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Insurance, Health Care and The SCOTUS Decision

A Panel of Penn Health Policy Experts Looks Ahead

Companion article: Health Care's Challenges Beyond the SCOTUS Ruling

PHILADELPHIA -- Along with the other things it's triggered, the Supreme Court decision upholding the Affordable Care Act has heightened national interest in Massachusetts' six-year-old health reform law and what it may tell us about the full rollout of the ACA concept it inspired.

Signed into law in 2006 by then-Governor Mitt Romney, the Massachusetts Act requires residents to have health insurance or pay a tax penalty. It provides free care to those below a 150% of the poverty level,
panel headerDavid Grande

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David Grande, MD, MPA, Assistant Professor of Medicine at Penn's Perelman School of Medicine and LDI Senior Fellow.
Jonathan Kolstad

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Jonathan Kolstad, PhD, Assistant Professor of Health Care Managment, Wharton School and LDI Senior Fellow.
Scott Harrington

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Scott Harrington, PhD, Wharton School professor of both Health Care Management and Insurance and Risk Management, Academic Director of Penn's Risk and Insurance Program and LDI Senior Fellow.
Tom Baker

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Tom Baker, JD, Professor of Law and Health Sciences, and Deputy Dean of Penn Law School and LDI Senior Fellow.
Mary Naylor

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Mary Naylor, PhD, RN, FAAN, Professor in the Penn School of Nursing and LDI Senior Fellow.
Ralph Muller

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Ralph Muller, CEO of the University of Pennsylvania health System and LDI Senior Fellow.
establishes a health insurance exchange, and more tightly regulates the pricing and practices of insurers.

Jonathan Kolstad, a University of Pennsylvania Wharton School assistant professor and researcher who has been studying Massachusetts' system, says it has achieved more positive effects than many people realize.

'Quite strong evidence'
"There's quite strong evidence," he said, "that when the individual mandate was implemented in Massachusetts, it really did facilitate healthier people signing up for insurance, so premiums were reduced. Most of the evidence also suggests that the mandate was potentially very important to actually making the insurance markets function generally and allow these reforms to build up infrastructure. Some evidence indicates that when Massachusetts widely expanded the insurance coverage, it actually saw some declines in length of hospital stay and some reductions in emergency room utilization."

"In addition," said Kolstad, "you actually had 'crowd-in' in the employer-sponsored insurance market, meaning there were increased offers of insurance to employees. Evidence suggests that occurred because by levying a tax penalty, you increased the value that people place on health insurance. So now, when they go and look for a job, that position is worth even more if it supplies health insurance."

'Not typical'
Scott Harrington, a Wharton School professor of Insurance and Risk Management and Academic Director of Penn's Risk and Insurance Program, has a different view: "Massachusetts is an unusual state demographically and not typical. It has used community rating and adjusted community rating to limit insurers options since the 1990s," he said. "Nationally with the ACA, we have to worry about a cost surge. The latest research suggests that the minimum plan that will be allowed, the bronze plan, will be more expensive than a lot of the individual insurance policies that people currently buy."

Both Kolstad and Harrington were speakers on a panel of six top health care experts at Penn's Leonard Davis Institute of Health Economics convened to discuss the ACA in the wake of the high court's ruling. The other panelists were Deputy Law School Dean Tom Baker, Assistant Professor of Medicine David Grande, Nursing School Professor Mary Naylor and CEO of the University Health System Ralph Muller.

Insurance echanges
The Massachusetts issue was only one of a number of ACA topics the forum addressed. Another was the question of how prepared the states are to meet health insurance exchange deadlines that are fast approaching. States must notify the Centers for Medicare and Medicaid if they intend to set up their own exchanges by Nov. 16; their exchanges need to be actively enrolling people by Oct. 1, 2013 and in full operation by the first day of 2014. Many state governments lagged behind in the hope or assumption that the Supreme Court would rule against the law.

A Kaiser Foundation survey updated just days before the Supreme Court ruling reports that three states have flatly refused to create an exchange, 14 others have taken "no significant action" and 18 more continued to "study their options." Only 15 of 50 states had taken the legislative and other steps required to actually organize and build exchanges.

'Holding their breath'
"Basically, everyone has been holding their breath for the last few months," said Law School Dean Baker. "The challenge now is tight deadlines and complexity. It will be a scramble and means more states will have their exchanges run by the federal government. So I think we're going to see a little less variation in exchanges than we might have otherwise seen."

"If the feds could say 'Here's the answers to all the different questions right now,' then I think a state that hadn't yet got going could maybe could make a go of it. But they've been faced with planning something without knowing exactly what they're planning for. That's a huge burden."

Kolstad said the way each of the 50 states ends up structuring its insurance exchange is potential very important to how its insurance market is facilitated or potentially hindered. "It's mostly about insurance," he said, "but the central role of payment reform is going to be key. If you look at the Massachusetts experiment, there was no payment reform and the cost curve was neither bent up nor down."

'Enormous regulatory burden'
Harrington pointed out insurers in all states are grappling with the ACA's complexity: "There's an enormous regulatory burden in the evolving law," he said. "the uncertainty of the regulations for health insurance companies is really quite stunning. It includes things like the regulation on medical loss ratios, rate reviews, essential benefits and, as we move forward to 2014, the so-called three Rs of new risk adjustment, reinsurance and risk corridors rules. Insurers are really having a hard time figuring out how all these things will play out."

Looking at challenges on the patient side in the ACA era, nursing professor Naylor pointed to underdeveloped primary care systems, silos that structure fragmentation throughout the health care system, cultural barriers created by people who want to "hold on to the way we've always done it," and things the ACA left out.

"We did an analysis of some provisions of the ACA," said Naylor, "and it's clear that some of the vulnerable people receiving long-term services and supports who have functional deficits have costs three times higher than traditional Medicare beneficiaries with the same set of chronic conditions. They are not well included in the existing ACA provisions. I don't think we have a panacea here, I think what we have is a foundation for innovation that, at some point, is going to have to embrace the total population."

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Hoag Levins is the managing editor of The LDI Health Economist.

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