However, Alabama has chosen not to participate in some of the changes, raising concerns among several policy analysts and health care experts about the law’s effectiveness in the state.
Affordable Care Act policies have been rolling out since Congress passed the law in 2010, but January 2014 is when many of the major pieces of the reform will begin. From expanding Medicaid and creating competitive, low-cost insurance exchanges to offering business tax credits and prohibiting insurers from declining coverage based on pre-existing conditions, the changes will be vast.
Policy analysts along with health care and business experts disagree as to how effective the changes will be in lowering costs and improving the country's health system. They also disagree on whether Alabama's choices will be good or bad for state residents.
Insurance markets: Federal vs. state
A major component of the health reform law is the creation of insurance markets for every state. The idea behind them is to create a competitive market for insurance, with more affordable premiums for those whose employers do not offer health coverage and who cannot afford coverage on their own. According to Healthcare.gov, the marketplaces will offer consumers a choice of health plans that meet certain benefits and cost standards. Open enrollment is set to begin Oct. 1 for these marketplaces.
Rachel Garfield, analyst for the Kaiser Family Foundation, a nonprofit, nonpartisan group that focuses on health care issues facing the country, said the marketplaces are designed not just to get more Americans covered, but to bring down insurance costs across the country.
"The bigger the pool of people on insurance is, the lower the average cost," Garfield said. "If you have a bigger amount of both healthy and unhealthy people, the costs go down."
Under the law, states were given the option of either creating their own marketplaces or using a federal version. Alabama leaders chose the latter. Regardless, Garfield expects many Alabamians will benefit from an exchange in the state. According to the Census Bureau, approximately 14.3 percent of Alabamians lack health insurance.
"Buying directly from insurers now is very expensive and is limited," Garfield said. "These will be new marketplaces to easily compare plans that will be cheaper."
Karen Pollitz, senior fellow with the Kaiser Family Foundation, said Alabama would be better off creating a marketplace of its own. Pollitz said that since 25 other states have also opted out of creating their own marketplaces, the federal government could have trouble managing them all on its own.
"Alabama could have drawn down literally unlimited grant money to set it up," Pollitz said. "Alabama and the other states that refused to do that will have an exchange for sure ... but because resources are limited and the federal government will be operating it, it won't have all the bells and whistles."
David McCormack, CEO of Regional Medical Center in Anniston, said he has little confidence in the marketplace's ability to lower health-care costs, at least for the foreseeable future.
"The state is going the federal route ... they really have not developed that yet," McCormack said. "I don't think they are ready to do it."
Dr. Michael Morrisey, professor of health economics at the University of Alabama at Birmingham, said he thinks the state made the right choice in opting out of creating its own insurance marketplace.
"The federal government has been really slow in coming out with regulations and guidelines with how the exchanges are to function," Morrisey said. "Also, the state would be on the hook for funding it in 2015 ... if things go badly, we have to pay for it."
Morrisey said he was skeptical an insurance marketplace will create increased insurer competition in the state because the state's insurance market is dominated by Blue Cross Blue Shield of Alabama. According to a report the American Medical Association released last year, Blue Cross Blue Shield controls 88 percent of the insurance market in the state.
"I don't see a lot of entry into exchanges initially, nothing that will lead to greater competition and lower premiums," Morrisey said.
Koko Mackin, spokeswoman for Blue Cross Blue Shield of Alabama, said the company had nothing against the concept of insurance marketplaces.
"We welcome the exchange and see this new online marketplace as another convenient way for Alabamians to purchase health insurance coverage," Mackin said. "We welcome the additional competition that the exchanges will bring and are currently finalizing our individual and small group exchange products for the bronze, silver, gold and platinum levels."
Tax credits: Subsidizing premiums
To help and encourage uninsured residents to participate in the exchanges, the federal government will offer tax credits. These credits will be available next year for those with income between 100 percent and 400 percent of the federal poverty line, which is $23,550 for a family of four. The tax credit is advanceable, so it can lower premium payments each month, rather than making consumers wait until tax time for a refund.
"The subsidies that will be available are scaled to income and can cover all the cost of a premium," Garfield said. "It can help you buy what is considered individual, non-group coverage."
Dr. Georges Benjamin, executive director of the American Public Health Association, said the tax credit will offset some of the cost of insurance for many low-income residents. According to its website, the American Public Health Association is the oldest association of public health professionals in the world.
"The biggest challenge is what happens at the state level ... how do you get people into the system," Benjamin said.
Expanding Medicaid: Alabama opts out
Millions of Americans too poor to even afford insurance in the exchanges will gain health coverage next year through Medicaid expansion. Americans who earn less than 133 percent of the poverty level — approximately $14,000 per year for an individual and $29,000 annually for a family of four – will be eligible to enroll in Medicaid.
Medicaid is funded by state and federal money and mainly pays for medical and long-term care for low-income children, pregnant women, individuals with disabilities and nursing home residents. The expansion would lead total spending by the states on Medicaid to increase by $76 billion (an increase of less than 3 percent) through 2022, according to figures provided by the Kaiser Family Foundation. Federal Medicaid spending will increase by $952 billion (a 26 percent increase) during the same timeframe, according to Kaiser’s figures.
The health reform law offered states three full years’ worth of funding to cover the expansion costs. However, Alabama has so far declined the money and will not expand its Medicaid program, opting to reform the system first in an effort to make it more efficient.
The Alabama Legislature in June passed a law that will shift the state's Medicaid services from a payment-for-treatment system to a managed care model and allow the program to establish contracts with private regional care organizations to provide services at a fixed cost. The goals of the reform law are to provide improved care for Medicaid patients while lowering costs. Full implementation of the law is still several years off. The first step of the law - the establishment of regions in the state where regional care organizations will operate - must be completed by Oct. 1.
The ACA originally required all states to expand Medicaid. However, the U.S. Supreme Court struck down that mandate last year while upholding much of the rest of the law.
Garfield said failure to expand Medicaid will significantly hurt Alabama residents.
"The biggest impact is the fact that there is going to be a large share of the population that has no coverage options available," Garfield said.
Garfield noted that the poorest Americans will be unable to use the subsidies to even attempt to purchase insurance through the exchanges.
"The original idea was that all the poor will be covered by Medicaid," Garfield said. "But for the poorest, these subsidies will not be available, which means people with the least means to purchase insurance will be left out."
Benjamin said residents in Alabama and the other states that refuse to expand Medicaid will suffer.
"Many of the states that have struggled with a lot of things — that have chosen not to expand — are challenged with very poor health statistics," Benjamin said.
According to the Centers for Disease Control and Prevention, Alabama consistently ranks among the top three states with the highest levels of obesity, smoking and diabetes.
Paige Powell, assistant professor of health care management at the University of Alabama at Birmingham, said the state's decision not to expand Medicaid could hurt hospitals. As Medicaid expansion increases, federal funding for uncompensated care to hospitals will decrease — the idea being that such funding will be unnecessary because more people will be covered by Medicaid.
"But by not expanding Medicaid for hospitals ... there may be a tightening of resources," Powell said.
McCormack agreed that a lack of Medicaid expansion could mean higher costs for hospitals, including RMC.
"We will just have to be a little more efficient and look at things that aren't necessary and see how we can eliminate them," McCormack said.
Morrisey said he hopes Medicaid expansion will be in Alabama's future.
"I continue to hold out hope that the governor will eventually expand Medicaid," Morrisey said. "However, when you add that many people to the Medicaid rolls, you're going to have to spend more money."
Benjamin, however, said expanding Medicaid will be good for the economy in the long term.
"Nothing is ever free, but if you look at the long term, this is an economic win for those states that expand," Benjamin said. "The health system is a major creator of jobs ... those states that are not participating are losing the economic value of those reform dollars.”
Pre-existing conditions: Insurers must cover
Under the law, starting next year, insurers will be forbidden from denying Americans coverage due to any pre-existing condition. Also, in the individual and small-group market, the law will eliminate insurance companies' ability to charge higher rates due to gender or health status.
Pollitz said protecting residents' eligibility will not just mean more people will have insurance coverage, but also that health care costs will likely be decreased.
"If you lose medical coverage, then you'll likely end up in that uninsured bucket," Pollitz said.
Uninsured patients tend to wait until the last minute to get help for an illness and usually use emergency rooms for care, all of which drive up health care costs, according to Rosemary Blackmon, vice president of the Alabama Hospital Association.
Mackin said Blue Cross Blue Shield approved of the change regarding pre-existing conditions.
"This change will help those with pre-existing medical conditions to obtain coverage and we will continue to abide by the regulations of the ACA," Mackin said.
Clinical trials and coverage limits
Similar to pre-existing conditions, the ACA will prohibit insurers from dropping or limiting coverage for people who choose to participate in clinical trials. This applies to all clinical trials that treat cancer or other life-threatening diseases.
"Clinical trials can get very expensive," Benjamin said. "There are many things put into the ACA to resolve certain concerns what insurers were doing."
The act also will prohibit new plans and existing group plans from imposing annual dollar limits on the amount of coverage an individual may receive, beginning Jan. 1, 2014.
Benjamin said the idea behind prohibiting insurers from dropping Americans based on clinical trials and pre-existing conditions or from limiting coverage is to lower health care costs overall. He said if someone becomes uninsured, the costs to treat that person usually increase later than if they still had coverage.
"By not having artificial situations where we're punting people out of plans, people will be getting treatment that is cheaper and more effective because we're not punting very sick people into an expensive bracket," Benjamin said.
Mackin said Blue Cross Blue Shield planned to abide by the ACA regarding the changes to health plan dollar amount limits.
"We will abide by the ACA and implement these annual dollar limits," Mackin said.
Individual and group mandates
Starting next year, all Americans who can afford health insurance must purchase it or pay a fee to help offset the costs for caring for the uninsured. The penalty in 2014 will be $95 per adult and $47.50 per child (up to $285 for a family) or 1 percent of family income, whichever is greater. The penalty is prorated by the number of months without coverage, though there is no penalty for a single gap in coverage of less than three months in a year.
The penalty cannot be greater than the national average premium for coverage in an exchange. After 2016, penalty amounts are increased annually by the cost of living.
While the fee will be lower than the cost to purchase insurance, it will still encourage some to buy coverage, Pollitz said.
"The fee will be lower than coverage for many people, but if you just pay the penalty you don't get anything," Pollitz said. "There will be less of an opportunity for people to sit out and wait until after something happens, so this will bring more healthy people into the market."
Businesses, meanwhile, have a one-year reprieve from the mandate. The U.S. Treasury Department announced in early July that it will delay until Jan. 1, 2015, the mandate that businesses with at least 50 employees provide their workers with health insurance.
Small businesses with fewer than 50 employees will be exempt from the group mandate.
According to the Census Bureau, about 55 percent of Americans purchased health insurance through their employer in 2011.
Amanda Austin, director of federal public policy for the National Federation of Independent Businesses, said the mandate will be a serious financial burden for businesses with between 50 and 100 employees, which her organization considers to be small businesses.
"This could be one of the most destructive components of the health care law for business," Austin said. "An employer mandate has no business being on the table."
Austin said some employers might have to make cuts elsewhere to provide proper insurance.
"They might have to cut back on a job or two," she said.
Tax credit for small businesses
The health care law next year will expand a small business tax credit that began in 2010, increasing assistance to help small businesses afford insurance for their workers. The 2014 credit will be up to 50 percent of the employer's contribution to provide health insurance for employees. According to the National Federation of Independent Businesses, an estimated 245,000 employers across the country are eligible for the full tax credit. Another 1.17 million are eligible for part of the credit.
Austin said the credit will likely only benefit small businesses that already offer insurance to employees. She said the tax credit is temporary and lasts only two years.
"It's not going to incentivize many non-insurance-offering employers," Austin said. "And it's a really tight credit — many employers are not eligible."
Pollitz agreed that the small business tax credit is not a great incentive – at least, not as good as the middle class tax credit.
"I think it remains to be seen how many small businesses will offer coverage," Pollitz said.
Staff writer Patrick McCreless: 256-235-3561. On Twitter @PMcCreless_Star.