2015 is the new 2014

When the Affordable Care Act was passed in 2010 the year 2014 was designed as the first year in which all Americans would have access to affordable health care. It was not envisioned that all would take advantage of the opportunity, but that opportunity would be there. The Supreme Court ruling, complexity of the law, partisan politics, and the limits of time have combined to create a different health system in 2014: one that may yield very different opportunities for coverage for very similar individuals and families.

The Supreme Court upheld the law, but somehow found that an expansion in eligibility constituted a separate program. As a result states could chose whether to expand Medicaid or keep their old Medicaid program. The irony is that states whose taxpayers, employers, and health systems would most benefit from Medicaid expansion are the most likely to have decided decline that option. Those choices were mostly in response to political considerations rather than rational policymaking.

As a consequence of that choice there is no longer a seamless path from public coverage to private coverage. Under the law it was envisioned that as family incomes grew they would move from public coverage to subsidized private coverage with the subsidy falling as incomes increased. It was designed to give everyone access to similar and affordable health insurance coverage. For states that have opted out of Medicaid expansion there is be a break in affordable coverage. An a family with income just below poverty may be able to access coverage for their children through the Medicaid program or the Children’s Health Insurance Program (Peachcare in Georgia), but the adults in the family will not have access to either Medicaid or subsidies in the exchange. A family with income just above the poverty level will have access to those subsidies.

There are indications from a number of non-expansion states that the decision not to expand may be short-lived. The costs of not expanding will be clearer in the coming year to tax payers and policy makers alike, making it likely that 2015 will see a Medicaid program that more closely resembles the one envisioned in 2010.

It was envisioned that in 2014 small employers would be able to offer their employees health benefits as good or better than those offered to employees of larger firms. The creation of the Small Business Health Options Program (SHOP) exchanges would not only reduce the costs of health insurance to small groups, but also enable employees of small employers to choose from a variety of plans and insurers. Currently the constraints of transaction costs and risk pooling require that most small employers who offer coverage chose one plan for all of their employees.

The difficulty of developing the appropriate information technologies to allow that choice have forced SHOP exchanges run by the Federal government to delay employee choice for at least a year. While reforms of the small group insurance market will reduce premium variability and less costly to most employers who currently offer coverage, employee choice will have to wait until 2015.

Many employers were relieved earlier this summer when it was announced that information technology difficulties meant that the employer mandate within the law would not be enforced until 2015. Under the law employers with over 50 employees who did not offer coverage were subject to pay a fine for each employee (after the first 30). Employers who offered coverage that was deemed unaffordable paid a fine for any employee who received a subsidy in the exchange. The employers most affected by the mandate are those whose workforce is largely low-income workers.

Those IT issues also mean that workers with access to affordable health coverage from there employers may find themselves facing large penalties if they apply for a subsidy with in the health insurance exchange. In 2015 the exchange will be able to ascertain if the individual is ineligible for a subsidy because their employer offers coverage at the time of enrollment. In 2014 the burden will be on the individual to know their eligibility status before they apply for a subsidy in the exchange. Any subsidies paid to ineligible workers will have to be paid back when the worker files their 2014 taxes in 2015 and the worker may be subject to rather stiff fines.

2014 will still remain a watershed year in health care financing. The health insurance reforms, the creation of the health insurance exchanges, and the partial of Medicaid in about half the country will begin a fundamental shift in access to care and cost management. Given the fundamental changes in health care the Affordable Care Act will trigger it may be appropriate that 2014 be a smaller step than was first envisioned.

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