When it comes to reforming our health care system, the contrast is clear: Democrats ended abusive insurance company practices, closed the Medicare ‘donut hole,’ and gave millions of Americans access to free, recommended preventive care – while Republicans fought to protect insurance company profits and let insurance companies continue to deny people coverage for pre-existing conditions.
Earlier this year, Congress passed and the President signed landmark health insurance reform legislation, the Patient Protection and Affordable Care Act (P.L. 111-148) and the Health Care and Education Reconciliation Act (P.L. 111-152), and Americans are already experiencing the benefits. These two laws, together referred to as the Affordable Care Act, put control over health care decisions in the hands of the American people, not insurance companies. Senate Democrats are committed to implementing health reform that holds insurance companies accountable, brings costs down for everyone, and provides Americans with the insurance security and choices they deserve. This fact sheet provides an overview of recent health reform implementation activity. Previous updates on health reform implementation and other information are available from the DPC. [DPC]
Americans Hold Favorable View of Health Reform
A new tracking poll recently released by the non-partisan Kaiser Family Foundation found that Americans have a favorable view of the new health reform law, by a 15-point margin. [Kaiser Family Foundation, 7/29/10] Fifty percent of the public now expresses a favorable view of the law, up from 48 percent in June, while just 35 percent hold an unfavorable view, down from 41 percent in June.
Free Preventive Care to Keep Americans Healthy
The Affordable Care Act makes preventive care more accessible and affordable by requiring new health insurance plans to cover recommended preventive services without charging a copayment, coinsurance, or deductible. On July 14, 2010, the Administration announced regulations implementing this critical benefit of the new health reform law. [HealthCare.gov, 7/14/10] New health insurance plans with policy years beginning on or after September 23, 2010, must cover and eliminate cost-sharing for evidence-based, recommended preventive health care services.
Americans use preventive care at about half the recommended rate, and approximately 11 million children and 59 million adults have private insurance that does not adequately cover immunizations. [New England Journal of Medicine, 6/26/03; Institute of Medicine, 8/4/03] The Administration estimates that 31 million Americans in new employer-sponsored insurance and 10 million Americans in new individual insurance will receive more accessible, affordable preventive care next year as a result of the Affordable Care Act with 88 million Americans benefitting by 2013. [HealthCare.gov, 7/14/10] While there is an estimated effect on health insurance premiums of approximately 1.5 percent, on average, Americans who currently have no or limited preventive care coverage will see significant out-of-pocket savings. For example, a 58-year-old woman at risk for heart disease could save more than $300 in out-of-pocket costs if she receives all recommended preventive care and screenings. [HealthCare.gov, 7/14/10]
$250 for Seniors Who Hit the ‘Donut Hole’
The first two rounds of one-time, $250 checks were mailed in June and July to Medicare beneficiaries who do not receive Medicare Extra Help and who had already entered the “donut hole.” The next round of checks is expected to be mailed in mid-August to beneficiaries who entered the donut hole after the first rounds of checks were mailed, and these checks will continue to go out monthly for the rest of the year as beneficiaries enter the coverage gap. [White House, 6/8/10] The $250 rebate check is tax-free and seniors do not need to do anything to receive it; Medicare automatically mails a check when the beneficiary reaches the “donut hole.” [Centers for Medicare & Medicaid Services, 5/10] Seniors should expect their check in the mail within 45 days or less of hitting the coverage gap. Information on the number of seniors in your state who may qualify for the rebate check this year is available from the DPC. [DPC, 6/22/10]
Beginning next year, Medicare beneficiaries who do not receive Medicare Extra Help will receive a 50 percent discount on brand-name drugs and biologics they purchase when they are in the coverage gap. In addition to the discount, coverage in the “donut hole” will increase until 2020, when 75 percent coverage on all drugs purchased in the gap will completely fill in the “donut hole.” More information on filling in the “donut hole” and other benefits of health reform for seniors is available from the DPC. [DPC, 6/10/10]
Establishing the Pre-Existing Condition Insurance Plan
For far too long, Americans with pre-existing conditions have struggled to obtain the health insurance and the health care they need. For plan or policy years starting on or after September 23, 2010, the Affordable Care Act prohibits insurers from discriminating against children with pre-existing conditions, and starting in 2014, the new law protects all Americans from this discrimination. [P.L. 111-148; H.R.4872enr.txt.pdf" target="_blank">P.L. 111-152] But these Americans need help now. As a bridge to a reformed health insurance marketplace, the Affordable Care Act creates a special high risk insurance pool, called the Pre-Existing Condition Insurance Plan (PCIP), for uninsured Americans who have been denied health insurance because of a pre-existing condition. The PCIP will be available in every state and the District of Columbia. [HealthCare.gov, accessed 7/29/10]
The Department of Health and Human Services recently issued an interim final rule for the Pre-Existing Condition Insurance Plan. [Federal Register, 7/30/10] The regulation outlines how to determine who is eligible for the plan, what benefits will and will not be covered, and other details to ensure that states and the federal government can move forward with implementing this critical provision of the Affordable Care Act. The Administration estimates that 200,000 – 400,000 Americans will enroll in the Pre-Existing Condition Insurance Plan, which, even at the lower bound of this range, would double the number of Americans covered by high risk insurance pools.
Covering Children with Pre-Existing Conditions
On June 28, 2010, the Administration issued regulations to implement a provision in the Affordable Care Act that prohibits all employer-sponsored plans and new plans in the individual market from excluding coverage of pre-existing conditions for children, for plan or policy years beginning on or after September 23, 2010. [Federal Register, 6/29/10] The Administration recently issued questions and answers on this policy, providing helpful information for parents and insurers. [HHS, 7/27/10] This guidance clarifies that insurance companies may establish an open enrollment period, during which parents may sign their children up for coverage. Without such a policy, parents might wait to insure their children only when they become sick, causing plans’ costs to increase. In addition, the guidance clarifies that children with pre-existing conditions should not be shifted from the Children’s Health Insurance Program (CHIP) to the individual market in an attempt to reduce state health care spending.
Protecting Consumers and Putting Patients Back in Charge
The Affordable Care Act protects consumers by ending some of the worst health insurance industry abuses. One way the Affordable Care Act protects consumers and puts patients back in charge of their health care is by requiring insurance companies to implement effective internal and external appeals processes. [P.L. 111-148; H.R.4872enr.txt.pdf" target="_blank">P.L. 111-152] Patients deserve the right to appeal coverage determinations and claims decisions made by their insurance plan. The Affordable Care Act guarantees consumer access to an internal appeals process and, for the first time, for the first time, the right for all consumers, regardless of where they live, to appeal decisions made by their health plan to an outside, independent decision-maker.
Specifically, the Affordable Care Act requires new insurance plans, with plan or policy years beginning on or after September 23, 2010, to implement an effective internal appeals process of coverage determinations and claims and to comply with any applicable State external review process. Regulations issued by the Departments of Health and Human Services, Labor, and Treasury will standardize internal and external review processes, so that no matter what state consumers live in, they have access to clearly defined and impartial appeals that ensure necessary health care is covered by their plan. [Federal Register, 7/23/10] The Administration estimates that next year, approximately 31 million people in new employer plans and 10 million people in new individual plans will benefit from these new appeals protections, and that 88 million Americans will benefit by 2013. [HealthCare.gov, 7/22/10]
The Affordable Care Act also provides $30 million in grants to states to establish or expand offices of health insurance consumer assistance or health insurance ombudsman programs. [P.L. 111-148; H.R.4872enr.txt.pdf" target="_blank">P.L. 111-152] These independent offices will assist consumers with filing complaints and appeals, educate consumers on their rights and responsibilities, and collect, track, and quantify consumer problems and inquiries. All states and territories may apply for these grants to expand their consumer assistance efforts. More information is available at Grants.gov. [Grants.gov, 7/22/10]
Combating Obesity in Children and Families
The Affordable Care Act created a Prevention and Public Health Investment Fund to provide an expanded and sustained national investment in prevention and public health programs to improve health and help control the growth rate of health care costs. [P.L. 111-148; H.R.4872enr.txt.pdf" target="_blank">P.L. 111-152] The Department of Health and Human Services recently announced that $5 million of the Investment Fund is available via a competitive grant to establish the Prevention Center for Healthy Weight. [Grants.gov, 7/16/10] Any public or nonprofit entity may apply for grant funding to plan, implement, and manage a nationwide Healthy Weight Collaborative, serve as a gateway for information regarding the prevention and treatment of overweight and obesity, and promote family-centered, community-based, coordinated care for children and families.
Improving the Wellbeing of Children and Families
The Affordable Care Act included $1.5 billion for states, tribes and territories to develop and implement evidence-based Maternal, Infant, and Early Childhood Visitation models targeted at reducing infant and maternal mortality by improving prenatal, maternal, and newborn health, child health and development, parenting skills, school readiness, juvenile delinquency, and family economic self-sufficiency. [P.L. 111-148; H.R.4872enr.txt.pdf" target="_blank">P.L. 111-152] The Department of Health and Human Services (HHS) recently announced the allocation of $88 million to the 49 states, the District of Columbia, and the five territories that applied for funding. [HHS, 7/21/10] In addition, HHS recently posted on the Federal Register a notice and request for comment regarding criteria for evidence of effectiveness of home visiting models. [Federal Register, 7/23/10]
Funding for States to Implement Reform
Grants to Plan and Establish Exchanges
The Affordable Care Act creates a new, competitive health insurance marketplace, through state-based Exchanges, where individuals and small businesses can compare and purchase health insurance online at competitive prices and access the same coverage options that Member of Congress will have. [P.L. 111-148; H.R.4872enr.txt.pdf" target="_blank">P.L. 111-152] Beginning in 2014, Exchanges will provide consumers a one-stop shop for health insurance and promote choice and competition in the purchase of health insurance. The Affordable Care Act authorized grants to provide states the funding needed to establish the new Exchanges. The Administration announced the availability of the first round of funding for these grants, a total of $51 million, or up to $1 million for each state and the District of Columbia, and released a Fact Sheet with more information. [GrantSolutions.gov, accessed 7/29/10; HealthCare.gov, accessed 7/29/10]
Grants to Support Children with Special Health Care Needs
The Affordable Care Act extended through Fiscal Year 2012 funding for Family-to-Family Health Information Centers. [P.L. 111-148; H.R.4872enr.txt.pdf" target="_blank">P.L. 111-152] These family-run organizations provide support and services to families of children with special health care needs and the professionals who help care for them. The Administration announced $4.9 million in grants to support the centers in all 50 states and the District of Columbia. [Health Resources and Services Administration, 7/27/10] A list of awardees is available from the Health Resources and Services Administration. [HRSA, accessed 7/29/10]
Grants to Help Americans with Disabilities Live Independently
The Affordable Care Act expanded and extended the Money Follows the Person Rebalancing Demonstration program. [P.L. 111-148; H.R.4872enr.txt.pdf" target="_blank">P.L. 111-152] This program provides states enhanced Medicaid funding when they transition an individual from institutional care to a home and community-based program. The Administration announced the availability of $2.5 billion in grants to extend the program and encourage the participation of states not currently involved. [HHS, 7/26/10] More information is available on Grants.gov (CFDA number 93.791) or from the Centers for Medicare & Medicaid Services. [CMS, 7/26/10]
Support for Working, Nursing Mothers
The Affordable Care Act includes a requirement for employers with more than 50 employees to provide nursing mothers with reasonable break time and a private place to express milk during the first year after their child’s birth. [P.L. 111-148; H.R.4872enr.txt.pdf" target="_blank">P.L. 111-152] Studies demonstrate the health benefits of breastfeeding for both infants and mothers, and increasing the number of mothers who breastfeed their babies is a goal of the Healthy People 2010 initiative. [HHS, 11/00] The Department of Labor (DOL) issued a fact sheet to provide some basic information on this provision for employers and employees. [DOL, 7/10] DOL will provide additional information in future guidance.
Not According to the Health Care Industry
Shortly before introduction of the Senate health reform bill last November, U.S. News posted an article entitled Why Wall Street is Bullish on Healthcare Reform. [U.S. News, 11/17/09] The first line summed up business and investor thoughts on the developing health reform legislation. “If reforms out of Washington are poised to wreck the healthcare industry, somebody forgot to tell the stock market – including hundreds of professional investors who own healthcare stocks and get paid to assess their prospects.”
Four months later, Congress passed and the President signed into law landmark health insurance reform legislation, the Patient Protection and Affordable Care Act (P.L. 111-148) and the Health Care and Education Reconciliation Act (P.L. 111-152). While opponents of reform continue to assert that the Affordable Care Act represents a “government takeover” of health care, the industry’s businesses and investors know nothing could be further from the truth.
“Government takeover” might be a convenient Republican talking point, but the performance of health care stocks and industry behavior since passage of the Affordable Care Act clearly reveal that the talking point has no basis in reality.
Health Insurance Stocks Weather Recession, Post Large Profits
Even in the midst of an economic recession, health insurance stocks continue to perform. When the overall market struggled at the end of 2008, health insurance stocks outperformed the S & P 500 – not what one would expect of an industry about to be “taken over” by the government. [U.S. News, 11/17/09] Immediately after reform was signed into law, Forbes reported, “Healthcare-related stocks lifted Wall Street indexes Monday as investors breathed easier now that Congress has passed a comprehensive reform of the nation’s healthcare system.” [Forbes, 3/22/10] In fact, through the first three months of the year, nearly every large, publicly traded health plan recorded strong earnings increases. [American Medical News, 5/31/10]
Recently-released second quarter earnings by major U.S. health insurers demonstrate continued strong performance as implementation of the Affordable Care Act ramps up:
- UnitedHealth Group, the largest U.S. managed-care company by revenue, reported a 31 percent increase in second-quarter net income. Second quarter profits this year were $1.12 billion, or 99 cents a share, compared with $859 million, or 73 cents a share, last year. [Wall Street Journal, 7/20/10]
- Wellpoint, the nation’s largest commercial health insurer based on membership, reported a four percent increase in second-quarter net income, managing to increase earnings even after cancelling plans to hike premiums on individual insurance in California, instead moving forward with a much smaller premium increase. [Associated Press, H.R.891Q02" target="_blank">7/28/10]
- Aetna, the third largest insurer, reported a 42 percent increase in second-quarter profits, earning $450.2 million, or $1.05 per share. [Associated Press, H.R.80JBG0" target="_blank">7/28/10] All three insurance companies also raised their earnings guidance for the year.
Insurance companies await the release of regulations implementing new medical-loss ratios included in the Affordable Care Act, which determine the percentage of premium dollars insurance companies must spend on actual medical care, as opposed to administration, profit and other non-medical spending. However, in announcing their earnings, insurance plans sought to assure market analysts that regardless of what the medical-loss ratio rules are, “their companies won’t take a big earnings hit.” [American Medical News, 5/31/10] Furthermore, Citigroup market analyst Carl McDonald noted, “It is going to be very difficult for plans to justify a 2011 rate increase right after having reported record profitability,” an indication that the increased scrutiny placed on insurers by the Affordable Care Act is having the desired effect. [Wall Street Journal, 7/19/10]
Analysts “very bullish” on Medicare Advantage
The Affordable Care Act reduces overpayments to private insurance companies that participate in Medicare Advantage. Payments to these private plans are, on average, 14 percent higher than the cost of insuring a beneficiary in traditional Medicare. [MedPAC, 3/2009] Medicare Advantage plans were originally envisioned as a source of savings, due to the belief that they could deliver guaranteed Medicare benefits at a lower cost than the government could do so. Instead, Medicare Advantage plans have increased Medicare spending and advanced the date at which the Medicare Trust Fund will become insolvent by 17 months. [GAO, 2/2008; Center on Budget and Policy Priorities, 9/14/2009]
The fate of insurance company Humana is tied to Medicare Advantage: Humana has 15 percent of the Medicare Advantage market, and more than 60 percent of its revenue comes from the program. [Reuters, 7/1/10] Even with changes for Medicare Advantage plans starting in 2012, Humana Chief Executive Officer Mike McCallister recently said, “Medicare is actually a very good place to be… Medicare is going to be a very big business in the future, we’re very well positioned, so we’re feeling pretty good about where we are.” [Reuters, 7/1/10] Humana plans to get back to the Medicare Advantage program’s original intent with something it calls the “15 percent solution” – administering its plans at costs 15 percent below the cost of traditional Medicare. In analyzing the future of private insurance companies participating in Medicare Advantage, John Gorman, chief executive of a consulting firm focused on government-sponsored health program, remains “very bullish” on the program. [Reuters, 7/1/10]
Hospital Stocks Jump, Private Entities Enter Sector
Immediately after passage of the Affordable Care Act, the Wall Street Journal reported, “Hospital operators jumped on Monday suggesting investors think healthcare providers could be the big winners in the government’s overhaul.” [Wall Street Journal, 3/22/10] Such big winners, in fact, that for-profit hospital companies and investment firms see opportunities in the nonprofit hospital sector. [Kaiser Health News, 7/13/10] Reports indicate an increase in merger-and-acquisition activity that shows no signs of slowing. In the first six months of 2010, at least 50 hospitals were involved in merger-and-acquisition deals, which is on pace to beat 2009. This is certainly the opposite of the ‘government takeover’ that opponents of health reform insist is happening in the health care industry. One big reason for the revived interest of for-profit companies and investment firms in the hospital sector is that the Affordable Care Act extends health insurance coverage to 32 million currently uninsured people, and more insured, paying patients will substantially reduce hospitals’ uncompensated care costs.
Pharmaceutical Companies Still Look Strong, Support Reform
The Affordable Care Act is built on a framework of shared responsibility, the idea that the government, the American people, and the health care industry all have a role to play in transforming our health care system. Beginning in 2011, pharmaceutical manufacturers are required to provide seniors with a 50 percent discount on brand-name drugs and biologics purchased in the Part D ‘donut hole,’ and a fee will be assessed on pharmaceutical manufacturers and importers. These policies are critical to helping American seniors affordable their prescription medication and to expanding health coverage for millions of Americans. Pharmaceutical company Merck estimates that the Affordable Care Act will lower revenues by less than one percent in 2010 and 2011, and not one of the 25 analysts who follow Merck recommend selling the stock, and 18 still recommend buying it. [DailyFinance, 4/30/10]
During Johnson & Johnson’s first quarter earnings call earlier this year, Vice President and Chief Financial Officer Dominic Caruso emphasized the pharmaceutical company’s commitment to reform. [Seeking Alpha, 4/20/10] “We support this legislation recently passed by the US Congress and we believe that appropriate healthcare reform can offer potential opportunities for growth and enhanced care for millions of patients in the United States,” Caruso told investors. “We continue to feel very positive about many provisions in the legislation that will help increase patient access over time, improve the long term sustainability of the US healthcare system and at the same time provide incentives for medical progress.”
Health Care Industry Shows No Signs of ‘Government Takeover’
The performance of three major sectors of the health care industry – insurance companies (including those participating in Medicare Advantage), hospitals, and pharmaceutical companies – solidly refutes any notion that the Affordable Care Act is a ‘government takeover’ of health care. Their stocks continue to climb, revenues continue to increase, and for-profit entities continue their involvement in the sector. “Government takeover” might be a convenient talking point for health reform opponents, but the performance of health care stocks and industry behavior since passage of the Affordable Care Act clearly reveal that the talking point has no basis in reality.