The Three-Legged Stool That Your Life Depends On
For those looking to read about the construction of a wooden stool by the use of widdling a tree trunk into a three-legged stool with a beautiful danish oil finish, you will be disappointed with this article. If you have a passion for health policy, then buckle up for this quick explanation of the three-legged stool concept of Patient Protection and Affordable Care Act (PPACA), more commonly known as Obamacare. The three-legged stool I am referring to is the metaphor to explain the Affordable Care Act.
The three legs are as follows. The Individual Mandate, Guaranteed Issuance of Benefits, and Tax Subsidies for Medicaid Expansion make the stool stable and able to support the healthcare system.
One of the legs of the stool, aptly named after exactly what it does. The individual mandate imposed a new tax penalty for anyone who did not elect to enroll in healthcare. What this mainly did, was bring healthy people into the pool of risk to help fund those in the pool that are not healthy. Without this leg, the funding of the other legs becomes difficult at best.
All will enroll, but only a few will file claims. That is the concept and purpose behind the mandate. However, since leaving office, legislation, executive orders, and court rulings have made the enforcement of this leg against the law.
Guaranteed Issuance of Benefits
Remember the days when insured individuals could see a doctor for their illness, file a claim, and would be denied due to your pre-existing conditions. Yes, you heard me. Insurance companies could choose not to cover specific ailments of their patients as a tool to not pay and maintain free of many risks.
The second leg of the PPACA stool made that very practice illegal. It forced insurance companies to cover a pre-existing condition as well as guarantee coverage for the following services:
Ambulatory patient services
Pregnancy, Maternity, and newborn care
Mental health and substance use disorders
Rehabilitation and Habilitation Services
Preventative and Wellness care — This is a significant public health plus. Since it mandated a lot of preventative services, be free, seeing your primary care physician for an annual check-up.
The listed coverage's above are the minimum that insurance companies need to cover under Federal Law. Some states have stricter and more inclusive coverage requirements that are applicable only in the mentioned state.
Now before I leave this topic, I want to let people know that just because those are the minimums. It does not mean that insurance companies do not offer other services. Many plans include further coverage. Kaiser Permanente is an excellent example of an HMO (Healthcare Maintenance Organization that provides significantly more services at little to no extra cost.
Federal subsidies are probably the most misunderstood or incorrectly cited leg of the stool. Having grown up in California, I had never really understood the concept that other states do not have robust Medicaid programs like Medi-Cal.
What these subsidies do are crucial in keeping low-income individuals in the risk pool to fund the Federal subsidies in the health insurance marketplace. These subsidies went towards reducing monthly premiums and out of pocket expenses in a further effort to expand the risk pools and provide coverage for low-income families or individuals. These individuals most frequently are unemployed and have little to no access to affordable healthcare services.
The law broke the subsidies down into two categories.
Premium Tax Credit which assists those unable to pay their monthly premium costs. It mandated the implementation of a multi-tiered coverage system (bronze, silver, gold, and platinum) to provide healthy individuals with lower-cost plans. These plans, also known as “Catastrophic Health Plans,” are relatively cheap, but generally have a higher deductible, copayment, or coinsurance should the health person get sick. They are also reserved for those meeting specific criteria. To balance out these low-cost plans are the higher end plans that act in the exact opposite manner. These plans, the Platinum plans, offer a much more comprehensive range of covered services, at a much lower out of pocket cost, but with a higher monthly premium.
The second subsidy is the Share of Cost Subsidy. This subsidy is aimed at lowering out of pocket costs by offering a share of cost risk pool to healthy individuals. You are responsible for a percentage of your healthcare premiums based on income (KFF, 2019).
Unlike the premium tax credit (which can be applied toward any metal level of coverage), cost-sharing subsidies can only be applied toward a silver plan. In essence, the cost-sharing subsidy increases the actuarial value (protectiveness) of a silver plan, in some cases making it similar to a gold or platinum plan.
The Healthcare Seat
Now that the three legs have been defined, we can now take a look at their importance. The seat, we will call “Healthcare.”
Healthcare is a sector of our economic structure that must be funded. Without funding, nobody would be incentive to work in or innovate in the field of medicine. At the same time, there is a belief that all people have a fundamental right to affordable and accessible healthcare. We are part of those people.
However, it is recognized that for healthcare to advance, it needs to be treated like a private corporation following the #1 rule in business.
Revenue must exceed expenses.
No money, no services. At this point, I urge you, the reader, to go back and reread the definitions of the three different legs and apply them to the funding of the American Healthcare system. It becomes more and more evident that these legs not only need to be strong for the growing economic sector, but all three must be present for the stool not to tip over.
Currently, the model has held up since its implementation in the early part of this decade. There have been some intended consequences such as rising premiums, rising costs of healthcare, and a partisan line to be drawn in permanent marker. There are currently many different aspects of the PPACA that are going through the Federal Court System to try and chip away at the benefits it provides. One of the greatest threats to the stool was the recent decision by the Trump Administration not to enforce the individual mandate. As you read earlier, you need all three legs for the stool to stay upright. We already see a decline in individuals enrolling in health plans, which in turn leads to underfunded care.
These new relaxed rules have also allowed insurance companies to place even more risk on patients and physicians.