• July 24, 2014

Health-Care Overhaul Brings Hope, Along With New Obligations, to Many Charities

Health-Care Overhaul Brings Hope, Along With New Obligations, to Many Charities 1

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For nonprofit groups that have been battered by the economic tailspin, the nearly $1-trillion new health-care overhaul law offers a glimmer of hope. As employers, they could get some relief from the escalating costs of health insurance, especially small groups that will benefit from tax breaks.

And as human-services providers, they could see life improve for millions of people who now can’t afford health care.

“This is the biggest benefit to the people that most nonprofits serve—low-income, moderate-income people—of anything we’ve seen since the ’60s,” says Drew E. Altman, president of the Henry J. Kaiser Family Foundation, a health-care research and information group.

The law, which will be phased in over more than eight years, is so fresh and so complex that nonprofit experts are still struggling to assess its potential impact.

No one expects it to be a panacea. It will not bring health insurance to everyone, and the provisions to expand the number of people eligible for Medicaid, the government insurance plan for poor people, could create some financial challenges for both nonprofit providers and state governments.

But it does present some immediate, concrete lifelines.

Starting this year, small nonprofit groups with average salaries of less than $50,000 are eligible for a payroll-tax credit if they pay for more than half of their employees’ health-insurance premiums. The benefit is available to groups with no more than 25 full-time employees—a category that includes at least 65 percent of nonprofit employers, according to a recent Congressional Research Service study.

That relief can’t come soon enough for Kelly Hart, executive director of Allied Arts of Whatcom County, an association in Bellingham, Wash. Her group has never been able to afford health insurance for its employees, but it used to offer a stipend of $150 to $350 a month to help them buy coverage on their own. The recession forced it to eliminate that benefit in January.

Now, Ms. Hart says, Allied Arts hopes to offer a health plan to its three employees within the next six months, and “having this added incentive of the tax benefit” could help make it happen, she says.

Help for Children

Two other measures that take effect this year will benefit charities like Talbert House, a group in Cincinnati that provides mental-health, substance-abuse, and other services to more than 20,000 people a year. One allows parents to keep children on their insurance plans until age 26 and another requires insurance companies to cover children even if they already have health problems. Neil F. Tilow, Talbert House’s president, says that before the new health law was passed, if a child had gone through drug-abuse treatment and her parents switched insurance plans, the new company could say, “We’re sorry, Susie’s previous episode is going to make her ineligible [for coverage] because it’s a pre-existing condition.” Yet many young people need more than one treatment to stay sober, he says.

Uninsured people make up about 10 percent of Talbert House’s caseload, Mr. Talbert says. That is far below demand, he adds, but given recent state and county budget cuts, his group is not able to help more.

Of course, the health-care overhaul introduces new obligations for nonprofit groups as well.

For example, starting in 2014, organizations with more than 50 employees could face fines if any of their full-time employees use subsidies to buy insurance on new state exchanges, or insurance marketplaces—either because the charities offer no health insurance or because their plan is not affordable.

That could have less of an impact in the nonprofit world than elsewhere, however, since a high percentage of nonprofit employers already offer health insurance—80 percent of those surveyed for a study last year by the Johns Hopkins University Center for Civil Society Studies, including 100 percent of those with at least 50 employees.

More Time for Care

The health-care overhaul is expected to provide insurance to 32 million people by 2019 who would otherwise not have it, according to the Congression­al Budget Office. About half of those will be covered by Medicaid or the Children’s Health Insurance Program and the other half will include people like those who benefit from subsidized insurance on the state exchanges or take out private insurance because the law requires most individuals to have it.

Kevin Burns, executive director of ActionAIDS, in Philadelphia, which provides services to people with HIV/AIDS, is looking forward to seeing more patients with private insurance since his group now spends much of its initial time with clients signing them up for government benefits.

“What I’m hoping it will do is free us up so we don’t have to spend as much time on getting people insurance and focus more on getting people into treatment,” he says.

But some people will continue to fall through the cracks even once the new law is fully in place.

The Congressional Budget Office says 23 million people will remain uninsured in 2019, including undocumented immigrants, who are not covered by the new law, and people who are eligible but not enrolled in Medicaid. The rules also exempt some individuals from the requirement to have health insurance, including those who have no “affordable” options.

And lower-income people with private insurance might still find it hard to afford their deductibles and co-payments—a situation that continued in Massachusetts even after it adopted a major health-care change in 2006 that shares elements of the federal plan, according to a 2009 report by the Kaiser Family Foundation.

That means nonprofit providers will still be called on to provide a safety net­—a message that some fund raisers hope donors do not forget. In fact, the philanthropic needs of hospitals could increase, since most gifts cover capital-intensive projects or research, says J. Gregory Pope, vice president of philanthropy at Saint Thomas Health Services Foundation, in Nashville.

“With more people having coverage, it’s likely we’re going to need more facilities to care for those people,” says Mr. Pope, who is board chair of the Association for Healthcare Philanthropy.

Medicaid Changes

The Medicaid expansion will bring new revenue to nonprofit hospitals, community health centers, and other medical groups. But Marian Mulkey, a senior program officer at the California HealthCare Foundation, in Oakland, warns that California and other states already facing devastating budget shortfalls could have trouble over time coming up with the required matching funds.

The federal government is providing states with 100 percent of Medicaid money for newly eligible people from 2014 to 2016, but the figure eventually declines to 90 percent in 2020 and subsequent years. For states that must pick up the rest, says Ms. Mulkey, “10 percent of a big number is a big number.”

What’s more, she says, once most people are required to have insurance, in 2014, a higher percentage of people who are eligible for the traditional Medicaid program will actually enroll—and the federal government pays just 50 to 60 percent of such costs.

“There are going to be, it’s fair to assume, some ongoing negotiations between state governments and the federal government over their shares of responsibility,” she says.

Patrick Lester, senior vice president for public policy at the Alliance for Children and Families, an association of human-services groups, says he is enthusiastic about the new health-care law, but he also hopes the newly expanded Medicaid program will increase payment rates to nonprofit and other providers.

“Traditionally, Medicaid rates have been lower than Medicare rates, which are themselves lower than private insurance rates,” says Mr. Lester. That sometimes makes it hard for poor people to find providers who will accept them, he says.

The new law raises Medicaid rates to Medicare levels for primary-care physicians but not for other providers. Mr. Lester says he hopes that a federal advisory commission that the law pays for will recommend higher Medicaid rates to Congress and the Obama administration.

“At the end of the day, an expansion of Medicaid for [human-services groups] isn’t necessarily helpful if they are barely keeping their heads above water and may be losing money in providing services to Medicaid populations,” he says.

While policymakers across the country will remain occupied for years putting the new health system into effect, some nonprofit leaders are looking ahead to an era when they can focus less on health “coverage” and more on improving public health.

The new law is just a first step, says Mr. Burns, of ActionAIDS. “It makes access to health insurance available to more people,” he says, “but having health insurance and getting good care are really two different things.”

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