- Obamacare introduced key changes to health coverage in the United States.
- Congress and the Trump Administration tried to address particular issues with Obamacare after the failure of its repeal.
- Alternative paths to health coverage and the continued impact of litigation and state responses to the federal activity, including requests for waivers that would permit states to best tailor the Obamacare framework to their particular circumstances, are examined in this first in a series of articles on this topic.
Introduction. The Patient Protection and Affordable Care Act and related statutes passed in 2010 (collectively the Affordable Care Act or ACA) created a complex but comprehensive approach to closing gaps to availability and affordability of major medical coverage. The ACA was passed by a Democratic majority in Congress and signed into law by President Obama. Although the health care and health insurance industries came to the negotiating table and impacted the final version of the bill, Republicans almost unanimously opposed the bill in Congress and have continued to oppose key parts of it.
With both a Republican administration and Congress beginning in 2017, efforts began almost immediately to repeal the ACA, but the law has remained resilient, and efforts to completely repeal the law have been unsuccessful. Over the course of 2018, more Republicans expressed support for the law’s popular ban on preexisting conditions. It is not clear, however, what cost and risk-pool protections would go in place to help offset the added costs to insurers of covering high-risk individuals and high-risk preexisting illnesses in lieu of those in the ACA. One of the key tools to offset added risk to the preexisting condition ban in the ACA is the individual mandate to purchase coverage or face a tax penalty. As will be addressed in later parts of this three-part series, in late 2017, Congress reduced the penalty to zero, and on Friday, December 14, 2018, a Texas federal judge struck down the law in its entirety based on Congress no longer exercising its tax power. Although the judge stayed his own ruling on December 30 and his ruling will not be enforced while it is appealed, the ruling opens the possibility that the entire law, including the preexisting condition ban, will be struck down by the courts, leaving a divided Congress and individual states to pick up the pieces.
In this first abstract of a three-part series, we first briefly discuss laws governing comprehensive health care before the ACA and then discuss the key changes introduced to health coverage in America by the ACA. We then discuss efforts by Congress and the Trump Administration to address particular issues with the ACA after the failure of repeal and also alternative paths to health coverage and the continued impact of litigation. Finally, we discuss state responses to the federal activity, including requests for waivers that would permit states to best tailor the ACA framework to their particular circumstances.
Healthcare coverage in the pre-ACA era. Prior to implementation of the ACA, there were gaps across the country in availability and affordability of health care. Insurance is primarily regulated by the states, and state laws varied in their requirements related to comprehensive healthcare coverage. The federal HIPAA portability laws passed in the 1990s made employer-based coverage available with no preexisting-condition exclusions to small employers, and made insurance portable among all employers. Portability applied to carriers offering coverage to employers and also applied to most employers who self-funded coverage.
HIPAA did not prohibit carriers from denying coverage to large employer groups as a whole or applying minimum requirements based on a percentage of employees participating or based on a percentage of premium contribution paid by the employer. Although small-group coverage was guaranteed issue, small group premiums could be high based on a group’s risk score and limited restrictions on small-group rating.
Coverage gaps persisted in the individual market as well. States were permitted, but not required, to prohibit carriers from excluding individuals based on preexisting conditions, and most states did not do so. Instead, consistent with HIPAA, most states created risk pools that acted as insurers of last resort in the individual market and allowed carriers to wholly or partially deny coverage to individuals. Such individuals could then purchase coverage in risk pools, but coverage was expensive, there were very few subsidies or other mechanisms to lower the cost of coverage, and coverage often was subject to a waiting period. About one-fifth of Americans remained uninsured.
The ACA and some of its key provisions. The following describes some of the most impactful components of the ACA:
- Preexisting condition exclusions prohibited. Under one of the most comprehensive changes of the ACA, a health insurance issuer may not deny or limit coverage based on preexisting-condition exclusions. See 45 C.F.R. § 147.108. The prohibition against preexisting-condition exclusions applies in all markets offering comprehensive health coverage—individual, small and large employer group insured coverage, and self-funded employer coverage.
- Allowing dependents to stay on plans until age Another popular provision of the ACA, this also applies to all forms of employer health coverage (individual, small-group insured, large-group insured, and self-funded). See 45 C.F.R. § 146.120.
- Essential health benefits. The ACA requires that 10 essential health benefits (EHBs) be offered by carriers in individual and small employer health plan markets, and has eliminated any annual or lifetime benefit limits on these In each state there is a benchmark plan to help establish the parameters of these benefits. See 45 C.F.R. § 156.100. The mandate to offer EHBs does not apply to large group health plans or self-funded employer plans, but to the extent that these plans offer EHBs, they must do so without annual or lifetime benefit limits on the EHBs. See 42 U.S.C. § 300gg-6; 45 C.F.R. § 147.150.
- Key individual and small employer group reform. The ACA created either state-based or federally facilitated marketplaces in which individual consumers and small employers can shop for and purchase coverage that contain a variety of more standardized benefits from rich to less robust. Both in and out of these marketplaces, individuals and small employer groups are subject to modified community rating, with the only permissible rating factors including geography, tobacco use, and age.
- Individual mandate. Beginning January 2014, individuals had to maintain minimum essential health insurance coverage, qualify for an exemption, or pay a penalty (upheld by the U.S. Supreme Court as constituting a tax). See 26 U.S.C. § 5000A; NFIB v. Sebelius, 567 U.S. 519 (2012). Exemptions are primarily income-based, but there are also several other exemptions, including religious-based exceptions and exemptions based on being out of the country, incarcerated, or uninsured for no more than three months. The late-2017 changes to the penalty portion of this law by Congress and the recent court decision upending the entire ACA based on that change will be discussed in future parts of this abstract.
- Large employer ACA-related taxes. Another way the ACA seeks to ensure coverage is through a tax on a large employer that does not offer ACA-compliance health coverage and any of its full-time employees report a premium tax credit on their individual income tax returns for health insurance they purchase through a state-based or federal marketplace. Calculations are complicated, but employers must offer minimum essential coverage and coverage at or above a minimum value. The IRS notifies large employers who appear to be out of compliance and the amount of the tax penalty based on the noncompliance. The large employer has an opportunity to respond before payment is made.
- Reduction of the number of uninsured through Medicaid expansion. Although the Supreme Court in NFIB ruled that states must be allowed to opt out of Medicaid expansion, 37 states now are or soon will be participating in expanding Medicaid to 138 percent of the FPL with an enhanced federal match. See the Kaiser Family Foundation interactive map on the status of Medicaid expansion, which has dramatically reduced uninsured rates in some states.
- Medical loss ratios. The ACA limits what carriers can spend on administrative costs versus spending on claims and quality improvement measures. In the individual and small-group market, insurers must spend at least 80 percent on claims and quality improvement, and in the large-group market, insurers must spend at least 85 percent on claims and quality improvement. If carriers fail to meet these benchmarks, insureds receive premium rebates.
- Risk adjustment mechanisms. The ACA also built in buffers against the added risk that carriers had to accept because of the ban on preexisting-condition exclusions. The risk adjustment mechanisms are complicated, but include payments from plans with lower-risk individuals to plans with higher-risk individuals to help lessen the impact of the higher claims costs.
Coming up in part 2 of this series: Results of ACA Implementation and Trump Era Rollbacks.
 The ACA regulates “major medical,” or comprehensive health coverage, which is coverage that typically provides preventive care and coverage for illness (including mental illness) and injury, along with prescription drugs. The ACA does not govern supplemental health coverage, such as cancer indemnity plans or hospital indemnity plans.
 In most states, “small employer” means no more than 50 employees for the purposes of state and federal law. In some states, a “small employer” means up to 100 employees. Large employers are any employers larger than small employers.