Welcome to the (Regulatory) Jungle

A wise person once cautioned against failing to see the forest for the trees.

I am guessing that person did not live in Washington, D.C.

As we roll into the one-year countdown before "Obamacare" takes full effect, state governments, health care organizations, insurers, and a myriad of partners are drilling down into the details of how the landmark health legislation will work in practice. To guide these efforts, they are looking to much-anticipated regulations from federal agencies such as the Department of Health and Human Services and the Department of the Treasury (it's a tax, remember?). Regulations are what make most laws work, a process similar to taking a car from the drafting table to the road.

To be fair, drafting these rules can be tricky, and everyone has an opinion. But as proposed and final rules begin to circulate from Washington, I am beginning to wonder if we need to remind regulators that the actual name of the law in question is the Patient Protection and Affordable Care Act and that the purpose of the legislation is... well, patient protection and affordable care.

Some of the new rules seem to lose sight of that goal.

For example, under the new law, individuals will ideally be able to choose among reasonably-priced plans in state-based health insurance marketplaces, and individuals earning up to roughly $46,000 a year will be eligible for a subsidy [tax credit] to purchase one of these plans. They will not have this option, however, if their employer already offers "affordable" health care coverage.

So what is "affordable?" Under new rules announced by the administration, it is any plan where the price of individual coverage is 9.5 percent or less of an employee's salary... even if the employee actually needs family coverage, and even if the family coverage is more than 9.5 percent of the salary.

Let's talk numbers. According to the Kaiser Family Foundation, the average premiums for employer-sponsored plans were $5,615 for individual coverage and $15,745 for family coverage in 2012. On average, employees contributed $951 to their individual premium coverage and $4,316 to their family coverage.

To see how these wonky details play out in the real world, consider the case of an employee who, like half of all wage earners, earns $27,000 or less a year. Because her cost for self-coverage through her employer is only $951 -- less than 9.5 percent of her salary -- she is not eligible for a tax credit to purchase a different plan in the marketplace a credit needed to afford to pay for a plan in the marketplace. She is not eligible even if she actually needs to spend $4,316 -- well over 9.5 percent of her salary -- on an employer-backed family plan because she has children at home.

In fact, the Government Accountability Office has estimated that under this rule almost half a million children would remain uninsured because their parents would be caught between a rock and a hard place: unable to afford family insurance through their employer and unable to shop for an affordable family plan in the marketplace because they could, in theory, afford an individual plan that leaves their children uninsured.

That rule is, unfortunately, now final. The administration has proposed other rules that are not yet final that also have me worried. We may still be able to impact some of these. For example:

  • A proposed rule would allow states to charge some Medicaid enrollees higher co-payments and premiums for basic services such as health care visits and prescription drugs, and for "non-emergency" hospital visits.

  • Another proposed rule delays the implementation of a streamlined, "one-stop shop" application where people can quickly learn what benefits and programs they may be eligible to receive. Without adequate screenings for both Medicaid and tax credits, it is likely that individuals who are newly eligible for Medicaid under the law's Medicaid Expansion will instead be steered into private insurance, which may offer fewer benefits at a higher cost.
  • The administration hasn't committed to translating the application into any language other than Spanish, which could leave behind the expected 23 percent of marketplace applicants who speak a language other than English at home.
  • The administration still has time to fix some of these issues before the rubber hits the road in October 2013 with the launch of the first open enrollment period.

    Obamacare has the potential to give millions access to quality affordable health care. I just hope the regulators remember this goal.