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Capitol Update Vol. 2 Issue 7

Yesterday the Joint Finance Committee (JFC) held the first public hearing on the budget (AB40) at Greendale High School. We listened to over 8 hours of testimony and did not close the proceedings until we allowed everyone to speak. The feedback we received from the public was greatly appreciated and will be detailed in our next E-Update. This E-Update focuses on the relationship between the state Medicaid program (i.e. BadgerCare, Family Care, IRIS etc.) and the Patient Protection and Affordable Care Act (aka ObamaCare). Our intent is to focus on the facts and steer away from the politics related to the significant changes in public policy relating to our health care system.

Health care Exchanges

Under the provisions of the Patient Protection and Affordable Care Act (ACA), beginning January 1st, 2014, every Wisconsin resident, with very limited exceptions, will be required to enroll in a health insurance plan or face financial penalties. To facilitate the purchase of affordable health care coverage, each citizen will have access to an online health insurance “supermarket”, or exchange, to compare plans and enroll in the plan of his or her choosing.

Each state’s governor was given the option to establish and fund a state-run exchange, partner with the federal government in forming the exchange or allow the federal government to administer the exchange. Because each option is essentially regulated by the federal government and the state-run option will eventually be dependent on state funds, Governor Walker has elected opt out of the state-run exchange, instead allowing Wisconsin residents to participate in the federal exchange.

The health care exchange will serve as a marketplace for Wisconsin residents to research, compare, and enroll in qualified health plans (QHP). Each plan will be evaluated according to prescribed standards to allow for easy comparison of benefits, coverage and costs. QHPs will fall into one of four categories based on the projected cost of covered services. Plans projected to cover at least sixty percent of healthcare costs incurred will be designated as bronze; silver plans will cover at least seventy percent; gold, at least eighty percent; and platinum, at least ninety percent. As with any insurance, plans with lower coverage will have lower premiums but will require individuals to pay more out-of-pocket for use of health care services through deductibles and co-pays.

​Plan
​Percentage of Costs Covered
(Estimate)
​Bronze ​60%
​Silver ​70%
​Gold ​80%
​Platinum ​90%
 

In order to make insurance more affordable for low to middle-income individuals and families, the federal government will provide an income-based tax credit. This tax credit will apply to individuals and families enrolled in QHPs through the exchange and will be based on income level. Wisconsin residents with incomes between 100% and 400% of the Federal Poverty Level (FPL) will be eligible for the credit. However, those with access to coverage through an employer with premiums less than 9.5% of income and coverage of 60% of projected costs will not be eligible for a tax credit.


While most tax credits are paid when taxpayers file their tax returns at the end of the year, the healthcare credit will be payable in advance; it will be paid directly to the health care provider when premium payments are due. The amount of the credit will be based on income and the cost of the second-lowest cost plan at the silver level in the state exchange. Those who wish to purchase plans in the gold or platinum range will be responsible for the extra cost. The tax credit varies with income and is structured to ensure that a person will not have to pay more than a specified percentage of income for healthcare premiums.

​Income Level ​Premium as a Percent of Income
​Up to 133% FPL
2% of Income
​133-150% ​3-4% of Income
​150-200% ​4-6.3% of Income
​200-250% ​6.3-8.05% of Income
​250-300% ​8.05-9.5% of Income
​300-400% ​9.5% of Income
 

·      For example: Sarah has an annual income of about $23,000, or 200% of the 2013 Federal Poverty Level.

·      Based on her income, she will not have to pay more than 6.3% of her income to enroll in the second-lowest cost silver plan.

·      6.3% of $23,000 = $1,449.

·      The projected annual premium of the second-lowest cost silver plan available to her is $5,800.

·       Her tax credit is $4,351 (5,800-1,449), to be applied toward whichever plan she enrolls in.

For individuals or families eligible for health insurance in the exchange, enrolled in a silver plan, with income under 250% FPL, the ACA makes additional cost-sharing subsidies available to offset the cost of using healthcare services. These subsidies are also based on income, and they ensure that an even larger percentage of projected costs are covered.

​Income Level
​Percentage of Costs Covered
(Estimate)
​100-150% FPL ​94%
​150-200% ​87%
​200-250% ​73%
 

Governor Walker's Budget Highlight - Medicaid

Another upcoming change for Wisconsin residents relates to Medicaid. With the passage of the Affordable Care Act (ACA) and a recent ruling by the Supreme Court, each governor is left with a decision to expand Medicaid with the federal government’s money or to opt out and consider proposing a change at the state level. While many states are taking advantage of the “free money” and short-term benefits that the federal government is offering, Governor Walker is focused on the long-term implications of this decision. The federal government has pledged 100% of the funds needed to cover the expansion through 2017, but the burden for funding will begin to shift to the state in the following years. Rather than choosing to participate in the federal government’s expansion, Walker has proposed a similar, state-supported change to BadgerCare, the state’s Medicaid program.

Many opponents of Walker’s plan argue that by not participating and essentially leaving this money on the table, we are simply giving it away to other states that do elect to participate in the expansion. However, with the federal government so deeply in debt, this money is essentially being printed as needed; by refusing the federal funding, we are, in effect, cutting federal spending.

One long-term implication of this decision is decreased reliance on the federal government for funding. While the government promises to fund the program 100% for the first three years and gradually reduce that to 90% in the following years, participation in this program requires placing a substantial amount of faith in Washington. If Congress decides that the funds are no longer available, Wisconsin taxpayers will be forced to foot the bill. Given the current state of federal finances, is it wise to rely on the federal government to continue funding this program?

Another positive impact of this program is decreased dependence on government. While the President’s plan encourages increased dependence through Medicaid expansion, Governor Walker’s proposal provides the opportunity for more Wisconsin residents to become independent as they are moved from the Medicaid program into the private exchange with the help of tax credits and subsidies.

Governor Walker is not alone in his stand against the expansion of Medicaid. Fourteen other governors have expressed their intention to oppose the expansion, with three others undecided but leaning towards not participating in the expansion.

So how exactly will Governor Walker’s plan work? Currently, BadgerCare covers pregnant women and children up to 300% of the FPL, parents with incomes up to 200% of the FPL and a small percentage of childless adults. Those outside of these limits are uninsured or purchase private insurance.

Compliance with the ACA expansion option would require expanding BadgerCare with federal funds to cover nonelderly adults with incomes up to 133% of the federal poverty level (FPL). Those with higher incomes (up to 400% of the FPL) not covered under BadgerCare will be eligible for tax credits, or subsidies, from the federal government to reduce their insurance costs and help them find affordable insurance in the newly established health insurance exchange.

Governor Walker’s plan expands BadgerCare without federal funds to cover all adults up to 100% of the FPL. Those with incomes between 100% and 200% of the FPL will no longer be eligible for BadgerCare, but will be able to take advantage of a federal subsidy in the healthcare exchange. Just as under the ACA expansion, every adult under 400% of the FPL will be eligible for either BadgerCare or a tax credit. In fact, this plan is projected to allow roughly 225,000 Wisconsin residents who are currently uninsured to obtain affordable healthcare.

The Governor’s plan is based on common sense and fiscal responsibility. Rather than enabling individuals to depend on government for support, “The Governor believes that government can best support those in need by helping them become independent, which leads to more freedom and more prosperity for everyone”  (2013 Budget in Brief)

Recap:

·      Every Wisconsin resident with income up to 400% of the Federal Poverty Level will be eligible for either Medicaid or a federal tax credit to help offset the cost of health insurance, unless an “affordable” employer- sponsored plan is available.

·      An affordable employer-sponsored plan is a plan that has premiums less than 9.5% of income and that covers at least 60% of the projected cost for covered benefits.

·      There will be no change for children and pregnant women under the proposed Medicaid plan.

·      Adults up to 100% of the FPL will be covered under the new Medicaid plan.

·      Adults between 100-400% of the FPL will be eligible for an income-based tax credit to offset the cost of insurance premiums.

·      Adults below 250% of the FPL who are enrolled in a silver plan will be eligible for additional federal assistance to cover out-of-pocket costs incurred at the point of service.

I understand this is a complicated and important issue. We are scheduling public hearings in the near future to further explain the changes and offer a forum for questions regarding the changes.  

Enjoy the change of weather and have a great weekend!