The following was written by Andy Bindman, MD, Professor in Medicine, Health Policy, Epidemiology & Biostatistics at UCSF. During 2009-2010 he served as a Robert Wood Johnson Health Policy Fellow on the staff of the Energy & Commerce Committee in the US House of Representatives, where he contributed to the legislative process that resulted in the passage of the Patient Protection & Affordable Care Act.
The central feature of the Patient Protection and Affordable Care Act (ACA), sometimes referred to as ”Obamacare“, is set to be implemented beginning January 1, 2014. On that date millions of Americans will gain access to insurance coverage either through an expansion of the Medicaid program or by new opportunities to purchase private health insurance through a Marketplace Exchange.
In California, the Medicaid program is called Medi-Cal and the new Marketplace Exchange is called Covered California. In California, those individuals under the age of 65 years whose household income is below 133% of the federal poverty level (approximately $15,000 for an individual and $31,000 for a family of 4) will be eligible for Medi-Cal while those Californians with a household income between 133% and 400% of the federal poverty level (up to $46,000 for an individual and $94,000 for a family of 4) will be eligible on a sliding scale basis for a federal subsidy to purchase private insurance from Covered California. Undocumented residents are not eligible for either program.
Higher income individuals can also purchase health insurance from Covered California, but they will not receive the benefit of the federal subsidy. Those who already receive health insurance from their workplace, including most individuals working for large employers, as well as Individuals ages 65 years and older who receive Medicare are not expected to experience much change in terms of how they receive health insurance coverage.
The ACA includes several provisions designed to improve the purchasing of health insurance:
First, it eliminates the use of pre-existing conditions as a reason for why an insurer can deny a person from purchasing health insurance; it guarantees that if an individual chooses a plan, the insurer must accept the individual into the plan. The insurer cannot apply limits on the value of the insurance and cannot use illness as a reason for dropping a person from the plan.
Second, insurers cannot charge individuals more on the basis of pre-existing conditions. Under the law, insurers can charge more for older individuals and for those whose personal behaviors, such as tobacco smoking, put them at higher risk for poor outcomes. But even then the differences in premiums among individuals for insurance will be required to be much smaller than they are today.
Third, the ACA fosters price competition among insurers by requiring them to report how much of the anticipated cost of health care their product will cover. Through the Marketplace Exchanges, insurance products will be rated Bronze, Silver, Gold, or Platinum depending on whether they are rated to cover 60%, 70%, 80%, or 90% respectively of an individual’s health insurance costs. Using this approach, a consumer will be able to compare across insurers the price for similar levels of coverage. By having all of this information visible on a website, insurers are expected to engage in price competition much like sellers with similar products do at a farmers market.
Finally, insurers will need to demonstrate that they are spending at least 80% of the money they collect from patients on health care services and not on marketing, profits or other administrative activities that do not directly benefit patients. If they are found to spend less than 80% of their revenue on patient care (called the medical-loss ratio), then they are required to refund the difference to individuals in their plan.
Open enrollment for those newly eligible for Medi-Cal and Covered California begins October 1, 2013. While the biggest expansion of coverage under the ACA is just a few months away, the law has already contributed to expanding insurance coverage. Beginning in 2010, the law required insurers to allow parents to cover dependent children until age 26 years. This change has allowed more than 3 million young adults who otherwise would not have been covered to gain health insurance.