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Public-Private Sector Interactions and the Affordable Care Act: Looking Back and Ahead To 2015

The views expressed are those of the author and do not necessarily reflect the views of ASPA as an organization.

By Ferd H. Mitchell and Cheryl C. Mitchell
November 4, 2014

Continuing studies of the Affordable Care Act (ACA) have been performed over the period 2010 to 2014. Insights have been gained by applying an action-reaction method of analysis. This paper describes some of the results from these studies.

The Affordable Care Act (ACA) set up a dynamic interaction between the Department of Health and Human Services (HHS), a very large public agency—and large private-sector employers.

The ACA started out in 2010 with statutes that were intended to pressure large employers to continue offering group health coverage with “good” benefits for all employees.

HHS (and the Internal Revenue Service) were placed in charge of implementation. In turn, companies have responded according to their own interests.

Mitchell novThe large-employer mandate (that companies provide coverage or pay a penalty) and the individual mandate (that almost everyone have insurance or pay a penalty) have produced reactions by the private sector and the public that have forced HHS to step back from the ACA intent of “good” insurance for almost everyone.

The “standard” for desirable insurance was established by the ACA through the definition of Qualified Health Plans (QHPs) to be sold through the new Health Benefit Exchanges. Extending through the new law was a theme that all health insurance coverage should be “guided” to be “QHP-like,” with coverage of “essential health benefits.”

However, as it turned out, strong negative reactions to this intent have forced HHS to reassess and revise this overall objective. First, HHS postponed the large-employer mandate for a year, from 2014 to 2015, to buy time. And the insurance requirements for individuals were weakened in 2014, through waivers of several kinds.

Now, regulations have been adopted that allow companies to offer—and individuals to buy—a much wider assortment of plans. Some of these can be quite minimal in terms of coverage.

Thus, these organizational reactions have brought enough political pressure to require HHS to back off from achieving the full general intent of the ACA.

Ongoing descriptions of these changes have been documented in a series of four annual books written by the authors and published by Thomson Reuters.

The outcome of this dynamic interaction has been the status of the program today. Much can be learned about such public-private sector interactions by tracing the ways in which ACA efforts have progressed. The studies to date have described the program outcomes that were intended by program designers; the likely outcomes that could be expected based on comprehensive analyses of the situation; and the actual outcomes that have been observed.

Intended outcomes were based on an assumption by the designers that companies and individuals would largely “go along” with the new statutes. Expected outcomes considered how company and individual reactions were likely to affect program outcomes. Actual outcomes were based on extensive documentation available from HHS and through the media.

The ACA was designed to pressure large employers to offer QHP-like group health insurance for employees. Financial penalties would apply for non-compliance. Other non-financial pressures were associated with potential employer-employee problems that might be associated with a failure to comply, as well as possible damages to the public images of resisting companies.

Part-time employees (working fewer than 30 hours per week) and employees on Medicaid were not covered by the mandate. This arrangement was included in the ACA to make the program more acceptable to employers.

At the start of 2013, it was estimated that behind-the-scenes pressures on HHS were likely to continue building, in an effort to postpone or weaken the large-employer mandate. Companies could reasonably anticipate that the new exchanges were likely to experience numerous problems and public sentiment against the ACA was running high. Against this backdrop, companies could seek ways to use these likely problems to motivate HHS to provide further relief.

In mid-2013, HHS gave to this pressure and postponed the large-employer mandate to 2015 (for the largest companies) and 2016 (for midsized companies). HHS also bent the rules to allow companies to cover only 70 percent of employees in 2015.

Then, in 2013-2014, HHS largely gave up on enforcing the general adoption of QHP-like policies with new regulations that watered down the concept of “minimal essential coverage” and expanded waivers for those who would not be required to have insurance at all.

Evaluation studies were performed by the authors in 2010, 2012, 2013 and 2014 to estimate in advance how large employers were likely to respond to the ACA in future years.

In 2010, it was forecast that employers were likely to react to the new law by adopting “wait and see” attitudes, gathering information, trying to estimate the impact on internal operations that would follow and performing numerous benefit-cost studies.

In 2012, it was determined that companies were likely to “play for time,” hold off from commitments, explore options and maximize pressure on HHS for relief.

In 2013 and early 2014, it was forecast that companies were likely to push for further accommodations for 2015.

All of these forecasts, produced through application of the action-reaction method, provided effective insights into the company reactions that could be expected.

As determined through these studies, when faced with outside financial pressures, large private-sector companies can bring financial, political and strategic reactions to bear on public sector agencies that are trying to force change. Private-sector reactions are likely to challenge the changes being attempted. Public-sector organizations are often not well prepared to effectively counter such resistance.

This suggests that, in the future, public programs might be better designed to interact with the private sector by relying on incentives more than mandates.

More details on ACA implementation and the action-reaction method of analysis may be found in a recent book by the authors. A publisher’s special “landing page” provides further information.

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The American Society for Public Administration is the largest and most prominent professional association for public administration. It is dedicated to advancing the art, science, teaching and practice of public and non-profit administration.

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