, it should come as no surprise if more co-ops collapse in the future.

A Preliminary Assessment of the Cost of Health Insurance in 2016

As of November 1, open enrollment has officially begun, and with it, a lot of chatter about how the cost of health insurance has increased in 2016. When it comes to the cost of health insurance, premiums get the most attention as they are the most convenient tool for comparing and contrasting the cost of insurance from year to year. This paper aims to consider what is already known about the 2016 individual marketplace, and what it might mean for the landscape of the health insurance marketplace moving forward.

Higher Cost-Sharing in Exchange Plans Leads to Higher Overall Medical Spending, Relative to ESI Plans

Higher Cost-Sharing in Exchange Plans Leads to Higher Overall Medical Spending, Relative to ESI Plans

While the Exchanges established by the Affordable Care Act (ACA) have provided millions of individuals with a new outlet for obtaining health insurance, the result for many has been a false sense of health and financial security. As many reports have shown, the insurance provided by the Exchanges is not comparable to the plans typically offered by employers—the deductibles and cost-sharing requirements are higher and the networks are narrower. A new study examined the impact of the higher cost-sharing for prescription drugs on patients with chronic conditions. The findings show that such cost-prohibitive provisions result in patients taking and refilling fewer prescription medications, but consequently increasing spending for other medical services, resulting in a net increase in spending of $298 for individuals with 4 or more chronic conditions. The chart below shows the expected annual changes in health care spending for individuals with chronic conditions if they were to switch from an employer-sponsored insurance (ESI) plan to an Exchange plan.

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