ACA Title 1, Sec. 1402, Reduced cost-sharing for individuals enrolling in qualified health plans: “Ugly” – Removes most user out-of-pocket cost sharing. This section provides a fairly complicated “sliding fee schedule” for removal of out-of-pocket cost sharing for those whose income is up to 4 times the federal poverty limit. Why “4” times? Why not “3” or “2”, or just one times the poverty line levels? Also this provision sets a correspondingly complicated to administer maximum out-of-pocket cost limit (i.e., 100% reduction of out-of-pocket cost sharing for those below the federal poverty line, 2/3rds reduction for 100% to 200% of federal poverty limit, ½ cost reduction for those with 200%% to 300% of the federal poverty limit, and 1/3 rd for those with 300% to 400% of the federal poverty line. The federal government spent more than $80 million of research funds in the Rand Health Insurance Experiment to find out that removing out-of-pocket cost sharing was not a good idea and here we are providing a complicated way of calculating it and removing it. Also tying any cost sharing level to the federal poverty level is problematic. Are we using the individuals or families last year’s financial earning experience or this years? Bad policy leading to bad behavior and bad practices. “Bad” for user behavior and adds more unnecessary complexity to an already complex law.

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ACA Title 1, Sec. 1401. Refundable tax credit providing premium assistance for coverage under a qualified health plan: “Bad” – Here again… “overkill.” In my opinion this section creates more bureaucratic machinations that are fundamentally unnecessary. It covers the detailed rules, conditions and details of how tax credits for public premium subsidies will be calculated and applied. Why not just make an IRS ruling that premium subsidies from public sources under the ACA are not considered to be income to the beneficiary? We don’t need to add another convoluted feature and more complexity to a tax code that is already a nightmare. Come on…. don’t make things so darn difficult!

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ACA Title 1, Section 1343, Risk adjustment: “Bad” – Further undermines incentives for efficiency. This section provides a relatively easy way to avoid efficient claims administration while at the same time we as a nation are adopting and implementing ICD- 10 CM. This new set of diagnostic and procedural codes will triple to quadruple the number of separate possible diagnoses and medical procedures that insurers and health plans must adjudicate. The combination here is likely to further remove competitive forces from a significant percentage of the health plan and health insurers in the marketplace. Here again I would recommend triggers that are extreme just to limit the fairly adverse opportunity of using adverse selection to the health plans advantage.

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ACA Title 1,Sec. 1342. Establishment of risk corridors for plans in individual and small group markets.: “Bad” – Removes much of the business incentive for efficiency. This provision effectively eliminates any real incentive for efficiency or prudency in the administration of the health insurance plans for the individual and small group markets. The three year ((2014 – 2016) creation of a federal determined cost experience “corridor” for cost shortfalls and premium surpluses gets the federal government deep into the business of health insurer and health plans. The regulatory requirements of this section are enormous. Also with a 50% rate of federal subsidization for losses (up to a maximum) and 50% rebate of surpluses up to a maximum back to the federal government it generally undermines the market incentives for efficiency in administering health coverage. I believe it would be better if the triggers for this section were at the extreme ends, rather than as a corridor, such as this provision could be triggered by a loss ratio of 110% or greater or a loss ratio less than 70% and then only at the request of the health plan or insurer Involved and if it was triggered both shortfalls and surpluses would be examined. By artificially narrowing the range of price quotes through the existing provision it is likely to have the effect “homogenizing” the efforts of health insurers and plans while providing a subtle incentive to gain business at the expense of the federal government. Also it appears to provide an incentive to not contain or limit administrative cost. Clearly it significantly distorts market mechanisms in health care even in the short run.

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ACA Title 1, Sec. 1341. Transitional reinsurance program for individual and small group markets in each state: “Bad” – Should be emergency provision only. Looks good on the surface, but should be considered as a alternative of last resort, not first resort. Its very presence may encourage irresponsible underwriting in the transitional period. Its good that it is seen as only a three year program with the possibility of extension. Concentration of high risk individuals in any insurance pool is not a good general idea and has a tendency to work against the normalization of risk in insured pools. Also reduces private sector reinsurance solutions and the number of reinsurance providers that write business in employer markets. Should be solution of “last resort” and considered a back up if private reinsurers fail to underwrite needed business. Price tag goes from $10 billion to $4 billion over three years.

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ACA Title 1, Sec. 1333. Provisions relating to the offering of plans in more than one state:”Good” – Mostly – Establishes multi-state health plan offerings. This section of the ACA provides for health plan providers to offer the same plans to the individual and/or small group markets in one or more states. Their state of domicile controls in terms of insurance regulation. The relationship is called a “Health Care Choice Compact” and are slated to be operational no earlier than January 1, 2016. Restrictions regarding “Essential Health Benefits Coverage” and cost sharing limits also apply. Another category of multi-state health plans is also authorized by this section and they are called “Nationwide Qualified Health Plan” and here the provision seems to be written for organizations like the Blues. Again the plans must meet minimums. These plans have to be rolled out in a timely manner and plans are linked to modified community rating which is not good if plans that require wellness are not included. Philosophically the entire law establishes a variety of similar health plans in terms of benefit coverage and cost sharing limits that compete with each other in the marketplace. Variety or diversity in plan design is discouraged and competition between plans mainly on price seems to be the major antidote to high health plan costs. Actually its relatively easy to see how the various legislative proposals from federal legislators were combined with little concern for duplication. Congress seems to have decided that more is better and the more competing plans the better. But a major change that seems to be overlooked is the absence of a provision that would provide an incentive for people to engage in wellness and health lifestyle choices. This concern seems to be relegated to another universe or time dimension.

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ACA Title I, Sec. 1332. Waiver for state innovation: “Good” – Supports innovation by states. Always a good provision, but it also comes with selected limitations including: must include 10 year budget neutrality for HHS, at least provides coverage compatible with “Essential Health Benefit Coverage”, and cost sharing levels no greater than the limits in the Law. These do represent some fairly stringent conditions for securing a waiver. However, controlled innovation is usually a good idea in matters as complex and high stakes as health care.

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ACA Title I, Sec. 1322. Federal program to assist establishment and operation of nonprofit, member-run health insurance Issuers: “Ugly” – Unnecessary and misguided. This section sets up a whole federal system for the awarding of grants, loans and contracts to stimulate consumer run, non-profit health insurance plans with the “catchy” name of “Consumer Operated and Oriented Plan” (CO–OP) program. Does anyone who knows anything about health insurance and health plans really think that these entities will produce more effective or efficient health plans? If they are such a good thing that we need a whole new $6 billion per year federal granting organization why are there not more of them already in existence? Bad idea and another prime example of the philosophical bias replete through the ACA about how innately bad “business” and “capitalism” are for Americans. I don’t agree….I think this is largely how we got to be the only viable superpower on the world stage. This section seems to be predicated on the assumption that if you take the “profit” out of the picture health care will cost less and be more effective. I see no valid empirical data supporting this premise. I believe that the problem with health care costs is not due to profits and profit taking -it is due to the fact that there are virtually no market incentives for people to shop, use health care wisely or maintain and improve their health. Also there is no entity in the U.S. health care system that plays the role of saying …no, you don’t really need that third MRI or that back surgery, or that third stent or that new knee, (because you’re 200 pounds overweight). Multiply this phenomenon by 10,000,000 and the lack of consumption discipline and the economic consequence become pretty clear. My opinion is that this section should be repealed, particularly with its $6 billion price tag.

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ACA Title I, Sec. 1321. State flexibility in operation and enforcement of Exchanges and related requirements: “Good” – Provides option for state to operate insurance “exchange” including standards and protection from federal preemption. This section of the ACA provides for states to operate an insurance exchange and that the Secretary of HHS will promulgate standards and a process for becoming an exchange. The specific requirements include: (A) the establishment and operation of Exchanges; (B) the offering of qualified health plans through such Exchanges; (C) the establishment of the reinsurance and risk adjustment programs under part V; and (D) such other requirements as the Secretary determines appropriate. States must operate their exchanges under federal standards or can choose to allow the federal government to provide the exchange (either directly by the federal government or through a non-profit.). DHHS decided to do it directly through www.healthcare.gov and unfortunately experienced a number of technical problems and delays. This section also recognizes state sovereignty in health regulation and limits preemption by federal law and regulation. Finally there is a general provision for including early versions of state exchanges until they can be evaluated by the standards. I see this provision as helping establish a national platform for developing a more “level” playing field for our health insurance markets. I believe this is necessary to allow consumers not to be confused by self-serving marketing and sales strategies of insurers and to provide a consistent national marketplace for consumers and businesses to purchase health insurance. It helps set the stage for effective price competition among health plans. However, exchanges by themselves, are not likely to lead to significant improvement in the nation’s health.

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ACA Title 1, Sec. 1313. Financial integrity: “Good” – Basic requirements for financial record-keeping, audits, reports and oversight of exchanges. This section requires that exchanges keep sound financial records, conduct periodic audits, report to the federal government, be investigated by the GAO and be monitored for patterns of abuse or filing of false claims. This is a basic requirement for all public expenditures and should be fully pursued by federal regulators. Nothing unusual here!

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