Practical Health Care (Implementing Health Care Reform)

June 30, 2010

Confused – Implementation Overload!!

DON’T PANIC!!

No need to memorize this! We are at theend of the beginning — 7 to 10 years of rule making and changes

Recap on Legislation• President signed Patient Protection and Affordable

Care Act (PPACA) on March 23

• Reconciliation bill signed on March 30

• Interpretation of legislation now requires examining multiple sources:– Senate-passed bill, H.R. 3590 (now P.L. 111-148)

– Manager’s amendment to the Senate bill

– Reconciliation bill, H.R. 4872

• Very important: Check all three sources when considering how the bill works

Recap on Legislation• What is the size of a small employer in the new law? – Two to 50

– One to 100

– One to 200

• What is a full time employee in the new law?– Thirty hours a week

– Forty hours a week

PPACA Overview

• Makes significant statutory changes affecting the regulation of and payment for many types of private health insurance – many insurance market reforms

• Will require almost all private sector employers to evaluate the health benefits they currently offer and consider whether they are compliant

• For those without access to employer coverage, new individual mandate to purchase and maintain minimum coverage in 2014

Grandfathered Plans• Essentially all plans in effect on date of PPACA

enactment (March 23, 2010) are “grandfathered”

• What does this mean? – Grandfather plans exempt from some, but not all, of PPACA

requirements

• Is this is a big deal?

• Law does not address whether a plan that is amended on or after March 23, 2010 can still retain grandfather status– Eligible family members of existing employee plan OK, as

well as new employees and their eligible family members

2010 Issues

• Small business tax credit

• Medicare Part D subsides are not taxable

• High risk pool for the uninsured with pre-existing conditions

• Early retiree reinsurance program

• New federal insurance plan requirements

PPACA in 2010• Eligible small businesses are eligible for phase one of the

small business premium tax credit.– Small employers with fewer than 25 employees may receive a

maximum credit, based on number of employees, of up to 35% of premiums until 2014. • Employer must contribute at least 50% of the total premium cost.

• Businesses do not have to have a tax liability to be eligible

• Non-profits are eligible

• Average salary must be $50,000 or less (owner income exempted)

– The credit reduces amount of premiums that can be deducted.

– The credit decreases as employer size increases.

– This may or may not be helpful.

PPACA in 2010

• Owner’s benefits and income generally not included in the credit calculation.

• IRS has a Q and A section and helpful information on its website.

• Not all questions are answered at this point.

PPACA in 2010• Deductibility for Part D subsidies is eliminated in

2013, but this results in an immediate accounting impact.– AT&T, Caterpillar, Verizon and other large corporations

reported the fiscal impact immediately

PPACA in 2010• Creates high-risk pool coverage for people who cannot

obtain current individual coverage due to preexisting conditions.– Employers cannot put people in the pool—would pay penalty

– Eligibility: Uninsured for 6 mos and denied coverage for a pre-existing condition

• This national program can work with existing state high-risk pools and will end on January 1, 2014, once the Exchanges become operational and the other preexisting condition and guarantee issue provisions take effect

• Financed by a one-time $5 billion appropriation

PPACA in 2010• Maryland will manage this program through its high

risk pool

• Virginia declined to participate and the federal government will operate the pool.– About twenty states declined to participate

• CMS Actuary says $5B could be exhausted by as early as 2012. – Further appropriations to fund the program?

• Pool should be operational around June 23, 2010.

PPACA in 2010• Establishes federal review of health insurance

premium rates.

• Secretary of HHS, in conjunction with the states, will have new authority to monitor health insurance carrier premium increases beginning in 2010 to prevent unreasonable increases and publicly disclose such information.

• In addition, $250 Million is appropriated for state grants to increase their review and approval process of health insurance carrier premium rate increases.

PPACA in 2010

• 2010 Reinsurance Program for employer “early retiree” health benefits (age 55-64) provides for subsidies up to 80 percent of the insurance costs (claim corridor of $15-90K) IF they invest the difference in wellness and chronic care management programs, among other things– Regulations were issued last week.

– The program becomes effective June 23, 2010.

– Self-funded and fully insured plans eligible.

PPACA in 2010

• Payments are retroactive for a plan year, so employers and early retirees will be able to take advantage of them for costs incurred from the date the program is established.

• Payments will be made to employer-sponsored health plans on behalf of an early retiree.

• To receive assistance, plans must apply, document claims, and implement programs and procedures to generate cost savings for participants with chronic and high-cost conditions.

• Savings for enrollees: Plans must use these proceeds to lower health costs for enrollees (e.g., premium contributions, copayments, deductibles, etc.)

Effective Plan Years on/after Sep. 23 – All Plans, Including Grandfathered

• Restrictions on annual limits– Plans may impose only “restricted annual limits” on the

dollar value of “essential benefits.” HHS to establish annual limits on the dollar value of essential benefits. On and after January 1, 2014, no annual limits will be permitted

• No lifetime limits– Plans may not impose lifetime limits on dollar value of

“essential benefits”

Effective Plan Years on/after Sep. 23 – All Plans, Including Grandfathered

• New strictures on “rescissions”– Plans may not rescind coverage unless person commits

fraud or makes a material misrepresentation prohibited under the terms of the plan

• Pre-Ex Restrictions– Plans may not impose any preexisting condition restriction

on children under the age of 19. After January 1, 2014, plans may not impose preexisting condition restrictions on anyone

Effective Plan Years on/after Sep. 23 – All Plans, Including Grandfathered

• Coverage for dependents to age 26– If a plan offers dependent coverage of children, such

coverage must extend to a child until the child reaches age 26

– Some carriers are implementing this change early

– For grandfathered plans, this requirement applies before January 1, 2014 only if the adult child is not eligible to enroll in another plan

– Point of confusion: the legislation increased the IRS definition of dependent up to age 27

Effective for Plan Years on/after Sep. 23, 2010 (Grandfathered Exempt)

• Nondiscrimination rules under IRS Code 105(h) applies to fully-insured plans

• Preventive care without cost sharing on services that receive an “A” or “B” rating from the US Preventive Services Task Force

• New appeals process rules for coverage determinations and claims

• Certain new patient protections

New Patient Protections (Grandfathered Plans Exempt)

• For all group and individual plans, including self-insured plans, emergency services covered in-network regardless of provider

• Enrollees may designate any in-network primary care physician as their primary care physician

• New coverage appeal process

2011 Issues

• New requirements for insurance plans

• Payroll deduction for a new long-term care program

• Federal wellness grants for small businesses without wellness programs

PPACA in 2011• Minimum medical loss ratio (MLR) requirements will

be established for insurers in all markets. How will this affect coverage?

• The MLR is 85% for large group plans and 80% for individual and small group plans (100 and below). – May impact provisions that reduce claims cost, such as pay

for performance, nurse lines, disease management, etc.

– May result in fewer carriers offering coverage in some areas, particularly rural, resulting in less consumer choice.

• Carriers will have to issue a premium rebate to individuals when MLR is too low.

PPACA in 2011• Creates a new public long-term care program.

• Premiums could be collected as early as January 1, 2011.

– Unknown what the premium will be but CMS actuary estimates premium as high as $240/mo. with 2% enrolled

• Benefits won’t be known until October 2012.

• Cannot make a claim for 5 years so earliest would be 2015, but more likely 2017.

• Must be attached to work to be eligible.

PPACA in 2011• Employers are expected to auto-enroll employees– Employees can opt-out.

• In order to meet actuarial requirements, the price of the plan will have to be very high.

• Administrative burden on employers.

PPACA in 2011– Beginning in 2011, $200 million over 5 years in grants

for employees of small businesses to participate in comprehensive workplace wellness programs• Eligible employers are those 100 employees who work 25 hours or more

per week, and did not have a workplace wellness program as of March 23, 2010

• First-come, first-serve

– Grants to allow state and local health departments to design community-based public health interventions and screenings for people age 55-64; and

– $25 million child obesity demonstration project

PPACA in 2011 and 2012• All employers must include on their W2s the aggregate cost of

employer-sponsored health benefits

• If employee receives health insurance coverage under multiple plans, the employer must disclose the aggregate value of all such health coverage, – Excludes all contributions to HSAs and Archer MSAs and salary reduction

contributions to FSAs – Applies to benefits provided during taxable years after December 31, 2010

• A new federal tax on fully insured and self-funded group plans, equal to $2 per ee/yr, takes effect to fund federal comparative effectiveness research takes effect in 2012

Employer Responsibilities

Employer Responsibilities• Key Concepts– Only employers with 50 or more full-time (or full-time

equivalent) employees must offer coverage

– Unlike original House bill (approved last November), large employers are not required to meet minimum benefit requirements (applicable to individual and small groups) or make minimum contributions to premiums

– The requirement is to offer essential coverage to full-time employees• Essential coverage = minimal benefits. The Secretary of Health and Human

Services will determine what “essential coverage” is.

Employer Responsibilities• Do these employers required to offer coverage?

• If so, to whom?– Employer A: 60 full-time employees and 20 part-time

employees (60 hours/month)

– Employer B: 30 full-time employees and 20 part-time employees (100 hours/month)

– Employer C: 10 full-time employees and 100 part-time employees (60 hours/month)

– Employer D: 30 full-time employees and 30 seasonal employees (120 hours/month for fewer than 120 days)

Employer Responsibilities• Effective starting January 1, 2014

• Employer must count all full-time employees and part-time employees – on a full-time equivalent basis – in determining if they have 50 or more employees– Certain seasonal workers are not counted in determining if employer

has 50 workers

– Full-time = 30 or more hours per week, determined on a monthly basis. Aggregate part-time hours and divide by 120.

– Reconciliation repealed the construction industry mandate (5+)

• Penalties assessed for “no coverage” or coverage that is not “affordable”

No Coverage• If an employer fails to provide its full-time employees

(and their dependents) the opportunity to enroll in “minimum essential coverage,” and

• One or more full-time employees enrolls for coverage in an exchange and qualifies for a premium tax credit or cost-sharing reduction, then

• Employer penalty = $2,000 for each of its full-time employees in the workforce, first 30 exempted

No Coverage• Employer of 60 full-time employees and 20 part-time

employees (20 hours a week) does not offer coverage.

• What is the fine?– 60-30 = 30

– $2,000 X 30 = $60,000

No Coverage• In 2014, all Americans will be required to have health

insurance that meets minimal benefits standards

• Penalties for noncompliance – $95 in 2014

– $225 in 2015

– $695 in 2016

Unaffordable Coverage• If employer offers its full-time employees (and their dependents)

the opportunity to enroll in minimum essential coverage, and

• One or more full-time employees enrolls for coverage in an exchange and qualifies for a premium tax credit or cost sharing reduction because

– The employee’s share of the premium exceed 9.5% of income, or

– The actuarial value of the coverage was less than 60%, then  

• Employer penalty = $3,000 for each full-time employee who receives a tax credit or cost-sharing reduction

Unaffordable Coverage• What is 9.5% of income?

– $15,000 = $1425

– $25,000 = $2375

– $40,000 = $3800

– $60,000 = $5700

• So how will this work?

• The employer is only required to offer coverage to full time employees

Additional Details• Actuarial value = the portion of allowable costs paid by

plan.• Penalties assessed on a monthly basis.• No penalties apply to part-time employees.• No penalties for waiting periods (if any), not exceeding

90 days.• Total “affordability” penalty is capped. May not exceed

penalty for “no coverage.”• Employer does not determine if employee is eligible for

premium tax credit based on household income, but is notified by the exchange if full-time employee qualifies.

Other Responsibilities• Employers must automatically enroll “new full-time

employees” in employer-sponsored coverage– Must provide adequate notice and opportunity to opt out

– Applies to employers with “more than 200 full-time employees”

– No effective date specified, but must be “in accordance with regulations promulgated by the Secretary (of DoL)…” (so presumably not effective until regulations are issued)

• Notice to current employees and new hires about exchange and subsidies– Existence of exchange, services and how to obtain assistance

– Availability of premium assistance if plan value below 60%

– Loss of employer contribution and tax exclusion for contribution

– Effective March 1, 2013

Health & Wellness

Health & WellnessFor services performed on or after July 1, 2010:o New 10% excise tax on amounts paid for indoor tanning services, whether or not insurance policy covers service. Service provider to asses tax on customer

Health & Wellness• HHS tasked with coordination among all Federal agencies with

respect to prevention, wellness, and health promotion practices

Public Health. Beginning FY2010, administer the Prevention & Public Health Fund to expand and sustain national investment in prevention and public health programs

•  Wellness Programs

– HHS to enforce employer wellness provisions for group market and work with DOL and Treasury to implement a 10-state pilot program to apply wellness program provisions to the individual market

Health & Wellness

• Within 2 years after enactment, HHS will develop reporting requirements for use by group health plans designed to:– Improve health outcomes

– Implement activities to prevent hospital discharge readmissions

– Implement activities to improve patient safety and reduce medical errors

– Implement and design wellness programs.

Discussion and Questions

For further information:

PAHU717/232-0022

E-mail: xenobun@aol.com