Health Care System in Transition Increases Importance of Thoughtfully Examining New Policy Changes

Dec 24, 2015


In 2010, Congress enacted the Patient Protection and Affordable Care Act (ACA), which made sweeping
changes to federal health care laws affecting how millions of Californians access health care. The law has imposed
new requirements on states, health insurers, employers, employees and other individuals in an effort to expand
coverage to millions of uninsured Americans, and to control the ever-increasing cost of health care. Some of its
key provisions include:
• An individual mandate requiring most U.S. citizens and legal residents to have health insurance coverage or
pay a penalty.
• An employer mandate requiring large employers to offer affordable coverage that includes a basic level of
benefits to their full-time employees and their dependents or pay a penalty.
• Creating health insurance marketplaces (exchanges) where individuals without access to employersponsored
coverage and small employers can purchase coverage and apply for federal subsidies to make their
premiums more affordable.
• Requiring that health insurers cover individuals with pre-existing conditions, design plans that cover 10
essential health benefits, limit administrative costs and spend more on direct care, and change how they calculate
premiums so that lower-income individuals and those with chronic health issues are not priced out of the market.
• Expanding the Medicaid program (known as Medi-Cal in California) to cover adults who make less than
138% of the federal poverty level, and promising to cover most of the cost of that expansion for states.
• A number of new taxes to help offset the costs associated with providing subsidies and expanding Medicaid,
including an increase in Medicare payroll deductions, taxes on medical devices, health insurers, drug
manufacturers, investment income, indoor tanning services and, starting in 2018, an excise tax on the most
expensive health care plans, referred to as “Cadillac plans.”
Implementation Delays
Most of the major provisions of the law were originally set to take effect on or before January 1, 2014,
including the individual mandate, employer mandate and expansion of Medicaid, as well as the expansion of
benefits and elimination of pre-existing condition exclusions for
individuals, but a number of these changes have been delayed
or modified due to the difficulties associated with implementing
such a complex set of policies.
In November 2013, for example, after insurers issued
millions of cancellation letters for plans that did not comply
with the ACA, causing a major public outcry, the Obama
administration gave states permission to authorize insurance
companies to continue offering these nongrandfathered,
pre-ACA plans to small employers and individuals through
2014. Five months later, the U.S. Department of Health and
Human Services (HHS) extended this transitional policy for
two additional years, potentially allowing small employers and
individuals to maintain noncompliant coverage into 2017. The
board of California’s health care exchange, Covered California,
chose not to allow individuals to extend their noncompliant
plans due to concerns that this would jeopardize the success
of the exchange if too many healthy individuals chose to stay
with their old plans. The Legislature, however, approved a bill
during the 2014 session allowing small employers that had
renewed their nongrandfathered plans prior to 2014 to continue
renewing those plans through January 1, 2015, and those plans
can remain in effect through the end of 2015.

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