Deck 17: Economic Evaluation of Health Policy: The Patient Protection and Affordable Care Act of 2010

Question 1

When analyzing legislative documents, such as the PPACA, it is important to rely on the original text of the document, not on secondary sources (e.g. summaries and overviews by parties with different political affiliations) to form your own independent opinion first.

Answer 1

False

Question 2

According to CBO projections, employer-sponsored health insurance coverage will be significantly eroded by 2021, as a direct result of PPACA implementation.

Answer 2

False

Question 3

As of 2014, purchase of health insurance will be mandatory for all citizens, and it will be mandatory for all employers to offer coverage, or face financial penalties.

Answer 3

False

Question 4

Under PPACA, each state is required to establish a single statewide health benefit exchange for individuals and small employers by January 2014.

Question 5

The law mandates that each state health insurance exchange must offer at least one "qualified" plan to individuals and small groups.

Question 6

To enforce the "affordable" aspect of the mandatory requirement to have health insurance, there are provisions in the law for low-income families to qualify for premium credits and/or subsidies.

Question 7

All individuals, with no discrimination by age, employment, insurance status, or any other factors, will have the right to purchase a plan through health insurance exchanges.

Question 8

The market that will be most radically transformed under the PPACA is the market for employer-sponsored health insurance.

Question 9

Suppose annual premiums for the silver plan in the health insurance exchange in your geographical area will be established at $5,000 in 2014. If your individual income will be $40,000 in 2014 and you will be eligible to buy health insurance through that exchange, you will qualify for a premium credit.

Question 10

The PPACA legislation can be viewed as an attempt by the US government to provide universal health insurance coverage to all citizens and legal residents in the U.S.

Question 11

For the federal government, the major problem with macro affordability is that the healthcare expenditures growth rate greatly exceeds the growth rate in the available income (GDP). This implies that if the current growth trends continue without change, spending on healthcare will become unsustainable.

Question 12

The design of the PPACA legislation uses several historical experiments with innovative healthcare financing as models, because of the positive outcomes observed from those experiences. The generalizability of those outcomes for the entire country, however, is less certain and the actual impact of PPACA legislation may vary greatly from the expected targets.

Question 13

Which population category will be primarily affected by the major changes that PPACA envisions?

A) current Medicare enrollees
B) current Medicaid enrollees
C) current enrollees in employer-sponsored health insurance plans
D) the uninsured and enrollees of individual health insurance plans
E) Federal employees

Question 14

Listed below are some of the most important new coverage rules under PPACA. Some of them aim to achieve greater efficiency, others aim to achieve greater equity. Which coverage rule from the list below aims to achieve better efficiency?

A) All pre-existing conditions must be covered in full
B) Limited deductibles
C) Eligibility and electronic claims submission standards
D) No dollar limit on benefits
E) Guaranteed renewal

Question 15

Listed below are some of the most important new coverage rules under PPACA. Some of them aim to achieve greater efficiency, others aim to achieve greater equity. Which coverage rule from the list below aims to achieve better equity?

A) Medical loss ratios
B) Uniform benefits descriptions
C) Insurers are allowed to increase premiums with age and for tobacco users.
D) Mandated coverage (penalty tax)
E) Preventive services must be covered at no cost to the patient

Question 16

Suppose annual premiums for the silver and gold plans in the health insurance exchange in your geographical area will be established at $5,000 and $7,000 respectively in 2014, your individual income will be $40,000 in 2014 and you will be eligible to buy health insurance through that exchange. If you decide to buy the gold plan, your contribution to the premium cost will be

A) $7,000
B) $5,800.
C) $5,000.
D) $3,800.
E) $1,200.

Question 17

The anticipated benefits of health insurance exchanges include all of the following except

A) lower (compared to the market for individual health insurance) prices.
B) better (compared to the market for individual health insurance) coverage.
C) simplified (compared to the market for individual health insurance) administrative procedures and lower administrative costs.
D) readily available and standardized information, allowing for easy comparison of plans.
E) lower (compared to the market for individual health insurance) wait times for medical examinations.

Question 18

Income distribution, and thus the ability to afford healthcare, is highly skewed in the U.S. The current nature of income distribution implies that average household income is _______________ median household income.

A) significantly less than
B) significantly greater than
C) always equal to
D) only infrequently equal to
E) completely unrelated to

Question 19

Which of the following examples of states, plans and programs - which had experimented with different forms of healthcare financing in the past - were not used as models when designing the PPACA legislation?

A) the Massachusetts healthcare law
B) the Oregon experiment with Medicaid expansion
C) the Hawaiian experiment with mandated employer coverage
D) Federal Employees Health Benefits Plan
E) the first HMO: Kaiser Health Plan

Question 20

Which of the following is not an example of an issue left unresolved by PPACA?

A) There is no guarantee the distribution of health insurance will be 100% equitable.
B) The standard package of "essential benefits" has not yet been precisely defined by the law, and is still left for individual states to determine.
C) The law will greatly reduce, but not completely eliminate the number of uninsured.
D) The law does not provide a clear mechanism for medium-size employers to access affordable health insurance.
E) It is still not quite clear how the costs of the reform will be distributed between different societal groups.

Question 21

Use the information below to answer questions 21 through 24 and ultimately make a prediction about which insurance option is likely to be selected by Consultants, Inc., a family-run business with 68 employees, providing anesthesia services on "as-needed" basis to hospitals and ambulatory surgical centers in a large metropolitan area.
Consultants, Inc. has been in business for 8 years, offering one generous health insurance plan and sponsoring 60% of premium contribution ($2,900) for each of the 49 employees that chose to participate. Their plan, however, will not meet the minimum essential benefits requirements under the PPACA, and after January 1, 2014 the firm will face the following choices:
Option 1: No insurance.
The firm will face fines: $2,000 per each employee, starting with the 31st worker
Option 2: Better Insurance: purchase a conforming plan through the health benefits exchange. Estimated cost per employee (60% contribution toward the total premium of $6,000) is $3,600, 57 employees are expected by the firm to participate.
Option 3: Old insurance
Since it is likely that at least one of the workers who cannot afford this insurance will try to obtain it through the exchange, the employer is likely to face the same fines as in Option 1, in addition to paying part of the premiums for participating workers.

-What will be the estimated cost of Option 1: not offering insurance at all?

A) $0
B) $76,000
C) $142,100
D) $205,200
E) $218,100

Question 22

Use the information below to answer questions 21 through 24 and ultimately make a prediction about which insurance option is likely to be selected by Consultants, Inc., a family-run business with 68 employees, providing anesthesia services on "as-needed" basis to hospitals and ambulatory surgical centers in a large metropolitan area.
Consultants, Inc. has been in business for 8 years, offering one generous health insurance plan and sponsoring 60% of premium contribution ($2,900) for each of the 49 employees that chose to participate. Their plan, however, will not meet the minimum essential benefits requirements under the PPACA, and after January 1, 2014 the firm will face the following choices:
Option 1: No insurance.
The firm will face fines: $2,000 per each employee, starting with the 31st worker
Option 2: Better Insurance: purchase a conforming plan through the health benefits exchange. Estimated cost per employee (60% contribution toward the total premium of $6,000) is $3,600, 57 employees are expected by the firm to participate.
Option 3: Old insurance
Since it is likely that at least one of the workers who cannot afford this insurance will try to obtain it through the exchange, the employer is likely to face the same fines as in Option 1, in addition to paying part of the premiums for participating workers.

-What will be the estimated cost of Option 2: purchasing a conforming plan through the exchange?

A) $0
B) $76,000
C) $142,100
D) $205,200
E) $218,100

Question 23

Use the information below to answer questions 21 through 24 and ultimately make a prediction about which insurance option is likely to be selected by Consultants, Inc., a family-run business with 68 employees, providing anesthesia services on "as-needed" basis to hospitals and ambulatory surgical centers in a large metropolitan area.
Consultants, Inc. has been in business for 8 years, offering one generous health insurance plan and sponsoring 60% of premium contribution ($2,900) for each of the 49 employees that chose to participate. Their plan, however, will not meet the minimum essential benefits requirements under the PPACA, and after January 1, 2014 the firm will face the following choices:
Option 1: No insurance.
The firm will face fines: $2,000 per each employee, starting with the 31st worker
Option 2: Better Insurance: purchase a conforming plan through the health benefits exchange. Estimated cost per employee (60% contribution toward the total premium of $6,000) is $3,600, 57 employees are expected by the firm to participate.
Option 3: Old insurance
Since it is likely that at least one of the workers who cannot afford this insurance will try to obtain it through the exchange, the employer is likely to face the same fines as in Option 1, in addition to paying part of the premiums for participating workers.

-What will be the estimated cost of Option 3: staying with the old insurance?

A) $0
B) $76,000
C) $142,100
D) $205,200
E) $218,100

Question 24

Use the information below to answer questions 21 through 24 and ultimately make a prediction about which insurance option is likely to be selected by Consultants, Inc., a family-run business with 68 employees, providing anesthesia services on "as-needed" basis to hospitals and ambulatory surgical centers in a large metropolitan area.
Consultants, Inc. has been in business for 8 years, offering one generous health insurance plan and sponsoring 60% of premium contribution ($2,900) for each of the 49 employees that chose to participate. Their plan, however, will not meet the minimum essential benefits requirements under the PPACA, and after January 1, 2014 the firm will face the following choices:
Option 1: No insurance.
The firm will face fines: $2,000 per each employee, starting with the 31st worker
Option 2: Better Insurance: purchase a conforming plan through the health benefits exchange. Estimated cost per employee (60% contribution toward the total premium of $6,000) is $3,600, 57 employees are expected by the firm to participate.
Option 3: Old insurance
Since it is likely that at least one of the workers who cannot afford this insurance will try to obtain it through the exchange, the employer is likely to face the same fines as in Option 1, in addition to paying part of the premiums for participating workers.

-Which option is likely to be selected by Consultants, Inc. in the year 2014?

A) No insurance.
B) Old insurance.
C) Better insurance.
D) Since the costs of staying with the old insurance and not offering insurance at all are identical, and the conforming plan, while more expensive, will bring a lot of employee loyalty gained through the provision of benefits, the firm will be indifferent between the three choices, i.e. equally likely to select any option.
E) The firm is likely to outsource 18 employees (all employees in excess of 50) to contractors in order to be considered as a small employer and avoid the requirement to provide health insurance under PPACA.

Question 25

Why does the law allow for a significant variety in the types of "qualified" plans that can be offered by health insurance exchanges? Wouldn't it be less expensive for the states (in terms of administrative costs) to offer just one standard plan of essential benefits to everyone?

Question 26

Is there an inconsistency in the following figures: healthcare costs comprise about 18% of the national income, however, the PPACA legislation sets the limit for individuals' spending on health insurance premiums as 9.5% of their incomes, with government credits covering the remainder. Where would the rest of the financing come from? Discuss.

Question 27

Consider the market for health insurance for medium-size employers (50-100 employees) after January 1, 2014. Under the PPACA, such employers will be subject to penalties if they don't offer health insurance to their workers, and health insurance exchanges should be able to present an attractive option for them to offer coverage. At the same time, an alternative opportunity to buy coverage outside of the state exchanges will still remain.
Keeping in mind that premiums for each employer group will depend on the average age of the entire pool of employees and some companies may tend to have a primarily older (or younger) workforce, discuss the potential impact of this policy on both markets: within vs. outside of health insurance exchanges. Are adverse selection issues likely to arise in any of these markets? Justify your answers.

Question 28

When state health insurance exchanges become effective in 2014, low-income individuals will qualify for premium credits and/or subsidies, where the amount of credit or subsidy will be determined individually for each person and depend solely on his or her income. Consider the following example: to obtain health insurance coverage effective throughout the year 2015, an individual would be shopping for it in the year 2014, which means he or she will be providing their tax returns for the year 2013 as an evidence of income level.
Do you see any potential problems arising from such a significant time lag between the date of income evidence and the dates of effective coverage? Should the most recent tax returns be the only acceptable proof of income, to qualify for premiums credits?

Question 29

Discuss the pros and cons of price transparency policies in the healthcare industry. Should it become a requirement for all medical providers to publish prices for their service on the web, so that patients are fully informed about prices before they actually receive care, not after (as it is usually the case today). Or, do costs outweigh benefits? Justify your answers.

Question 30

What is the most important takeaway from Dr.Getzen's analysis of the PPACA legislation?