The Affordable Care Act At 3: Big Cost Burden, Big Consumer Impact

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As the Affordable Care Act (ACA) celebrates its third anniversary, the law has already imposed $21 billion in private-sector burdens, $9.8 billion in unfunded state liabilities, and 111 million paperwork burden hours.  When the American Action Forum (AAF) reviewed the law’s regulatory impact last year, the ACA had imposed a combined cost of $12.4 billion and 50 million hours, meaning in the last year the administration has more than doubled the cost of implementation and added 21 million compliance hours.

The macro figures, $30.8 billion in costs and 111 million hours, might give policymakers some concern, but the real impact is how these figures affect the healthcare market, consumers, and small businesses. 

Healthcare Market: Premium Increases

Perhaps the strongest criticism against the law during passage was that it did nothing to bend the healthcare cost curve.  With rising Medicare and Medicaid costs, fixing those programs and finding a way to provide affordable coverage for more Americans remains elusive, especially for the ACA.  On several occasions, the law’s own regulations admit that new regulatory provisions will drive up the cost of health insurance premiums.

In the “Notice of Benefit and Payment Parameters” regulation, the administration conceded that premiums would increase, states would bear unfunded costs, and issuers would pay upfront costs.  The regulation noted, “There are administrative costs to States to set up and administer these programs.  For issuers not receiving payments, any contribution is an additional cost, which an issuer could pass on to beneficiaries through premium increases.  There are also reporting costs for issuers to submit data and financial information.”  In total, the rule imposes more than 1 million paperwork hours, half of a billion dollars in costs, but it declines to quantify the economic impact of higher premium increases.  

Conceding premium costs was not an isolated instance.  For example, the final ACA rule on “Preexisting Condition Exclusions” noted that if HHS failed to grant a waiver, “[T]he restricted annual limit provisions of these interim final regulations would result in a significant decrease in access to benefits or a significant premium increase.”  The final cost of this regulation was somewhat trivial, $4.9 million and 38,000 hours, but again, the administration declined to quantify the potential impact of premium spikes.

Although the administration has admitted some of its rules could increase healthcare costs, AAF performed separate research of the market.  In sum, AAF confirmed what many feared when the President signed the legislation: premiums will increase.  AAF surveyed large health insurers that cover a majority of patients in the U.S.  The survey areas included Atlanta, GA, Austin, TX, Chicago, IL, Phoenix, AZ, and Milwaukee, WI.  The results are sobering: young and healthier individuals, including small employers, can expect a 169 percent premium increase, averaged across the five cities.  Consumers in Milwaukee could experience the greatest sticker shock, with a 190 percent increase in 2014.

Even if these figures are high-end estimates, they confirm previous regulatory presumptions.  All that is left is to review future data to determine how high premium increases might actually go.  Although the administration might try to issue new rules to curtail rising premiums, the layered regulatory apparatus will do little to improve quality and stabilize rising healthcare costs.

Individual Impact

Beyond the political scapegoats in the healthcare debate, large insurance companies, individuals also face strong regulatory headwinds.  Many of the $30 billion in costs will eventually affect individuals, in some form.

For example, pending ACA rules mandating nutrition labeling could drive up food prices.  Although labeling might seem innocuous, even the administration admits there are huge costs, and $0 in quantified benefits from the proposed rule.  The menu labeling proposal conceded, “Prices rise to reflect new costs, but generally not by enough to completely offset them.  If the expense of meeting the proposed requirements cause prices to increase for some or all restaurant and restaurant-type foods offered for sale by covered establishments, then the consumption of these foods will fall, further reducing profits for some, or all, of these establishments.”  This proposal could cost more than $750 million, impose 2.6 million paperwork hours, and cause some businesses to forgo certain consumer products.   

Beyond the indirect costs, there are also more direct regulatory provisions that affect individuals.  The infamous “Tanning Services Excise Tax” is only going to impose 10,000 annual hours of paperwork, according to the White House, but many admit the actual consumer impact will be much greater.  However, like many ACA rules, the administration never placed a cost on the macroeconomic impact of the rule.

Looking past the broad regulatory costs placed on individuals, there are often overlooked paperwork requirements.  At 111.4 million hours, it would take 55,742 employees, working 2,000 hours in a year, to complete the required ACA red tape. 

One rule went so far as to require an accounting of the value of food brought to meetings: “reporting payments or other transfers of value that fall under the ‘food’ nature of payment category is quite complicated, both in terms of calculating the value of the payments and determining who should be reported as having received payments.”  Physicians and businesses would likely agree with that statement, and would probably prefer to avoid the rule’s $1.9 billion in costs and close to 8 million paperwork burden hours.

Small Business Impact

The policy implications of the employer mandate, the 50-employee threshold, and the meager tax credit are well known.  Perhaps less obvious are the numerous occasions when the administration conceded its ACA rules would impose significant costs on small businesses.

Under the Regulatory Flexibility Act, agencies must determine if a regulation would impose a “significant economic impact on a substantial number of small entities” (SISNOSE).  This term is undefined among agencies, but HHS states that if a rule reduces revenue or raises prices by 3 to 5 percent within a five-year period, it imposes a SISNOSE.  Regulations rarely trigger this threshold, but to date, the ACA has implemented 11 regulations that would have a significant economic impact on small businesses. 

ACA Rules Burdening Small Businesses According to HHS

Aggregate Small Business Impact: $1.9 Billion and 11.3 Million Hours

The listed costs of $1.9 billion and 11.3 million hours are as reported by the agencies, taking everything listed in the Federal Register at face value.  However, the reality for millions of affected firms is a regulatory tax of 3 to 5 percent, a tax the administration admits.  These burdens will appear nowhere on CBO’s fiscal tables, but they will undoubtedly affect health insurance coverage, consumer products, and the amount of time Americans spend completing federal paperwork.

Conclusion: Past is Prologue?

After $30 billion in burdens and more than 111 million hours, 2013 is the real race to the finish for the ACA.  As the administration places the finishing touches on regulatory implementation, expect rules to undergo expedient White House review, provide brief comment periods, and contain incomplete benefit-cost analyses.  Currently, there are three ACA rules under review at the White House and the administration still must finalize menu labeling and outpatient drug rules. 

If past is prologue, the 2014 report on ACA burdens will catalogue higher costs, more paperwork, and additional layers of red tape on the U.S. healthcare system.  

[1] According to the rule, “These requirements are exempt from the PRA [Paperwork Reduction Act] in accordance with the provisions of the Affordable Care Act.” 75 Fed. Reg. 72238.

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Elizabeth Warren Slams Republicans For Trying To Weaken Consumer Finance Protections

At a Senate Banking Committee hearing on Thursday, Sen. Elizabeth Warren (D-MA) rebuked Republicans for blocking Richard Cordray’s confirmation as director of her brainchild, the Consumer Financial Protection Bureau. After a bitter confirmation fight in 2011, President Obama bypassed the Senate using a recess appointment to grant Cordray a temporary term until the end of 2013. Republicans are threatening to filibuster him this time around unless the CFPB is drastically restructured.

Warren declined to question Cordray, who has testified a dozen times. She then directed scrutiny to her Republican colleagues, calling them out for using her former lieutenant’s confirmation as an excuse to undermine the Bureau:

What I want to know is why every banking regulator since the Civil War has been funded outside the appropriations process — but unlike the consumer agency, no one in the U.S. Senate has held up confirmation of their directors demanding that that agency or those agencies be redesigned…I see nothing here but a filibuster threat against Director Cordray as an attempt to weaken the consumer agency. I think the delay in getting him confirmed is bad for consumers, it’s bad for small banks, bad for credit unions, for anyone trying to offer an honest product in an honest market. The American people deserve a Congress that worries less about helping big banks and more about helping regular people who have been cheated on mortgages, on credit cards, on student loans and on credit reports. I hope you get confirmed. You have earned it, Director Cordray.

Watch it:

Warren herself was ousted from the running for CFPB director in an effort to avoid a confirmation battle with Republicans. Still, Senate Republicans are intent on holding up the confirmation of any director to the Bureau. In a letter to Obama last month, 43 Senate Republicans vowed to filibuster any nominee unless they are allowed to hobble the agency’s authority.

Republicans have tried to weaken the Bureau from its inception, claiming it lacks transparency. Unlike other financial regulatory agencies, which are dependent on Congress for funding, the CFPB is intended to be an independent agency with independent funding. If Republicans get their way, the CFPB will lose this independence, making it vulnerable to the partisan shenanigans and funding shortages that have derailed other regulators.

Cordray’s first term demonstrates the CFPB’s efficacy as an independent agency. In one year, the agency has increased supervision over mortgage lenders, brokers, consumer reporting agencies, and large banks, set up programs to help consumers better understand loan agreements and recoup refunds from deceptive and illegal practices, and wrote new rules to prevent wrongful foreclosures.

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Presidential Proclamation -- National Consumer Protection Week, 2013

The White House

Office of the Press Secretary

BY THE PRESIDENT OF THE UNITED STATES OF AMERICA

A PROCLAMATION

Over 4 years ago, widespread abuses in America's financial system nearly brought our economy to its knees. Millions saw their life savings erode, businesses shuttered their doors, and families were devastated by job loss and foreclosure. This crisis cast a harsh light on the breakdown in oversight that led to an epidemic of irresponsibility, and it highlighted the need for common-sense regulations to protect the vast majority of Americans from the reckless actions of a few. During National Consumer Protection Week, we remember those lessons, and we recognize that our shared prosperity depends on empowering all Americans to make sound decisions for themselves and their families.

My Administration is ramping up consumer protection throughout the economy. Last year, we established a new unit to combat fraud and investigate the abusive lending and mortgage packaging that led to the housing crisis. We launched the "Know Before You Owe" campaign to help students and their parents make smart decisions about paying for college. We cracked down on unscrupulous lenders and credit card companies that charge hidden fees. And we did away with the practice of adding pages of misleading fine print to important financial agreements.

We are also committed to helping consumers avoid scams, protect their personal information, and make good financial decisions. That is why agencies across the Federal Government joined with consumer advocates to launch www.NCPW.gov, an online resource that provides practical advice for managing finances and safeguarding against identity theft.

As the driving force behind our economy, consumers deserve clear rules, fair treatment, and full disclosure. Whether opening credit cards, buying cars, applying for mortgages, or taking out student loans, all Americans should have access to complete, concise information. This week, we resolve to strengthen consumer rights and build a more transparent, efficient, effective marketplace.

NOW, THEREFORE, I, BARACK OBAMA, President of the United States of America, by virtue of the authority vested in me by the Constitution and the laws of the United States, do hereby proclaim March 3 through March 9, 2013, as National Consumer Protection Week. I call upon government officials, industry leaders, and advocates across the Nation to share information about consumer protection and provide our citizens with information about their rights as consumers.

IN WITNESS WHEREOF, I have hereunto set my hand this first day of March, in the year of our Lord two thousand thirteen, and of the Independence of the United States of America the two hundred and thirty-seventh.

BARACK OBAMA

Mrs. Obama joins a virtual conversation about Let’s Move!, her initiative to ensure our nation’s kids grow up healthy and reach their full potential.

The Open Government Partnership publishes the text of the President's directive extending whistleblower protections to the intelligence and national security communities, as requested by the community.

The Department of Labor celebrates its centennial anniversary and looks forward to continuing its important work on behalf on America's workers.

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GOP Senators Obstructing The Consumer Protection Bureau Receive Loads Of Wall Street Donations

43 Republican senators signed a letter last week saying that they would obstruct any nominee to run the Consumer Financial Protection Bureau, regardless of qualifications, unless the CFPB is weakened. Republicans are essentially attempting to nullify a federal law via obstruction; Congress passed and President Obama signed a bill creating a CFPB, but the GOP is ensuring that it can’t function.

By weakening the CFPB, the GOP is doing the bidding of Wall Street’s biggest banks, which would have preferred that a regulator solely focused on consumer protection never come into being. Here are some facts and figures that Public Campaign pulled together on how much cash Wall Street has handed over to the 43 GOP’ers publicly obstructing Obama’s nominee:

– The 43 Senators have received $143 million in industry cash during their time in Washington.

– Sen. John McCain (R-Ariz.), boosted by his 2008 presidential bid, is the top recipient of financial industry cash of those signing the letter, with $36.7 million in donations from the industry. McConnell is second with $7.4 million in donations. Sen. Mike Crapo (R-Idaho), the ranking member of the Senate Banking committee, has received $2.4 million in industry cash. [...]

– The six Senators recently elected, or re-elected, in November who signed the letter — Sen. John Barrasso (R-Wyo.), Ted Cruz (R-Texas), Jeff Flake (R-Ariz.), Orrin Hatch (R-Utah), Dean Heller (R-Nev.), and Roger Wicker (R-Miss.) — received nearly $7 million altogether in industry donations in the 2012 cycle. Hatch tops this list with $2 million raised from the industry for his last election.

Sen. Rob Portman (R-OH), who is one of two Republican senators that did not sign the letter, said last week that Richard Cordray, who was recess-appointed by Obama to be the first CFPB director, simply accede to the GOP’s hostage-taking and call for watering down his own agency.

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Corker: Court ruling could invalidate recent NLRB, consumer bureau actions

Sen. Bob Corker (R-Tenn.) said Sunday a recent court ruling “could well” invalidate a year’s worth of actions made by President Obama’s appointees to the National Labor Relations Board (NLRB) and the Consumer Financial Protection Bureau (CFPB).

On Friday, a federal appeals court ruled that Obama's controversial appointments of a trio of members to head the NLRB were unconstitutional. Those appointments were made the same day Obama named Richard Cordray as the first director of the CFPB, leading many to question whether Cordray's appointment could be the next to be struck down.

Corker was asked directly if the ruling invalidates the “more than 300 rulings made by the NLRB over the last year,” and anything accomplished under Cordray at the CFPB, during an interview on “Fox News Sunday.”

“Could well do it,” Corker responded. “In each case someone might have to challenge those rulings to make them invalid, but certainly that’s what we said at the time – these people were going to be working in vain and the rulings that they come forth with were going to be challenged. That’s turned out to be the case.”

Corker added that the court ruling “was a huge victory for anybody that believes in balance of power and the Constitution,” and called the appointments “the most abusive cases ever” of presidential overreach.

Illinois Sen. Dick Durbin (D), appearing on the same show, shot back that the administration made the appointments out of “frustration” that Republicans in the Senate refused to give Obama appointees a fair hearing.

“Why did we reach this point? Why did the president believe these recess appointments were so critical,” Durbin asked. “I think you can see we reached that point because we couldn’t go through the orderly process of reviewing nominees and literally voting on them. It was a question about how often they would be brought to the floor, how long they would languish on the calendar, what secret hold would apply, whether or not there would ever be a vote. And in its frustration this administration said we were elected to govern… they wanted to put people in place to govern.”

A filibuster-proof number of Republicans blocked Cordray's nomination at the end of 2011. They warned that they would oppose any nominee to head the bureau until its structure was changed so it was run by a bipartisan commission instead of a lone director.

“We have seen this president denied the opportunity to make appointments over and over and over again because one senator happens to hate a particular agency or person,” Durbin said. “For goodness sakes, give them a hearing, give them a vote.”

At the time of the move, Congress had been holding brief "pro forma sessions," lasting just a few minutes, in an effort to keep Congress in session over longer breaks, thereby blocking recess appointments. The White House argued after it made the appointments that these brief sessions do not constitute legitimate sessions of Congress.

The NLRB court ruling came one day after Obama had re-nominated Cordray as CFPB director. His recess appointment, if it is not struck down, would expire at the end of 2013.

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What The Consumer Protection Bureau’s New Mortgage Rules Will And Won’t Do

The Consumer Financial Protection Bureau rolled out new rules today to clean up the mortgage servicing industry, which has been at the root of several scandals, including the use of the now-infamous “robo-signers.” The new rules will provide important protections for homeowners, no longer leaving them subject to the most pernicious mortgage servicing practices. Here’s what the rules will do:

– End dual tracking. This practice involves banks starting foreclosure proceedings on a homeowner at the same time that the homeowner is being evaluated for a mortgage modification. The end result is many homeowners lose their homes when they think they are receiving a modification. Under the rule, “Servicers cannot start a foreclosure proceeding if a borrower has already submitted a complete application for a loan modification or other alternative to foreclosure, and that application is still pending review.”

– Force balance transparency. The new rules call for clearer monthly mortgage statements and more advance warnings of changes like interest rate hikes. Servicers must also “promptly” credit payments that homeowners make.

– Limit “forced place” insurance. “Forced place” insurance is the insurance that lenders purchase on behalf of borrowers if they think there has been a lapse in coverage. The policies are often far more expensive than standard home insurance, and servicers receive a cut of the payments. Abuse of forced place insurance became a big industry during and after the buildup of the housing bubble: “From 2006 to 2011, direct earned premiums for lender-placed insurance more than tripled, to $3.1 billion from $954 million.” As the New York Times noted, “the cost [of forced place insurance] more or less ensures foreclosure for a household on the brink; it can also hurt a borrower’s chances for a loan modification.” Under the new rules, servicers must warn borrowers that a forced place purchase will occur and “If servicers buy the insurance but receive evidence that it was not needed, they must terminate it within fifteen days and refund the premiums.”

However, the new rules do not create a single point of contact for borrowers (who often get the runaround at banks by being passed off between different bank employees). The California Homeowner’s Bill of Rights includes a mandatory point of contact, as does a new bill Minnesota Democrats are trying to enact. The rules will not be implemented for another year, leading one housing advocate to say that the CFPB is just “providing mortgage servicers advance notice to do their dirty work.”

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Health of the Consumer

 Highlight transcript below to create clipTranscript:  Print  |  Email Go  Click text to jump within videoMon 07 Jan 13 | 05:30 PM ET The CDC says this is the most aggressive early flu season in 8 years. Discussing which under-the-weather trades could lead to some healthy profits, with the Fast Money traders; and Dan Hurwitz, DDR CEO, discusses the winners and losers in retail now, and what's next for DDR.

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