Obamacare starting Oct. 1, changing U.S. health insurance

Winthrop Quigley / Journal Staff Writer1 day ago

Copyright © 2013 Albuquerque Journal

History will be made Tuesday.

On that day will begin the major push to implement the Affordable Care Act – Obamacare – a federal program designed to assure that, in 2014, nearly everyone will have a way to pay for health care and that no one can be denied coverage. Not since Medicare was enacted in 1965 has a government social program been designed to touch so many lives.

“I think we’ll look at this years from now and see this is a historic moment,” said J. Mario Molina, president of Molina Healthcare, based in Long Beach, Calif.

If all goes more or less according to plan, millions of Americans who do not have health insurance will begin signing up for coverage through the new health insurance exchanges required by Obamacare. Many will get government help paying for it.

Millions more will begin signing up for federal government-paid Medicaid benefits that will be made available for the first time to able-bodied low-income adults who are not yet old enough to qualify for Medicare. That is another feature of the Affordable Care Act, though only half the states, including New Mexico, are expected to accept federal money to expand Medicaid.

170,000 new signups

The state Human Services Department estimates 170,000 New Mexicans out of approximately 417,000 without coverage today could sign up for Medicaid over the next four years under the expansion.

Most Americans who do not have health insurance next year in some form – purchased on an exchange, obtained from an employer, veteran’s benefits, Medicare, Medicaid or some other coverage – will be penalized when they file their 2014 income taxes.

Starting Tuesday, thousands of the nation’s smallest businesses can begin the process of obtaining coverage for their employees and get federal financial help to do it, should they choose to do so. No companies are required to offer coverage, but all companies are required to inform employees about relevant portions of the act.

The political vitriol accompanying Obamacare is historic as well. Polls show large numbers of Americans don’t understand the act and don’t like it. The debate over the Affordable Care Act helped spawn the tea party movement. Organizations like the Club for Growth have spent millions of dollars trying to sabotage it. Not a single Republican voted for it when it passed the Congress in 2010, and Republicans in the U.S. House of Representatives have voted dozens of times to repeal it.

“It’s been more than three years since Obamacare was signed into law, but in that time the administration that created it has been unable to find a way to make it workable,” said Rep. Steve Pearce, R-N.M.

Insurance is at its most affordable and dependable if very large numbers of people are covered. The high costs of caring for the approximately 20 percent of the pool that uses most of the health system’s services are offset by the relatively low costs of serving everyone else, especially younger people.

If a private insurance industry is to be maintained at the same time coverage is available to everyone, the young and healthy have to be in the pool. Hence, the requirement that everyone have coverage.

“It’s probably a good time to reflect on why we are doing this as a country,” said Presbyterian Healthcare Services CEO Jim Hinton. Absent some sort of universal access to health care, whether it is provided by Obamacare or in some other way, “we have high costs, low quality and people who don’t get health care.”

“Many people are priced out of the (health care) market,” Molina said. “So they play Russian roulette, hoping that they don’t get sick. That goes away” if Obamacare works as intended.

‘Good conceptually’

The act “is good conceptually. The tough part is implementation,” said Bill Frist of Tennessee, a heart surgeon and Senate Republican leader from 2003 until he left the Senate in 2007. Frist spoke this month at the Domenici Public Policy Conference in Las Cruces.

“It’s probably the right thing to do,” he said. “We have to get everybody into this market. Otherwise, it doesn’t work.”

Coverage makes a big financial difference to health care providers. Robert DeFelice, CEO of First Choice Community Healthcare, said the clinic charges people without coverage $30 for a primary care office visit, which doesn’t begin to cover the clinic’s costs.

It makes up the shortfall with government funds, donations and, like all other health care providers, by shifting the cost of care to patients covered by commercial insurance. It is estimated that as much as 20 percent of insurance premiums in New Mexico go to paying to care for people without insurance.

Medicaid, on the other hand, will pay First Choice $139 for the office visit.

Widespread confusion

So far, though, the major result of Obamacare appears to be confusion.

A telephone help line established by the parent company of Blue Cross and Blue Shield of New Mexico has fielded 31,000 calls in New Mexico and Texas since it opened a few months ago.

“The No. 1 question people are asking is, ‘What is ACA going to cost me?’ ” said Janice Torrez, vice president of external affairs. “We get a lot of questions about ‘How do I afford to pay for health insurance?’ ”

The success of Obamacare will be determined in large measure by the success of the insurance exchanges that open for business Tuesday.

These are electronic marketplaces where consumers and small employers can buy health insurance in a manner similar to buying books from Amazon or airline tickets from Expedia. The idea is that the exchanges will not only be easy to use, but enough companies will compete for exchange business that prices should be tempered.

Blue Cross and Blue Shield, Lovelace Health Plan, Molina, New Mexico Health Connections and Presbyterian will offer insurance to individuals who buy on the exchange. All but Molina will sell insurance to New Mexico employers of 50 or fewer employees on what is called the SHOP exchange.

Where to go

Consumers get to the exchange through www.bewellnm.com. The Spanish-language site is www.seguroquesinm.com. Insurance brokers who are certified by the exchange can also help individuals and companies get enrolled.

The individual exchange software is designed to help customers evaluate plans, provide them with a price, determine whether they are eligible for federal tax breaks to defray the cost of insurance, and verify if they are eligible for Medicaid.

The SHOP exchange allows the employer to choose the type of plan employees can buy and determine the employer’s contribution to the cost. Employees then go onto the SHOP exchange to choose which companies’ insurance they will buy, consistent with the employer’s parameters.

The exchanges will offer what are known as bronze, silver, gold and platinum plans. Bronze is the cheapest and platinum the most expensive.

The major difference among the levels is in the amount the consumer will pay out of pocket. Cheaper plans will require higher deductibles or co-payments.

Cost sampling

The average silver plan sold in New Mexico will cost individuals an average of $282 a month, according to the federal Department of Health and Human Services. The national average premium is $328. The average silver plan sold in New Mexico has a deductible of $1,582 a year.

“I think that competition worked in this case,” said Health Action New Mexico Executive Director Barbara Webber, though she also credited state insurance regulators for assuring the plans were both affordable and provided adequate coverage.

Whether these premiums make sense, however, is a matter of some speculation.

Determining a price “has been a bit of a challenge because we have no experience” serving thousands of customers who haven’t had health insurance before, Molina said.

If thousands of people with health problems immediately start seeking care for untreated ailments, the price could climb as insurance companies try to cope with this “adverse selection.” If thousands of previously uninsured healthy young people sign up for coverage, their relatively low cost of care could hold premiums down.

Predicted low rates

New Mexico Health Connections CEO Martin Hickey says exchange rates are so low “they’ll knock your socks off.”

Lovelace Health System Chief Financial Officer Stephen Forney thinks the long-term trend will be higher premiums.

“It would be nice if the young invincibles would all sign up for products because that’s ultimately how the model is designed,” Forney said. “However, by definition, they believe themselves to be invincible, which means anything they pay is too much, because (insurance) is not viewed as needed.”

Penalties for not enrolling aren’t that high – only $95 per adult next year and up to $285 for a family, though it can be as much as $295 per adult and $2,085 per family in 2016. The penalty is assessed on one’s tax return, so if the young and healthy uninsured New Mexican makes too little to file income taxes, the penalty will never be assessed.

There just isn’t that much incentive for the low-cost New Mexican to join the actuarial pool, Forney said.

Indeed, there is no telling for certain how many individuals will comply with the mandate that they have insurance. Nor does anyone know how businesses will respond in 2015.

That is when employers of more than 50 people will be penalized if they do not offer adequate coverage and their employees receive federal tax breaks when they buy their own health insurance.

Contrary to popular belief, businesses are not required to offer coverage, and the penalty applies only if an employee gets federal help buying insurance. Given the size of the penalties and the cost of group health insurance, some businesses could find it much less expensive to get out of the health insurance business, pay the penalty and send employees who want coverage to the insurance exchange.

Delay for some

The mandate was originally scheduled to take effect Jan. 1, but the government gave businesses an extra year, citing confusion among employers.

Some employers have threatened to reduce the hours their employees work to fewer than 30 hours a week, since those part-time employees are not covered by the mandate. New Mexico Association for Home and Hospice Care members were especially concerned that the payments they receive from insurers and government programs were not enough to allow them to buy insurance.

The association’s executive director, Joie Glenn, said the extra year will let members “get a handle on what it is going to cost” and what “we are going to have to ask payers to do to help us.”

The National Federation of Independent Business has been so opposed to Obamacare that it was one of the lead plaintiffs in unsuccessful lawsuits challenging the act’s constitutionality. Now that it is law, the federation “is accepting that (the SHOP exchange) is an option for small business members,” said state director Minda McGonagle.

“I haven’t got a lot of feedback (from members) about who is going to be in and who is going to be out” of the exchange, she said.

Federal penalties

The penalty in 2015 is $2,000 per full-time employee, but the first 30 employees are not counted for purposes of calculating the fee. That is significantly less than the average New Mexico employer contribution, according to the Kaiser Family Foundation, of $10,602 for family coverage.

That difference led to speculation that larger employers might cancel insurance and pay the penalty. So far, that doesn’t appear to be happening in New Mexico, said Eric Weinstein, senior vice president of Aon Risk Solutions, an employee benefits consulting company.

“Our clients want to provide a meaningful benefit to their employees and their families,” Weinstein said. “Our clients’ primary focus continues to be the health and productivity of their employees” while controlling costs.

“Everybody asks about it,” said Steve Byrd of the Manuel Lujan Agencies. “Everybody says, ‘Hey, what if I drop (coverage)?’ But I haven’t got the feeling that any significant number of large employers are considering dropping coverage.”

Some big businesses, however, are eliminating coverage for employees’ spouses and domestic partners when they can get coverage from their own employers, among them Lovelace Health System. Weinstein expects more companies to take that route in 2015.

Smaller companies are considering dropping their traditional group plans in favor of defined contribution plans available on the SHOP exchange, Byrd said. This approach leaves the choice of plan to the employee, and the employer pays a share of the cost. Until businesses get live quotes from the exchange, it’s too early to know what they’ll do, Byrd said.

Delivering the care

Once everyone is insured, there is still the matter of delivering care. New Mexico is short about 400 primary care physicians, and perhaps 400,000 more people with coverage will seek care over the next few years.

Presbyterian’s Hinton said that when Massachusetts required its residents to have insurance, “there was an initial uptick in utilization,” but the system stabilized as the newly insured learned how to use the system effectively and as health care providers found ways to be more efficient.

All of the Albuquerque area’s major health care providers have spent years gearing up for the surge in covered lives.

Lovelace, which didn’t employ physicians until its health plan and the independent physicians group ABQ Health Partners ended the relationship last year, has been hiring physicians. It has opened new outpatient clinics and is adding services at its Women’s and West Side hospitals.

First Choice has been on a building binge. It added more than 15,000 square feet to its Los Lunas facilities, 24,000 square feet in the South Valley, and it turned its 5,000-square-foot South Broadway operation into a training center and put a 15,000-square-foot facility in the neighborhood. It is actively recruiting health services students, including physicians.

Switching patient focus

All of the systems are shifting their focus from treating the acute needs of patients to techniques for managing the health of populations, an approach that involves teams of providers to proactively work with patients.

For example, ABQ Health Partners is developing approaches to patient care used by its California-based parent company, HealthCare Partners. HCH was able to reduce hospital admissions and total cost of care of patients with chronic obstructive pulmonary disease by using teams of physicians, nurses and other providers to closely monitor patients and visit them at home.

Presbyterian has used a similar approach, plus new technologies, to deliver hospital-like services in patients’ homes.

First Choice has teams that try to identify community problems that lead to health problems, things like unsafe streets, substandard housing and inadequate nutrition.

The promise of universal coverage ought to be that providers no longer will have to scramble to provide care to people who can’t pay. It isn’t working out that way for hospitals, said New Mexico Hospital Association President Jeff Dye.

‘Less with less’

A combination of federal spending cuts and Affordable Care Act provisions has hammered smaller hospitals in New Mexico.

“There will not be any immediate end to uncompensated care,” Dye said. “In the short term, most hospitals, especially rural ones, are doing less with less.”

In the past three years, New Mexico Medicaid outpatient payments were cut $250 million; sole community provider payments, which pay for indigent care, were cut $70 million; and Medicare cuts designed to help pay for the ACA cost New Mexico hospitals another $76.5 million, Dye said.

At the same time, hospitals are having to spend millions to comply with ACA requirements, such as adoption of electronic health records.

Dye said the result is that rural hospitals have closed obstetrics services, hospitals have laid off workers, and keeping managers has become difficult.

Even with the strain, New Mexico hospitals have improved care. They have reduced pneumonia associated with ventilators by 75 percent, and injuries due to patient falls, urinary tract infections and bloodstream infections are down significantly, Dye said.

Frist anticipates the roll-out of Obamacare will be “very, very tough.”

That’s to be expected, Molina said. Every time a state rolls out a new Medicaid program, there are always problems. Obamacare will be no different.

“When they look back, they see these are basically good programs. They help a lot of people. The minor bumps are forgotten over time,” Molina said.

“This is a radical change in the insurance market,” Hinton said. “But the sun is likely to come up over the Sandias on Dec. 31.”

The Associated Press contributed to this report

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