Transcript Title Goes Here

Health Care Reform 2010: The Basics
Current as of: September 23, 2010
Prepared By
Karen J.W. Breitnauer, JD
M3 Insurance Solutions for Business
Agenda
Legislative Overview
2010 Provisions
The Future
Resources
Questions?
Legislative Overview
Patient Protection and Affordable Care Act
(“PPACA”) (P.L. 111-148)
• Passed by Congress on March 21, 2010
• Signed into law on March 23, 2010
• Subject to the “fix-it” provisions of the Reconciliation
Act
Legislative Overview
Health Care and Education Reconciliation Act
of 2010 (“Reconciliation Act”) (HR 4872)
• Passed by Congress on March 25, 2010
• Signed into Law on March 30, 2010
• Addresses concerns that members of the House had
with the PPACA but did not believe they could rectify
through the normal legislative process because of
the loss of the “filibuster proof majority”
Provisions in Effect in 2010 - ERRP
Early Retiree Reinsurance Program (ERRP):
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Temporary retiree reinsurance program
Limited funding - $5 billion
Effective date: June 1, 2010
Interim final rules (clarification) released May 5, 2010
A temporary program offering reimbursements of up
to 80% for claims between $15K and $90K to
qualified employers offering coverage for retirees 5564
• Application process: Application available June 10
on www.hhs.gov
Provisions in Effect in 2010 - ERRP
ERRP (continued)
• Reimbursements must be used to lower costs in the
employer’s plan (reduce premium contributions, copayments, deductibles and other out of pocket costs)
and not used as employer’s general revenue
• Effective until 2014…or until funds are depleted
• Opportunity for employers who provide retiree
benefits to recoup some of the expense for offering
such benefits
• Plan must satisfy application and submission rules
to qualify.
Provisions in Effect in 2010 – Small Business Tax Credit
Tax Credits for Small Employers (Effective for
tax years beginning after December 31, 2009):
• Tax credit is available to “qualified small employers”
that provide health care coverage to their employees
through a “qualifying arrangement”.
• “Qualified Small Employers” are employers who:
• Have no more than 25 FTEs for the tax year
• Average annual wages of no more than $50K annually per FTE
• Employer pays premiums under a “qualifying arrangement”
Provisions in Effect in 2010 – Small Business Tax Credit
Tax Credits for Small Employers (continued)
• “Qualifying arrangement” means the employer pays a
uniform percentage of premiums (but not less than
50%) for each employee enrolled in health care
coverage offered by the employer.
• Credit may be up to 35% of employer’s portion of
premium cost:
• Full 35% credit is allowed for qualified small employers with 10 or
less employees and average annual wages of less than $25,000
• Credit is reduced for qualified small employers with more than
10 employees and average annual wages greater than $25,000
• IRS Notice 2010-44 provides further guidance
Provisions in Effect in 2010
Health Plan Mandates
• Apply to fully insured and self-funded plans
• Distinguishes between “grandfathered plans” and
“non-grandfathered plans”
o “Grandfathered plans” are plans that were in existence on or
before March 23, 2010
o The “grandfathered plans” protection status clearly applies
where there is no change to existing coverage and a plan will
retain the status even if family members or new employees are
allowed to join
o However, what other changes will cause a plan to lose
grandfathered status….
Provisions in Effect in 2010
Health Plan Mandates
• Grandfathered vs. Non-Grandfathered Plans –
Regulations issued June 14, 2010
• “Grandfathered plans” are plans that were in existence on or
before March 23, 2010. Any policies sold in the group or
individual markets to new entities or individuals after March 23,
2010 will not be grandfathered.
• Plans must include a disclosure statement in the policy or
certificate of coverage if the plan believes it is a “grandfathered
plan”, along with contact information regarding complaints.
• Plans are required to maintain records documenting terms of the
plan or coverage in effect on March 23, 2010 if they wish to
maintain grandfathered status.
Provisions in Effect in 2010
Health Plan Mandates
• Loss of “Grandfathered” Status:
• Elimination of all or substantially all benefits to diagnose or treat
a particular condition
• Any increase in percentage cost-sharing
• Any increase in fixed amount cost-sharing requirements
(deductible, out-of-pocket limit) that is greater than the
maximum percentage increase, defined as medical inflation plus
15 percentage points
• Any increase in fixed copayment amounts if the increase
exceeds the greater of $5 (adjusted annually for medical
inflation) OR a percentage equal to medical inflation plus 15
percentage points
Provisions in Effect in 2010
Health Plan Mandates
• Loss of “Grandfather” Status (continued):
• Decrease of employer contribution amounts by more than 5
percent below contribution rate on March 23, 2010
• Changing insurance companies
• Plan forces consumers to switch to another grandfathered plan
that has less benefits or higher cost sharing as a means of
avoiding new consumer protections
• Plan is bought by or merges with another plan to avoid
complying with the law
Provisions in Effect in 2010
Health Plan Mandates
• Changes NOT causing loss of “Grandfathered”status
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Changes to premium
Changes to comply with federal or state legal requirements
Changes to voluntarily comply with the PPACA
Changing TPAs
Adding family members
Adding new hires or new enrollees
Provisions in Effect in 2010
Effective for Renewal Dates after
September 23, 2010, Grandfathered Plans Must:
• Provide dependent coverage to age 26
• Child does not have to be unmarried to qualify.
• Prior to 1/1/14, provision applies only if the adult child is not
eligible to enroll in employer-sponsored health plan.
• IRS Notice 2010-38 states intent of IRS to amend regulations
105 and 106 to allow for tax exempt treatment of adult child’s
coverage: effective March 30, 2010.
• Eliminate preexisting condition exclusions for
children under age 19 (eliminate entirely by 1/1/14)
Provisions in Effect in 2010
Effective for Renewal Dates after
September 23, 2010, Grandfathered Plans Must:
• Eliminate annual limits, however:
• plans may establish “restricted annual limits”
on essential health benefits until 1/1/14
($750,000 (2010-2011), $1.25 million (20112012) and $2 million (2012-2013); no limit
thereafter
• annual limits allowed on non-essential health
benefits
Provisions in Effect in 2010
Effective for Renewal Dates after
September 23, 2010, Grandfathered Plans Must:
• “Essential Health Benefits”:
• May use definition in the PPACA until further
clarification. Includes:
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Ambulatory patient services
Emergency services and hospitalization
Maternity, newborn care and pediatrics (oral and vision)
Mental health and substance use disorder services
Prescription drugs
Rehabilitative and habilitative services and devices
Laboratory services
Preventive and wellness services
Chronic disease management
Provisions in Effect in 2010
Effective for Renewal Dates after
September 23, 2010, Grandfathered Plans Must:
• Allow rescission only in cases of fraud
• Eliminate lifetime limits
• Must allow those who have reached the limit
to re-enroll in the plan
Provisions in Effect in 2010
Effective for Renewal Dates after
September 23, 2010, Non-Grandfathered Plans
Must:
• Cover emergency services without prior
authorization and as if services were provided
in-network
• Cost sharing requirements imposed for out of network
emergency services cannot exceed the in-network cost sharing
requirements
• Out of network providers may balance bill patients
Provisions in Effect in 2010
Effective for Renewal Dates after
September 23, 2010, Non-Grandfathered Plans
Must:
• Implement a new appeals process
• Plans and issuers must implement an effective internal claims
and appeals process
• If a state mandates an external review process that at a minimum
contains the consumer protections of the NAIC Uniform Model
Act, then issuer may comply with that process
• If the state does not mandate an external process, plans or
issuers must comply with the Federal external review process
• Minimum standards are included in the regulations
Provisions in Effect in 2010
Effective for Renewal Dates after
September 23, 2010, Non-Grandfathered Plans
Must:
• Permit Choice of Health Care Professional:
• If plan requires designation of a primary care provider, plan must
permit designation of any participating primary care provider if
provider participates in network and is accepting patients
• If plan requires designation of a primary care provider for a child,
plan must permit designation of a physician who specializes in
pediatrics as the child’s primary care provider if the provider
participates in network and is accepting patients
• If plan provides OB-GYN care and requires designation of a
primary care provider, plan may not require an authorization or
referral for OB-GYN care
Provisions in Effect in 2010
Effective for Renewal Dates after
September 23, 2010, Non-Grandfathered Plans
Must: (continued)
• Cover preventive services without cost-sharing
• Evidence based items that have a rating of A or B in the current
recommendations of the US Preventive Services Task Force
• Immunizations for routine use in children and adults as
recommended by the CDC
• For children and women, evidence informed care and screenings
as supported by the Health Resources and Services
Administration
• May apply cost-sharing for services provided out of network
• Plans may use medical management to determine frequency,
method, setting, etc to extent not specified in guidelines.
Provisions in Effect in 2010
Effective for Renewal Dates after
September 23, 2010, Non-Grandfathered Plans
Must: (continued)
• Apply non-discrimination rules (fully insured plans) –
different coverage for highly-compensated
employees may not be allowed.
Provisions in Effect in 2010
Important Employer Disclosures
Model language: www.dol.gov/ebsa
• Adult Child
• All plans; must be provided no later than the first day of the first
plan year after 9/23/10
• Grandfathered Status:
• Plans maintaining grandfathered status; must be provided in any
plan materials describing benefits
Provisions in Effect in 2010
Important Employer Disclosures
Model language: www.dol.gov/ebsa
• No Lifetime Limit/Enrollment Opportunity
• All Plan; must be provided no later than the first day of the first
plan year beginning on or after 9/23/10
• Patient Protection
• Non-grandfathered plans; must be provided no later than the first
day of the first plan year beginning on or after 9/23/10
• For plans that require a designation of a primary care provider or
a primary care provider for a child
• For plans that provide OB/GYN coverage and require a
designation of a primary care provider
• Additional Appeals Notices
Provisions in Effect in 2010
Miscellaneous 2010 Provisions
• Wellness plans may not require participants to
answer questions on lawful firearm or ammunition
ownership, storage or use. (Effective for renewal
dates after September 23, 2010.)
• Rebates for Medicare Part D “Donut Hole”: $250
rebate check for all who enter the donut hole
(coverage gap between $2,830 and $6,440 in total
drug spending).
• Indoor tanning services tax: 10% tax on indoor sun
tanning services.
The Future: 2011
2011
Community Living Assistance Services and
Supports (CLASS) Program
• Long-term care program effective 1/1/11 – HHS has
until 10/12 to work out details
• Employees of companies that chose to participate
will be auto-enrolled unless they “opt-out”
• Employees must pay premiums for 5 years before
eligible for benefits
• Premiums may average $150-240/month- based on
age
• Benefit average: $50-$75/day
The Future: 2011
2011
• Health insurance issuers will report on
medical loss ratios – National Association of
Insurance Commissioners (NAIC) is assisting
HHS with rules for this requirement.
• Employers required to disclose value of
health insurance on W-2s.
The Future: 2011
2011
• Costs for over-the-counter medications will not be
reimbursed under an HSA, FSA or HRA without a
prescription.
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IRS Notice 2010-59 issued on September 3, 2010
Expenses for medicines or drugs are reimbursable under a plan
(including a health FSA, HRA or HSAs) only if prescribed (including
over-the-counter) or are for insulin
Does not apply to items that are not medicine or drugs, including
equipment such as bandages or crutches and diagnostic devices such
as blood sugar test kits
FSA or HRA debit cards may not be used after January 1, 2011 for over
the counter drugs as the current system is not capable of recognizing
whether drugs or medicines were prescribed (grace period until January
15 – must provide substantiation after January 15)
The Future: 2011
2011
Simple Cafeteria Plans – Tax-Free Benefits
• Small Employers: 100 or fewer employees during preceding
two years
• Exempt from non-discrimination requirements if
contribution, participation and eligibility requirements are
met
• Employer contribution: must be equal to a uniform
percentage of not less than 2 percent of employee’s
compensation OR 200 percent match of employee
contributions up to 6 percent of employee’s compensation
for the plan year. Rates must be consistent.
• Sole proprietors, members of LLCs, partners in partnerships
and more than 2 percent shareholders still precluded from
participation
The Future: 2011
2011 – Miscellaneous
• HHS will develop standards for providing a summary
of benefits and coverage explanation
• HHS will establish a set of operating rules for
eligibility and health claim status transactions
• Increase tax to 20% on HSA withdrawals that are not
used for qualified medical expenses
2012 – Not much!
• Plans will begin using uniform summary of benefits
and coverage explanation (March 23, 2012)
The Future: 2013
2013
• Medical FSA contributions limited to $2,500 annually
• Employer Medicare Part D subsidy (RDS) (employers
who maintain prescription drug plans for Part D
eligible retirees) eliminated
• Health plans must file a statement with HHS
certifying data and information systems are in
compliance with applicable standards (ETFs,
eligibility, claim status, payments, etc.) by
December 31, 2013
The Future: 2013
2013
• Taxes:
• Individuals: Additional employee share of Medicare (HI) payroll tax
of .9% on earned income over $200,000 individual/$250,000 joint;
PLUS
• Individuals: Unearned income tax of 3.8% on the lesser of (1) net
investment income or (2) the excess of modified AGI over the
threshold amount ($200,000 single or HOH/$250,000 joint or
surviving spouse)
• Businesses: 2.3% excise tax on medical devices sales (eye
glasses, contact lenses, hearing aids, and devices “generally
purchased by the public at retail for individual use” are excepted)
The Future: 2014
2014
Individual Mandate
• Individuals required to maintain “minimum essential
coverage” or pay a penalty. “Minimum essential
coverage” would include enrollment in an employersponsored plan.
• Penalty starts at $95 and increases each year up to
$695 in 2016.
• Families will pay half the penalty amount each year
for children.
The Future: 2014
2014
Employer Penalties:
• PPACA does not mandate an employer to offer health
insurance to employees
• Penalties may apply to an employer with at least
50 full-time equivalents (FTEs):
• Full-time employees (30+ hours per week)
• Part-time employees (total monthly hours divided by 120)
• Excluding full-time seasonal employees who work less than
120 days during the year
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The Future: 2014
2014
Employer Penalties – Apply if:
1. No coverage offered to full-time employees and at
least one full-time employee receives a premium
credit.
2. Coverage offered to full-time employees, but at
least one full-time employee receives a premium
credit.
Premium Credit: A full-time employee receives
premium credits in an exchange plan because his/her
required contribution exceeds 9.5% of his/her
household income or employer pays less than 60%
of covered health care expenses.
The Future: 2014
2014
Employer Penalties – Amounts:
1. No coverage offered: $2,000 per number of full-time
employees minus 30 (monthly assessment).
2. Coverage offered: $3,000 per each full-time
employee who receives the premium credit OR
$2,000 per total number of full-time employees
minus 30, whichever is less.
No penalties imposed on an employer with
respect to any employee who is provided a
free choice voucher.
The Future: 2014
2014
Vouchers
• Employers offering minimum essential coverage who
pay any portion of the costs of the plan will provide
free choice vouchers to “qualified employees”.
• “Qualified employee”: Employee’s contribution is
between 8-9.5% of household income for a tax year
AND employee’s household income is not greater
than 400% of the federal poverty level AND employee
does not participate in the employer’s plan.
The Future: 2014
2014
Vouchers
• Amount of voucher equal to amount employer would
have paid for self-only or family coverage as elected
by employee.
• Employee can credit voucher towards cost of
exchange provided coverage (employer pays
amounts to exchange).
• Any excess amounts are paid to the employee.
• Voucher value is not taxable to employee; deductible
by employer.
The Future: 2014
2014
American Health Benefit Exchanges
• Exchanges established in each state – not insurers,
but access to insurers’ qualified health plans
(Travelocity or Expedia).
• Individuals and small employers – states can define
small employers as 100 or fewer or 50 or fewer.
• Large employers may be allowed into the exchanges
in 2017 (not required).
• Participating employers may limit employees’ choice
of plans to a benefit level, employees then choose
any available plan at that level.
The Future: 2014
2014: Additional Health Insurance Reform
• Health insurance companies are not allowed to:
• Refuse to sell or renew policies based on health status
• Exclude coverage for pre-existing conditions
• Charge higher rates due to health status, gender and other
factors (premiums can vary based on age, geography, family
size, and tobacco use)
• Impose annual limits
• Drop coverage because an individual chooses to participate in a
clinical trial for cancer or other life-threatening diseases or deny
coverage for routine care that they would otherwise normally
provide just because an individual is enrolled in a clinical trial
The Future: 2014
2014: Additional Health Insurance Reform
• Limits on waiting periods: plan cannot impose any
waiting period that exceeds 90 days
• Plans cannot impose any pre-existing exclusion
• Cost-sharing subsidies:
• Individuals eligible for premium credits and are enrolled in a
“silver tier” plan will also be eligible for assistance in paying
cost-sharing
• Subsidies based on HDHP limits for HSAs
• 2/3 reduction for individuals between 100%-200% of federal
poverty level, 1/2 for 201%-300% and 1/3 for 301-400% Secretary makes periodic payments to insurers for the subsidies
The Future: 2014
2014: Taxes and Fees
• Premium tax credits available through exchanges
o Credits available for people with incomes above Medicaid
eligibility and below 400% of poverty level who are not eligible
for or offered other coverage
o Credits apply to premiums and cost-sharing
• Small Business Tax Credit
o Second Phase: Employers can receive a credit for contributions
to purchase health insurance for employees up to 50% of the
premium
• Health Insurance Provider Fee: does not apply to
companies whose net premiums are $25 million or
less
The Future: 2018
2018
Cadillac Tax:
• 40% nondeductible excise tax on high cost
employer-sponsored health insurance plans
• Annual limit (inflation-adjusted): $10,200 for
individuals and $27,500 for other than individual
coverage
• Higher limit for high-risk professions and
Non-Medicare retirees age 55 and older
Resources
Websites
http://healthreform.kff.org/
The End…. For NOW
Questions?
Comments?
Concerns?