With the 2012 presidential elections approaching, the implementation of the Patient Protection and Affordable Care Act (PPACA) will be a central issue of debate. Signed by President Obama in March 2010, PPACA establishes an individual mandate, creates new restrictions for health insurance companies, and increases federal presence in the national healthcare system.
Although Republicans have claimed that PPACA will increase public costs without improving health outcomes, Republican presidential nominee Mitt Romney has also come under scrutiny for the 2006 Massachusetts Health Care Reform Law, which he signed into law as governor. The law was aimed at reforming health care on a state level through the implementation of an individual mandate and elimination of health insurance premiums for those earning within 150 percent of the Federal Poverty Line.
According to the Obama campaign, the Massachusetts Health Care Reform Law served as the basis for the federal reforms included in PPACA. Despite similarities between the two laws, Mr. Romney maintains there are crucial differences and promises, if elected, to “repeal and replace” PPACA on his first day in office.
The individual mandate
Both laws require citizens to have health insurance under their individual mandate provisions. In Massachusetts, all state residents were required to have health insurance that met minimum standards as of July 1, 2007. Those without insurance are penalized based on their income level. PPACA similarly mandates individuals to carry health insurance that meets “minimum essential coverage” requirements with annual penalties assessed based on income.
In Massachusetts, exemptions to the individual mandate were limited (income level and religious obligations). PPACA, however, contains broader provisions allowing individuals to opt-out of mandated coverage based on a wider range of reasons, including the following:
- religious objections
- limited loss of coverage due to occupational transfers
- documented American Indian status
- undocumented immigrant status
- incomes lower than the tax filing threshold
- “hardship situations” as defined by the Secretary of Department of Health and Human Services
- insurance premiums in excess of 8 percent of income
Both laws establish subsidies to aid individuals unable to afford the mandated insurance coverage. In Massachusetts, funds used to reimburse hospitals for treating uninsured patients were reallocated to subsidize health insurance premiums and based on an income-sliding scale. In addition, the Commonwealth Care Health Insurance Program (C-CHIP) is available to uninsured adult citizens (19 years or older) who do not qualify for Medicaid and either do not work or have employers who do not offer insurance. Individuals who are eligible for Medicare, TRICARE, MassHealth, and other qualified plans are not eligible for coverage under a C-CHIP plan.
Under PPACA, individuals have more options for subsidized assistance. Low-income individuals who are not eligible for Medicare, Medicaid, Children's health insurance Program, TRICARE, or Veterans Affairs coverage may qualify for premium credits. The financial value of the credit will equal the lesser of the monthly premium of a qualified health insurance plan purchased through a state-level healthcare exchange or the difference between the monetary value of the second–least expensive “silver” plan in a given exchange and a percentage of household income (ranging from 2 percent to 9.5 percent, based on income levels above the federal poverty line).
Although no program similar to C-CHIP exists under PPACA, extending the Medicaid umbrella, coupled with premium credit assistance, achieves a similar effect.
Exchanges and coverage standards
State-based health insurance exchanges under PPACA and the Health Connector (ie, public insurance broker) in Massachusetts connect individuals seeking insurance with health insurance plans that meet the law’s minimum coverage requirements. Under PPACA, each state must maintain and operate two types of exchanges—an American Health Benefits Exchange for individuals and a Small Business Health Options Exchange for small businesses with up to 100 employees. Similarly, the Connector has both an individual and a business program (for small business with up to 50 employees).
These exchanges are readily accessible through call centers, the Internet, agents, in person, or by mail. They are intended to increase competition among health insurance plans, thereby lowering premiums, and to provide information on each qualified plan for first-time buyers. During annual open enrollment periods, buyers will be able to compare plans side-by-side with real-time premium quotes and get answers to their questions prior to purchasing coverage. The structures of the federal exchanges and the Connector are similar.
Both laws require minimum standard coverage, including the following services:
- ambulatory services
- emergency services
- hospitalization costs
- maternity and newborn care
- prescription drug costs
- mental health care
- laboratory testing
- preventive care
- pediatric care
The Massachusetts law also requires coverage for abortions, in-vitro fertilizations, radiation, chemotherapy, and rehabilitative services. All qualified plans must follow marketing, administrative, and quality-improvement guidelines to increase transparency, prevent determent of low-income individuals from enrolling, and provide access to a network of providers.
Plans in the exchanges are tiered to four levels based on the percentage of benefit costs covered by the plans’ premiums. From the most expensive to the least expensive, PPACA plans are ranked as platinum, gold, silver, and bronze, while Massachusetts offers gold, silver, bronze, and young adult programs. Each participating health insurance company in the Massachusetts Connector offers plans at all four levels. The young adult plans are for adults aged 19 to 26 and have low monthly premiums, high out-of-pocket costs, and annual limits on benefits.
Under PPACA, bronze plans cover 60 percent of costs and platinum plans cover 90 percent of costs. PPACA also establishes catastrophic plans with different standards for individuals younger than age 30 who cannot afford any other insurance plan.
In addition to establishing essential health benefits criteria for insurance plans, both PPACA and Massachusetts further regulate insurance providers by restricting insurers from denying coverage to consumers due to preexisting conditions. In Massachusetts, insurance companies have to tailor plans that would qualify for the Connector, but otherwise, relatively little regulation has occurred.
As a federal law, PPACA may have a greater impact on the health insurance industry due to its 80/20 rule. This stipulation requires that 80 percent of all premiums collected in the small group and individual market must be spent on medical claims, with the remaining 20 percent applied to administrative costs.
In the large group market, insurers will be mandated to pay 85 percent of all premiums collected on medical claims. Furthermore, insurance companies must publicly justify any increase in premiums of 10 percent or more to review boards and must provide consumers with an opportunity to appeal their decisions to deny third-party payments.
PPACA also requires insurance plans to extend coverage to dependents younger than age 26 and establishes specific patient protections. These protections include giving consumers a choice of participating primary care providers, eliminating preapproval requirements for seeing an obstetrician-gynecologist, and providing access to emergency services without limitations or restrictions, including network participation.
The law also prevents health insurers from setting annual and lifetime caps on the monetary values of essential health benefits and makes them responsible for notifying covered individuals that these caps are no longer in place. Companies are further prevented from arbitrarily withdrawing coverage from groups, families, or individuals except in the case of fraud or misrepresentation of information. Copayments or deductibles for preventive care services and immunizations are eliminated, and companies must have an appeal process for individuals who were denied coverage for a medical service.
Implications for orthopaedists
Although both laws have similar key provisions, lessons learned from the 2006 Massachusetts law during the past few years can help predict the impact that PPACA—or a modified form of PPACA that is more similar to the Massachusetts law—will have on practicing orthopaedic surgeons.
The Massachusetts law extended health insurance coverage to 401,000 more residents; the state currently has the highest insured population rate in the country, at 98.1 percent. Physicians in the state have favorable views of the law; nearly 70 percent support it and 75 percent want it to remain in place, according to the results of a survey published in The New England Journal of Medicine.
The majority of surveyed physicians also believe that the law has had a positive impact on their practices by decreasing the numbers of uninsured patients seen and helping patients afford quality care. This indicates that practicing orthopaedic surgeons should be prepared to deal with a different patient population makeup and have resources in place to deal with racial and ethnic groups who previously faced barriers in obtaining care.
These positive impacts, however, may be offset by corresponding negative effects. Nearly half of physicians reported negative impacts on their practices. For example, the average wait time for consultation with an orthopaedist in Massachusetts increased from 17 days to 26 days as newly insured patients sought medical services. Patients who were previously uninsured often have a longer list of problems and comorbidities that must be addressed, increasing the strain on already limited resources in both private practice and hospital settings.
Furthermore, healthcare reform has caused a shortage of primary care physicians, making it difficult for orthopaedic patients to receive essential follow-up treatment at local primary care facilities. Primary and preventive care services that may deter the development or progression of osteoporosis and osteoarthritis are difficult to obtain. Nearly one in five nonelderly adults in Massachusetts are unable to find a primary care physician, and the state spent nearly $510 million on avoidable emergency department care that could have been addressed by primary care centers. As a result, orthopaedic surgeons may see patients with more advanced disease states.
Ironically, reform resulted in higher, rather than lower, healthcare costs in the state. Per capita healthcare expenditure is expected to nearly double—from $9,278 in 2009 to $17,872—in 2020. Total healthcare expenditure for physician and clinician services has also increased, with a 21-percent increase in private insurance spending for physician services from 2007 to 2009.
Despite the fact that the increase in physician services spending was due primarily to the increased volume of newly insured patients, governmental agencies have generally responded to rising healthcare costs by reducing reimbursement rates to physicians. Thus, practicing orthopaedic surgeons may expect potential reimbursement cuts as well as a larger patient cohort under a PPACA–like reform.
As elections approach, an awareness of the similarities and differences between PPACA and the Massachusetts Health Care Reform Act will become increasingly important in helping orthopaedic surgeons prepare for the future. Orthopaedic surgeons can expect Democrats to focus on the similarities between the two laws and Republicans to highlight the differences. The Supreme Court’s decision on the constitutionality of the law (not released at the time of this writing) will also have an impact.
Allie Obremskey; Vasanth Sathiyakumar, BA; Jordan Apfeld, BA; Alex A. Jahangir, MD; and Manish K. Sethi, MD, are all associated with the Vanderbilt Orthopaedic Institute Center for Health Policy.
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