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Health Reform Decisions Now Move to States

The Supreme Court has now upheld most of President Obama’s signature health reform law. Now it’s up to states to implement it.

By Rose Hoban, with reporting by Kelsey Tsipis

In a stunning refutation of what had become conventional wisdom, the Supreme Court upheld President Obama’s signature health care reform law, the Patient Protection and Affordable Care Act in a 5-4 ruling Thursday morning.

President Obama signing the Affordable Care Act, March 24, 2010. Photo courtesy Keith Ellison, Flickr Creative Commons

President Obama signing the Affordable Care Act, March 24, 2010. Photo courtesy Keith Ellison, Flickr Creative Commons

But even as the country’s highest court has signaled the law is constitutional, state Republican leaders have not yet indicated what they’ll do about implementing the ACA.

With the constitutionality of the law no longer in question, the next issue for North Carolina legislators is whether or not to create a health insurance exchange that would be a clearinghouse for people to find insurance coverage, and whether to expand the Medicaid program.

In a press release issued Thursday, Senate President Pro Tempore Phil Berger (R-Rockingham) said the General Assembly would not be addressing the need to create a health insurance exchange during this session. He did not address the possibility of a special session to be convened before the long session reconvenes in January.

Under the PPACA, North Carolina could potentially add between 560,000 – 700,000 people to the state’s Medicaid rolls.

“About 80 percent (of those) will be people who are newly eligible,” said Pam Silberman, head of the NC Institute of Medicine, “and the rest are people who were already eligible but haven’t been enrolled in the program.”

According to the NCIOM, about 1.6 million North Carolinians, or 19 percent of people under 65, do not have insurance coverage. In the first year after the law takes effect, estimates are that about 700,000 will be able to buy health insurance coverage through the health insurance exchange.

“Most of the uninsured have someone in their household that’s working full time, often two people in their household working full time,” Silberman said. “Some of them work in low wage jobs, some work part time… and a lot of small businesses can’t afford to offer insurance.”

Many of those newly insured will get a subsidy from the federal government to pay for their insurance. About half who come into that market will have been previously uninsured. The rest of the people who choose to buy through the exchange are those who will find insurance more affordable – or easier to purchase – than before, said Silberman.

Under the law, anyone making less than 400 percent of the federal poverty level – up to $92,200 a year – would be eligible for help paying for health insurance.

“If your income is below 250 percent of the federal poverty level, then you get a subsidy on the premiums and on the out-of-pocket cost share,” Silberman explained. Above that level, people will be required to spend up to 9.5 percent of their incomes on insurance, while help from the federal government diminishes.

“It depends on whether they get it through their employer or not,” Silberman said. She said the subsidy is only available to people who cannot get affordable coverage through their employers and who are not eligible for public coverage, like Medicaid or Medicare.

Use this calculator from the Kaiser Family Foundation to see if you’d be eligible for insurance subsidies

To expand or not expand

The way the ACA is written, a state that might not want to expand Medicaid could have all funds for the entire program pulled by the federal government. But the justices ruled that was an unconstitutional form of federal coercion, and struck down that portion of the law.

Supreme Court Building, Image by dbking, Flickr Creative Commons

Supreme Court Building, Image by dbking, Flickr Creative Commons

In essence, the justices said that expanding Medicaid to cover more people becomes optional for states.

North Carolina is currently one of many states where coverage will expand significantly for low-income people. For the first three years, Washington will pay the total tab for everyone who was previously ineligible for Medicaid. That federal payment drops to 90 percent of the cost in the subsequent three years.

The biggest cost to North Carolina will be covering those people who have been eligible for Medicaid all along, but who haven’t been on the program already. That will come to an average of $138 million a year. (In contrast, this past year’s Medicaid overrun was about $200 million.)

“The state will end up paying for those people whether we expand Medicaid or not,” Silberman said. “Because the state has to pay it’s share of anyone who’s already eligible, and for the first three years the costs to the state are just the people who are already eligible but not enrolled.”

Meanwhile, the federal government will pick up most of the cost of expansion for those six years, contributing almost $16 billion to grow Medicaid in North Carolina.

But, even though the terms are favorable, lawmakers in the Republican-controlled legislature have expressed their distaste for implementing the law. In March 2011 the General Assembly attempted to make an end run around the ACA by passing a law making it illegal for the ACA to be implemented in North Carolina. Governor Bev Perdue vetoed the law.

“It’s a fascinating test of ideology versus financial self-interest,” said Don Taylor, Jr. a health policy professor at Duke’s Sanford School of Public Policy. “The red states don’t like government health insurance but we’re going to see how much they don’t like it when we see if they leave that money on the table.”

But on Thursday, Republicans in the legislature were not commenting about whether they intended to proceed with a Medicaid expansion. (NCHN attempted to contact multiple members of the General Assembly’s Republican leadership on Thursday without success.)

A poor rate of exchange

The other task at hand for the General Assembly for implementing the law is setting up a exchange for all the people who will be buying health insurance in the state. If the state does not have an insurance exchange in place by early next year, the federal government will take over the task and instead run North Carolina’s program.

Supreme Court Seal, Image by DonkeyHotey, Flickr Creative Commons

Supreme Court Seal, Image by DonkeyHotey, Flickr Creative Commons

In last year’s budget document, lawmakers inserted language saying, “It is the intent of the General Assembly to establish and operate a State‑based health benefits Exchange that meets the requirements of the federal Patient Protection and Affordable Care Act.”  But no work has been done since early 2011.

“We’re way behind on the exchange,” Taylor said. “The General Assembly has not really moved to set it up. We need to move and figure out how to put the details in place and there are many, many of them.”

Currently the lawmakers are poised to recess in the coming week, after the governor decides whether or not she will veto the state budget.

“We need a special session on health reform or else they’re going to let the fed run the exchange,” Taylor said. “They need to give some kind of answer, and they need to do it before January.”

It is possible for the governor to call the General Assembly back into session, said Michael Keough, executive director of the North Carolina health insurance high-risk pool, Inclusive Health. But Keough said he has seen no call to action yet.

According to Keough, the Supreme Court decision allows 5,000 more uninsured North Carolinians with preexisting conditions to gain coverage, but leaves high-risk pool directors like him wondering what the time frame is to transition people into exchanges.

North Carolina is not alone in confronting this paradox of whether to abide by a detested federal mandate by creating an exchange, or having the state’s insurance market taken over by the federal government. Legislators in neighboring states Virginia, Georgia and South Carolina have also not yet created exchanges and face similar choices as in North Carolina.

“The ironies abound,” said Taylor. “Our political system produces messy outcomes.”

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2 Comments

  1. Will N.C. Expand Medicaid? Start to Set Up and Exchange? « freeforallJun 29, 2012 at 10:26 am

    […] Those are the two biggest questions facing North Carolina the day after the Supreme Court ruling uph…. […]

  2. More on North Carolina’s Medicaid Choice « freeforallJun 30, 2012 at 1:15 pm

    […] expand health insurance coverage to low income residents than via the implementation of the ACA (between 560,000-700,000 North Carolinians could be covered via the Medicaid expansion, with the federal govt paying 100% of the cost for the […]

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