As a result of its public and private health care coverage reforms, the Patient Protection and Affordable Care Act (ACA) will greatly increase access to affordable health insurance. This increased access will occur through the expansion of Medicaid programs (in states that choose to exercise this option) and enrollment in private health insurance through the enrollee’s state or the federal health insurance exchange. (See this chapter’s section Health Care Coverage: Private Insurance—Individual- and Employment-Based Group Plans.)
The ACA (as interpreted by the US Supreme Court) gives state Medicaid the option to cover uninsured adults between ages 18 and 65, with incomes up to 138 percent of the federal poverty level (FPL).
The exchanges provide individuals and small businesses with a new option for health coverage. To help make coverage sold through the exchanges more affordable, premium tax credits and cost-sharing subsidies are available for eligible individuals and families with incomes between 100 percent and 400 percent of the FPL. Individuals are required to have insurance coverage as of 2014, but there are exemptions for those who find coverage unaffordable, have income that is less than 100 percent of the FPL, or experience financial hardship. (For AARP principles governing health care reform, see the Principles sections in this chapter; in Chapter 3, Taxation; and in Chapter 8, Long-Term Services and Supports.)
Transitions to Medicare—subsidies for coverage through the health insurance marketplace do not extend to people eligible for Medicare. Unless a clear process is put in place for people making the transition from subsidized coverage to Medicare, those who have been receiving subsidies will be at risk for the full cost of their coverage and may face penalties if they do not enroll in Medicare when they become eligible.
Financing—it is important that all ACA reforms be adequately financed over both the short and long term. The ACA requires additional revenues to finance subsidies in the exchanges, Medicaid expansion, and other reforms in the act. The financing comes from a combination of savings—due to slower growth of Medicare costs—and revenue provisions. The additional revenues come from a number of measures, including changes to individuals’ tax deduction for health care expenses, increases in the Medicare payroll tax for high-income workers, a tax on net investment income for high-income taxpayers, fees on segments of the health industry, and a limit on contributions to flexible spending accounts. In addition, the law includes an excise tax on high-cost employer-sponsored health coverage. (See discussion in Chapter 3, Taxation: Tax Expenditures and Incentives—Taxing Employer-Provided Benefits; see also sections in this chapter, Health Care Coverage: Private Insurance—Individual- and Employment-Based Group Plans and, in the same subsection, Retiree Health Coverage.)
State Innovation Waivers—beginning in 2017, the ACA authorizes State Innovation Waivers that allow states to try innovative coverage reforms such as covering low-income people in the private insurance market rather than through traditional Medicaid. Waivers are allowed for up to five years, but states can request an extension. In order to be approved, waiver programs must safeguard the ACA’s existing coverage, affordability, and quality-of-care provisions.
States can apply to waive one or more of the following provisions:
- requirements related to qualified health plans (including the “essential health benefits” package),
- cost-sharing reductions,
- refundable tax credits,
- the individual minimum coverage requirement, and
- the employer shared-responsibility requirement.
The law has requirements to ensure the transparency of the waiver application process, for periodic state reporting on waiver program implementation, and for program evaluation. The law also establishes criteria against which requests for waiving ACA coverage provisions must be assessed.
States can fund their waiver programs, within statutory limits, by drawing on federal funding that otherwise would have been used for premium tax credits, cost-reduction payments, and small-business tax credits. States can submit a single application for a waiver of ACA requirements and a waiver of requirements of the Medicare, Medicaid, and the Children’s Health Insurance Program, as well as any other federal law relating to the provision of health care items or services.
Expanding Health Care Coverage: Policy
The federal government, in partnership with the states, should implement the policies enacted in the ACA that expand access to coverage and help make it more affordable. Where states do not implement policies, the federal government should use its authority to provide residents of those states with expanded coverage options authorized by the ACA.
AARP supports health care reforms that significantly improve access to adequate coverage for those who either are without public or private insurance or are at risk of losing coverage. Reform strategies to improve access may include:
- opening existing public health insurance programs (e.g., Medicare, Medicaid, and public employee benefit plans) or new public insurance programs to additional groups of uninsured people—coverage could be available on a buy-in basis or, depending on income, through the use of subsidies;
- developing health plans specifically for the uninsured;
- developing health insurance exchanges that expand access to affordable and portable coverage (available to individuals and employers) by negotiating with private insurers for packages of benefits and coverage that meet minimum coverage requirements;
- subsidizing through risk mitigation programs a portion of high health care costs insured by private plans;
- subsidizing the purchase of private coverage (e.g., through the tax system) for those who otherwise could not afford it;
- encouraging employers to offer health insurance to employees or to contribute to the cost of the health care system;
- encouraging individuals to enroll in available health coverage options; and
- continuing group health coverage at group rates for people whose access to group coverage is ending.
Any requirement that individuals have health coverage must also:
- be part of a set of policies that requires employers and government to bear their fair share of financial responsibility for health coverage and/or a health care safety net;
- ensure that options providing adequate coverage are both available and affordable, so as to prevent people from being unable to afford care despite their coverage; and
- not impose a penalty on individuals who cannot afford coverage.
Transitions to Medicare
To facilitate transitions to Medicare, federal policymakers should require timely, clear notice to people insured through the health insurance marketplace and receiving subsidies who are approaching Medicare eligibility. The notice must inform them that their subsidies will end when they are eligible for Medicare, and explain the process for making a smooth transition to Medicare before their subsidies end. (See this chapter’s section Health Care Coverage: Medicare.)
Proposals to extend Medicare or other federal coverage to older adults who are not yet eligible for Medicare should:
- include sufficient subsidies to make coverage affordable to low-income individuals who are unable to afford the full premium and cost-sharing;
- not affect the financial stability of Medicare or other federal programs as currently configured; and
- protect against the erosion of existing employer-sponsored coverage.
Private market reform
Reforms that rely on expansion of private coverage must ensure that affordable and adequate coverage is accessible to all individuals targeted by the expansion, regardless of health or age. Reform of market rules is a necessary component of coverage expansion (see this chapter’s section Health Care Coverage: Private Insurance—Individual- and Employment-Based Group Plans).
Tax policies that relate to health coverage, health savings, and health spending should be evaluated in the context of fiscal policy as well as that of health policy (including objectives, priorities, and equity).
Tax incentives to support the purchase of private health coverage should:
- give priority to groups that are currently without coverage and are not benefiting from current tax incentives;
- adjust incentives to recognize the high cost of private-market coverage for people who are older, have health problems or histories of poor health, and have low incomes;
- include assistance for those who earn too little income to pay taxes and who may have insufficient resources to pay premiums out-of-pocket during the tax year;
- guarantee access to policies in the private market that offer adequate coverage;
- not single out one type of product; and
- conform to AARP’s taxation principles.
State Innovation Waivers
All consumers should receive coverage and care that is at least as good as that required for policies offered through health care exchanges.
Budget neutrality should not be achieved by weakening existing coverage requirements.
State Innovation Waiver applications must comply with the coverage, quality, and affordability requirements established by Section 1332 of the ACA. To qualify for a State Innovation Waiver, the state application must establish that its reform plan would provide coverage that:
- is at least as comprehensive as ACA coverage,
- is at least as affordable as ACA coverage,
- covers at least as many residents as the ACA would have covered, and
- will not increase the federal deficit.
Federal and state governments must comply with the public accountability and transparency requirements established by Section 1332 of the ACA.
State public notice and comment process, the post-award public forum, and the draft and final annual reports (which track affordability, comprehensiveness of coverage, the number of people covered, and the impact on the federal deficit) must be published on a state’s public website.
Waiver applications that integrate waiving ACA provisions under Section 1332 with waiving Medicare and/or Medicaid provisions must align with the relevant AARP policies for those programs.