Untangling the Affordable Care Act

Vol. 21 No. 2


Hannah Hayes is a Chicago-area freelance writer.

For SCOTUSblog, the highly respected U.S. Supreme Court news site, June 28, 2012, will go down in history as the legal bloggers’ “Super Bowl,” according to founder and legal analyst Tom Goldstein. As the country waited for the ruling on the constitutionality of the Patient Protection and Affordable Care Act, SCOTUSblog registered more than 500,000 simultaneous readers.

Litigated as one of the most watched cases in Supreme Court history, what is commonly referred to as the Affordable Care Act (or ACA) impacts the healthy as well as the ill, large and small employers, insurance companies, hospitals and other health care providers, and all levels of government.

It also impacts lawyers across practice areas—from general counsels for large industries to sole practitioners advocating for consumers. The original Act weighed in at 2,409 pages, and if that isn’t enough to digest over morning coffee, clarifications and regulations over the past two years have added thousands more.

“It’s not exactly bedtime reading,” observes Mark Rust, managing partner in the Chicago office of Barnes & Thornburg LLP and chair of the firm’s national health care department. Rust points out that in addition to the law’s depth and complexity, the November elections added a shadow of uncertainty.

“But even if there were no elections, this law is still entering new territory,” he adds. “We’re going into a no man’s land with employers making decisions about whether to get out or apply for subsidies or go to the available exchanges. Providers, whether it’s a physician or not-for-profit are asking ‘how can we do what we do best and bring in the most revenues?’ ”

As the changes laid out in theplan’s five-year time line unfold, CLEs are popping up regularly and government-sponsored seminars are attempting to discern the effects on employers, providers, consumers, insurers, and other areas.

Providers Adjust and Anticipate

Rust represents large health care providers such as radiology and cardiology groups, multispecialty clinics, hospitals, and managed care organizations like HMOs. This year, the changes in Medicare have most affected the hospitals and service providers he represents. “They have the ACA in front of them, they’re digesting it and reacting to it, and for most providers it means a reduction in payments.”

The wide-sweeping changes in Medicare reimbursement fueled much debate in the presidential election. The health law changed who gets reimbursed for various services, with further reductions for poor-quality care. For example, if a hospital has repeated readmissions for certain conditions or an excessive number of high-cost procedures, it could be penalized.

“Providers are trying to figure how to be the most productive once the Act is fully implemented, but it’s such an ongoing process,” Rust says.

In addition to lowering rates and instituting penalties for inefficiency, the law offers incentives such as reducing hospital-acquired conditions and implementing more integrated health care delivery systems.

One option under the Act is the formation of an accountable care organization (ACO). An ACO is a network of doctors and hospitals sharing responsibility for providing care and managing all health care needs of a minimum of 5,000 Medicare beneficiaries for at least three years. Providers would focus on prevention and steady care with incentives for keeping patients healthy.

However, much of the frustration experienced by providers is the lack of clarification for provisions like ACOs. Rust says planning is made difficult for providers by the uncertainty surrounding Medicaid expansion and not knowing which states will opt out. “Some states have said they are opting out,” he explains, “but as of yet there is no formal procedure because the government didn’t anticipate this [aspect of] the Supreme Court decision.”

Insurers Scramble to Comply

For the legal department at Blue Cross Blue Shield of Louisiana, “it has been all go” since the law passed on March 23, 2010, according to Michele Calandro, senior vice president and general counsel. “We knew and anticipated the challenges to the reform law and thought that it would eventually end up at the Supreme Court, but the outcome really became impossible to predict.”

Calandro points out that due to the law’s complexities, her company could not afford to wait. “We respected the fact that it was the law, and we kept our eye on the compliance,” she says.

The legal department tackled the new legislation by breaking it up and assigning staff members a topic, making them subject experts on a given area of the law. For insurance companies, the law includes aggressive time lines that presented financial and operational challenges if the required reforms were to be implemented on time. “We needed computer systems to implement a lot of the changes, and the required skill set as well as money—it was just huge,” Calandro says.

Timely implementation of many of the ACA provisions has proved as challenging for insurers as it has for providers. For example, the Act included a grandfather clause that allowed employers to keep their insurance plans if it suited them. Interim guidelines proved too restrictive, and further mandates developed down the line. “It basically doubled our workload in terms of writing two policies and then tracking the changes system-wide,” Calandro says.

“It’s been a big challenge—the devil’s in the details,” she continues. “In a sense, there are opportunities to get into other markets with Medicaid and the uninsured, but it’s really hard to project.”

Employers Debate Choices

Businesses large and small must decide what the ACA means for them and their employees. Laura Sanborn of Choate Hall & Stewart LLP in Boston has been assisting employers with implementation of the ACA’s provisions. Although some employers have taken a wait-and-see approach, Sanborn says many employers have been up to speed for quite some time, working with consultants about underlying issues and being proactive.

Sanborn also sees many employers coping with the regulations and issues as they come down the pipeline. For example, under the ACA, health insurance companies must spend 80 percent of their revenues from premiums directly on health care services. This medical loss ratio component of the law meant individuals and employers have received rebate checks.

However, employers were not sure what to do with the rebate checks they received from insurance companies. The checks could be considered plan assets, but Samborn says many companies did not know whether they should be distributed to employees until the U.S. Department of Labor and the Internal Revenue Service issued guidelines.

Sanborn points out that the law often crosses government departments. “Many regulations have been issued jointly by the Departments of Labor and the Treasury and Health and Human Services. Other times entities publish the guidance themselves.”

Overall, Sanborn, who represents primarily midsize to large businesses, ensures that some employers are doing strategic planning in anticipation of future changes while working with their insurers to comply with the changes as they take effect.

Small businesses have new requirements as well as options. Although the law requires employers with 50 or more full-time employees to provide benefits, these businesses also will see an increased tax credit. Small businesses have incentives to provide insurance, and businesses will be able to purchase employee plans on the exchanges scheduled for launch in 2014 (see ACA Time Line on page 7).

“There has been some very recent and specific guidance around how employers were counting the number of employees to see if they were subject to employee shared responsibility,” Sanborn says. “It’s a 2014 requirement, but it’s obviously going to take some planning.”

Protecting and Educating the Consumer

Even as the law’s complexities unfold and clarification continues, opportunities abound from the increased numbers of people who will have health care coverage. Susan Loeb is a lawyer and claims advocate based in Chicago. “From a consumer standpoint, there’s no question that it’s a complicated law,” says Loeb, who points out that the people most often learn about health insurance when it gets taken away. “It’s a rude awakening, and basically what I do is educate people about their options.”

Loeb has also seen the ACA change as it unfolds. For example, while the law will eventually cover adults with preexisting conditions, right now it only covers children with such conditions. Loeb has a client where both parents and a child were denied because of preexisting conditions. “Up until now there were no policies for children only; they had to be attached to their parents’ policy, but the parents were denied.” Eventually Blue Cross Blue Shield unrolled a plan for children, but it took a while for companies to catch up to the law.

Loeb explains that considering all of the changes, she has to know how new regulations interact with existing plans. “You can’t just look at it in a vacuum.” She foresees many transitional issues changing the playing field for plans such as COBRA. For example, she asks, will a laid-off employee be better off with a grandfathered plan or a new plan?

“I’m telling clients between now and 2013 is what we have to worry about,” Loeb says. “A lot of these things we’ll have to revisit in 2014.”

Looking Ahead

Many health law experts believe the ACA will qualitatively improve women’s lives (see sidebar on page 5). While the challenges are many and the law will undoubtedly take years to unfold, Kathleen Scully-Hayes says many portions of the ACA “are going to be life-changing.” Hayes-Scully is an administrative law judge for the Social Security Administration and chair-elect of the American Bar Association’s Health Law Section. She spent 18 years as a general counsel for the federal Centers for Medicare and Medicaid Services.

“I’ve spent an awful lot of my life looking at people who have been devastated by life-threatening diseases,” she says. “Many people have worked their whole lives and suddenly something is wrong and not only are they not able to work, but they don’t have insurance coverage.”

While the ACA directly impacts these people, many sectors affected by the law remain on the sidelines or look with uncertainty to 2014. The Supreme Court ruled that states will be able to opt out of the ACA’s Medicaid expansion. As of this fall, many states have remained silent on their intentions. States also have to determine whether to run their own health insurance exchanges, partner with the government, or opt out to leave the federal government to run the exchange.

“This presents tremendous challenges as far as the states are concerned,” Scully-Hayes says. Further, the uncertainty is heightened for companies in states that have not made their decision.

The challenge for lawyers will be to recognize that ACA-related issues will most likely find their way into many practice areas. “Most attorneys are very busy and don’t like to spend their time looking at the various ‘what ifs,’” Rust says. “A lot of people will wait for it to be ironclad and then get themselves up to speed. We’re not quite there yet.”

Affordable Care Act Time Line

On March 23, 2010, President Barack Obama signed the Patient Protection and Affordable Care Act into law. Many of the reforms have received widespread attention, but many others have been under the radar. What follows is a brief summary of highlights for each year of the Affordable Care Act (ACA); for a more complete time line, visit healthcare.gov, a federal government website managed by the U.S. Department of Health and Human Services.

2010 (26 of 26 provisions in effect)

Consumer Protection. The ACA placed new rules on premium increases and gave consumers new rights to appeal insurance company decisions. Barred insurance companies from refusing to cover children with preexisting conditions, from dropping coverage for people who get sick, and from placing lifetime limits on coverage.

Expanded Coverage. Allowed children to stay on their parents’ policies until age 26. Provided a $250 rebate for seniors who reach the Medicare prescription “donut hole” and coverage for adults with preexisting conditions.

Small Businesses. Provided tax credits for small businesses to cover employees.

2011 (17 of 20 provisions in effect)

Consumer Protection. Required insurance companies to spend 80 to 85 percent of premiums on medical care. Provided free preventive care under Medicare and half-priced brand-name prescription drugs for seniors in the Medicare “donut hole.”

Small Businesses. Provided grants for employee wellness programs and help for employers offering coverage for early retirees.

Health Care Providers. Provided incentives for physicians to join together to form accountable care organizations. In these groups, doctors can better coordinate patient care and improve the quality of care, while reducing unnecessary hospital admissions by preventing disease and illness.

Addressing Health Disparities. Health programs must report racial, ethnic, and language data to help identify and reduce disparities.

2012 (9 of 11 provisions in effect)

Electronic Recordkeeping. To reduce paperwork, costs, and medical errors, billing will be standardized and health plans will begin adopting rules for the secure electronic exchange of health information.

Value-Based Purchasing. Hospitals are offered financial incentives to improve the quality of care.

2013 (5 of 15 provisions in effect)

Preventive Health Care. To expand preventive care, new funding will be available for state Medicaid programs that choose to cover preventive services for patients at little or no cost. States will pay primary care physicians the full Medicare payment rates for primary care services.

Bundling Payments. A national pilot program paying providers flat fees for an episode of care will attempt to encourage hospitals, doctors, and other providers to work together to improve the coordination and quality of patient care and reduce costs.

Children’s Health. States will receive two additional years of funding to continue coverage for children not eligible for Medicaid.

2014 (2 of 16 provisions in effect)

Affordable Insurance Exchanges. Starting in 2014, if an employer does not offer insurance, individuals will be able to buy directly in an affordable insurance exchange. An exchange is a new insurance marketplace where individuals and small businesses can buy health plans that meet benefits and cost standards.

Individual Responsibility. Most people who can afford health insurance will be required to obtain basic health insurance coverage or pay a fee to help offset the costs of caring for uninsured Americans.

Expanding Access to Medicaid. Low-income individuals and families will be eligible to enroll in Medicaid, and states choosing to adopt the expansion will receive federal financing to offset almost all costs of covering newly eligible individuals and families.

Making Coverage Affordable. Some workers who can’t afford their employer’s coverage will get help buying coverage through the exchanges. Tax credits will help the middle class afford insurance if they are not eligible for other affordable coverage. Individuals also may qualify for reduced cost-sharing.

Ending Discrimination. Insurance companies will be prohibited from refusing to sell or renew coverage because of preexisting conditions and from charging more because of gender or health status.

Small Business Tax Credit. The small business tax credit is raised as well as a credit for small nonprofit organizations.

2015 (0 of 1 provision in effect)

Tying Payments to Value. Physician payments will be tied to the quality of care they provide.

Source: Adapted from healthcare.gov, the Henry J. Kaiser Family Foundation’s Health Reform Source (healthreform.kff.org), and the AFL-CIO Affordable Care Act Time line (www.aflcio.org).

Women and the Affordable Care Act

When the U.S. Supreme Court upheld the majority of the Affordable Care Act (ACA) on June 28, 2012, Marcia Greenberger, copresident of the National Women’s Law Center (NWLC) in Washington, D.C., announced that “being a woman is no longer considered a preexisting condition.” NWLC submitted an amicus brief in support of the ACA, citing the sex discrimination in the health insurance and health care markets.

A 2010 report by New York–based Commonwealth Fund, a private foundation focusing on health care, found that women had higher out-of-pocket medical expenses than men, were less able to afford care because of low wages, and were more likely to declare bankruptcy because of medical expenses. Women also were more likely to be carried as dependents on medical insurance, making them more apt to lose coverage if they divorced or their spouses lost their job.

The Planned Parenthood Federation of America, Inc., called the ACA “the single biggest advancement in women’s health in a generation.” According to Planned Parenthood’s website, 45 million more women are now receiving preventive care without copays since the law passed in 2010. Highlights of ACA provisions that specifically affect women include

  • Preventive screenings, well-baby care, and contraception. New insurance plans must cover well-women visits, screenings for domestic violence, breastfeeding supplies, contraceptive services, mammograms, cervical cancer screenings, prenatal care, flu and pneumonia shots, and regular well-baby and well-child visits.
  • Better care for senior women. The ACA addresses the current cap on Medicare-covered prescription drug copays and lays the groundwork for improved quality of senior care and screenings.
  • An end to gender discrimination in health care premiums. Insurance companies will not be able to charge patients more based on health status or gender. Under the current system, 31 states charge men and women differently for the same services, according to NWLC.
  • More benefits for pregnant women and new mothers. Maternity care will be included in all plans, and nursing mothers will be given mandated breaks and private places to pump breast milk while at work.

For more information, visit the National Partnership for Women & Families at www.nationalpartnership.org or the Commonwealth Fund at www.commonwealthfund.org.


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