It has been three years since the enactment of national health care reform, but some senators had a collective déjà vu moment during last month’s debate over the FY2014 budget.
Although President Barack Obama signed the Affordable Care Act (ACA) into law on March 23, 2010, although the U.S. Court of Appeals ruled the ACA constitutional on November 8, 2011, and although the Supreme Court reaffirmed the constitutionality of the individual mandate portion of the law on June 28, 2012, somehow a number of senators apparently missed the past three years of history. At least 80 non-binding amendments out of roughly 400 lobbed at the budget proposal tried to turn back the clock by undoing the ACA’s individual mandate (Mike Lee’s contribution), generally delaying different elements of the law (Lamar Alexander, Richard Burr, Kelly Ayotte, and Pat Roberts), limiting eligibility for subsidies to buy insurance on the ACA-created health exchanges (Lindsey Graham), and reducing states’ matching rates for Medicaid expansion (Tom Coburn).
Senator Ted Cruz of Texas went for the whole nine yards, proposing to repeal the ACA in its entirety. His amendment lost on a straight party-line vote, suggesting that one political party is still working from a pre-2010 script. But die-hard opponents like Cruz, dedicated to undoing the past three years of social progress on health care, are doing plenty to upset the applecart to the disadvantage of nonprofits, whose interests are entwined throughout the ACA, and of all Americans who need a stabilized, expanded, improved, rationalized system of health-care coverage.
On the ACA’s third birthday, what is in store for the nonprofit sector’s role and stake in national health insurance reform?
What happened to the expansion of health insurance coverage to very low-income people?
The key element for reaching very low-income people was to expand Medicaid coverage in the states for low-income individuals and households with incomes up to 138 percent of the poverty level. As it currently stands now, 16 percent of Americans are uninsured, and another 16 percent get health care coverage only because they qualify for Medicaid. The ACA called for an increase in the minimum income eligibility for Medicaid to 138 percent of the federal poverty level by 2014, but the Supreme Court decision in 2012 allowed states to opt out of the expansion of eligibility.
Using the concern that by opting in states (which share the costs of Medicaid with the federal government) will be left paying for the bulk of the expansion after initial federal subsidies expire, some governors have come out against Medicaid expansion. Basing its analysis on the opinions of the states’ governors, the Kaiser Family Foundation counts 27 governors in favor of Medicaid expansion in their states, 19 opposed, and five “weighing options.” The Advisory Board Company counts 25 governors in favor, two leaning in favor of expansion, 15 clearly opposed to expansion, three leaning against expansion, and five not expressing an opinion.
In the absence of a single-payer system, Medicaid expansion is the crux of coverage for the very poor. Families at 138 percent of the federal poverty level – $15,414 for an individual, $31,809 for a family of four – don’t have the income to even participate in buying insurance in the health exchanges. More than half of the nation’s 49.1 million nonelderly uninsured are people with incomes below 138 percent of the poverty level. Without this expansion, swaths of the poor will be caught in the gap between the letter of the ACA and the decision of the Supreme Court allowing an opt-out.
One would think that this would be like the position of conservative governors rejecting stimulus money in 2009, vocally denouncing the federal expenditures but generally unwilling to let the moneys bypass their states in the end. In this instance, some governors have stubbornly held to a position of rejecting expanded Medicaid coverage for their constituents, notably governors Rick Perry in Texas, Scott Walker in Wisconsin, Bob McDonnell in Virginia, and Tom Corbett of Pennsylvania. However, other solidly conservative governors have decided not to take the political risk or embrace the counterproductive social policy of denying health-insurance coverage to millions in their states, notably Jan Brewer in Arizona, Chris Christie in New Jersey, and Rick Scott in Florida.
Nonetheless, despite one-fourth of Texans without health insurance, Perry has only hardened his stance against Medicaid expansion. In other states, there seems to be confusion. Missouri governor Jay Nixon supports Medicaid expansion, but the Missouri House has voted it down for the moment. In Indiana, the House called for federal Medicaid funding merged with a state health-insurance program, but Governor Mike Pence wanted the federal funding to come as a block grant. The Florida legislature rejected Governor Rick Scott’s recommendation for Medicaid expansion, leaving one million of Florida’s four million uninsured without a health-insurance option.
Playing politics with the health-care options for poor people is foolhardy if the uninsured decide to target the state executives who denied them and their families the coverage they need. As close as any sector to the needs of the poor and very poor, nonprofits have a crucial role to play in focusing state attention on the coverage needs of the uninsured.
What happened to subsidies for nonprofit employers to buy health insurance?
This was one of the first big crises for the nonprofits in national health insurance reform. When the Obama administration rolled out its program of tax subsidies for small employers to purchase health insurance, it forgot about nonprofits as small employers. The reality is that roughly three-fourths of the nonprofit sector – that is, those that have paid employees – are small firms employing less than 100 people. Ultimately, with extensive advocacy led by the National Council of Nonprofits, the Administration approved a fix, but it left nonprofits with a structure of incentives 10 to 15 percent less than the incentives offered to for-profit small businesses (25 to 35 percent for nonprofits, compared to 35 to 50 percent for for-profit employers). Government had its arguments – that many small businesses wouldn’t be able to use the tax subsidies due to their lack of profits and taxable income or that nonprofits already get a subsidy of sorts through their tax exemption – but the bottom line is that nonprofit employers ended up with a categorically lower level of federal subsidy simply because they aren’t for-profits.
Now, as the nation veers closer to full implementation of the ACA, the sequester cut the Small Business Health Care Tax Credit, already lower for nonprofit employers than for-profit employers, by 8.7 percent. But even with the availability of a subsidy, a lack of choices means that nonprofit employers will have little or no leverage to bargain with insurers to find affordable packages.
Big businesses have the purchasing power in the marketplace to choose among competing health plans, but small businesses don’t have the capital or scale to exercise that option. The point of the ACA in this regard was to establish insurance exchanges to give small firms the ability to choose among plans. Several states have declined to operate their own insurance exchanges, defaulting to the federal government’s exchange instead. But because the Obama administration isn’t ready, it is going to delay operating its insurance exchanges for one year, until 2015 at the earliest, in the 26 states that have taken the default choice of relying on the federal exchange and seven that will operate their exchanges in partnership with the federal government. Because the federal government is delaying its exchange, it is delaying the start-up date for 18 state-operated exchanges as well.
The exchanges meant to serve small businesses, called Small Business Health Options Program exchanges, or SHOP exchanges, were meant to give small employers some bargaining power with insurers, but until 2015, the exchanges will offer only one insurance plan. A choice of one is, in essence, a choice of none. The idea that small businesses would finally get a leg up was a major selling point of the law, but John C. Arensmeyer of the Small Business Majority called the delay “a major letdown for small business owners and their employees,” an understatement for the small businesses that were counting on this provision.
This hits nonprofit employers harder than most. Nonprofits have long struggled to provide health-care benefits to their employees. And yet, according to the Agency for Health Care Research and Quality findings, they’re in fact doing a better job of it than comparably sized for-profit employers despite their reliance on limited government and charitable resources. The obstacles in maintaining coverage are familiar to nonprofit managers, but little-known to the outside world. The testimony of Shona Eakin (the executive director of Voices for Independence, a disability-services nonprofit) calling on Pennsylvania’s governor Tom Corbett to expand Medicaid is instructive, because at many nonprofits, not only are the organizations hard-pressed to afford employment-based health insurance, but the employees sometimes earn so little that they could easily qualify for insurance-purchasing subsidies and even for Medicaid.
It is hard to imagine that the inability of the federal exchanges to offer insurance alternatives to employers will be different than the government’s ability to operate exchanges for individual consumers. The result is that this delay is one of the discrete items that is making the implementation of the ACA likely to be more difficult rather than less.
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What happened to the nonprofit health insurance CO-OPs?
When the Obama administration capitulated on the “public option” for competing against the private insurers, inventive legislators (particularly Senator Kent Conrad of North Dakota) revived an idea for health insurance with roots going back decades. The ACA was amended to allow for the creation and funding of nonprofit health-insurance cooperatives, owned by patients or patients and providers themselves, that would provide at least some competition for the for-profit and nonprofit insurers. Some health-insurance cooperatives are really decades old and quite successful, notably Group Health Cooperative in Seattle, established in 1947 and serving 600,000 members in Washington and northern Idaho, and Health Partners in Minnesota, created in 1957 and now serving 1.4 million members in several states.
Were they really going to take the place of the public option, of government offering a substantial alternative to the private insurers, perhaps by expanding or replicating the infrastructure of Medicare? Not in the slightest. To replicate just what Group Health and Health Partners have done requires, as health insurance expert Timothy Stoltzfus Jost told the New York Times, addressing “the need to establish a brand identity, figure out how to handle claims, develop actuarial expertise, establish reserves, meet state licensing requirements and solvency requirements.” But, according to Jost, “The biggest problem is coming up with a network. You have to find doctors and hospitals and negotiate contracts. Most are already locked up by the dominant insurers. They’re not going to give you – a tiny co-op – a better deal. That’s assuming they’ll deal with you at all. The alternative would be to rent a network, but you’re basically buying your product from your competitor. There’s no way you’ll get a good deal there, either.”
Nonetheless, existing and new health-insurance cooperatives under the banner of the National Alliance of State Health Cooperatives (NASHC), created in 2010, have been advocating for the new groups organized under the ACA’s provisions for the nonprofit Consumer Operated and Oriented Plan organizations (CO-OPs). The ACA provided money for start-up loans for CO-OPs and awarded $1.98 billion in low-interest start-up loans to 24 nonprofit cooperatives before the walls came crashing in in the fiscal-cliff legislation.
Several provisions of the fiscal-cliff bill removed critical funding and underpinnings of the ACA, perhaps none more significant than what it did to the nonprofit cooperatives. The fiscal-cliff bill eliminated funding that might have gone to new nonprofit health-insurance cooperatives. Therefore, the nonprofit health-insurance cooperative that is furthest along in its plans, in Montana, doesn’t lose money that it had already received from the federal government, but the cliff legislation eliminates its access to funding to expand into Wyoming and Idaho, where no local nonprofit cooperatives are in the works. Overall, the cliff bill doesn’t stop the efforts of the 24 nonprofit cooperatives that have already been approved for the nearly $2 billion in start-up loans from the Department of Health and Human Services, but it sinks plans for nonprofit cooperatives in another 26 states. Note in fact that already the money for the cooperatives had been slashed from $6 billion down to $3.4 billion. The cliff bill eliminates all new start-up loans, even for efforts that were in the planning and proposal stages, such as the Montana co-op’s plans for Wyoming and Idaho.
For nonprofit insurers, the cliff bill created winners and losers. The winners, who got their plans approved in 2012, included the likes of Coordinated Health Plans of Ohio, which got a $129 million loan in October, a farmer’s union in Colorado, the Freelancers Union in New York, and a culinary health fund in Nevada. The losers – those who were still inking the final details of their plans to submit to the U.S. Department of Health and Human Services – are the co-ops in the remaining 26 states whose plans were “torpedo(ed)” and “blindsided,” in the words of NASHC president John Morrison.
Will these fragile start-ups even have a chance of survival? The federal government’s continued whittling away at the resources that the cooperatives might be able to access now and down the road isn’t a good omen. Let’s face it: These nonprofit cooperatives weren’t meant to be, as Consumer Union’s Chuck Bell noted in an interview with NPQ, “a robust substitute for the public option in any case.” But the fact that even this part of the ACA has been defunded – with little widespread response from the nonprofit sector, which at the time was consumed with its focus on preserving the maximum benefit possible from the charitable deduction – “shows a lack of willingness to explore alternatives to private coverage.”
Health-care cooperatives deserve to be promoted – not just the ones being organized under the ACA as official “CO-Ops,” but the variety of cooperative efforts of consumers, businesses, and workers to utilize the cooperative form to address gaps and inefficiencies in health-care coverage, including pharmaceutical purchasing cooperatives, health-insurance purchasing cooperatives, hospital group purchasing cooperatives (like the University HealthSystem Consortium), and worker-owned health care cooperatives (with Cooperative Home Care Associates in the South Bronx as a great model). But starving new and existing cooperatives of access to needed federal resources leaves them unable to compete against the established insurance providers with their well-developed infrastructure, millions or billions in operating capital, and stranglehold contracts with providers.
What happened to nonprofit hospitals in the ACA?
As we have recounted, the nation’s nonprofit hospitals are under a new regime of documenting what they are doing to serve the underserved in their markets. According to the American Hospital Association, there are 4,973 registered community hospitals, of which 2,903 are nonprofit hospitals. In the leadup to the ACA, nonprofit hospitals struggled with trying to define their “nonprofitness,” so to speak, in terms of community benefit, though advocates pushed them more specifically on their provision of “charity care,” largely what they spent on medical care for the uninsured. Numerous Congressional hearings initiated by the Senate Finance Committee under Senator Charles Grassley (R-Iowa) revealed nonprofit hospitals to be frequently little different in their levels of charity care than their for-profit competition, even as they earned substantial surpluses and profits. The minimal levels of nonprofit hospital charity care has been used in some states to deny hospitals property tax exemptions and other nonprofit tax breaks, notably in the case of the Provena system in Illinois.
With the advent of national insurance coverage, much of this problem should dissipate. In the Community Health Needs Assessments (CHNA) required of nonprofit hospitals, freed from what should be deluges of uninsured patients showing up in emergency rooms for lack of alternatives, nonprofit hospitals ought to be able to focus on a more important issue: access to, delivery of, and quality of health-care provision itself.
That doesn’t mean that patients won’t have charity-care needs. Whole swaths of the population, notably undocumented immigrants, are denied subsidized health insurance under the ACA, due to the nation’s wave of opposition to immigrants using government services that captured Democrats and Republicans when the Obama administration held its health-care planning sessions in 2009. In addition, in those states that reject the expansion of Medicaid, low-income people will still be flocking to nonprofit hospitals for essential services. Under the ACA, hospitals have to publicize their charity-care programs that provide discounts or other mechanisms to help people afford even their insurance health care. Nonprofit hospitals have to make an effort to seek financial help for patients before dunning them for payments. An excellent summary of the new charity care regime for nonprofit hospitals is posted at Community Catalyst.
As nonprofits, nonprofit hospitals might be able to think differently about how to accomplish their health-care missions under the ACA infrastructure. “There are changes in their external environment that change their nonprofit missions,” Consumer Union’s Chuck Bell noted. “Perhaps nonprofit hospitals have to look at other people who are left out for various resources, at the variety of new health needs that emerge, and to take account of them and think about how to address them.” Is there a nonprofit pulse in nonprofit hospitals? The ACA gives them a challenge. By offering a structure of health-insurance coverage that in theory should stabilize the financing of health care, the ACA essentially asks nonprofit hospitals to re-engage their nonprofit missions. Will they respond in kind, or will they follow the leads of some nonprofit insurers, such as Blue Cross Blue Shield in Michigan, which decided to convert into a mutual company rather than reexamining and elevating how they might have served their market as a nonprofit insurer.
Nonprofit advocates have to be intervening in the CHNA process to ensure that nonprofit hospitals live up to their tax status to meet the needs of the communities they serve, particularly the lower-income individuals and families that will still find themselves with pressing financial and health-care needs regardless of the pace and scope of ACA implementation.
What happened to the nonprofit sector’s role in the public debate over health care?
The arc of history bends toward providing improved health-care coverage for all Americans. The ACA won’t cover everybody, but it is a huge step forward. Even though the public is basically split on attitudes toward this large and complex law, polls show overwhelming majorities of the public strongly supportive of key components: tax credits to small businesses to purchase health-care insurance for their employees (88 percent), the creation of health-insurance exchanges (80 percent), extension of dependent coverage (76 percent), subsidy assistance for individuals to purchase insurance (76 percent), expansion of Medicaid (71 percent), “guaranteed issue” or the prohibition against denials of coverage due to pre-existing conditions (66 percent), and the employer mandate for large employers (57 percent). Behind the lack of support for the ACA itself are misconceptions of the law and downright mischaracterizations promulgated by opponents of so-called “Obamacare,” including ideas such as that the law will cut benefits for Medicare recipients, establish a government “end-of-life” panel, allow undocumented immigrants to receive subsidies for purchasing health-care insurance, or allow for or impose a “public option.”
Opponents are attempting to nickel-and-dime national health-insurance reform into a state of dysfunctionality that they can then say proves the point of their original opposition. While the public hears the critics’ inchoate charges about too much governmental interference in health care, critically important aspects of the health-insurance law are underpublicized and underappreciated. These include requirements that insurance cover preventive-care services such as cancer and diabetes screenings or that the exchanges would allow employers and individuals the ability to make apples-to-apples comparisons of competing plans. US News points out that the ACA “also creates an external review process for consumers to appeal insurance company decisions and invests $15 billion in public health programs.” These are huge advances in national health-care policy, but they exist under the radar screen, relatively invisible from public discourse.
Nonprofit advocacy organizations such as Community Catalyst, Consumers Union, Health Care for America Now, Health Care for All, Families USA, and others, plus think tanks and funders such as the Commonwealth Fund and the Kaiser Family Foundation are doing yeoman’s work to elevate the public dialogue about national health care. But the debate isn’t about whether there should be national health reform. Despite Cruz and other senators, the debate should shift from whether should be health-insurance reform to how to make it happen. The ACA is a big, complex piece of legislation. As Bell told us, the coming weeks and months should be “full employment for health advocates” due to the many moving parts of the ACA that need to be “fine-tuned.”
The nonprofit sector overall cannot sit on the sidelines on this one and hope that the law and the battered Obama administration withstand the constant sniping of health-reform advocates – and hope that the White House and Congress show themselves able to fend off the aggressive and well-financed lobbying of the insurers. Given what nonprofits spend for health coverage of their own employees and how much the nonprofit sector overall spends on providing health care for people who can’t get the service they need, this is an issue for every nonprofit. The role of nonprofits in this landmark issue of our time cannot be escaped. Nonprofit-sector leadership organizations, the so-called nonprofit infrastructure, have to be engaged in fighting against efforts to enfeeble the ACA.
It has been three years since the ACA was signed. The nonprofit sector cannot lose its focus so easily on a public-policy issue that affects every nonprofit employer and employee. Ted Cruz may not be all that aware of the reality of the past three years. The nonprofit sector ought to be reminding him and all other health-insurance Luddites, as well as pushing the White House to step it up on turning an extraordinarily complex law into a beneficial regime of successful implementation. –Rick Cohen