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National Legislative Update: Health Care Reform
Presented by
Alicia Scalzo WilmothMarch 2011
© USI Insurance Services LLC 2011. All rights reserved.
Disclaimer This presentation is intended to convey general information and is not an exhaustive analysis. Information contained in this presentation may change as guidance develops. Kibble & Prentice and USI do not provide legal or tax advice. For advice specific to your situation, please consult an attorney or other professional.
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Today’s Agenda
Overview
Political and legal landscape
Market reforms 2010-2011
On the horizon
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Overview
Patient Protection and Affordable Care Act
Overhaul of U.S. health care system
Provide coverage to 32 million uninsured by 2019
Cost of $938 billion over 10 years
Significant changes to all facets of the current health care system
Focus on private sector coverage (employer-sponsored health plans and insurance reform)
No discussion of Medicare and Medicaid changes
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Overview
The Basics
Require most Americans to have health insurance coverage by 2014
Individuals without access to affordable employer coverage may be eligible to purchase insurance through a new marketplace, the Exchange Government assistance available to lower income individuals (100-400% FPL)
Penalties on certain large employers who don’t provide affordable coverage if employees receive government assistance
New market reforms that impose requirements on individual and group health plans
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Overview
Paying for Reform
Billions of dollars in fees on pharmaceutical sector and insurance industry
New Taxes 10% tax on tanning services (2010)
2.3% medical device sales tax (2013)
Medicare hospital tax increase on high income earners (2013)
40% high cost plan excise tax (2018)
Penalties on individuals and employers who don’t have or provide health insurance
Reduce or eliminate certain tax breaks
Changes in Medicare and Medicaid
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Political Challenges
Repeal health care reform?
House voted in favor of a repeal, Senate opposed
Insufficient majority to override a veto
Where does it go from here?
Delay funding of certain provisions
Additional hearings
Delay in regulations
2012 elections
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Legal Challenges Finds HCR Constitutional Finds HCR Unconstitutional
Eastern District of Michigan: Thomas More Law Center v. Obama, Oct 7, 2010Dismissed claims that individual mandate is unconstitutional
Eastern District of Virginia: Commonwealth of Virginia v. Sebelius, Dec 13, 2010Ruled that individual mandate is unconstitutionalOn appeal to 4th Circuit Court of Appeals
Western District of Virginia: Liberty University v. Geithner, Nov 30, 2010Dismissed case, finding that the individual mandate is constitutionalOn appeal to 4th Circuit Court of Appeals
Northern District of Florida: Florida v. Sebelius, Jan 31, 2011Attorneys general of Florida and 25 other statesRuled that individual mandate is unconstitutional, but due to lack of severability clause, entire act “must be declared void”Medicaid expansion is constitutional
Source: http://www.washingtonpost.com/wp-srv/special/health-care-overhaul-lawsuits/
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Market Reforms2010 – 2011
Market Reforms
All group health plans are required to comply with specific market reforms effective the first plan year* that begins on or after September 23, 2010 (January 1, 2011 for calendar-year plan)
Significant design changes for group health plans
Limited exceptions apply to “grandfathered” plans
Most of these reforms also apply in the individual market
* For employer-based group health plans, this is the ERISA Plan Year which may (or may not) be the same as the policy year
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Grandfathered Plans Built from the premise that “you can keep the health plan
coverage you have” Estimated 40-70% of all group health plans will lose grandfathered
status by 2014
A group health plan that is in existence on March 23, 2010 is considered grandfathered Certain changes will cause a plan to lose this status
Subject to most market reforms, with some exceptions Many insurance carriers “deeming” their plans non-
grandfathered
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Grandfathered Plans: Requirements & ExceptionsMust comply with the following requirements: Lifetime limits Annual limits Cannot cancel coverage Extension of dependent coverage to
age 26 Uniform explanation of coverage No pre-existing condition exclusions No waiting periods over 90 days Notice to employees about Exchange Automatic enrollment for large
employers Vouchers Employer coverage penalties Reporting of employer-sponsored health
insurance coverage High cost plan tax
Do not have to comply with the following requirements: Preventive care Nondiscrimination in favor of HCIs New appeals process Clinical trials HHS reporting Comprehensive health insurance
coverage for small groups and Exchange plans
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Market Reforms – All Plans
Effective the first plan year on or after September 23, 2010 (January 1, 2011 for calendar year plans)
No lifetime limitations on essential benefitsNo annual limitations on essential benefits, except as allowed by HHS until 2014Cover children to age 26 (special exception applies for grandfathered plans)No pre-existing condition exclusions on individuals under age 19No rescission of coverage
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Lifetime Limitations
What is an essential benefit? No clear guidance – good faith standard based on the following categories: Ambulatory patient services, hospitalization, ER, Rx
Maternity & newborn care, pediatric services (incl. oral & vision)
Mental health & substance use disorder services, including behavioral health treatment
Rehabilitative and habilitative services and devices
Preventive care & wellness services
Chronic disease management
Laboratory services
Plans/carriers are removing limits on transplants, preventive and rehab services
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Annual Limitations Permitted annual limitations on essential benefits until 2014
9/23/2010-9/23/2011: $750,000
9/23/2011-9/23/2012: $1.25 million
9/23/2012-1/1/2014: $2 million
Waivers
HHS waiver program available to plans in existence on September 23, 2010 if compliance with the required limits would result in a significant decrease in access to benefits or a significant increase in premiums for affected individuals
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Other Market Reforms – All Plans Children up to age 26 are eligible under a parent’s health
plan
Generally cannot condition eligibility on student status, residing with parent, tax dependent status, marital status or employment
Grandfathered plans may exclude children who have employer-based group health plan coverage that is not provided by a parent
No rescission of coverage except in the case of fraud or intentional misrepresentation of material fact
Prospective cancellation of coverage and cancellation for nonpayment of premiums are not rescissions
No pre-existing condition exclusions on individuals under age 19
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Market Reforms – Non-Grandfathered Plans
Effective the first plan year on or after September 23, 2010 (January 1, 2011 for calendar year plans)
Cover preventive care at 100% in-network If a PCP designation is required, allow enrollees to designate any in-network doctor (including OB/GYN and pediatrician)Emergency services covered as in-network and no required preauthorizationNew claims, appeals and external review processes105(h) nondiscrimination rules apply to insured plans – prohibit discrimination in favor of HCIs as to eligibility or benefits
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2011
Medical Loss Ratios
Insurance companies will be required to satisfy certain medical loss ratios (MLR) 80% in the small market
85% in the large market
Requires $0.80/0.85 of every premium dollar that the carrier receives be spent on medical care and activities to improve health care quality
Failure to maintain these thresholds results in rebates
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More 2011 Requirements Optional W-2 Reporting
Mandatory 2012 OTC & Tax Favored Accounts
Requires a prescription for reimbursement through a health FSA, HRA or HSA
HSA Penalty Increase From 10% to 20% penalty
Small Employer Wellness Grants Grants become available to certain eligible employers that establish
Comprehensive Workplace Wellness Programs CLASS Act
Government-run long-term care program Employers may elect to enroll employees and withhold premium
amounts Appears to be delayed
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On the Horizon
2012/2013
Uniform summary of benefits (2012) HHS reporting (2012) New fees in pharmaceutical manufacturing sector (2012-2013) $2,500 health FSA cap (2013) Medicare tax on high income earners (2013) Fee on health plans for Patient Centered Outcome Research
program (2013) Excise tax (2.3%) on medical device sales (2013)
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2014 Market Reforms – All Plans
Effective the first plan year on or after January 1, 2014
No pre-existing condition exclusion clauses on any individualsNo waiting periods in excess of 90 daysAll annual limits are prohibitedCover children to age 26
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2014 Market Reforms – Non-Grandfathered Plans
Effective the first plan year on or after January 1, 2014Coverage for individuals participating in approved clinical trials
Includes approved clinical trials for cancer treatment
Cannot deny (or limit or impose additional conditions on) coverage of routine patient costs for items and services furnished in connection with the clinical trial
Mandated coverage in the small market and through the Exchange
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On the Horizon
New fees on insurance companies ($8 billion in 2014) Exchange established (2014)
New marketplace for individuals and small employers to purchase health insurance coverage
Individual mandate (2014) Individuals must have insurance coverage or pay a penalty
Large employer penalties and additional compliance burdens (vouchers and automatic enrollment) (2014)
Cadillac plan tax (2018)
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Thank you!
ALICIA SCALZO WILMOTH, JD
Kibble & Prentice, a USI Company
p. 206.441.6300
www.kpcom.com
