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Issue Analysis

    PPACA Waivers and the Roberts Decision

    07/03/2012

    The Obama administration granted more than 1600 waivers over compliance with parts of the Patient Protection Affordable Care Act. The Supreme Court ruling that the individual mandate is a tax will not affect the waivers, as they dealt with what kind of insurance people have, not whether they have it.  The ruling, and the waivers, point us directly to the disaster that awaits the country unless the PPACA is fully repealed.

    The PPACA Waivers

    The waivers were regarding compliance with various stages of the law's implementation. In particular, the PPACA bans annual limits on medical coverage, even though annual limits make it easier to afford insurance. Insurance companies can offer lower premiums if they know they won't have to make any really big payouts. 

    Many of the waivers were for "mini-med" plans, designed to have very low premiums and minimal coverage. These plans often have an annual limit of $10,000 or less. They are designed to allow people for whom $10,000 is a lot of money -- which is most people --  be able to afford medium-sized medical expenses. They also give people peace of mind when going to the hospital. 

    As importantly from a cultural standpoint, people who use the fruit of their own labor to purchase health coverage for themselves can say they are independent, functioning citizens not relying on some government program for their needs. It is a psychological benefit, as well as a social reward of immeasurable, but undeniable, value.

    Since some people who purchased this type of plan in the past thought they were insured against really big medical expenses, the PPACA paternalistically bans them for everyone.

    According to the HHS web site:

    For plan years starting between September 23, 2010 and September 22, 2011, plans may not limit annual coverage of essential benefits such as hospital, physician and pharmacy benefits to less than $750,000.  The restricted annual limit will be $1.25 million for plan years starting on or after September 23, 2011, and $2 million for plan years starting between September 23, 2012 and January 1, 2014. For plans issued or renewed beginning January 1, 2014, all annual dollar limits on coverage of essential health benefits will be prohibited.

    Other waivers were for insurance company "medical loss ratios". Under the PPACA, insurers in the individual market must use 80% of their premium income for medical expenses, leaving only 20% to cover overhead, labor, and profit. The minimum ratio in the group market is 85%. Seventeen states applied for waivers allowing their insurers to have lower MLRs, typically 65-75%, until 2013.  The only six to receive waivers were Georgia, Iowa, Kentucky, Maine, Nevada, New Hampshire, and North Carolina.

    The Looming Disaster

    What happens on January 1, 2014? That's when the state-based exchanges are supposed to be up and running, allowing federally subsidized insurance to supplant the policies getting waivers. In 2014, the PPACA will kick people off private, non-compliant plans and throw them onto subsidized exchange plans, or onto Medicaid.

    Says HHS (emphasis added):

    In order to protect coverage for workers in mini-med plans until more affordable and more valuable coverage is available in 2014, the law and regulations issued on annual limits allow the Department of Health and Human Services (HHS) to grant temporary waivers from this one provision of the law that phases out annual limits if compliance would result in a significant decrease in access to benefits or a significant increase in premiums.  Plans that receive waivers must comply with all other provisions of the law and must alert consumers that the plan has restrictive coverage and includes low annual limits.  Additionally, these waivers are temporary and after 2014, no waivers of the annual limit provision are allowed.

    In other words, they know their changes will make health insurance unaffordable for many people who now have it. Their solution presupposes that a state creates its own exchange. In states not implementing their own exchange, there will be no subsidies unless the law is changed to allow subsidies under federal exchanges. No such change to the law is likely forthcoming, unless the courts sweep away its clear language as the Roberts decision did with the individual mandate.

    The result of the Roberts decision and the pathological design of the PPACA will be fewer people paying for their own health insurance.

    We must not risk allowing Congress to reopen the PPACA monstrosity. It must be fully repealed before implementation goes any further, so a patient centered health care law can be carefully and openly created. 

    The Roberts ruling laid out starkly the cruciality of the November elections. Once Obamacare is implemented, it will become entrenched, permanent, and pervasive.  If the law is not repealed, every subsequent election also will be about health care: how much to raise taxes, how much to ration, and which groups get what.