Implementation of the ACA: Turning federal law into state-level reality

The Affordable Care Act (ACA), P.L. 111-148, was signed into law in 2010 with the goal of lowering the number of uninsured Americans while reducing the cost and improving the quality of health care. Before its passage, the ACA was a divisive and partisan-driven piece of legislation, and it became even more so after its enactment. The U.S. Supreme Court upheld the constitutionality of most of the law in 2012 but made Medicaid expansion voluntary for the states. Although it is a federal statute, much of the responsibility for implementing the law rests with the states, including implementation of market reforms, overseeing Medicaid expansion, and creating the state health insurance exchanges. These action items were largely put into motion in 2013.¹ This article examines how states have implemented the ACA thus far and the possible implications of these policies for surgeons.

Flexibility

State legislators have wide latitude regarding how much of the law they embrace, with seven states (Connecticut, Hawaii, Maryland, Massachusetts, Minnesota, Oregon, and Vermont) adopting all provisions outlined in the ACA and five states (Alabama, Missouri, Oklahoma, Texas, and Wyoming) adopting none of the provisions in the ACA.¹ The extent to which states have chosen to adopt the policies in the ACA thus far correlates with the partisan composition of the states.

States also have the option of developing their own health insurance exchanges, either by working in partnership with the federal government to develop and implement the exchanges, or by allowing the federal government to run the exchanges. So far, 17 states have created and are running their own exchanges, seven states are working in partnership with the federal government, and 27 states have opted to let the federal government operate their exchanges.² Many other states also have decided not to participate in Medicaid expansion, and a few have received waivers to implement the expansion differently than outlined in the legislation. Each state also has been granted latitude in establishing a benchmark plan to cover all 10 essential health benefits outlined in the ACA. As each state implements the ACA differently, there are profound implications for the population of each state in how they access health care and what is covered.

Medicaid expansion

The ACA originally required every state to allow individuals earning up to 138 percent of the federal poverty level (FPL) ($27,000 for a family of three) to receive health care coverage through an expanded Medicaid program.³ This Medicaid expansion mandate was expected to expand coverage to an additional 16.2 million of the 27 million people the ACA would cover overall.⁴ As noted previously, the Supreme Court ruling made expansion voluntary. Currently, 26 states and the District of Columbia have chosen to expand Medicaid to the newly eligible population.

Although states continue to debate the expansion of Medicaid, a delayed expansion will have some immediate effects economically and on patient access to care. One of the biggest consequences is the loss of billions of dollars in federal Medicaid expansion funds. Furthermore, an estimated 5 million people will be without affordable access to health care. Individuals earning less than 100 percent of the FPL fall into a “coverage gap,” which means they are ineligible for subsidies because they were expected to be covered by Medicaid, but also earn too much to participate in current Medicaid programs. For example, in Texas, an estimated 687,000 women would be ineligible for coverage due to various program gaps. This leaves few, if any, options for individuals who fall into this category in non-expansion states.³

Payments to disproportionate share hospitals (DSH) also were cut to pay for the law, with the expectation that fewer uninsured individuals would be seeking uncompensated care. In those states that opted out of Medicaid expansion, however, many hospitals will likely experience only a minor reduction in uncompensated care and will have to absorb the added DSH cuts without increased revenues. Many hospitals in states that have opted out of Medicaid expansion are deeply concerned about potential access issues. Critical access hospitals in rural areas may be hardest hit, and some may be forced to close their doors as a result.

HHS waivers

Political concerns have prompted some states to opt out of expansion, and several are beginning to look at creative ways to expand Medicaid without having to follow the provisions outlined in the ACA. For example, Arkansas, Iowa, and Michigan have received a U.S. Department of Health and Human Services (HHS) 1115 demonstration waiver to implement Medicaid expansion in a manner that is palatable to each state’s population.⁵ (Pennsylvania has also applied for a waiver, but it has yet to receive HHS approval.) A 1115 waiver allows the HHS Secretary to waive state compliance with certain federal requirements and may provide budget-neutral federal funding that would otherwise be unmatched. Each waiver must also go through a public comment period, and the process allows for negotiations between the state and HHS.

Arkansas was the first state to apply and receive approval for a 1115 waiver to expand Medicaid to the newly eligible population. Arkansas’ plan mandates that all newly eligible enrollees receiving premium assistance purchase insurance from a qualified health plan through the state exchange.^6,7 Iowa was also approved for a waiver and currently is enrolling newly eligible patients who earn 100 percent to 138 percent of the FPL in a premium assistance program, while charging small premiums and providing incentives for healthy lifestyle behaviors.^8,9 While Arkansas was the first state to pass an altered version of Medicaid expansion, the program barely survived to see a second year after the state House had to vote multiple times to garner enough votes to pass it, demonstrating how politically volatile the issue still is in that state.

Michigan did not pursue premium assistance for its newly eligible enrollees, but it is charging premiums to those households with annual incomes of 101 percent to 138 percent of FPL and is providing incentives for healthy behaviors.¹⁰ Pennsylvania has applied to enroll all newly eligible enrollees in premium assistance and to charge premiums to individuals making 100 percent to 138 percent of FPL, incentivize healthy behaviors, and institute job training and employment-related activities as a requirement to receive benefits.¹¹ HHS has never approved a work requirement and has only allowed premiums to be charged to a limited population (Iowa’s original waiver application sought to charge premiums to those enrollees earning 50 percent to 138 percent of FPL; it was approved only for those making 100 percent to 138 percent of FPL).⁵ At press time, negotiations between Pennsylvania and HHS are ongoing. These examples demonstrate how 1115 waivers may be used to allow states to test individualized approaches to Medicaid expansion.

Indiana Gov. Mike Pence (R) is working on a different alternative to Medicaid expansion. He is seeking to expand the state’s Healthy Indiana Plan, which is a Medicaid pilot program initiated in 2008 to provide health insurance coverage to individuals and families who earn too much to qualify for traditional Medicaid. It is modeled on a health savings account (HSA) linked to a high-deductible insurance plan sold on the private market. Then-HHS Secretary Kathleen Sebelius sent a letter to Governor Pence in December stating that Indiana cannot receive full federal reimbursement for expanding Medicaid to individuals earning up to 138 percent FPL if the program requires these individuals to contribute to an HSA.¹² At press time, Governor Pence and Secretary Sebelius were still working on a compromise, and Governor Pence was waiting on a ruling for a second long-term waiver to fully implement this program.

Insurance exchanges

Individuals and families were able to start enrolling in plans offered through the ACA-created health insurance exchanges on October 1, 2013. The federal exchange, the option available in 34 states, had a notably problematic roll-out. Initially blaming high traffic, the Obama Administration conceded approximately a week into open enrollment that significant technology issues were affecting the federal site and would take weeks to correct. The site only became fully functional at the end of 2013, leaving many Americans struggling to sign up for coverage before January 1. State exchanges were, overall, more successful in enrolling individuals, although a few states had and continue to experience significant technological complications with their sites. California, Colorado, and Connecticut all had fairly smooth roll-outs, whereas Maryland, Minnesota, and Oregon had significant issues.

Connecticut’s exchange program, Access Health CT, is taking advantage of its online enrollment success by offering consulting services to other states. The chief executive officer of Access Health CT is offering “exchange in a box” consulting services, ranging from basic consulting to a complete overhaul. At press time, the Connecticut exchange had approximately 55,000 enrollees. This number far exceeded the federal government-set benchmark of 33,000.¹³

In addition to the functional struggles of the federal exchange website, another concern emerged after the health insurance exchanges opened in October 2013, which centered on whether many of the plans being offered included an adequate network of providers. One analysis, completed by the McKinsey Center for U.S. Health System Reform, looked at all hospital networks offered in silver exchange products in 20 urban rating areas, which included 120 distinct exchange networks offered by 80 carriers. This analysis found that within these exchange products, almost two-thirds of hospital networks in the exchanges were narrow or ultra-narrow.¹⁴ Narrow network plans and tiered-network plans are offered largely to ensure the availability of affordable coverage, but these networks are a major area of concern as people seek out health care providers. The federal government shares this concern, and HHS recently announced it would be performing more network adequacy reviews for plans offered through the exchanges in 2015.¹⁵

Physicians also have concerns regarding the ACA-established exchanges. A survey of physician group practices completed by the Medical Group Management Association in October 2013 found that most physicians held unfavorable views of the ACA. The survey had 1,000 responses from group practices, which represents 47,500 physicians. The survey found 55 percent of respondents were still evaluating whether they would participate in the exchanges; another 30 percent had decided they would participate, but 15 percent had decided they would not and more than 15 percent did not know.¹⁶ In addition to questions about network adequacy and payment, physicians also are concerned about the ACA’s 90-day grace period, which provides continued insurance coverage to patients who receive advance premium tax credits but fail to pay their premium for three months. Under this provision, insurers can hold claims to physicians during the second and third months of this grace period, though insurers are required to notify physicians of patients’ grace period status when responding to eligibility verification requests. Nonetheless, some physicians are concerned that these notifications will be insufficient and that they will find themselves providing a considerable amount of uncompensated care.

Essential health benefits

The ACA requires all plans participating in the exchanges, as well as those plans not grandfathered in, to offer a set of essential health benefits; that is, designated services that all health insurers must cover at limited cost to the patient. Certain individual and employer-based plans have been grandfathered in and are not subject to the essential health benefit requirements.

Currently, 10 categories of coverage are considered essential under the ACA (see sidebar). For an insurance policy to be sold on the marketplace, it must comprise all 10 of the mandated areas. Initially, the federal government was expected to identify the benchmark plan and outline which services would be included in the essential health benefit package, but instead HHS issued regulations allowing each state to identify its own benchmark plan and the services that would be covered. These plans are further broken down into five tiers.

• The bronze plan has a minimum creditable coverage including 60 percent of benefit costs, and out-of-pocket limits equal to the HSA limits.
• The silver plan has 70 percent covered costs.
• The gold plan has 80 percent covered costs.
• The platinum plan has 90 percent covered costs.
• A catastrophic plan also will be available in the individual market for individuals ages 30 and younger and to individuals who are exempt from the individual responsibility requirement.¹⁷

The 10 coverage categories appear in the sidebar on page 26. In addition to the 10 required services, plans must establish a maximum out-of-pocket charge for individuals and families, which for 2014 is set at $6,350 for individuals and $12,700 for families. These limits are compatible with federal HSA contribution limits and, likewise, will be indexed with inflation for future increases.¹⁸

Some states are choosing to provide coverage beyond the 10 minimum standards. One of the most common additional services is bariatric surgery. Almost all plans cover obesity screening and some treatment options, but only 24 states require insurance companies to cover weight-loss procedures (26 states and the District of Columbia do not currently have plans to cover these procedures). One factor that may encourage states to include bariatric surgery as an essential benefit is the recent action taken by the American Medical Association’s House of Delegates in June 2013 to recognize obesity as a disease state with multiple pathophysiological aspects requiring a range of interventions.

UnitedHealthcare dropping physicians

The ACA cut payments to Medicare Advantage to pay for other parts of the legislation and equalize payments between Medicare Advantage and traditional Medicare. One consequence of this provision has been the narrowing of networks in Medicare Advantage Plans. Over the last several months, UnitedHealthcare has been dropping primary and specialty physicians from their Medicare Advantage network, particularly in Connecticut, New York, and Florida. In Connecticut, at least 2,000 physicians were removed without cause or explanation. The Connecticut Chapter of the American College of Surgeons (ACS) has been working with the Connecticut State Medical Society and the Connecticut congressional delegation to help resolve this situation. In December 2013, the Fairfield and Hartford County Medical Associations won a temporary restraining order from the U.S. District Court in Bridgeport, CT, and an injunction against UnitedHealthcare. Before the restraining order and injunction were issued, these terminations were slated to take effect February 1, 2014, but are currently on hold due to pending litigation.¹³

A surgeon who has received notification of being dropped from a network should consider appealing this action. Contacting the health plan is the first step in this process, as it is important to learn exactly how the network was tiered or narrowed and to ask for the data and any other information used in the designation process. Speaking to a health plan representative can help clarify exactly how the designation process worked, and this individual should be able to explain how each measure (quality, cost, and so on) was used in the decision-making process.

Some common errors that surgeons should be on the alert for include incomplete or inaccurate patient demographic information; patients included in the designation process who are receiving care from other physicians; cases that are outliers and that, as a result, would skew the data; insufficient sample sizes; and improper use of quality measures.

There are some states that have laws governing the appeals of physician rankings in tiered network programs, and those laws may be useful in negotiating a tiering designation. If a health plan has deviated from the law in this regard, it may be possible to file a complaint with the state’s Department of Insurance.

State enrollment numbers

At press time, the number of people enrolling in exchange plans, Medicaid, and state Children’s Health Insurance Programs was continuing to increase daily, and this trend continued as the March 31 deadline to obtain health insurance or pay a fine approached. As more states work to expand Medicaid or offer other solutions to fill the coverage gap, even more people will shift from uninsured to insured status. At press time, approximately 7 million of the roughly 28 million people eligible for coverage under the ACA nationwide had signed up for insurance using the exchange.¹⁹ California and Connecticut have the highest percentage of people enrolled versus people eligible, while North and South Dakota and Iowa have some of the lowest percentages.¹⁹ As of April 2014, more than 908,000 New York State residents had obtained health insurance either through the exchange or expanded Medicaid.²⁰ In contrast, only 7,600 Hawaiians had signed up during the four-month enrollment proces—the lowest enrollment rate of any state.²¹ The White House exceeded their goal of enrolling 7 million people by the March 31 deadline.²² At press time, more than 7.1 million people enrolled prior to March 31. For the most up-to-date enrollment information, visit the Kaiser Family Foundation website.

College seeks feedback

ACA implementation has been a learning process for state governments, physicians, insurance companies, and the general public. The effects of the ACA are just beginning to be known, and there continues to be more to learn and more work to be done. As implementation progresses, the College asks that Fellows let the organization’s leadership know how related issues are affecting the surgical practice. The ACS also encourages Fellows to advocate for better policies at the state level, especially on coverage for bariatric surgery and protections from the tiering and narrowing of networks. For more information or to get involved, contact Tara Leystra Ackerman at tleystra@facs.org or 202-672-1522 or Justin Rosen at jrosen@facs.org or 202-672-1528.

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References

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2. Kaiser Family Foundation. State decisions for creating health insurance marketplaces, 2014. Available at: http://kff.org/health-reform/state-indicator/health-insurance-exchanges/. Accessed February 19, 2014.
3. Kaiser Commission on Medicaid and the Uninsured. The coverage gap: Uninsured poor adults in states that do not expand Medicaid. October 2013. Available at: http://kaiserfamilyfoundation.files.wordpress.com/2013/10/8505-the-coverage-gap-uninsured-poor-adults8.pdf. Accessed February 19, 2014.
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6. Arkansas Medicaid. State’s public notice and input processes for 1115 Demonstration Waiver Project applications/renewals/amendments. Available at: https://www.medicaid.state.ar.us/general/comment/demowaivers.aspx . Accessed on February 19, 2014.
7. Tavenner M. Letter to Andy Allison, Director, Arkansas Department of Human Services. September 27, 2013. Available at: http://www.medicaid.gov/Medicaid-CHIP-Program-Information/By-Topics/Waivers/1115/downloads/ar/ar-private-option-ca.pdf. Accessed on February 19, 2014.
8. Iowa Department of Human Services. Iowa marketplace choice plan. August 2013. Available at: http://www.dhs.state.ia.us/uploads/IAMktplaceChoice1115_Final.pdf. Accessed February 19, 2014.
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10. Tavenner M. Letter to Stephen Fitton, Director, Michigan Medicaid Services Administration. December 30, 2013. Available at: http://www.michigan.gov/documents/mdch/Healthy_Michigan_Plan_1115_Demonstration_Approval_443686_7.pdf. Accessed February 19, 2014.
11. Pennsylvania Department of Public Welfare. Healthy Pennsylvania 1115 demonstration application. February 2014. Available at: http://www.dpw.state.pa.us/cs/groups/webcontent/documents/document/c_071204.pdf. Accessed on March 18, 2014.
12. Groppe M. Gov. Mike Pence seeks path to Medicaid expansion. The Indianapolis Star. February 23, 2014. Available at: http://www.indystar.com/story/news/politics/2014/02/23/gov-mike-pence-seeks-path-to-medicaid-expansion/5767033/. Accessed February 27, 2014.
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14. McKinsey Center for U.S. Health System Reform. Hospital networks: Configurations on the exchanges and their impact on premiums. December 2013. Available at: http://www.mckinsey.com/~/media/McKinsey/dotcom/client_service/Healthcare%20Systems%20and%20Services/PDFs/Hospital_Networks_Configurations_on_the_Exchanges_and_Their_Impact_on_Premiums.ashx. Accessed February 19, 2014.
15. Centers for Medicare & Medicaid Services. 2015 letter to issuers in the federally-facilitated marketplace. Available at: http://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/draft-issuer-letter-2-4-2014.pdf. Accessed February 20, 2014.
16. Legislative and Executive Advocacy Response Network: ACA insurance exchange implementation. September 2013. Medical Management Group Association. Available at: http://www.mgma.com/Libraries/Assets/Government%20Affairs/Advocacy/LEARN/ACA-Exchange-Implementation-LEARN.pdf. Accessed February 20, 2014.
17. American Medical Association. Improving the health insurance marketplace: Essential health benefits. Available at: http://www.ama-assn.org/resources/doc/market-reforms/essential-health-benefits.pdf. Accessed March 14, 2014.
18. UnitedHealthcare. Essential health benefits overview. Available at: http://www.uhc.com/live/uhc_com/Assets/Documents/EssentialHealthBenefits_Overview.pdf. Accessed March 14, 2014.
19. Kaiser Family Foundation. Marketplace enrollment as a share of the potential marketplace population. February 2014. Available at: http://kff.org/health-reform/state-indicator/marketplace-enrollment-as-a-share-of-the-potential-marketplace-population/. Accessed February 27, 2014.
20. CNYCentral.com. New York health exchange reports 501,000 enrolled. Available at: http://www.cnycentral.com/news/story.aspx?id=1011898#.Uw5b4dQo7ct. Accessed on February 19, 2014.
21. Reston M. Hawaii health marketplace off to an especially rough start. Los Angeles Times. February 25, 2014. Available at: http://www.latimes.com/nation/la-na-obamacare-hawaii-20140226,0,6901935.story#ixzz2uXUCcYue. Accessed March 14, 2014.
22. Levey N. Obamacare enrollment tops 5 million amid surge in sign-ups. Los Angeles Times. March 17, 2014. Available at: http://www.latimes.com/nation/politics/politicsnow/la-pn-obamacare-enrollment-hits-five-million-20140317,0,7065693.story#ixzz2wtYp8KHB. Accessed March 24, 2014.