The Affordable Care Act: An Early Progress Report David Grande, MD, MPA Senior Fellow, Leonard Davis Institute of Health Economics Assistant Professor of Medicine University of Pennsylvania February 5, 2014

Coverage Financial security Better health

Insurance Pricing We can experience rate – vary premiums based on health status – More affordable insurance for the healthy – Sick get priced out We can community rate - “everyone” is charged same premium – More affordable insurance for the sick – Healthy don’t want to join and drop out Insurance market outside of ESI has been a failure

Eliminate Medical Underwriting or “pre-existing conditions” Individual Mandate Subsidize or Provide Coverage The Affordable Care Act

Affordability How much do you have to pay for insurance? (i.e. premium credits) – Premium contributions as % of income How much cost sharing do you have to shoulder at the point of care? (i.e. cost- sharing subsidies) – Cost sharing subsidies increase actuarial value of insurance for low income individuals (70-94%) Source: Kaiser Family Foundation: Summary of the New Health Reform Law

Example: 35 year old earning $30,000 per year (260% of FPL) Contribute 8.4% of income ($210/month) Calculate subsidy from “benchmark Silver plan” $287-$210 = $77/month – apply to any plan Subsidies tied to prices in local markets Individual $ exposure: age, income, benefit design Public $ exposure: prices in local markets Source: Center for Budget and Policy Priorities; HealthCare.gov

Coverage Projections 2019 Source: Congressional Budget Office, February 2014

It will take about 3 years…

Marketplace Enrollment as % Eligible by State ~2 million enrolled (January 2014) Source: Kaiser Family Foundation

Awareness of Marketplaces Among Uninsured December 2013 Source: Robert Wood Johnson Foundation / Perry Undem Research/Communication 2014

77% have not visited Marketplace Why not? Source: Robert Wood Johnson Foundation / Perry Undem Research/Communication 2014

What do they know about the ACA? Source: Robert Wood Johnson Foundation / Perry Undem Research/Communication 2014

If the young and healthy don’t buy… will there be a “death spiral”?

Temporary Reinsurance Program Adverse Selection – Catastrophic Losses within a Plan Goal: Protect against actuarial uncertainty in early years of ACA (encourage plan participation)

Temporary Risk Corridor Program Adverse Selection – Sicker than Expected Enrollees within a Plan (Marketplace Plans) Goal: Protect against actuarial uncertainty in early years of ACA (encourage plan participation)

Risk Adjustment Program Adverse Selection Across Plans Goal: Long-term mechanism to guard against cream skimming in community rated private market

Source: Kaiser Family Foundation

Healthy PA Proposal Changes to existing Medicaid program – Collapse to 2 plans – low risk & high risk – Charge monthly premiums > 50% FPL – More limited benefits Expansion population – Marketplace plans – Requirements: Wellness program (HRA, annual exam, timely payment) Job search requirements

Healthy PA Questions Disruptions of coverage due to premiums – Experience in other states: 10-50% disenrollment Administrative burden – Verification systems Cost neutrality – What are the assumptions?

The Future Coverage: – likely close to target Risk Pool: – unknown but risk of premium spike low – premiums lower than expected Satisfaction: – Resolution of early enrollment problems – Limited networks – High deductibles Politics: – Will states get on board with implementation?

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