With last week's Supreme Court decision in King v. Burwell, upholding tax credits for individuals purchasing health insurance through the federal insurance exchange in addition to state insurance exchanges, the Patient Protection and Affordable Care Act (ACA) further imbedded its sweeping changes into America's health care system.
If they have not done so already, structured settlement consultants and other personal injury settlement planners should now be thinking strategically about how the ACA impacts their clients as well as their own work product and professional services. S2KM has previously reported on ACA analysis by speakers at conferences attended by S2KM as well as ACA analysis by authors reviewed by S2KM.
Among settlement planning professionals, special needs attorneys within the Academy of Special Needs Attorneys (ASNP) and the National Academy of Elder Law Attorneys (NAELA) have been notably proactive in analyzing the ACA. Not coincidentally, San Francisco attorney Kevin Urbatsch serves as both National Director for ASNP and as Editor in Chief of the NAELA Journal.
ASNP has featured ACA speaker presentations at each of its annual conferences beginning in 2011 (Cynthia Barrett); 2012 (David Lillisand); 2013 ( Scott Solkoff); 2014 (Lillesand, Ann Koerner, Scott McDonald, and Bradley Frigon); and 2015 (Solkoff and Koerner).
The "NAELA Journal", which featured a comprehensive ACA review in its Spring 2011 issue plus an additional Medicare article detailing various cost-saving components of the ACA in its Spring 2013 issue, has added two additional ACA articles in its most recent Spring 2015 issue.
Although written for special needs and elder law attorneys (and available only to NAELA members), the two most recent "NAELA Journal" articles raise important issues and offer valuable insights about the ACA which are applicable to all settlement planning professionals. This blog post summarizes those articles and considers their analyses from a structured settlement and settlement planning perspective.
Scott Solkoff's NAELA Journal Report
In his Spring 2015 NAELA Journal article titled "Report on the Patient Protection and Affordable Care Act: Its Impact on the Special Needs and Elder Law Practice", Scott Solkoff discusses the consumer provisions of the ACA, as opposed to the industry and regulatory provisions.
Solkoff characterizes the ACA as "a big new law that includes a mass of new statutes, state and federal regulations, court decisions, and variances that differ from state to state and county to county." He maintains that trained professionals (presumably including structured settlement consultants and settlement planners), as well as consumers (presumably including personal injury claimants), will be challenged to understand and navigate this new system.
How has the ACA changed health insurance? Quoting attorney David Lillesand, Solkoff emphasizes: the ACA "creates a whole new definition of ‘health insurance.’” Solkoff explains this "new ACA definition" by highlighting some of the deficiencies of the "old definition" of health insurance:
"policies with annual and lifetime limits, policies with no “medical loss ratio” to control excess administrative expenses and profits, policies that could limit or deny coverage to people with disabilities or pre-existing conditions, parental policies that would not accept children beyond a certain age or status, policies with less preventive care coverage, and policies that could be more restrictive or punitive on doctor choice or emergency room access."
ACA health insurance policies now must include all these features.
Solkoff's article discusses the ACA's impact on: Medicaid; Special Needs Trusts (SNTs); Medicare; personal injury settlements; tax and financial planning - all of which are significant for structured settlements and settlement planning.
Medicaid and SNTs
The ACA's elimination of pre-existing condition restrictions in health insurance policies profoundly impacts persons with disabilities who formerly relied on Medicaid as their only health insurance option. It also complicates the insurance decision making process, as well as "needs analysis" (a structured settlement and settlement planning priority) as Solkoff illustrates with a suggested list of post-ACA client information questions.
For many clients, Solkoff points out, SNTs and Medicaid are now options and no longer necessities. Although SNTs continue to serve the same purpose, the ACA has changed the determination of whether creation of a SNT is appropriate. For some clients, Solkoff concludes, the best solution may require the creation of a SNT as well as the purchase of an ACA health insurance policy.
Solkoff summarizes the ACA provisions which expand Medicaid eligibility to permit individuals who lack the resources to purchase private insurance through the exchanges, even with credits and subsidies, to gain access to health care. This Medicaid expansion, however, was restricted by the U.S Supreme Court. In the same 2012 decision in which it upheld Congress' power to enact most of the ACA's provisions, the Supreme Court ruled the federal government cannot mandate states to expand the Medicaid eligibility pool. To date, 22 states have refused to expand Medicaid leaving 4.3 million Americans uninsured.
Another important Medicaid feature Solkoff discusses: the ACA does away with asset cap eligibility tests and substitutes a new uniform eligibility measure, the Modified Adjusted Gross Income (MAGI) standard. Certain Medicaid applicants, however, such as SSI beneficiaries who automatically qualify for Medicaid, are exempt from the MAGI calculation.
Many people mistakenly believe the ACA does not affect Medicare, perhaps Solkoff suggests, because the health insurance exchanges do not affect Medicare. To the contrary, according to Solkoff, changes to Medicare are among the most significant ACA reforms to affect the elderly and people with disabilities. Although Medicare remains a single-payer system run by the federal government, Solkoff highlights several important Medicare-related changes resulting from the ACA:
- Increased coverage for prescription medications and preventive care;
- Rewards for health care providers for enhancing services;
- Gradually closing of the gap in drug coverage (known as the “donut hole”);
- Rewards for Accountable Care Organizations (ACOs) that save money through the Medicare Shared Savings Program (MSSP);
- Creation of the Independent Payment Advisory Board (IPAB) to oversee Medicare costs with authority to make changes to the Medicare program.
Tax and Financial Planning
Solkoff identifies several ACA-created tax and financial planning provisions that could impact structured settlement and settlement planning calculations: 1) tax credits for premium payments and subsidies using the new MAGI calculations; 2) increased thresholds for taxpayers to deduct unreimbursed medical expenses from 7.5% to 10% of Adjusted Gross Income (AGI); and 3) a new Net Investment Income Tax of 3.8% on certain net investment income of individuals, estates and trusts with AGI above statutory thresholds.
Personal Injury Settlements
In addition to the ACA-related changes summarized above, structured settlement consultants, settlement planners and their clients will need to consider the ACA's impact on the size of individual personal injury settlements - and, more specifically, on the calculation of future medical expenses. S2KM has addressed this issue in a series of prior blog posts beginning with this review of an article by plaintiff attorney Seth Cardeli featured in the May 2014 issue of the AAJ's "Trial Magazine".
Similar to Cardeli, Solkoff anticipates defendants will now argue their exposure for annual future medical expenses, before considering inflation and present value discounting, "should be no greater than the predictable cost of premium payments, deductibles, and copays that are capped by the total [out of pocket] expense limits imposed by the ACA for the plaintiff’s actuarial life expectancy. In 2014, this cap was $6,350."
Like Cardeli, Solkoff also recognizes potential counter-balancing legal issues created by state-specific collateral source rules and subrogation clauses. Perhaps most significantly, Solkoff points out, quoting Professor Victor Matheson: "[t]he most expensive component of most big life care plans is either home nursing care or institutional care, neither of which is covered by ACA compliant insurance plans."
Solkoff's article highlights how the ACA fundamentally changes the health care system for persons with disabilities - individuals who represent clients for special needs attorneys as well as structured settlement consultants and personal injury settlement planners.
What strategic impact will the ACA have on these professionals - individually and/or collectively?
Solkoff's article does not confront this existential issue directly or in depth. His analysis, however, encourages readers to reach their own conclusions. For S2KM, these include: 1) disabled persons now have more health insurance options and potential benefits; 2) the ACA creates new knowledge requirements, business opportunities and anticipated competitive challenges, for professionals who advise, and/or negotiate benefits and/or provide products for, disabled persons and their families; 3) the new, overlapping health insurance/settlement planning market can be expected to expand in scope and complexity and also to attract and develop new professionals, products and business models.
E. Spencer Ghazey-Bates NAELA Journal Warning
In a second article appearing in the Spring 2015 issue of the NAELA Journal, titled "The Affordable Care Act and the Continued Commoditization of Elder Law", E. Spencer Ghazey-Bates warns that key provisions of the ACA, when combined with the anticipated addition of predictive technology "will either enable nonattorneys to compete with [elder law] attorneys for clients or result in clients simply self-educating to the point of no longer needing attorney guidance."
The ACA provision which most concerns Ghazey-Bates is the new Modified Adjusted Gross Income (MAGI) test which streamlines Medicaid enrollment by replacing all state-defined Medicaid eligibility criteria - regardless of whether a state opts to expand Medicaid. At least for elder law attorneys, he views the new MAGI test as "[t]he single largest change resulting from the ACA" because it "effectively unified 50 separate eligibility methodologies into a single system."
This new unified Medicaid enrollment process, according to Ghazey-Bates, will facilitate nonattorney services to enter the Elder law market by combining new (anticipated) Internet technologies with the ACA's Certified Application Counselor, Navigator, and In-Person Assister consumer assistance programs.
Ghazey-Bates frames his Medicaid analysis in the context of of Richard Susskind's more general transitional theory of the legal profession. Susskind postulates "The End of Lawyers" resulting from an inevitable continuum beginning with unique, customized advice ("bespoke" model) transitioning next to service that draws upon precedents ("standardized" model) and finally to a "systematized" or "packaged" model resulting in the loss of perceived attorney value whereby legal service becomes a commodity differentiated solely by price.
Ghazey-Bates is not alone in predicting some negative consequences for traditional elder law (and special needs law) practice as a result of the ACA. David Lillesand, for example, observed during the ASNP 2012 annual conference : "The need for self-settled (first party) special needs trusts has decreased (except when a beneficiary requires long term institutional care) because the ACA provides better insurance options than Medicaid for many persons with pre-existing medical conditions including personal injury victims."
Ghazey-Bates' article does end with an optimistic observation for elder law attorneys ("demographic shift toward an older population makes Elder Law a growth industry") and this advice: "perhaps the best counterpunch to the forces of commoditization: educating consumers about the value an Elder Law professional brings beyond simple statutory knowledge."
Lessons To Be Learned
What lessons, if any, can structured settlement and settlement planning participants learn from Ghazey-Bates' warnings about potential industry obsolescence and/or professional commoditization as a result of the ACA?
To paraphrase President Obama's words to Republicans in 2009: "Legislation has consequences." Although not yet fully determined, the significant consequences of the ACA for persons with disabilities, combined with advancing Internet technologies, will almost certainly transform the personal injury settlement planning market resulting in new products, new competitors and new business models. In S2KM's opinion, however, special needs attorneys (as knowledge resources) and structured settlements (as strategic products) should both generally benefit from the ACA.
What about individual structured settlement brokers? Their post-ACA success may depend upon whether and how they address the following strategic questions: 1) has your product-specific knowledge become a commodity? 2) what new, unique "value added" knowledge, if any, will you provide to your clients, customers and other settlement planning professionals? 3) what new marketing initiatives, if any, are needed to grow your business? 4) how does the ACA impact your educational priorities? 5) your business model?
For all of S2KM's blog posts about the Affordable Care Act, see the structured settlement wiki.
To read Patrick Hindert's article "How the Affordable Care Act Impacts Life Care Planners", see the 2014 Winter Issue of the Nurse Life Care Planning Journal.