Patient Protection and Affordable Care Act

The Patient Protection and Affordable Care Act makes many changes not just inside the health

care industry, but within all industries. The PPACA seemingly takes the steps necessary to assure not

only the uninsured, but the underinsured will have some sort of health care coverage. The health care

reform law requires that all Americans have health insurance, which means employers will need to

prepare for a new wave of young employees needing insurance coverage.  With health care costs rising

and salary increases remaining small, employers may need to get creative when it comes to

compensation and benefits in 2011 to ensure they communicate their value effectively and motivate

and engage employees. For example, cost-conscious employers may offer more benefits to attract and

retain talent, such as flexible work options, including adjustable work schedules or telecommuting.

Vacation buy and sell programs, where employees can purchase or sell back extra vacation days to their

employer, are another low cost creative option likely to gain appeal. (Marzulli, 2011).

                With all the changes coming about due to the new Patient Protection and Affordable Care Act  

there are many employers having to search for creative and new ways to cut costs. One of the creative

ways employers seem to be turning to are wellness incentive type programs which include but are not

limited to the following: education, preventive care, fitness and nutrition.  (Loehrke, 2011). The

employers who have developed wellness programs have  recently been asking their employee's to

voluntarily provide a health risk assessment. Does this mean that your employer is delving into your

personal affairs? Not necessarily. Employers cannot require medical information unless they reasonably

believe that the employee cannot or will not be able to perform an essential function of their job due to

a medical condition, or if the employee may pose a threat to themselves or others due to that condition.

(Loehrke, 2011).Thus, many employers are still trying to find ways to decrease health care costs. 

                Decreasing health care costs is a goal of employer's even for their employee's who take care of

aging loved ones. It's no surprise that employees who care for older relatives may cost employers more

in terms of reduced productivity and higher absenteeism. But a recent study by the Met-Life Mature

Market Institute now finds that family caregivers tend to have higher health care costs as well. The study

estimates that U.S. employers pay 8 percent more per year in health care costs for employees without

those responsibilities. This could potentially cost U.S. employers $13.4 billion per year, according to the

report.  Among the chronic conditions more prevalent in caregivers than noncaregivers: depression,

costing one particular company an estimated $6,380 in increased medical expenses; hypertension

combined with coronary artery disease, costing $30,073; and diabetes costing $14,979. (Baker, 2010).

                Within some companies it looks like employee's are being receptive to the creative ideas their

employers are having. Is this because employee's are realizing that these programs could save them

money in the long run? "Only 31 percent of employees who had negative feelings about the way their

medical benefits were handled felt good about their health care plans" (Wells, 2010). "Claims auditors

estimated that an average 3 percent to 8 percent of enrolled employees' dependents would be

ineligible. Assuming a $1,900 average annual cost per dependent, savings can be substantial.  Plans with

3 percent ineligibility per 10,000 dependents would save $570,000; those with 8 percent ineligibility

might net a return of about $1.5 million" (Wells, 2010). "A recent analysis by Hewitt Associates reports

average premium increases for 2009-2010 at 6 and 6.9 percent, respectively, and projects an 8.8

percent average premium increase for 2011" (Loehrke, 2011).

                 Bear in mind that the new health care reform act protects many individuals who would soon be

uninsured, and/or, underinsured, some due to ineligibility.  Many of these previously ineligible

individuals are adult children who will now remain covered until age 26. (Tyler, 2010). The previous

savings employer's have by not covering these individuals may now be a potential cost increase and

 possibly  force some employers to increase premiums for health care coverage of  their employees'  and

dependents.  "A recent analysis by Hewitt Associates reports average premium increases for 2009-2010

at 6 and 6.9 percent, respectively, and projects an 8.8 percent average premium increase for 2011"

(Loehrke, 2011). Who will be impacted by the provision requiring employers to make coverage available

for all children until they turn 26? Beginning in 2014, even an adult child who has access to coverage

 through his or her employer will be eligible for coverage through a parent's plan. This impact may be

substantial with a projected increase of up to 4 percent of total plan costs. This impact should be

minimal for plans which are employee only. (Tyler, 2010).  The financial incentive to change to employee

only coverage appears strong, many employers are not at this time saying they expect to make the

change to employee only coverage. This financial incentive is strong especially since coverage

generally costs employers much more than the $2,000 per employee penalty as addressed within the

health care reform act. (Tyler, 2010). Employers are simply looking at the difference in cost of insuring

an employee compared to the cost of the penalty.  This means that business leaders look at benefits

from a cost standpoint. If the burden is more in providing coverage then they will more than likely drop

the benefit of dependent coverage for their employees. (Tyler, 2010). This would mean dependents, and

in some cases spouses would be amongst the millions of uninsured. Employers are finding additional

changes for their previously uninsured employees as regulated within the new PPACA law.

                Many employers have found themselves in a quandry and in need of guidance from the

government on how to interpret the Patient Protection and Affordable Care Act which was signed into

law in March 2010. One of the pieces of this reform act employers seem to be looking for is how to

define full-time employee status. The employers are asking for specifics on how to measure the 30-hour

workweek requirement for a full-time status. (Sammer, 2011).  This change in the law means, employees

who did not meet full-time status before and were ineligible for health care coverage may now meet the

requirement. So, what does this mean to you and your employer? What this means is if you were

previously considered part-time you could possibly now by law be deemed full-time and eligible to

receive the benefits of a full-time employee. What it means for your employer is they would now be

required to provide the same health care benefits, as they do to all full-time employees. "Growth in the

average total health benefit cost per employee in the United States picked up steam in 2010, rising 6.9

percent to $9,562" (Miller, 2011). There is a provision within the Patient Protection and Affordable Care

Act for employers with health plans in existence when the law was signed to be "grandfathered". This

provision has several regulations not released until June 17, 2010 by the Obama administration. (Miller,

2011). According to the regulations, a sponsor that wants to keep a plan grandfathered cannot cut or

significantly reduce benefits, raise co-insurance charges, raise co-payment charges by more than $5,

adjusted annually for inflation, raise deductibles significantly, reduce employer contributions by more

than 5 percentage points, or change insurance companies. (Tyler, 2010). These grandfathered plans still

could not exclude coverage of pre-existing conditions or set annual or lifetime coverage limits, but they

can avoid the reform law's requirements for additional reporting on employees' W-2 tax forms. (Tyler,

2010). Many employers' view the additional W-2 reporting requirements in the top provisions impacting

costs.  

                We have already started to see changes come about from the PPACA. Beginning in June of 2010

we started seeing  Medicare beneficiaries who reach the Part D "donut hole" get a $250 rebate, and a

change toward those with pre-existing conditions being offered insurance until 2014. (Lankford, 2010).

In September 2010 the provisions for covering dependent children up to age 26 were revealed. We also

saw the new regulation requiring insurers to cover certain preventive services and prevention of

imposing lifetime limits on the dollar value of coverage. They also can no longer rescind coverage except

 for fraud, or exclude pre-existing conditions on children. So far for the 2011 year Medicare recipients

will now get free preventive services and a 50% discount on brand-name drugs purchased in the Part D

donut hole. We also saw reimbursements for over-the-counter drugs in tax-favored medical accounts

become disallowed.  The projection for 2013 is for Flexible spending account contributions to be limited

to $2,500 per year. However, the threshold for deducting medical expenses on a tax return rises from

7.5% to 10% of adjusted gross income, those age 65 and older are exempt through 2016. In 2014

according to the new law we will see all U.S. citizens and legal residents being required to have health

insurance. There will be penalties of $95 or 1% of income, rising to $695 or 2.5% of income in 2016. We

will also see people younger than 65 who earn up to 133% of the poverty level become eligible for

 Medicaid, and a tax credit for those singles earning $44,000 or less and $80,000 or less for families buy

coverage.  In 2018 health plans will be hit with a 40% tax on the portion of coverage worth more than

$10,200 for individuals or $27,500 for families. (Lankford, 2010).

                Another change began at the start of 2011. Individuals who earn more than $85,000 or

$170,000 if married filing jointly will have to pay a high-income surcharge for Part D premiums. 

(Lankford, 2010). The law does appropriate $5 billion for a high-risk pool, in effect from June 2010 until

2014 to help people otherwise locked out of the insurance system to buy subsidized policies. The new

pool's policies must cap annual out-of-pocket spending at $5,950 for individual coverage or $11,900 for

families (not including premiums). (Lankford, 2010).

                Despite the positive changes for U.S. citizens there is a great deal of negativity regarding the

PPACA as it is currently written. "Dan Wolterman, president and CEO of Memorial Hermann Health

System in Houston, says it's because the law is flawed and needs revisions. However, he does say that

the PPACA offers a platform to begin a necessary realignment of the stakeholders in the provision of

quality healthcare. However, he's concerned, as are many other senior healthcare executives who

participated in a survey by Health Leaders magazine. They feel that the law as written pays

disproportionate attention to access. In other words, insuring the uninsured. " (Betbeze, 2010). Mr.

Wolterman states, "The pay or play provisions on both the employer and individual are set much too

low. Incentives are strong to opt out. I don't believe in the intermediate term that the number of

uninsured will go down. In fact, we run a very good chance that they will go up as employers opt out.

Penalties were set artificially low intentionally." (Betbeze, 2010).  In the Health Leaders survey many

respondents express concern that the access problem can't be fixed without massive change in the

delivery system, addressing such concerns as fee-for-service financial incentives that have been left in

place during the transition period.  Wolterman goes on in saying "The federal government is cutting

their reimbursement and disproportionate share funding. If you improve your quality, your

reimbursement per unit of service will go down and your bottom line will go down as well."(Betbeze,

2010).  When asked about the law's provision of an independent payment advisory board under the

executive branch, Wolterman says, "If you read the fine print in the law, this is not an impartial group,

it's not accountable to Congress, and it fundamentally changes how Medicare rates and budgets have

been done. Although they can override the board's decision, they would have to substitute other cuts to

take the place of anything they override. Not a lot of people in our industry understand that

implication." (Betbeze, 2010).

                In years past larger hospitals or health systems (those with more than 500 beds) were

somewhat insulated from economic adversity, times have changed and capital budgets are reflecting it.

By definition, a capital expenditure is an outlay of cash to acquire or upgrade a business asset that

includes purchasing or constructing a new building or wing, or upgrading an existing one and it also

encompasses clinical or technological equipment purchases. Generally, the motivation for these actions

is to promote growth; however, growth may be on the back burner as healthcare leaders strive to fulfill

government mandates. So, it is not surprising that many facilities/providers are using most of their

capital budgets to add electronic medical record equipment.  Providers that fail to adopt certified EMR

systems or can't demonstrate meaningful use by 2015 will find their Medicare reimbursements decline

by 1%, then by 2% in 2016, 3% in 2017, 4% in 2018, and so on up to 95% depending on future

adjustments. Through an incentive that is part of the American Recovery and Reinvestment Act,

providers can receive up to $44,000 in Medicare incentive payments beginning in 2011 for implementing

these systems.  Ultimately when providers look at the dollars that could potentially be left on the table,

it is a compelling reason to focus on getting EMR systems.  (Minisch-Pourshadi, 2011).  The prospective

 ease of access to patient records through EMR is purported to aid providers in seeing more patients, at

a faster rate, and in a shorter amount of time.  EMR is slated to eventually eliminate or at least decrease

the use of emergency departments by those who do not have a regular doctor. Studies have shown that

those residing in the poorest communities had a 21% higher rate of hospitalization in 2008 than those

residing in all other communities. Community income level had the least impact on the hospitalization

rate of patients 65 years and older, with the poorest communities experiencing similar rates compared

to all other communities.(Cantlupe, 2011). Between 1997 and 2008, the number of hospital discharges

grew by 15%; however growth varied widely by expected primary payer. For example, Medicaid

discharges increased at twice that rate (up 30%), followed closely by uninsured discharges (up 27%). The

number of discharges billed to Medicare grew by 18%. Despite the double-digit growth of discharges by

those payers, growth in the number of discharges billed to private insurance and other payers remained

relatively stable (up 5% and 4% respectively). (Cantlupe, 2011).  Will the new reform law be able to

 come to full fruition with the ever increasing rate of hospitalizations, and need for care?

                There is a question of whether there will be enough providers to take care of everyone. Younger

physicians are wanting a life outside of their practice with fewer hours there is the pressing need for

more primary care. In the years ahead, there is the looming reality of millions of uninsured entering the

health care system, never mind the crunch of the aging baby boomers eventually needing not only

medical help, but also government assistance. Physicians are facing the reality of a 23% Medicare pay

cut that was scheduled to take effect December 1, but which was subsequently delayed by Congress. 

Nearly 13% of 516 responses to a recent survey done by American Academy of Family Physicians said

they would consider no longer seeing patients if Congress failed to override the mandatory pay cuts.

This demonstrates a serious threat to Americans' access to healthcare. This will make many patients,

children, their parents, and their grandparents face the all too real prospect of losing their doctors. The

 cuts by Medicare could force doctors out of business. If that happens, all patients in the community

would lose access to needed healthcare regardless of the type of insurance coverage.  So, in essence it

would be like Medicare patients were uninsured or underinsured. But, we have to face the stark reality

that our physicians are also a business. They cannot continue to run that business if 30% of their

customers were going to reduce their payments by 25% or more. (Commins, 2011).

                "Although health care providers debate their individual and personal obligations to provide

uncompensated care, the system itself finessed the problem for a long time by shifting the costs of care

from the uninsured to the insured. This unofficial but practical approach to indigent care was ethically

tolerable as long as the reimbursement system for paying patients was so open ended that the cost of

treating the uninsured could easily be passed on to paying patients. "(Sultz, 2011).

                                                                  References

Baker, B., (2010, July). Caregivers Incur Higher Health Costs For Selves, Workforce Management, 89(7),                 pp. 8.

Betbeze, P., (2010, Dec.). Reform Without Results, Health Leaders, 13(12), pp. 28-32.

Cantlupe, J., (2011, Mar.). The Quest For Quality, As healthcare reform sharpens the focus on quality     outcomes, the ability to achieve and demonstrate success becomes increasingly important,      Health Leaders, 14(3), pp. 14-26.

Commins, J., (2011, Jan.). The Demands on and by Physicians, Health Leaders, 14(1), pp. 12-13.

Lankford, K., (2010, Jun.). Health Reform, Phase1: What You Will See When, Kiplinger's Personal Finance,             64(6), pp. 20-21.

Loehrke, K., (2011, Apr.). The Legalities of Employee Wellness, Talent Management magazine, 7(4), April             2011, pp.32-34.

Marzulli, T., (2011, Jan.).  Making Benefits Work in 2011, Talent Management Magazine,  7(1), pp. 28-31.

Miller, S., (2011, Jan.). Per-Employee Health Costs Jump 6.9 Percent, HR Magazine, 56(1), pp.14.

Minisch-Pourshadi, K., (2011, Mar.). Caution Leads to Capital Budget Cuts, Delays, Health Leaders, 14(3),               pp. 30-34.

Sammer, J., (2011, Jan.). Navigating Health Care Reform's Unclear Mandates, HR Magazine,56(1), pp.14.

Sultz, H. A., & Young, K. M. (2011). Health care USA: understanding its organization and delivery (7th     ed.). (pp. 26-27,227-229, 259,395-396)Sudbury, Mass: Jones and Bartlett Publ..

Tyler, K., (2010, Sept.). Health Care Reform Now: FIRST Things First, HR Magazine, 55(9), pp. 40-54.

Wells, S.J., (2010, Jul.). Overseeing Audits of Your Health Plans, HR magazine, 55(7), pp. 34-39.