New Mexico could be hard hit by gutting ACA

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By Arin McKenna

Editor’s note: Second in a two-part series.

According to Anne Sperling, president and CEO of Vanguard Resources, Inc., one goal of the Affordable Care Act (ACA) – eliminating discrimination based on factors such as preexisting health conditions and gender – has one glaring flaw.
Age discrimination is built into the premium structure, and it impacts both individuals and small businesses. That impact will only get worse if the so-called “Cadillac tax” goes into effect in 2020.
Sperling pointed to the premium for a Blue Cross/Blue Shield bronze plan with a $6,000 deductible and a maximum out-of-pocket expense of $7,150. The premium for a 59-year-old is $820 a month. A 21-year-old pays $200 a month.
Needless to say, the impact on individuals is tremendous. But small employers – defined as one to 50 employees in New Mexico and up to 100 employees in other states – also feel both the financial and administrative burden of those rates.
Large employers receive composite rates, in which the age of the population is averaged. Rates for small employers are based on the age of each individual in the organization.
“Nine times out of 10, when I throw these charts in front of my employers, they say, ‘Well, I’m not hiring anybody over here in this age group any more. I’m going to hire over here (in the lower age range),’” Sperling said.
According to Sperling, the “face of the workplace is changing so dramatically based on age.”
“It’s changing the complexion of America because us baby boomers – there are lots of us out there. And a lot of us are really hard workers and still extremely healthy but we’re generating this horrible figure,” Sperling said.
According to Sperling, rates prior to the ACA were only age-based for groups of one to 10, and those were age-banded in five-year increments. Groups over 10 paid composite rates for single, spouse and family plans.
“So you weren’t looking at this age thing. It would always just be one rate,” Sperling said. “It made it very easy on the accounting for business. It made it very easy to do COBRA administration (the Consolidated Omnibus Budget Reconciliation Act, which allows employees to temporarily continue their group health care coverage after leaving employment). It made it very easy for employers to budget.
“And it made it very blind as far as age was concerned. This might still be working in the background actuarially, but the employers never saw it. So they didn’t have any thought process to be discriminatory.”
According to Sperling, administering employee benefits with age-based insurance rates is “an administrative nightmare,” since the rate for each employee is different.
“So that’s the scream you hear from employers across the nation,” Sperling said. “Is that difficult to fix? No. That’s actually really easy to fix. You don’t have to repeal the whole law to get that fixed.”
The problem will be compounded if the Cadillac tax is implemented in 2020. The Cadillac tax is a 40-percent excise tax on any premium amount over $820 dollars a month – the current bronze plan premium for that 59-year-old.
Unions have been fighting the tax since its inclusion in the ACA, due to the impact on their members, but the tax will also affect individuals and small businesses by penalizing those higher age-based premiums.
“To call it the Cadillac tax is a joke, because originally the thought process on that was to tax the very rich in benefit programs,” Sperling said, noting that the 59-year-old’s bronze plan is anything but a “Cadillac plan.”
“The interesting thing, of course, is that the government excluded itself from the Cadillac tax, and they have the riches plan in America.”
Sperling contends that “that part of the law needs to go away.”
“I understand it’s a huge moneymaker, but basically what it does is it takes the tax deductibility of group health insurance plans to being not tax deductible anymore. It changes that platform,” Sperling said.
“So that’s probably the easiest fix the congress and the (President-elect Donald) Trump administration could do straight out of the chute.”
Sperling also hopes President Barak Obama will fix that element of the law before leaving office.
Several potential choices Congress and the Trump administration could make regarding the ACA could impact New Mexicans.
If they choose, for example, to eliminate the federal health insurance exchange, New Mexico may lose its own health exchange. The health exchanges are federally mandated under the ACA.
New Mexico is one of a handful of states that partnered with the federal exchange instead of developing its own.
“So the feds might say, through the Trump administration, guess what: we’re not partnering with any more states. We’re done. Good luck, New Mexico. We’re not being there for you any more,” Sperling said.
If that happened, New Mexico would have to quickly find money to develop software in order to operate its own exchange.
State nonprofit insurance cooperatives are also mandated under the ACA. According to Sperling, New Mexico Health Connections is one of only seven cooperatives surviving nationwide. Sixteen cooperatives have gone out of business, and New Mexico’s is also in danger.
The state took $1.7 billion dollars in federal loans to set up the cooperative, which are now due. Like the cooperatives that have already failed, New Mexico may be unable to pay that loan back.
“So will it survive? I don’t know. The feds may come back and say, you cooperatives are gone,” Sperling said.
According to Sperling, another element of the ACA Trump wants to get rid of is the individual mandate, which assesses penalties on anyone who does not purchase insurance.
Although that would be welcome news to many people, it could make the entire ACA fall apart, since the program is based on having as many people insured as possible.
Sperling believes the Republicans may push to either simplify or completely repeal all the fees, penalties and taxes associated with the law, which were intended to offset the cost of implementing the ACA. According to Sperling, $15 trillion dollars have already been spent on startup money for public exchanges and cooperatives, subsidy programs and Medicaid expansion.
“When you look at the fees, penalties and taxes, Congress is going to have to make a decision, do we want to keep these in place long enough to get some money back in the bank, or are we going to write that (cost) off by repealing the law,” Sperling said.
Although Trump has backed off from some of his campaign rhetoric regarding the ACA, leadership in both houses of congress have promised to repeal it. What actually happens when Trump takes office next January remains to be seen, but as Sperling points out, many things short of complete repeal could unravel the Affordable Care Act.
“If they defund the public exchange, if they take away the individual mandate, if they defund the Medicaid expansion program for the states, this thing’s dead, because those are the cornerstones of the law,” Sperling said.
For more on how the change in administration could impact the ACA, see “Local expert discusses future of ACA” in the Nov. 23 edition of the Los Alamos Monitor.