Mandates and Exchanges: Important Reform News for Physicians

Two elements of the Affordable Care Act - the individual mandate and insurance exchanges - are making news and have implications for physicians.

Health Insurance Mandate

As originally written, the Affordable Care Act required all employers with more than 50 full-time equivalent (FTE) employees to provide health care coverage for those employees. This requirement was scheduled to become effective January 1, 2014. Earlier this month, the administration announced that the mandate would be delayed until January 2015. The reason given for the change was said to be employer confusion with the law's requirements and that additional time would be needed for them to be compliant. Employers with fewer than 50 FTE employees (the law states that any employee that works 30 hours or more per week is considered full time) has no mandate to offer health insurance as a benefit.

This change has the potential to become problematic for the law itself. The new effective date is now after the mid-term elections and Republicans are likely to use the concerns of employers that resulted in the delay as an example of how the reform law was ill-conceived and should be overturned as part of congressional campaigns. With public support for the law not more than 50 percent, according to a June 2013 Gallup poll, the Republican message may get traction.

Not delayed is the individual mandate. The law requires that everyone obtain insurance coverage by January 1, 2014, through an employer plan, public program (Medicare/Medicaid), or from the health insurance exchanges, also known as marketplaces, scheduled to open their doors later this year. Individuals that fail to obtain coverage face a $95 fine. The impact of the mandate is questionable since the monthly cost of insurance will be more than the annual fine. The government would subsidize coverage costs on a sliding scale tied to income.

Given this uncertainty about how many people will actually be covered by health insurance, as well as the future of the law itself, planning for potential increases in patient loads becomes problematic.

Health Insurance Exchanges

The Affordable Care Act also contained a provision that states establish a means for individuals to purchase health insurance. States could decline to organize an exchange and the federal government would do so by default. Only 17 states have announced plans to sponsor their own program. The thinking was that exchanges would attract both healthy and sick individuals and the resulting rates would be lower than current individual coverage. Seems like a good idea so what is the issue? There are two really.

The first problem is that far fewer insurance companies have indicated that they will offer plans through the exchanges. This will limit competition and might result in rates higher than expected. Higher rates will result in more consumer discontent and reduced support for the law. These exchanges become active one month before the election.

The second issue? Feedback from medical practices that are members of the Medical Group Management Association (MGMA) is that insurance companies that plan to offer products through the exchanges are approaching them with reimbursement rates that are 20 percent to 30 percent below current levels. While you might think the solution is simple - just say no - that might not be an option. Some of the current contracts between physicians and the plans have an "all products" clause that requires that the physician accept all of the plan's programs or none. My post two weeks ago discussed planning for rates equal to Medicare but in many markets, this might result in rates below Medicare.

Mandates and exchanges promise to be the targets of heated discussion over the next few months. Unofficial messages from the Obama Administration hint that portions of the healthcare reform law require revision which will certainly give fuel to the opponents that want to repeal the entire law (House Republicans have voted to repeal the Affordable Care Act 40 times so far).