The Patient Protection and Affordable Care Act was signed into law March 23, 2010. Its constitutionality was upheld by the high court following a legal challenge from 26 states, with Chief Justice John Roberts writing the majority opinion.
The legislation — sometimes called Obamacare after President Barack Obama, who promoted the law — seeks to expand the number of U.S. citizens who have health insurance, something that 53.5 percent of working-age Americans get through an arrangement with an employer, according to the National Institute for Health Care Reform.
The nonpartisan Congressional Budget Office (CBO) predicts the law will reduce the number of people who receive health insurance through their jobs, as some businesses could stop offering health benefits as a cost saver.
“There is clearly a tremendous amount of uncertainty about how employers and employees will respond to the set of opportunities and incentives under that legislation,” wrote the CBO in March.
According to the law, businesses with more than 50 employees will be required to provide health insurance to full-time employees or face penalties. Those with fewer than 50 employees will not have to offer insurance.
Those workers could seek insurance either as individuals or through “exchanges” set up by states that, in theory, would make insurance options easier to discern and cheaper to purchase.
Some small-scale entrepreneurs could benefit under the law, as it stipulates that employers with fewer than 25 workers who are all paid less than $50,000 annually are eligible for tax credits that can make up for as much as 50 percent of the cost of the employer’s health insurance share starting in 2014.
Owners of several downtown Tracy businesses said this week that they and their employees were likely to be unaffected by the recently upheld law.
“For me, it’s going to be status quo,” said Harish Patel, owner of Barista’s on 10th Street.
Patel employs seven workers in addition to four family members, but he said he planned to stick with his health benefits program.
Dan Schack, who runs the architecture and design firm Schack & Co. on Central Avenue, said he was also unlikely to break a decades-old relationship with his insurer.
“It’s an ongoing responsibility of small-business owners to be on top of it as best they can, for themselves and the well-being of their employees,” said Schack, who employs five. “Insurance is such a huge component of small business.”
Tracy’s McClain Food Services is a larger employer, with 120 workers. But according to spokesman Dan Ball, the law is unlikely to change much at the food distribution center, with one exception.
Ball referred to a clause in the law that took effect in 2010, allowing children to stay on their parents’ health care plans longer.
“It drives up the cost, because you’re now insuring kids up to 26,” Ball said.
But even more companies — including the insurance agencies that carry the policies — were less certain about what actions they would take to prepare for 2014, when the majority of the law’s components go into effect.
“We’re digesting the situation,” said Kaiser Permanente spokeswoman Gerri H. Ginsburg when asked Monday, July 2, although a Kaiser media release tried to reassure customers.
“We want our members to know that they need not be concerned about any disruption of their coverage resulting from the Supreme Court’s decision,” the statement read.
Law of the land
The health care law’s consequences will be wide-reaching.
The Congressional Budget Office estimated in March that the net cost of the law to the federal government would be $1.1 trillion between 2012 and 2021, though it anticipated that the law would, “on net, reduce budget deficits.”
While the extent of the law’s on-the-ground impacts won’t be known for some time, many of its requirements for individuals are clearly spelled out.
One, called the “individual mandate” — the issue at the center of the Supreme Court’s decision — requires every U.S. citizen to enroll in an insurance program.
Under the law, anyone who does not have insurance through work can buy it individually or choose to buy through exchanges set up through the states, with subsidies for people at certain income levels.
The California Health Benefit Exchange estimates that at least 1.8 million California residents will buy subsidized insurance through the exchange and that 1.5 million more state residents will be eligible for coverage under an expansion of Medicaid, an insurance program for the poor.
The Medicaid expansion will cover those who make less than 138 percent of the federal poverty line — $15,415 for an individual or $31,810 for a family of four, according to the California exchange.
A “sliding scale” of health insurance subsidies would apply to people earning 138 percent to 399 percent of the federal poverty line, according to the U.S. Department of Health and Human Services. For a family of four, 399 percent of the poverty level is $89,400.
If individuals do not get insurance coverage, they will be subject to penalties, which were ruled a form of taxation in Roberts’ opinion.
By 2016, according to the California Health Benefit Exchange, most families will face an annual penalty of $695 per uninsured adult member or $347.50 for an uninsured dependent younger than 18. The maximum penalty limit is set at $2,085 a year.
Those with higher incomes would be penalized based on household income, but the charges would be capped at an amount equal to the national average premium for “bronze level” health plans — ones in which the patient is responsible for about 60 percent of the cost of care — available through the state exchange.
The individual mandate to buy insurance has been described by supporters of the health care law as a way to ensure enough people pay into the insurance pot to keep costs from rising too quickly.
Others have derided the mandate as government overreach and an intrusion on personal liberty.
In addition to those tax penalties, individuals making more than $200,000 and couples making more than $250,000 a year will pay 0.9 percent more in Medicare payroll taxes and a 3.8 percent tax on investments under the law.
A tax also starts in 2018 on so-called Cadillac insurance plans — those that carry premiums exceeding $27,500 a year for a family of four.
Health care expansion
Some health care professionals, including CEO of San Joaquin General Hospital David Culberson, see a big upside for those who have had trouble obtaining health insurance and the medical care it provides.
“About 23 to 25 percent of our population we serve is either unfunded or they’re uninsured to some extent,” Culberson said.
Culberson said many people in San Joaquin County who turn to his hospital for help have chronic health issues, no insurance and no primary-care physician, which leads them to put off routine treatment until a crisis sends them to the emergency room.
Coupled with a lack of insurance, that can make administering care more expensive than it needs to be, Culberson said.
“I believe it’s a good step,” he said of the ACA. “It allows us to focus on primary-care physicians and getting patients regularly visiting their physician or other providers and able to manage their acute diseases a little better.”
Culberson added that diabetes and obesity, chronic conditions that can be managed with routine care but often result in medical emergencies if left untreated, are major health problems in the area.
The hospital CEO believes the expansion of Medicaid and subsidies for those who purchase their own insurance will increase the number of people who have access to health care.
But he also anticipates more pressure on hospitals.
As part of the law, hospitals agreed to reduce the amount of money they receive for treating Medicare patients. While that saves the federal government money, it means less money for hospitals.
“We have to continue to extend access to improved quality and operate more efficiently,” Culberson said. “It’s going to be much more competitive.”
Pat Fry, the president and CEO of Sutter Health network, agreed that hospitals will be forced to “achieve higher clinical quality and to deliver personalized patient care and support services at more affordable prices.”
“Like other health care organizations, we share concerns about reimbursement reductions,” Fry said in a prepared statement. “Keep in mind that Medicare is reducing payments to Sutter Health by nearly $2 billion over the current decade. We are preparing for health care financing changes by further reducing care variation and by more broadly adopting best-practice approaches.”
Medicare reimbursement changes could place particular pressure on San Joaquin General, one of only 21 county hospitals left in California. The county hospital has run at a deficit for several years, and the county planned to set aside $8.8 million in its 2012-13 budget to keep the hospital operating.
Culberson hopes the reduction in Medicare money is at least partially compensated by insurance payments for many county hospital patients who are now uninsured.
“Knowing that 25 percent of our population is uninsured, we hope the extensions of coverage … will help improve the hospital’s bottom line,” he said.
Also among the benefits touted by Obama is that, beginning in 2014, insurers cannot deny coverage to or charge higher rates to individuals solely because of pre-existing medical conditions.
The law was also written to prevent insurance companies from capping the amount of money spent on a patient in a given year.
Costs still rising
However, many worry that the health care law will not solve one of the biggest problems it was ostensibly passed to solve: the rising cost of health insurance and health care.
Between 1970 and 2010, U.S. spending on health care as a percentage of gross domestic product rose from 7.2 percent to 17.9 percent, according to the Henry J. Kaiser Family Foundation.
“Health care spending has exceeded economic growth in every recent decade,” according to the foundation. “Despite this relatively high level of spending, the United States does not appear to achieve substantially better health benchmarks compared to other developed countries.”
Premiums have also increased faster than inflation. According to the foundation, premium increases have ranged from 3 percent to 13 percent annually since 2000; it concludes that health care costs are a significant burden on at least 25 percent of Americans.
The health care law’s individual mandate was supposed to keep costs in check by having more people pay into the risk pool, making sure those with insurance weren’t covering for “freeloaders.”
However, the Kaiser Foundation anticipates that expenses will continue to rise.
“Despite the many cost-reducing provisions in the ACA, system-wide health care costs are still projected to rise faster than national income for the foreseeable future, and this cost growth has important implications for government and family budget,” according to the Kaiser Foundation.
One of the possible reasons is the provision preventing insurance companies from dropping patients or capping annual spending limits on care, which are designed to prevent families from being bankrupted by medical expenses.
California Chamber of Commerce President and CEO Allan Zaremberg worries that the expansion of coverage will make costs rise faster, because insurance companies will have to insure high-risk, high-cost patients.
“People who don’t have health care today can’t afford it because it is not affordable or because they have an expensive pre-existing condition,” Zaremberg said in a statement. “Therefore, someone else will have to subsidize insurance for these individuals, either through higher taxes or higher premiums due to cost shifts. Thus, the Supreme Court’s decision emphasizes the need to control health costs, or premiums and taxes will spiral out of control.”