The Coverage and Cost Effects of Implementation of the Affordable Care Act in New York State

© 2012, The Urban Institute Health Policy Center • www.healthpolicycenter.org page 1 The Coverage and Cost Effects of Implementation of the Affordable Care Act in New York State March 2012 Fredric Blavin, Linda J. Blumberg, Matthew Buettgens, Jeremy Roth Introduction The Patient Protection and Affordable Care Act of 2010 (ACA) provides states with the opportunity to develop health benefit exchanges – structured marketplaces for the purchase of health insurance coverage by small employers and individual purchasers. If New York State elects to do so, the law provides an array of design choices to the states in an effort to allow the exchanges to reflect varying preferences across the country.1 All health benefit exchanges must adhere to minimum federal standards, but there is considerable room within those standards for states to make a variety of policy choices. This analysis delineates the cost and coverage implications of a standard implementation of the ACA in New York compared to the no reform case, along with the differential effects of a number of alternative design options. This analysis, based upon the Urban Institute’s Health Insurance Policy Simulation Model (HIPSM), is intended to provide analytic support to the state’s policymakers as they assess the options available to them for implementing federal health care reform. We quantify the coverage and cost implications of the various reform options for consumers, employers, and government. The results provided in this report should not be taken to suggest any preference for one policy option over another and are merely intended to provide information on the tradeoffs of different approaches. Policy Options Simulated In total, we simulated six different options under the ACA in addition to the no reform case. We refer to the first option as the “standard implementation,” and the others are compared to it for convenience. In all but one case, the alternative policy options differ from the standard implementation by only one design feature, for ease of comparison. Figure 1 summarizes the six options simulated, and they are described below. All simulations are done as if the reforms were fully implemented and behavior fully phased-in in the year 2011 to ease comparison across the options. All simulations include the main coverage provisions of the ACA and include only the non-elderly population. Income groups are defined by modified adjusted gross income (MAGI) as required by the law. The main coverage provisions are:2  Medicaid eligibility is set at 138 percent of the federal poverty level (FPL) for all adults, with the Children’s Health Insurance Program (CHIP) remaining in place at current levels. Medicaid maintenance-of-eligibility for adults with incomes above 138 percent of the FPL is modeled as an option, as described below.  New state-based health insurance exchanges offer plans constructed to meet actuarial value standards of 60, 70, 80, and 90 percent.3 Exchange plans are Figure 1: Summary of Options Simulated Standard Alt. #1 Alt. #2 Alt. #3 Alt. #4 Alt. #5 Small Group & Non-Group Markets Merged Non-merged Merged Merged Non-Merged Merged Small Group Size ≤ 100 workers ≤ 100 workers ≤ 50 workers ≤ 100 workers ≤ 50 workers ≤ 100 workers Medicaid Eligibility Level 138% FPL 138% FPL 138% FPL 138% FPL + FHP parents to 150% FPL 138% FPL 138% FPL Basic Health Plan? No No No No No Yes © 2012, The Urban Institute Health Policy Center • www.healthpolicycenter.org page 2 guaranteed issue, as are all plans in the small group and non-group markets, as is the case in New York today. Although the ACA permits age bands in these markets of up to 3:1 and tobacco-use bands of up to 1.5:1, our simulations assume that the state will maintain its pure community rating policy in these markets and that no age or tobacco-use rating will be introduced. Undocumented immigrants are ineligible for exchange coverage.  Refundable premium tax credits (subsidies) are available to eligible families purchasing insurance through the non-group exchange. These are provided on a sliding scale basis. They limit the maximum percentage of income that a family will have to spend on its health insurance premium. The limit is 2 percent of income for those with incomes up to 138 percent of the FPL, 3 to 4 percent of income for those with incomes between 138 and 150 percent of the FPL, 4 to 6.3 percent for those with incomes between 150 and 200 percent of the FPL, 6.3 to 9.5 percent for those with incomes between 200 and 300 percent of the FPL, and 9.5 percent for those with incomes between 300 and 400 percent of the FPL.  Cost-sharing subsidies are available to those in the non-group exchange with incomes below 250 percent of the FPL, and reduced maximum out-of-pocket limits are provided to those with incomes below 400 percent of the FPL.  There is an individual responsibility requirement (also known as an individual mandate) that introduces a