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Today’s virtual House graphic: Iowa impact of ACA repeal

Posted February 23rd, 2017 to Blog

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Yes, whatever actions are taken on the Affordable Care Act will come from Congress, but state legislators may be left to pick up the pieces. Iowa legislators, are you paying attention? Are you talking to your federal counterparts about this? (Some are in the state this week.)

What many may not know is the impact the ACA has had on reducing the uninsured population in Iowa. The Medicaid expansion under the ACA is one of the big reasons we have seen a greater share of the Iowa population covered by either public or private insurance.

For more information on how the ACA has affected uninsurance in Iowa — and the stakes of repeal without an adequate replacement — see Peter Fisher’s policy brief, Repealing ACA: Pushing thousands of Iowans to the brink.

Editor’s Note: The Iowa House of Representatives now denies the ability of lawmakers to use visual aids in debate on the floor. To help Iowans visualize what kinds of graphics might be useful in these debates to illustrate facts, on several days this session we are offering examples. Here is today’s graphic, to illustrate the impact on Iowa, and potentially on state finances and responsibilities, if the federal Affordable Care Act is repealed.


Today’s virtual House graphic: Iowa impacts of ACA repeal

Posted February 9th, 2017 to Blog

Editor’s Note: The Iowa House of Representatives voted Monday to deny the ability of lawmakers to use visual aids in debate on the floor. To help Iowans visualize what kinds of graphics might be useful in these debates to illustrate facts, we will offer examples. Here is today’s graphic, to illustrate what could be expected to happen in Iowa if Congress repeals the Affordable Care Act.

170119-IFP-ACA-F2xxRepealing the Affordable Care Act (ACA) without an adequate replacement, as Congress and the incoming Trump administration appear poised to do, jeopardizes the health care coverage and economic well-being of the most vulnerable Iowans. About 230,000 fewer Iowans would have health coverage in 2019 if the law is repealed, including 25,000 children.

In fact, repeal of the ACA could leave tens of thousands of adults uninsured who actually had insurance prior to the ACA. Some 69,000 Iowans covered by an Iowa program, IowaCare, became part of the Iowa Health and Wellness Program with the advent of the ACA, while even more Iowans had insurance with the help of ACA subsidies.

Repeal leaves all three of those programs gone — IowaCare, Iowa Health and Wellness, and the ACA subsidies. Thus, fewer will have insurance than in 2013, prior to the ACA, and low-income Iowans will be worse off. This is an issue that state legislators may be left to address with no help from the U.S. Congress, but is not getting attention at the Iowa Statehouse.

For more information, see this Iowa Fiscal Partnership policy brief by Iowa Policy Project Research Director Peter Fisher.


Repealing ACA: Pushing thousands of Iowans to the brink

Likely turmoil in insurance market, higher premiums, and harm to the economy

Instead of incentives to invest, the proposals reward decisions made with no subsidy needed

Updated March 2017

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By Peter S. Fisher

Repealing the Affordable Care Act (ACA) without an adequate replacement, as Congress and the incoming Trump administration appear poised to do, jeopardizes the health care coverage and economic well-being of the most vulnerable Iowans. About 230,000 fewer Iowans would have health coverage in 2019 if the law is repealed, including 25,000 children. Thousands of adults working in low-wage jobs — such as those waiting tables, working on construction sites, bagging groceries, or providing care to children, the sick, and the elderly — would lose coverage if the Medicaid expansion is repealed. For families unable to afford health coverage on the individual market prior to health reform, coverage subsidized by tax credits could disappear, and 42,000 individuals would lose their insurance. More people would turn to hospitals and other health providers for uncompensated care, which would likely be provided in emergency rooms, leaving those who are insured to pay the bill through their own premiums, or for health-care providers to swallow the cost. Iowa’s economy would suffer as $626 million in federal funds would be withdrawn from the state, costing Iowa 6,700 jobs. The insurance market would be thrown into immediate disarray, raising premiums and reducing insurance options. Such are the prospects for Iowa as decisions loom in Washington on the ACA.  

The Affordable Care Act dramatically expanded health insurance coverage in Iowa

The number of Iowans without health insurance declined by almost 93,000 between 2013 (prior to implementation of the Affordable Care Act) and 2015, the second year in which the ACA and the insurance exchange were fully implemented in Iowa. This represents a 37 percent decline in the number of uninsured. Statewide, the percent of persons without insurance declined from 8.1 percent to 5 percent. Increased coverage came in two ways: (1) about 47,000 more individuals purchased private insurance directly, with subsidies available to most of those through the ACA, and (2) about 70,000 more Iowans obtained health insurance from Medicaid.

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At the same time that options expanded for people to access publicly funded or subsidized coverage, the number of Iowans obtaining health insurance through their employer actually increased by 28,000 over the two-year period. The ACA, in other words, does not appear to have caused employers to eliminate health insurance and push employees onto public plans.

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The most dramatic decrease in the number of uninsured occurred for non-Hispanic white Iowans, among whom the number dropped by 85,000, accounting for 92 percent of the decrease statewide. The uninsured rate for this population declined from 7 percent to about 4 percent. The ACA had much less dramatic effect in reducing the uninsurance rates among Hispanics, African Americans and other non-white Iowans, where the uninsured share remained at 12 percent or higher.

The percent of the population that was uninsured dropped in nine of the 10 most populous counties in Iowa, in most cases by a substantial amount. The uninsured rate in the more rural remainder of the state also declined dramatically, from 9.2 percent to 5.3 percent. All told, about 41,000 fewer Iowans in the 10 largest counties were uninsured in 2015, while 52,000 fewer Iowans in the remainder of the state had coverage.

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Repeal would increase the number of uninsured Iowans

The ACA has made good-quality health insurance available to thousands of low-income individuals and families in Iowa who otherwise could not afford coverage. About 55,000 Iowans purchased insurance on the exchange during the 2016 enrollment period, and 85 percent of them qualified for the premium tax credit.[1] The average monthly premium for those purchasing insurance on the exchange was $425, with $303, or 71 percent of this cost, covered by the credit. The ACA subsidy that is now in danger reduced the average cost to ACA enrollees to $122 per month.  Nearly 28,000 people in this group also received cost-sharing reductions (CSRs), which lowered deductibles and other out-of-pocket costs for them by roughly $28 million that year.

The Urban Institute has estimated that if the ACA is repealed, 230,000 fewer Iowans will have health insurance coverage in 2019 than if the law is left as is.[2] Of these, 42,000 are individuals who will receive tax credits for the purchase of health insurance if the ACA continues, credits worth on average $4,281 per recipient per year. The credit covers over two-thirds of the cost of health insurance on average. Few people could afford to keep their coverage if they lose that subsidy.

As a result of these losses in coverage, the Urban Institute projects that ACA repeal would increase the number of uninsured in Iowa from 153,000 to 383,000, a 150 percent increase.[3] This includes an increase of 25,000 in the number of uninsured children, as well as 68,000 more uninsured parents.[4]  The percentage of Iowa children without health insurance would more than double, from 3 percent to 6.2 percent.

Taking Medicaid coverage away from thousands of adults would likely lead to an increase in the number of uninsured children. This is because adults who are uninsured are less likely to enroll their children in Medicaid or hawk-I.[5]  For many children in Iowa, this will mean not just poorer health, but poorer long-term prospects overall. Research has shown that better health care as a child is associated with greater educational attainment and higher earnings as an adult.[6]

Repeal of the Medicaid expansion would cut eligibility below pre-ACA levels

In 2014 Iowa created its own version of the Medicaid expansion, called the Iowa Health and Wellness Plan. As of January 2017, 151,000 people were enrolled in the Wellness Plan. See Appendix Table for enrollment by county. All of those individuals now in the Wellness Plan are at risk of losing health insurance if the Medicaid expansion portion of the ACA is repealed.

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Prior to the ACA, Iowa had created a Medicaid waiver program called IowaCare that extended Medicaid benefits to many adults not eligible under traditional Medicaid.[7] There were 69,000 people enrolled in IowaCare in FY2013.[8] With the advent of the ACA in 2014, those enrolled in IowaCare were automatically shifted to the Iowa Wellness Program, and IowaCare ceased to exist. If Congress repeals the Medicaid expansion, all those in the Wellness Program would be at risk of losing coverage. People losing coverage would include those formerly in IowaCare, unless the state re-created such a program under a waiver request once again and got approval for that waiver from the federal government. This is unlikely. Thus the repeal of the ACA could leave tens of thousands of adults uninsured who actually were insured prior to the ACA, or who could have been covered if IowaCare still existed.  This would leave low-income Iowans worse off than they were in 2013, prior to health reform taking effect.

Working Iowans would be hurt by Medicaid expansion repeal

The majority of the non-elderly adults receiving Medicaid are working Iowans. In 2015, 61 percent of Medicaid recipients age 18 to 64 were working at least part time. A third of those were working full time at low-wage jobs that left them earning near the poverty line. Many of these adults get their health coverage through the Iowa Wellness Program and are thus at risk of becoming uninsured if the Medicaid expansion is repealed.

Basic RGBAmong the adult Medicaid recipients in Iowa who are working, about 45 percent work in 10 industries. They are waiting tables, working on construction, bagging groceries, or serving children, the sick, and the elderly. They are working in jobs that pay little and provide few if any benefits.

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Uncompensated care would rise with repeal

The ACA expanded insurance coverage to thousands of Iowans who would otherwise have sought emergency room or other care that they could not pay for, but which hospitals and doctors nonetheless are obligated to provide. This “uncompensated care” was greatly reduced by the ACA. With repeal and the loss of insurance coverage for 230,000 Iowans, it is estimated that total uncompensated care in Iowa in 2019 (assumed to be the first year in which repeal is fully in effect) would more than triple, from $345 million to $1.2 billion.[9] Over a 10-year period, a $10 billion rise in uncompensated care in Iowa is anticipated. All Iowans would feel the effects, as hospital fees and insurance rates would rise to make up for these costs, and as hospitals retrench.

The decline in health insurance coverage and the rise in uncompensated care could be especially challenging for Iowa’s rural hospitals. Rural hospitals are more likely to be in a precarious financial situation if they are in a state that did not expand Medicaid, and repeal would throw all Iowa hospitals into that situation. Since 2010, 80 rural hospitals across the country have closed, the majority in non-expansion states.

Repealing the ACA would cause immediate harm

Repeal of the ACA would likely follow the provisions of the repeal bill passed by Congress last year. This would eliminate immediately the individual mandate to purchase insurance or pay a penalty, while retaining popular provisions such as the requirement that insurance companies not deny coverage because of pre-existing conditions. The result is that many healthy individuals would drop their coverage.  Insurance companies would be left with the sickest and most expensive customers, which would prompt some to leave the state’s individual insurance market or to raise rates for remaining customers if they stayed.  The health insurance market would thus be devastated quickly, even though full repeal of the subsidies and other provisions of ACA would be delayed, possibly until 2019.

Repeal would also endanger some of the ACA’s most important consumer protections. No “replacement” plan has been proposed, but it is likely that the quality of insurance policies in the individual market would deteriorate, with rising deductibles, the return of limits on how much insurers will pay out in benefits each year or over a person’s lifetime, and failure to cover such things as maternity care, mental health, or prescription drugs.

With repeal of the individual mandate and the subsidies, it would be untenable to maintain the ACA’s protections for people with pre-existing health conditions. In Iowa, the number of adults with pre-existing conditions that would have led to denial of insurance coverage prior to the ACA has been conservatively estimated at 448,000, or about 24 percent of non-elderly adults in the state.[10] Ensuring the individual insurance market is accessible and affordable for this group, should they need to purchase coverage there, has been a major achievement of the ACA , but one made possible only because of the mandate and the marketplace subsidies, which broadened the pool of individuals the insurance companies were covering to include many healthier adults. Without the broader pool, insurance companies will not continue to offer quality, affordable policies, to the detriment of all those buying health insurance in Iowa.

Contrary to what some in Congress have been saying, the exchanges are not in a death spiral — higher premiums causing healthy individuals to forgo insurance, leaving the insurance companies with a more costly pool, leading to higher premiums, etc. Enrollment through the exchanges has increased each year since inception in 2014, and 2017 enrollment is ahead of last year’s. There is evidence that the premium increases this year are a one-time correction for underpricing in previous years, not the beginning of a trend.[11] In fact it is repeal, not continuation, of the ACA that would push the exchanges into a death spiral.

Repeal would shower benefits on the wealthy

Repeal of the taxes financing the ACA would lavish tax cuts on the highest-income households in the country. The Medicare taxes imposed by the ACA fall only on individuals with incomes above $200,000 or couples with incomes above $250,000. The 400 richest households in the country would receive a $2.8 billion windfall in 2017 if these taxes were ended, for an average tax cut of about $7 million a year for each household.[12] Without the revenue from these and other taxes imposed by the ACA, it would be difficult or impossible to finance a replacement.

Repeal would harm Iowa’s economy

The repeal of the ACA would have a substantial impact on the Iowa economy, cutting off billions in federal money flowing into the state, and reducing income and employment, not just in the health care industry, but throughout the economy.

Repeal of the ACA would result in the loss of $626 million in federal funds in 2019, and a total of $7.4 billion from 2019-2028.[13] That would reduce payments to health care providers throughout the state, who in turn would reduce purchases from vendors and cut employment. Ripple effects would follow: vendors would cut payroll, and the reduced spending by employees both of the health care providers and of the vendors would mean reduced purchases of goods and services in Iowa, and reduced state taxes. Repeal of the ACA (including the taxes that finance it) would cost Iowa 6,700 jobs,[14] not just in the health care sector, but also in sectors such as construction, retail, finance and services.

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[1] U.S. Department of Health and Human Services, ASPE Issue Brief, March 11, 2016. Health Insurance Marketplaces 2016 Open Enrollment Period: Final Enrollment Report For the period: November 1, 2015 – February 1, 2016.

[2] Linda J. Blumberg, Matthew Buettgens, and John Holahan. Implications of Partial Repeal of the ACA through Reconciliation. Washington, DC: The Urban Institute, December 2016. Available online at http://www.urban.org/research/publication/implications-partial-repeal-aca-through-reconciliation

[3] Linda J. Blumberg, Matthew Buettgens, and John Holahan. Implications of Partial Repeal of the ACA through Reconciliation. Washington, DC: The Urban Institute, December 2016. Available at http://www.urban.org/research/publication/implications-partial-repeal-aca-through-reconciliation

[4] Matthew Buettgens, Genevieve Kenney, and Clare Pan. Partial Repeal of the ACA through Reconciliation: Coverage Implications for Parents and Children. Washington, DC: The Urban Institute, December 21, 2016. Available at: http://www.urban.org/research/publication/partial-repeal-aca-through-reconciliation-coverage-implications-parents-and-children. 

[5] Government Accountability Office. Medicaid and CHIP: Given the Association between Parent and Child Insurance Status, New Expansion May Benefit Families. February 2011. Available at:  http://www.gao.gov/new.items/d11264.pdf .Georgetown Center for Children and Families, Medicaid Expansion: Good for Parents and Children. January 2014. Available at: http://ccf.georgetown.edu/wp-content/uploads/2013/12/Expanding-Coverage-for-Parents-Helps-Children-2013.pdf  

[6] Medicaid’s Long-Term Earnings and Health Benefits. Center on Budget and Policy Priorities, May 12, 2015. Available at: http://www.cbpp.org/blog/medicaids-long-term-earnings-and-health-benefits   Medicaid at 50: Covering Children Has Long-term Educational Benefits. Center on Budget and Policy Priorities, July 7, 2015. Available at: http://www.cbpp.org/blog/medicaid-at-50-covering-children-has-long-term-educational-benefits

[7] Traditional Medicaid covers low-income individuals who are aged, blind, disabled, pregnant women, children, or parents of children on Medicaid.

[8] https://dhs.iowa.gov/sites/default/files/IowaCare_Narrative.pdf

[9] Matthew Buettgens, Linda J. Blumberg, and John Holahan. The Impact on Health Care Providers of Partial ACA

Repeal through Reconciliation. The Robert Wood Johnson Foundation and the Urban Institute, January 2017.

http://www.urban.org/sites/default/files/publication/86916/2001046-the-impact-on-health-care-providers-of-partial-aca-repeal-through-reconciliation_0.pdf

[10] Gary Claxton, Cynthia Cox, Anthony Damico, Larry Levitt, and Karen Pollitz.Pre-existing Conditions and Medical Underwriting in the Individual Insurance Market Prior to the ACA. Kaiser Family Foundation, December 12, 2016. Available at: http://kff.org/health-reform/issue-brief/pre-existing-conditions-and-medical-underwriting-in-the-individual-insurance-market-prior-to-the-aca/

[11] Sarah Lueck. “Commentary: Even as Insurance Market Improves, GOP’s ACA Repeal Would Kill It.” Center on Budget and Policy Priorities, January 17, 2017. Available at: http://www.cbpp.org/health/commentary-even-as-insurance-market-improves-gops-aca-repeal-would-kill-it

[12] Brandon DeBot, Chye-Ching Huang, and Chuck Marr  ACA Repeal Would Lavish Medicare Tax Cuts on 400 Highest-Income Households. Center on Budget and Policy Priorities, January 12, 2017 Available at: http://www.cbpp.org/research/federal-tax/aca-repeal-would-lavish-medicare-tax-cuts-on-400-highest-income-households

[13] Includes Medicaid expansion funding and insurance subsidies. Linda J. Blumberg, Matthew Buettgens, and John Holahan. Implications of Partial Repeal of the ACA through Reconciliation. Washington, DC: The Urban Institute, December 2016. Available online at http://www.urban.org/research/publication/implications-partial-repeal-aca-through-reconciliation

[14] Josh Bivens. Repealing the Affordable Care Act Would Cost Jobs in Every State. Economic Policy Institute, January 31, 2017. http://www.epi.org/publication/repealing-the-affordable-care-act-would-cost-jobs-in-every-state/

 

pfisher240200Peter S. Fisher is Research Director for the Iowa Policy Project. He holds a Ph.D. in economics from the University of Wisconsin-Madison and is professor emeritus of Urban and Regional Planning at the University of Iowa. A national expert on public finance, Fisher is frequently quoted in the Iowa and national media on issues involving tax policy and economic development strategies. His critiques of various state business climate rankings are posted on a website, Grading the States, at www.gradingstates.org.

Iowa Uninsured at 8 Percent in 2013

One of nation’s best rates leading up to ACA and Medicaid expansion

A greater percentage of Iowans had health insurance than in most other states leading up to the implementation of the new health care law, Census data showed Tuesday.

Data from the Census’ American Community Survey showed 248,000 Iowans, or 8.1 percent, were uninsured in 2013, down from 254,000, or 8.4 percent, in 2012. The change was not statistically significant, as it was within the margin of error.

Only three other states and the District of Columbia had lower percentages of people who identified themselves as uninsured.

“As good as the Iowa numbers look in comparison to other states, we still had a quarter of a million people without insurance heading up to implementation of the Affordable Care Act,” noted Peter Fisher, research director of the nonpartisan Iowa Policy Project, which is part of the Iowa Fiscal Partnership.

“The Census report demonstrates a need for policies that provide access to health insurance such as ACA, or Obamacare, and Iowa’s Medicaid expansion. Both can be expected to have reduced the number of uninsured. It will be interesting next year to see how these numbers have changed after more people have enrolled.”

Fisher noted one reason for optimism of better numbers in the future is that the state with the lowest uninsurance rate is Massachusetts, which has had a state plan for a number of years. The uninsurance rate in Massachusetts was 3.7 percent in 2013.

“As the ACA is implemented and we have a public policy response to the problem of uninsurance, you have to wonder if we’ll approach the Massachusetts number,” Fisher said.

Besides Massachusetts, only Hawaii and Washington, D.C., at 6.7 percent and Vermont at 7.2 percent had lower rates than Iowa. Minnesota at 8.2 percent was about the same as Iowa’s 8.1 percent, as both had a 0.3 percentage-point margin of error.

In the region, Iowa and Minnesota were well ahead of neighboring states, with uninsurance in Wisconsin at 9.1 percent and all others in double digits: Nebraska and South Dakota both at 11.3 percent, Kansas at 12.3 percent, Illinois at 12.7 percent, and Missouri 13 percent.

The Iowa Fiscal Partnership is a joint public policy analysis initiative of two nonpartisan, nonprofit organizations — the Iowa Policy Project in Iowa City and the Child & Family Policy Center in Des Moines. Reports are at www.iowafiscal.org.

Iowa’s decline in job-based health insurance

Posted April 11th, 2013 to Blog

The Cedar Rapids Gazette today offered an interesting look at the question of where Iowans get their insurance. It’s less and less something that comes through employment. And when the costs of insurance keep rising, that makes it tougher on the household budget — or results in people not having insurance.

This is a trend we’ve been watching and reporting on at the Iowa Policy Project for many years, as have several good research organizations such as the Economic Policy Institute.

The Affordable Care Act offers at least a partial remedy. As health insurance exchanges are developed, affordable insurance should be more readily available. Tax credits for employers providing insurance will provide a targeted incentive to offer employees a better option than what employees might find on the individual insurance market.

Colin Gordon

Colin Gordon

Our State of Working Iowa report for 2012 offers another good look at this issue. As author Colin Gordon observes, wage stagnation, erosion of good jobs and recession have combined to batter workers, at the same time non-wage forms of compensation, health and pension benefits, also have declined. This has eroded both job quality and family financial security, and increased the need for public insurance. In Chapter 3, “The Bigger Picture,” Gordon writes that Iowa is one of 15 states, including five in the Midwest, to lose more than 10 percent of job-based coverage in a decade. He continues:

These losses reflect two overlapping trends. The first of these is costs. Health spending has slowed in recent years, but still runs well ahead of general inflation. Both premium costs … and the employee’s share of premiums have risen sharply — especially for family coverage — while wages have stagnated.

In 1999, a full-time median-wage worker in Iowa needed to work for about 10 weeks in order to pay an annual family premium; by 2011, this had swollen to nearly 25 weeks. Steep cost increases have pressed employers to drop or cut back coverage, or employees to decline it when offered. High costs may also encourage more employees to elect single coverage — counting on spousal coverage from another source and kids’ coverage through public programs. The second factor here is the shift in sectoral employment outlined above: Job losses are heaviest in sectors that have historically offered group health coverage; and job gains (or projected job gains) are strongest in sectors that don’t offer coverage.

This graph looks at the rate of employer-sponsored coverage, by industry sector, from 2002 to 2012.

job-based coverage comparison, Iowa 2002-2012

An interactive version of that graph in the online report allows the reader to toggle between those two years; the colored balloons sink on the graph in moving from 2002 to 2012, as if they all are losing air — the result of declining rates of coverage.

Good public policy could help to fill them again.

2010-mo-blogthumbPosted by Mike Owen, Assistant Director

 


Nonsense from the Far Right

Posted August 24th, 2012 to Blog

Political consultant Dick Morris slipped into Iowa last week, and the Spin-O-Meter was in overdrive.

Now, rather than repeat Mr. Morris’ misinformation, here is a link to a Des Moines Register story about his appearance at a rally orchestrated by the national right-wing organization Americans for Prosperity.

What Iowans need to know is that (1) Morris is wrong about what is driving the federal budget deficits, and (2) the causes are clear: You can’t cut taxes and fight two wars at the same time without digging a big budget hole.

Center on Budget and Policy Priorities graph

Center on Budget and Policy Priorities

As shown in the graph at right from the Center on Budget and Policy Priorities, the economic downturn, President Bush’s tax cuts and the wars in Afghanistan and Iraq explain the vast majority of the deficit through 2019. One thing folks must recognize is that deficits caused by those factors cause more debt down the road, because we have to keep paying interest. Even after the Iraq war ended, we have to keep paying for it.

As we deal with these self-inflicted budget problems, we must maintain the fundamental and long-accepted responsibilities of our nation — to care for the most vulnerable and put them on their feet to get work and succeed in our economy.

Dick Morris has a big megaphone to try to instill something other than a factual presentation about what’s causing our deficits and debt. Fortunately, the discerning Iowan can find the facts by looking for them, and not buying into the conventional spin he delivers in his traveling medicine show.

Posted by Mike Owen, Assistant Director


The policy effects of Supreme Court ruling — beyond politics, legal arguments

Posted June 28th, 2012 to Blog

Andrew Cannon

While many are focusing on the political and judicial ramifications of today’s Supreme Court ruling affirming the constitutionality of the Affordable Care Act (ACA), it’s important to focus on how the law will affect health coverage.

ACA provisions at the heart of the Supreme Court decision are the personal responsibility requirement (or individual mandate) and the Medicaid expansion. Both provisions are not scheduled to take effect until January 1, 2014.

However, a number of provisions have been in effect since 2010 — shortly after the law’s passage, and have helped make insurance coverage accessible and more affordable for millions of Americans. Today’s ruling upholding the law means that millions of Americans will retain that coverage and those benefits.

Among the provisions currently in effect:

  • Young adult coverage — Uninsured persons age 18 through 25 may continue to be insured as a dependent on their parents’ health coverage. This provision has extended health care coverage to an estimated 6.6 million young Americans.[1]
  • Protections against pre-existing condition exclusions for children — The ACA prevents insurers from denying coverage to sick children. In Iowa, there are up to 51,000 children who have pre-existing conditions.[2]
  • The end of lifetime and annual benefit limits — Consumers with serious health conditions and treatment expenses no longer need to worry about bumping against maximum amounts an insurer will pay.
  • The elimination of the Medicare “doughnut hole” — Under existing Medicare law, seniors with high prescription costs had to pay for prescriptions entirely out-of-pocket. The ACA gradually eliminates this “doughnut hole,” providing seniors a 50 percent discounts on name-brand drugs and a 7 percent discount on generic drugs.
  • Tax credits for small businesses — Small businesses that meet specified qualifications may presently receive a tax credit if they offer their employees coverage and cover at least half of the premium cost.[3] Estimates of the number of eligible businesses vary, from about 2.6 million to about 4 million.[4] Take-up has been limited, partially due to lack of awareness.

Provisions that will take effect in 2014:

  • Expanding Medicaid coverage — Under the ACA, uninsured individuals with earnings at or below 133 percent of the federal poverty level ($30,657 for a family of four in 2012) will qualify for enrollment in Medicaid.  If Iowa fully participates in the Medicaid expansion, as many as 114,700 Iowans may receive coverage.[5]
  • Creation of new insurance marketplaces, or “exchanges” — The ACA instructs states to construct new insurance marketplaces, accessible by Internet, in which those who don’t receive insurance through their employer may shop for insurance coverage. Individuals who don’t qualify for Medicaid coverage will receive tax credits to help them cover the cost of their heath premium. This is the group affected by the individual mandate. According to estimates, as many as 250,000 Iowans could find their health coverage through the new insurance marketplace, or exchange.[6]

While legal scholars and political pundits will undoubtedly have much to say for months on today’s decision, the central purpose of the law should not be lost in the discussion: to expand health insurance coverage and help create a health system that works for everyone.

Posted by Andrew Cannon, Research Associate


[1] Sara R. Collins, Ruth Robertson, Tracy Garber and Michelle M. Doty, “Young, Uninsured, and in Debt: Why Young Adults Lack Health Insurance and How the Affordable Care Act is Helping,” the Commonwealth Fund. June 2012. <http://www.commonwealthfund.org/~/media/Files/Publications/Issue%20Brief/2012/Jun/1604_collins_young_uninsured_in_debt_v4.pdf>.

[2] Christine Sebastian, Kim Bailey, and Kathleen Stoll, “Health Reform: A Closer Look. Help for Iowans with Pre-Existing

Conditions,” Families USA. May 2010. <http://www.familiesusa.org/assets/pdfs/health-reform/pre-existingconditions/iowa.pdf>.

[3] See “Right Balance for Small Business in Health Reform,” Iowa Fiscal Partnership, July 22, 2010. <http://www.iowafiscal.org/2010docs/100722-IFP-HCR-credits.pdf>.

[4] “Small Employer Health Tax Credit: Factors Contributing to Low Use and Complexity” (GAO-12-549), Government Accountability Office, May 2012. <http://gao.gov/assets/600/590832.pdf>.

[5] John Holahan and Irene Headen, “Medicaid Coverage and Spending in Health Reform: National and State-by-State Results for Adults at or Below 133% FPL,” Kaiser Commission on Medicaid and the Uninsured, May 2010. <http://www.kff.org/healthreform/upload/medicaid-coverage-and-spending-in-health-reform-national-and-state-by-state-results-for-adults-at-or-below-133-fpl.pdf>.

[6] Matthew Buettgens, John Hollahan, and Caitlin Carroll, “Health Reform Across States: Increased Insurance Coverage and Federal Spending on the Exchanges and Medicaid,” Urban Institute, March 2012. <http://www.urban.org/uploadedpdf/412310-Health-Reform-Across-the-States.pdf>.


Health Reform: Right balance for small business

Posted July 10th, 2010 to Health, Work Supports

In Iowa, Targeted Tax Credits Offer Business Benefits, Employees Health Access

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News Release

By Andrew Cannon

A largely silent but very active movement within state and federal agencies is preparing for the full implementation of the Patient Protection and Affordable Care Act (PPACA). Though the new health reform law does not fully go into effect until 2014, dozens of agencies within the federal government are complying with the law’s provisions to ensure that the law’s implementation has the maximum impact of making insurance affordable to all.

One provision that takes immediate effect helps small businesses provide health insurance to their employees. The PPACA provides small businesses that pay at least half of their employees’ health insurance premium with tax credits of up to 35 percent of the premium cost.

Background

Small businesses and their employees have been disproportionately hurt by the rapid increase in health insurance premiums. Larger firms are able to spread the risk of insuring their employees across a larger pool. In addition, their size affords them bargaining power that smaller businesses lack.

A 2006 study found that the smallest firms pay considerably higher health insurance premiums than large firms. Premiums for firms with nine or fewer employees are 18 percent higher than those of large firms (those with 1,000 or more employees), and firms with 10 to 24 employees pay 10 percent more in premiums than large firms. [1]

In addition, premiums have risen significantly for all firms over the past 10 years. In 2000, Iowa companies reported an average premium of $6,487 for a family health insurance plan. By 2008, the average family health insurance plan in Iowa had risen by more than $4,400. [2]

Rising premiums have made health insurance a benefit that many smaller employers can simply no longer afford to offer employees. While larger firms have continued to offer health insurance to employees at an unchanged rate since 2000, the percentage of smaller firms offering health insurance benefits has declined. From 2000 to 2008, there was a drop of three to four percentage points in firms with 100 or fewer employees that offered health insurance. [3]

As a result, employees of small firms are less likely to get their health insurance through an employer. In 2008, about two-thirds of Iowa firms with between 10 and 24 employees offered health insurance to employees and only a third of Iowa firms with 10 or fewer employees offered health insurance. [4] By comparison, more than 91 percent of Iowa firms with 25 or more employees offered health insurance to their employees. [5]

Health Insurance, Small Businesses and the PPACA

The PPACA aims to reduce this disparity between 2010 and 2013 by offering highly targeted tax credits to small businesses that pay for at least half of their employees’ health insurance premiums.

Eligibility for the full credit of 35 percent of an employer’s contribution to employee health insurance is limited by both the number of full-time equivalent employees and the average taxable wages the employer pays.* Firms with 10 or fewer full-time equivalent employees with an average wage per employee of $25,000 or less are eligible for the full credit. Firms with more than 10 employees or average wages higher than $25,000 are eligible for tax credits on a declining scale. At 25 employees, or an average wage of $50,000, credit eligibility disappears. Table 1 shows the eligibility scale for the small business tax credits.

Table 1-HCR credits For example, if a small business that qualifies for the maximum credit offers its employees an individual health insurance plan with an average premium of $4,500, and pays $2,500 of the cost, the employer would receive a tax credit of $875 per full-time employee.

A firm with eight full-time employees and eight part-time employees who work 20 hours a week, for instance, would not be eligible for the full 35 percent credit, even if the average wage was $25,000 or less. Under the PPACA tax credit guidelines, the example firm has the equivalent of 12 full-time employees. Such a firm would be eligible for a 30 percent credit. [6]

In 2014, when full implementation begins with the creation of state-based health insurance exchanges, or marketplaces for individuals and small businesses to purchase insurance, small businesses will be eligible for a maximum credit of 50 percent of the employer’s contribution to the premium.**

Iowa Small Businesses

Firms with 20 or fewer employees account for over 85 percent of Iowa’s private establishments. [7] Over 56,400 small businesses in Iowa have 20 or fewer employees. Depending on the average wage within the firm, these businesses may be eligible for the PPACA health insurance tax credit.

These targeted tax credits will provide a significant benefit to Iowa’s qualifying small businesses that already pay the majority of costs for health coverage for their workers. There also may be some impact upon firms that have not been able to provide employees with health insurance because of its cost and now decide to do so. Even with the federal incentive, however, health insurance costs are likely to weigh against many small employers picking up coverage they do not now provide. The experience with state small business insurance incentive programs is that they generally serve a very small share of the businesses that are potentially eligible, with particular challenges to reaching those predominantly employing lower-wage employees.

Still, employers that do offer health coverage may benefit not only from the federal funding, but also from having a more stable workforce. Nearly three-quarters of workers in a national survey stated that employer-sponsored health insurance was a major factor in their decision to take a job. [8] Similarly, about 80 percent business executives in one national survey described the provision of health insurance benefits as “extremely” or “very important” in job retention. [9]

Overall, the provision of this credit will make health insurance provision by employers less costly. Some additional small business employees, as a result of the tax credit, may have health insurance offered by their employers, and small businesses currently offering coverage will be less likely to drop that coverage. Nearly 60 percent of Iowa’s uninsured population is employed,[10] so the credit will have some impact on the number of uninsured workers within Iowa.

Iowa’s small businesses and their employees stand to gain in obtaining affordable health insurance through this and other provisions in PPACA. Though the major provisions of health reform do not take effect until 2014, premium tax credits already have taken effect.

* Nonprofit organizations that meet the payroll and employee requirements will receive a 25 percent non-refundable credit, which can be used to reduce the organizations’ income and Medicare tax withholdings.
** Beginning in 2014, nonprofit organizations meeting the payroll and employee requirements will receive a 35 percent nonrefundable tax credit, again reducing the organizations’ income and Medicare tax withholdings.
 
Andrew Cannon is a research associate for the Iowa Policy Project (IPP), focusing on fiscal policy and economic opportunity issues including health reform. The Iowa Fiscal Partnership is a joint initiative of IPP and the Child & Family Policy Center, two nonprofit, nonpartisan Iowa-based organizations that cooperate in analysis of tax policy and budget issues facing Iowans. Find Iowa Fiscal Partnership reports at www.iowafiscal.org.
[1] Jon Gable, Roland McDevitt, Laura Gandolfo, et. al. “Generosity and Adjusted Premiums in Job-Based Insurance: Hawaii is Up, Wyoming is Down,” Health Affairs. May/June 2006.
[2] Agency for Healthcare Research and Quality. Average total family premium in dollars per enrolled employee at private-sector establishments that offer health insurance by firm size and state  (Table II.D.1), years 1996-2008. Medical Expenditure Panel Survey Insurance Component Tables. Generated using MEPSnet/IC. Accessed June 15, 2010. <http://www.meps.ahrq.gov/mepsweb/data_stats/MEPSnetIC.jsp>.
[3] AHRQ. Percent of private-sector establishments that offer health insurance by firm size and selected characteristics (Table I.A.2), years 1996-2008.
[4] AHRQ. Percent of private-sector establishments that offer health insurance by firm size and state (Table II.A.2), years 1996-2008.
[5] AHRQ MEPS, Table II.A.2.
[6] Chris L. Peterson and Hinda Chaikind, “Summary of Small Business Health Insurance Tax Credit Under PPACA (P.L. 111-148). Congressional Research Service. April 5, 2010.
[7] Small Business Administration, Office of Advocacy. Employer Firms, Establishments, Employment, Annual Payroll and Estimated Receipts by Firm Size, and State, 2007. <http://www.sba.gov/advo/research/st_07.pdf>.
[8] Ellen O’Brien, “Employers’ Benefits from Workers’ Health Insurance,” the Milbank Quarterly, Vol. 81, No. 1 (2003).
[9] Rachel Christensen, Paul Fronstin, Karl Polzer, and Ray Werntz, “Employer Attitudes Affecting and Practices Affecting Health Benefits and the Uninsured: Issue Brief No. 250.” Employee Benefits Research Institute. October 2002. <http://www.ebri.org/pdf/briefspdf/1002ib.pdf>.
[10] Steven Ruggles, J. Trent Alexander, Katie Genadek, Ronald Goeken, Matthew B. Schroeder, and Matthew Sobek. Integrated Public Use Microdata Series: Version 5.0 [Machine-readable database]. Minneapolis: University of Minnesota, 2010.