ACA Eroding Employee Insurance, Increasing Demands on Providers
November 11, 2015
Choppy waters await independent psychologists accepting third-party reimbursement, as businesses and insurers react to features of the Affordable Care Act (ACA). Employer-sponsored insurance (ESI) is being eroded, while the law’s value-based payment system guarantees increased insurer scrutiny of psychological care.
Patients with ESI are bearing increased cost-sharing as an indirect yet intentional consequence of a 40 percent excise tax on their plans. The so-called “Cadillac tax” is assessed against insurers in 2018 and beyond, targeting the portion of policy expense above a dollar limit. Carriers will offset this loss through higher company premiums.
To reduce financial exposure, firms are already reducing the quality of plans they offer. For employees, this means higher premiums, deductibles and copayments, narrower provider networks and reduced contributions to health and flexible savings accounts.
Because the tax’s threshold is indexed to general inflation instead of medical inflation, it will over time capture all ESI.
The Obama administration envisions a twofold virtue to the tax. Increased consumer “skin in the game” will encourage workers to access less health care and thus lower national health expenditures. The revenue is also expected to support Medicaid expansion and ACA exchange subsidies.
Jonathan Gruber, the MIT professor who helped create the ACA, said the tax would eventually rid the nation of what economists call the “employer exclusion,” the IRS policy exempting worker health benefits from taxation.
ACA developers recognized that a direct assault on the tax break would have been politically unpopular. “(T)he only way we could get rid of it,” explained Gruber, “was first by mislabeling (the Cadillac tax) – calling it a tax on insurance plans rather than a tax on people – when we all know it’s a tax on people who hold those insurance plans.”
Over 2008-2009, Gruber and fellow architect Ezekiel Emanuel maintained that as company plans are trimmed or eliminated, workers gain dollar-for-dollar pay raises. Income and payroll taxation of these wage hikes is expected to generate the bulk of the $91 billion revenue projected from 2018 to 2025.
While the feature went unnoticed by the media for years, the Cadillac tax is now subject to fierce debate. Presidential candidates Hillary Clinton and Bernie Sanders have called for its repeal, as have unions, business groups, workers and a bipartisan Congressional coalition. However, 101 economists and policy experts recently wrote to Congress in support of the tax unless an alternative “that would more effectively curtail cost growth” is substituted. The Wall Street Journal reports that the administration also opposes repeal.
Many workers are already experiencing affordability problems, and according to advisory company PricewaterhouseCoopers, 40 percent are foregoing care (up from 29 percent in 2009). Increased cost-sharing, according to USA Today, is causing many workers “to feel they must skip doctor visits, put off medical procedures, avoid filling prescriptions and ration pills.”
Psychologists may thus find that patients schedule less frequently or even abandon treatment. Some may transfer care to clinicians in their new narrow networks, while those losing ESI may enroll in Medicaid or the ACA exchanges.
Research firm S&P Capital IQ projects that 90 percent of ESI-covered workers “will be shifted to” the public exchanges by 2020. Emanuel has long made similar predictions.
Beside these challenges, psychologists accepting insurance will see insurer demands for increased accountability and behavioral change measurement, according to The Trust’s recent ACA workshop. There will be “more audits to measure patient status and compliance with efficacy and efficiency criteria” and a need to justify and carefully document diagnostic and treatment decisions. Insurers will require that psychologists employ empirically validated treatments and demonstrate their effectiveness through screening instruments.
The movement to “pay for performance” is occurring “much faster and sooner than anyone expected,” according to The Trust’s Dan Taube. “There’s less money, more requirements,” and since referrals will be electronic, “referral patterns are going to be more challenging.” It will be “harder to sustain solo private practice in this environment.”
However, the speakers also saw the potential for independent practices to survive outside the third-party system. “A group of people will become disaffected by the system,” especially those valuing privacy and separate mental health records.
Some patients will prefer cash practices due to dissatisfaction with the ACA’s more “manualized and automated” treatment protocols. “The ACA system,” explained Taube, won’t provide “longer-term dynamic services.”
Although its voyage is uncharted and insecure, the ACA is quickly and dramatically changing the delivery of and payment for health care. The Trust projects that third-party-free psychology practices may keep afloat through creative marketing, development of new product packages and niche specialties, and in the future, remote digital service provision.
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