best practices forum: human resources hosted by strategic government resources and the north central...

BEST PRACTICES FORUM: Human ResourcesHosted by Strategic Government Resources and the North Central Texas Council of Governments

Summary of Healthcare Reform LegislationMay 28, 2010

Executive Summary of

Patient Protection and Affordable Care Act

Health Care and Education Reconciliation Act



Legislation Adoption Process

The following dates outline the timeline for the adoption of the two pieces of legislation:

December 24, 2009 – Senate passes Patient Protection and Affordable Care Act

March 21, 2010 – House passes Patient Protection and Affordable Care Act

March 23, 2010 – President signs Patient Protection and Affordable Care Act

March 30, 2010 – President signs Health Care and Education Reconciliation Act



How Much Does It Cost

The Congressional Budget Office estimates that the two pieces of legislation will reduce the number of uninsured by 32 million in 2019 at a net cost of $938 billion over ten years, while reducing the deficit by $124 billion during the same time period.



Key Provisions in the Legislation

- Requires most individuals to have health insurance by 2014

- Individuals who do not have access to affordable employer coverage will be able to purchase coverage through a health insurance exchange.

-Employers will be required to pay penalties for employees who receive affordability tax credits for health insurance purchased through the exchange.

-Health insurers will be prevented from denying coverage for any reason, and from charging higher premiums based on health status or gender.

-Medicaid will be expanded to 133% of the federal poverty level for all individuals under age 65.



Provisions taking effect on or after September 23, 2010

-Extension of dependent coverage to adult children up to age 26 (initially, only if they are not eligible for other employer-sponsored coverage)

-No lifetime limits on the dollar value of coverage

-Restrictions on annual limits on coverage (as determined by regulations)

-No pre-existing condition exclusions for children under age 19

-Mandatory preventive care without cost-sharing and certain preventive care services as required by the government

-Mandatory implementation of an external appeals review process



Provisions taking effect on or after September 23, 2010

-No pre-authorization or increased cost-sharing for emergency services

-Extension of discrimination rules to fully-insured medical plans

- Implementation of automatic enrollment with notice subject to an opt-out for employees (for employers with more than 200 full-time employees)



Provisions taking effect on or after January 1, 2014

-No waiting period longer than 90 days to enter the plan

-No annual limits on coverage

-No pre-existing condition exclusions

-Limits on out-of-pocket maximums apply

-Limit on wellness incentive rewards increased to 30 percent of the cost of coverage (regulations may increase up to 50 percent)

-Coverage of routine care during clinical trials for life-threatening diseases



Individual Mandate

- Requires most individuals to have health insurance by 2014, or pay a penalty.

-Those without coverage pay a tax penalty of the greater of (1) $695 per year up to a maximum of $2,805 per family, or (2) 2.5% of household income.

-The penalty will be phased in as follows:

YEAR FEE PERCENTAGE

2014 $95 1.0%

2015 $325 2.0%

2016 $695 2.5%



Individual Mandate Exemptions

• Financial hardship • Undocumented immigrants (i.e. illegal aliens)

• Religious objections • Incarcerated individuals

• American Indian • Those for whom the lowest cost plan option exceeds 8% of annual income

• Laps of coverage for less than three months

• Those with incomes below the federal income tax filing threshold ($9,350 for singles and $18,700 for couples in 2009 under age 65)



Exchange Programs

- Creates state based American Health Benefit Exchanges for individuals and families, and Small Business Health Options Programs (SHOP) for small businesses (under 100 employees).

-Access to exchanges are limited to U.S. citizens and legal immigrants. Small business with up to 100 employees can purchase coverage through the exchanges. Business with over 100 employees can purchase coverage through the exchanges beginning in 2017.

-The Office of Personnel Management will contract with private insurers to offer at least two multi-state plans in each exchange, including at least one offered by a not for profit entity. Federal funds are available to establish non-profit, member run health insurance CO-OPs in each state (think benefit pools)



Exchange Programs

- Insurers will offer four levels of coverage that vary based on premiums, out of pocket costs, and benefits beyond the minimum required plus a catastrophic coverage plan. All out of pocket costs are tied to the contribution limit for a Health Savings Account ($5,950 for individuals, and $11,900 for families in 2010).

-Essential health benefits are determined by the HHS Secretary on an annual basis through a “transparent and public process.”

COVERAGE LEVEL MINIMUM COVERAGE REQUIREMENT BENEFIT/OUT OF POCKET

Bronze Minimum creditable coverage, plus essential health benefits

60%/HSA limit

Silver Essential health benefits 70%/HSA limit

Gold Essential health benefits 80%/HSA limit

Platinum Essential health benefits 90%/HSA limit



Exchange Programs

-Premium subsidies will be provided to families with incomes between 133% and 400% of the federal poverty level ($29,327 to $88,200 for a family of four in 2009) to help them purchase coverage through the exchange.

-Assistance will be available on a sliding scale between 2% and 9.5% of the individuals income.

-Subsidies will also be available for individuals between 133% and 400% of the federal poverty level for out of pocket spending.



Employer Requirements

-There is no employer mandate, but employers with more than 50 employees will be assessed a $2,000 fee per full-time employee in excess of 30 employees (the remaining 20 are charged) if they do not offer coverage.

-Employers who do not offer coverage, but have at least one full time employee who receives a premium subsidy through the exchange, must pay the lessor of (1) $3,000 for each employee who receives a subsidy; or (2) $2,000 for each full time employee.

-Employers with less that 50 employees are exempt from any of the above penalties.




-Requires employers that offer coverage to provide a “free choice voucher” to employees with income less than 400% of the federal poverty level ($88,200 for family of four) whose share of policy premiums exceeds 8%, but is less than 9.8% of their income and who choose to enroll in a plan offered through the exchange.

-The voucher amount must be equal to the amount the employer would have paid for the employee under the employer’s plan, and it must be used by the employee to offset the premium costs for the exchange plan they are enrolled under.

-Employers providing “free choice vouchers” will not be subject to penalties for employees that receive premium credits in the exchange.




-Local governments that self-insure must, after two years, demonstrate to the Secretary of Health and Human Services that their self-insurance plans are sufficiently funded or capitalized to cover all likely medical claims.

-The health care insurance used by local governments, like all employers, will have to meet certain minimum cost, coverage, and reimbursement requirements that are prescribed by the law and the Department of Health and Human Services.

-Local governments, like all employers, that already offer insurance to some workers must provide insurance to all workers—both full and part-time.

-A 40 percent excise tax applies to employment-based health plans with premiums exceeding $10,200 for single coverage, $27,500 for a family plan, $11,850 for retirees, and $30,950 for employees in high-risk professions (public safety).



Medicaid Expansion

- All non-Medicare eligible individuals under the age of 65 (children, pregnant woman, parents and adults without dependent children), with modified adjusted gross incomes up to 133% of the federal poverty level ($14,404 for single, or $29,327 for family of 4) will have access to Medicaid.

-Medicaid and Children’s Health Insurance Program (CHIP) will continue at their current eligibility levels until 2019, although there are federal subsidies for State programs throughout 2019.

-States have the option to expand Medicaid coverage to eligible childless adults on April 1, 2010. ( no federal subsidy provided until mandated in 2014).



Medicaid Expansion – Federal Subsidies

- States will receive the following federal funding subsidy to finance the coverage costs for the newly eligible under the expanded Medicaid program:

YEAR COVERAGE SUBSIDY

2010 -2013States can expand coverage to childless adults on a voluntary basis 0%

2014-2016 All non-Medicaid eligible individuals under age 65 100%

2017 Same as above 95%






Summary

-Both the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010 create fundamental changes in the U.S. health insurance industry.

-There are many provisions that are yet undefined as the various federal agencies charged with administering the different provisions in the legislation have yet to publish any regulatory rulings.

- It is my personal opinion that the greatest impact that City’s will face with the new requirements is the additional cost associated with expanded coverage for part time employees working over 30 hours per week, capitalizing all likely medical claims for self insurers, and other as of yet unknown consequences upon the market.



References

-The following sources were used to gather the data in this presentation:

-The Henry J. Kaiser Family Foundation: www.kff.org

-TML-IEBP: www.tmliebp.org

-National League of Cities and DLA Piper: www.nlc.org

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