U.S. FEDERAL LAW ON HEALTHCARE INSURANCE
-Dr. Vinod Patidar1
Principal, Indore Institute of Law
“America’s health care system is neither healthy, caring, nor a system” – Walter Cronkite
Although most individuals do not need acute medical services frequently, when care is needed,the cost can be burdensome unless services are paid for by private insurance or another third party payer such as the government. Provisions of affordable medical care is important to society at large because basic medical services, such as vaccinations, protect society through the reduction in the incidence, severity, or spread of certain diseases.
There are various ways through which the financial risk in relation to medical services is managed worldwide. The framework for health care financing and delivery reflects its economical, cultural and political characteristics; the level of health care within a nation reflects the stage of economic development of the country.
For instance, the culture in US is such that it provides instantaneous access to state-of-the-art technology to those who are well insured however those who are deprived of medical insurance has hurdles in access to expensive treatment. The US culture places greater value on private market solutions to financing health care rather than on social equity.
America’s health care system is broken2 , despite having health care costs higher than any other developed country, the country ranks 39th for infant mortality, 43rd for adult female mortality, 42nd for adult male mortality, and 36th for life expectancy3 . 16 percent of the GDP is spent on health care that is higher than any other industrialized nation4 . However, United States, Turkey and Mexico are the only developed countries without universal health coverage5 . Fifty million Americans are uninsured and middle class families are also adversely affected by rising health care costs6.
In the US, the rate of increase in health care expenditure throughout the 1980s and early 1990s was significantly higher than the increases in general inflation, population growth, and the overall increase in GDP. During much of this period, increases in health care costs were at rates two time that of inflation. Health care costs accounted for about 14% of US GDP. Other countries, even those with universal health care systems, spend less on health care than the United States.
HISTORY OF NATIONAL HEALTH-CARE REFORM IN USA
In the year 1965, President Johnson Lyndon brought in law that introduced Medicare, the legislation covered both general medical insurance and hospital for senior citizens in such manner that it was paid in the form of a Federal employment tax through the employed life of the retiree, and the legislation gave the power to the government to bring in programs for the poor by collaborating in management and financing with the individual states.7 8
In 1985 with the introduction of Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA), the Employee Retirement Income Security Act of 1974 was amended so as to give employees the authorization to continue health insurance coverage even after terminating the employment.9
In the year 1996, the Health Insurance Portability and Accountability Act (HIPPA) was brought into function, the act not just protects healthcare insurance coverage to workers and their dependants (families) when they lose their jobs or are during transition period when they change their jobs but also makes the insurance companies to cover preexisting conditions. If the conditions had already been diagnosed prior to the purchase of insurance then the insurance companies are required to cover it as well after the insurer has availed a year of continuous coverage.10
Year 1997 saw the introduction of SCHIP that is State Children’s Health Insurance Program brought by the federal government to provide health insurance to children of families falling at or below the 200% of the federal poverty line.11
Year 2010 saw the introduction of the Patient Protection and Affordable Care Act which also known as the Obamacare, the said act brought on floor several debates and views from all the sectors of the economy and political groups. The enactment provided for phased implementation over a time period of four years of a comprehensive system of compulsory/mandated health insurance with a view of bringing such reforms as to eliminate the ill practices of the insurance companies. 12 The enactment focused specifically on elimination of pre-existing condition screening and premium loadings, annual and lifetime coverage cap and policy cancellation on technical grounds when illness is probable. The legislation also provided a minimal ratio of premium income to health care spending and sough to create price competition and enable comparisons by consumers by introducing an internet based health insurance exchange platform where consumers can compare prices and plan their purchase accordingly. The system has protected the private insurance and health care sector while brought into place subsidies to enable poor people to buy insurance.13 14
U.S. FEDERAL LAW ON HEALTH INSURANCE [PATIENT PROTECTION AND AFFORDABLE CARE ACT (PPACA)]
INTRODUCTION TO THE ACT
The Patient Protection and Affordable Care Act (PPACA) also called as the Affordable Care Act and colloquially as the Obamacare, is the federal statute of United States passed by President Barack Obama along with Health Care and Education Reconciliation Amendment Act; it brought an overhaul in the US healthcare system.
The ACA was brought in with a perspective to increases the affordability and quality of health insurance, reduce the costs of healthcare for government and individuals, and lower the uninsured rate by expanding private and public insurance coverage. To achieve the said objective, the enactment introduced mechanisms like individual mandate, insurance exchange and subsidies15.
The law mandates the insurance companies to cover all people within new minimum standards and to not discriminate upon interest rates or policy access on the basis of pre-existing conditions or sex.16 The ACA is expected to lower both future Medicare spending and deficits.17
The ACA comprises of provisions regarding measures to control healthcare expenditure and to expand the reach of coverage through private and public insurance; by employing broader Medicare coverage and eligibility, and by providing subsidized, regulated private insurance.
OVERVIEW OF THE PROVISIONS
The Act includes significant reform, most of which took effect on January 1,2014, some of the most important provisions being brought into force include:
1. The insurers are prohibited to deny coverage to individuals due to pre-existing medical conditions because of the Guaranteed issue clause in the Act.18 Partial community rating requires the insurer to not offer differential premium price, same premium price is to be provided to all applicants having the same age and geographical location without making any differentiation on ground of pre-existing medical condition and gender.19
2. Individual mandate, one of the most contended clause of the amended act, it requires all the individuals that are not covered by an employer sponsored insurance plan, Medicare, Medicare or any other insurance programs. The act makes it mandatory for such individuals to acquire an approved private healthcare policy or to pay a penalty unless exempted by virtue of financial hardship or any other provision of law.
3. Minimum standards are laid down that are to be complied with by the health insurance policies.20
4. The Act brings into existence Health Insurance Exchanges, which operates a new avenue through which businesses and individuals can do comparative analysis of policies on the basis of which they can buy insurance.21
5. Individuals and families having low-income, that is to say whose incomes are between 100% and 400% of the FPL, will be provided with federal subsidies if they brought insurance via an exchange.22
6. State Children’s Health Insurance Program (CHIP) enrolment process is simplified.23
7. Reforms in the Medicare payment system is expected to promote efficiency in the healthcare system by bringing restructuring in the Medical Reimbursements by bringing bundle payments system instead of fee-for-service.24
8. It provides for Employer mandate, wherein businesses that employ 50 or more than 50 people but does not employ any policy for offering health insurance to full time employees will be liable to pay tax if the government has subsidized.25
U.S. SUPREME COURT ON CONSTITUTIONALITY OF THE AFFORDABLE CARE ACT;
‘OBAMACARE’ VALIDITY IN ACCORDANCE TO CONSTITUTIONAL MANDATE
The US Supreme Court in the case known as National Federation of Independent Business v.
, the court regarded the constitutionality of two key provisions of the Patient
Protection and Affordable Care Act (hereinafter referred as ‘Obamacare’).
The provisions being regarded were the individual mandate and the Medicaid expansion. The court decided in favour of the individual mandate in majority while the provision relating to Medicaid expansion was found coercive and therefore unconstitutional as it did not provided proper notice for voluntary consent and gave unfettered power to the Secretary to without the state’s existing federal Medicaid funds in situation of non-compliance, the court considered the same to be coercive in nature and the issue was thereby remedied by putting limitation upon the Secretary’s enforcement authority, thus letting the Medicaid co-exist along with the other provisions of the Obamacare Act.
The individual mandate as provided in the act requires people to comply with a minimum level of healthcare coverage for themselves and their dependants. Such mandate can be satisfied through individual insurance plan or employer-sponsored insurance including any such plan as was being introduced by the new health insurance exchange, government sponsored coverage, grandfathered plan, Medicare or Medicaid or any other federally recognized health insurance coverage. Few categories were exempted from this compliance like illegal immigrants, incarcerated people or religious objectors27.
The act imposed penalty, known as shared responsibility payment, if a person does not comply with the mandate.
The court decided that the individual mandate is a constitutional exercise of Congress’ power to tax.
The court’s majority held that the individual mandate is a constitutional exercise of congress; power to levy taxes.28 Article I, Section 8 of the U.S. Constitution provides that “Congress shall have power to lay and collect taxes, duties and excises, to pay the debts and provide for the common defense and general welfare of the US”29.
The court relied on three factors to judge upon the constitutionality of the mandate as a tax;
1.) the amount will be less than the price of insurance, and, by statutory interpretation it can never be more than that.
2) The mandate does not depend upon the intentionality of the action
3) The Act prohibits the revenue from collecting the shared tax responsibility through punitive measure like prosecution.30
The court therefore asserted that the failure in compliance to the mandate is not unlawful and shared responsibility is not a penalty to punish. The shared responsibility mandate seeks to encourage people to buy insurance, it merely functions as a tax as it “leaves an individual with a lawful choice to do or not to do a certain act, so long as he is willing to pay a tax levied on that choice”31.
THE MEDICAID EXPANSION
The court held that “threatened loss of over 10 percent of a State’s overall budget… is economic dragooning that leaves the states with no real option but to acquiesce.32
The Medicaid provides insurance coverage to people with low income by joint funding by state and federal government. The program is voluntary for states but all states are currently implementing the same while opting for various options but adhering to certain federal rules.33
The Obamacare extends the application of Medicaid’s mandatory coverage upon all people under age 65 without household income less than 133% FPL.34 To fund this expansion of Medicaid coverage, the ACA provides that the federal government will cover 100% of the states’ costs of the coverage expansion in 2014 through 2016, gradually decreasing to 90% in 2020 and thereafter.35
The court held that the Medicaid expansion is unconstitutional as it puts coercive force upon the states since the states does not have an opportunity for voluntary consent and that the Secretary has unfettered power to withhold existing funds of the state for non-compliance. However, the court remedied the situation by harmonizing the existing law and circumscribing the Secretary’s enforcement authority. The court held that the congress must not make that state’s existing Medicaid fund depend upon the choice regarding the compliance with the ACA Medicaid expansion36.
The debate surrounding the Patient Protection and Affordable Care Act has covered the US. No one is entirely happy. The Right is criticizing for increasing the size and power of the federal government, whereas the left is criticizing for not providing “universal coverage”. Doctors are criticizing the cuts in returns, while private insurers and the manufacturers of drugs argue that the new tax regime is oppressive and inhibit profitability. Workers argue that their employers are simply passing their increased costs down to them through lower wages, higher co-payments, and greater cost sharing.
The most expeditious path to constructing a high-quality and lower-cost health care system is to use the Patient Protection and Affordable Care Act as a guiding document. The changes must be so initiated that will correct its deficiencies and enhance its strengths. The primary focus of reform should be singular – to improvise and sustain the health care of the entire American Population. The focus should primarily be upon the care provided and then the cost for the same, only than we can ensure that the American public will be benefited by this law in the long haul – where the cost curve will eventually slant. The boards, agencies and elected representative of the state and federal government have all the opportunities to amend and bend the law as required but to do so the focus must primarily be upon the patient safety and politics must be kept aside. It has to be understood that healthcare should never be made a ground for political strategies, it is really about thinking and opting to do what really is in the best interest of the people.