Monthly Archive: August 2013

Will individuals ineligible for exchange premium subsidies turn to catastrophic plans?

Less than half (48 percent) of Americans who currently buy health coverage for themselves and their families in the individual market will qualify for advance tax credits to subsidize coverage purchased in the state health benefit exchange marketplace, according to a Kaiser Family Foundation paper issued this month. (That figure does not include those who qualify for Medicaid coverage in states that elect to expand coverage for households earning up to 133 percent of the federal poverty level.) The exchange advance tax credit subsidy is available in six income tranches for those with incomes between 100 and 400 percent of the federal poverty level. Those earning more than 400 percent of the federal poverty level ($45,960 for singles; $92,200 for a family of four) are ineligible for the subsidies.

A big question as the exchanges prepare to open for 2014 enrollment this October is to what extent this cohort will find their premiums exceed eight percent of their incomes. The Affordable Care Act and implementing regulations regard premiums at this level as unaffordable and exempt those meeting this test from the law’s individual responsibility requirement and associated penalties for not having coverage. They allow these individuals to obtain a certificate of exemption from state exchanges that entitles them to purchase lower cost “catastrophic” coverage on or off the exchange marketplace. (Pending California legislation, SB 639, would restrict off-exchange sales to plan issuers offering catastrophic plans through the exchange marketplace). Catastrophic plans must include the 10 essential benefits required for all individual plans beginning in plan year 2014 as well as at least three primary care visits – with a flat deductible of $6,250 for individuals and $12,500 for families.

Federal rules (45 CFR § 156.155(c)) specify that for family catastrophic coverage, each enrolled family member must meet the eight percent income to premium affordability exemption or be under age 30. Lower premiums for catastrophic plans would enable these individuals and families to avoid going without coverage in case of a major, unexpected accident or illness as well as potentially facing very costly standard hospital “rack rate” charges for those without insurance.


Need a speaker or webinar presenter on the Affordable Care Act and the outlook for health care reform? Contact Pilot Healthcare Strategies Principal Fred Pilot by email or call 530-295-1473. 

ACA needs a Direct Primary Care/Medical Home fix

Add one to the list of possible future amendments to the Patient Protection and Affordable Care Act: revisiting Section 1301(a)(3) that recognizes Direct Primary Care/Medical Home plans as qualified health plans sold in the state exchange marketplace.

Direct Primary Care (DPC) is paid directly – as the name suggests – by patients to primary care providers and not by insurers or managed care plans. Direct primary care payment is typically effected via basic monthly fee (as well as additional charges for some procedures and tests) that includes direct access to doctors and other primary care providers. Table 2 of this California Healthcare Foundation paper lists several DPC providers and their fees.

As author Dave Chase notes, there are potential downstream medical utilization cost savings from early preventative primary care intervention. Section 1301(a)(3)’s direct linkage of DPC to a “medical home” suggests an added benefit of keeping patients more connected with a primary care provider who can follow a patient over time and help coordinate referrals and care from other providers. The DPC primary care model also fosters economic incentive for primary care physicians to help alleviate concerns of a post-ACA primary care doctor shortage to handle the influx of newly insureds.

In order to be a qualified individual health plan sold on the exchange marketplace under Section 1301(a)(3), a DPC/Medical Home plan must be a health plan that includes primary care as well as nine other essential benefits. This applies to qualified health plans sold through exchanges as well as those sold outside the exchange marketplace. The primary care requirement however isn’t compatible with DPC because as noted previously, the patient – not a health plan or insurance – pays primary care services directly out of pocket via DPC fees. Plus plans must fall into one of the four metal tier actuarial values (AV) specified in the ACA ranging from bronze (60 percent AV) to platinum (90 percent AV), values predicated on both primary and higher cost care.

The appropriate form of insurance for a DPC patient is catastrophic coverage currently exempt from the metal tier AV requirements under Section 1302(e) but limited to young people under age 30 or those exempt from the individual coverage mandate because of financial hardship or coverage costs exceeding eight percent of income.  It’s the right type of coverage for DPC because as the name implies, it is designed not for relatively low cost primary care but rather big dollar costs such as hospitalizations and surgeries.  Referred to as “wraparound” coverage, it picks up where DPC leaves off. It acts as a true insurance product in that these costly services are typically accident-related or otherwise unexpected.

Section 1302(3) should be amended to include those enrolled in DPC arrangements in addition to the so-called “young invincibles” and recognized as meeting the ACA’s individual responsibility requirement to have some form of health coverage. The current limits on out of pocket costs for individual plans at Section 1302(c) would probably work well for DPC “wraparound” coverage.  However, since DPC patients are by definition paying primary care costs out of pocket, catastrophic DPC plans should include only a flat high dollar deductible.  Finally, to provide greater incentive for individuals and families to enroll in DPC/Medical Home plans, the ACA should amend the Internal Revenue Code to make 50 percent of DPC fees paid in a calendar year tax deductible for all taxpayers.


Need a speaker or webinar presenter on the Affordable Care Act and the outlook for health care reform? Contact Pilot Healthcare Strategies Principal Fred Pilot by email or call 530-295-1473. 

Congressional staff headed for enrollment in state exchange marketplace; some state and local government retirees could be next

Two types of government workers could end up getting health coverage through the state health benefit exchange marketplace.  The first is members of Congress and their staffs as mandated by the Patient Protection and Affordable Care Act.  The federal Office of Personnel Management issued a proposed rule this week that implements the requirement under which these individuals would use their existing employer contributions from the Federal Employees Health Benefits program to purchase exchange plans for coverage beginning in January 2014.

The other category is state and local government retirees who have not yet become eligible for Medicare. These early retirees could also end up in the exchanges as state and local governments struggle with ballooning deficits in retiree health funds that threaten their solvency.  The prospect is the topic of recent articles by Bloomberg and Governing magazine. The apparent thinking is a fair number of these pensioners on relatively modest fixed incomes would qualify for advance income tax credits to help them purchase an exchange plan and wouldn’t have to undergo medical underwriting under individual market reforms that take effect in 2014.


Need a speaker or webinar presenter on the Affordable Care Act and the outlook for health care reform? Contact Pilot Healthcare Strategies Principal Fred Pilot by email or call 530-295-1473. 

Shifting employment landscape complicates ACA implementation

When the Patient Protection and Affordable Care Act was drafted, it contemplated preservation of employer-based health coverage that came about in the 1940s and which continues to serve as the primary form of coverage for working age Americans.  In preserving employer-based coverage, the Affordable Care Act assumes most people will continue to obtain their incomes – and their health coverage – via full time employment.

It also assumes small employers will for the most part want to provide health benefits to their employees provided they have access to quality, affordable plans, reinforced by the law’s reforms of small group markets and pooling their purchasing power via the health benefit exchange Small Business Health Options Program (SHOP).

However, there are multiple, large scale shifts altering employment in the United States and the health benefits that have historically come with it for more than six decades:


Need a speaker or webinar presenter on the Affordable Care Act and the outlook for health care reform? Contact Pilot Healthcare Strategies Principal Fred Pilot by email or call 530-295-1473. 

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