Black and White Program

Tweaking the Affordable Care Act

December 6th, 2012 by Kyle Rankin

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The Affordable Care Act, having withstood a Supreme Court challenge, and significant effort by opposition parties to overturn it, is now secure with the recent election results that put President Obama in office for another term. But there is some tweaking being done to the regulation by the Department of Health and Human Services. The comment period on those tweaks ends on December 26. Areas of tweaking are mostly oriented to preserving the primary provisions of the Affordable Care Act, including preventing insurers from denying coverage to those with pre-existing conditions, and limiting how much consumers can be expected to pay out of pocket for the healthcare plan and treatments they select.

There are three areas of ongoing tweaking of the regulations as reported. The origins of the Health Care Law were rooted in trying to reduce consumer’s cost by limiting plan deductibles. Within small insurance groups, insurers could not set a deductible any higher than $2,000 for an individual. However, this created a problematic situation for insurance firms who offer different levels of benefits. Varying plans include Bronze health-insurance plans, defined as plans that cover about 60 percent of an individual’s medical costs, lowering the upfront costs of premiums for the consumer. (Silver plans will cover 70 percent, with Gold and Platinum plans offering more high-end benefits).  Insurance firms strongly opposed the provision saying it was impossible, with a relatively small deductible, to build an insurance plan that has the consumer paying 40 percent of the bill. Tweak number one by the Obama administration has been agreement with the insurers. As a result, insurers will be allowed to go above the $2,000 threshold if they cannot “reasonably” build a benefit package at any metal level without doing so.

Another component of The Affordable Care Act was to limit how much more older Americans can be charged for health insurance by tethering their rates to those of their younger, generally healthier counter-parts. In very specific terms, the law says that older Americans cannot be charged more than three times as much as young Americans.  An initial oversight, though, was specificity about how those different rates would phase in.
The second round of tweaking indicates that the law will use one-year age bands – each year, in other words, will come with a slight increase.  The following chart published by The Washington Post presents how the age curve will work, albeit each individual state can implement their own version.

Tweak number three involves the use of tobacco. The health-care law allows insurers to charge tobacco users 1.5 times as much as non-smokers. The thinking here was that the higher rate is designed to cover the higher costs incurred from smoking-related diseases. An exception is now being introduced that would prohibit insurance firms from levying the full surcharge if the individual smoker enrolled in a smoking cessation program. “Rather than have the tobacco use surcharge… be strictly a negative financial incentive,” the regulation notes, “This approach would encourage tobacco users to pursue tobacco cessation remedies offered under their employers’ wellness programs, enhancing their long-term health and potentially reducing health care costs.”

 

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