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national health care reform update - understanding the new plan - update november 2012

national health care reform update - understanding the new plan - update november 2012






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  • The major point in all of this is that if the Federal Premium Subsidy does in fact take effect in 2014 then right now these state exchanges will have the exclusive authority to administer that subsidy – much the same way that states have exclusive authority to administer the Medicaid grants from the Federal government (as opposed to private insurers)…
  • Kimberly Belshe is former Secretary of Health and Human Services in California and a long time health care expert. Diana Dooley was voted in as Chair and was appointed by Governor Brown (was on his staff). Paul Fearer comes from the Pacific Business Group on Health (PBGH) who formerly had taken over the old Health Insurance Plan of California (HIPC) and turned it into Pacific Health Advantage.

national health care reform update - understanding the new plan - update november 2012 national health care reform update - understanding the new plan - update november 2012 Presentation Transcript

  • National Health CareReform –Understanding TheNew Plan Updated November, 2012 Presented by David L. Fear, Sr. RHU Partner, Shepler & Fear General Agency Roseville, California
  • Historical Perspective… Medicare and Medicaid were passed into law in 1965 ERISA signed into law in 1974 TEFRA, COBRA in 1983, 1986 Medicare Reform Act in 20031/29/2013 2
  • PPACA - history HR3590/HR4872 signed into law in March, 2010  2,700 page rough draft became the law  Largest piece of health related legislation since Medicare/Medicaid  Many provisions went into effect immediately  Regulations released since 2010 and more expected in the future  Major portion of the law is scheduled to go into effect on 1/1/20141/29/2013 3
  • PPACA – history: The Supreme Court SCOTUS ruled 5-4 on 6/28/2012: Chief Justice Roberts writing for the majority:  The individual mandate is legal because it is in fact a tax and congress has the right to levy taxes  Forcing the States to expand Medicaid funding by taking away all funding if they did not expand it was not legal The Chief Justice did not want the Court to be “legislating” and basically said that if the people don‟t like the law, then have Congress change it… 1/29/2013 4
  • PPACA and future elections 2012 elections:  President Obama re-elected and unlikely to agree to amendments  Senate remains in Democratic control and still requires 60 vote supermajority to approve any changes in the law (unlikely)  Republicans maintain control of House but are unlikely to hold more repeal votes  May propose some compromise of minor provisions of the law as part of negotiations pertaining to other matters Administration will now move forward to release regulations to clarify many points of the law between now and 1/1/2014 1/29/2013 5
  • Big picture – what’s happening 2010 through 2013 – Law  After 2014 – additional initiated and first provisions changes are also go into effect (some are scheduled suspended or delayed)  Visit www.healthcare.gov 2014 – Mandates and Major for updates… Market Reforms go into  Note: amendments can be effect: enacted and change this  Individual mandate timeline and some provisions can be delayed via executive  Employer “play or pay” decision.  Exchanges  Note: Majority of funding  Insurance reforms was appropriated prior to  Reporting, penalties 1/1/2011 1/29/2013 6
  • 2010: What happened… Grandfathered Status was available for plans in effect on the date of enactment:  May keep such a plan only if no changes are made to the plan (other than to add or delete employees or changes scheduled as a result of a collective bargaining agreement) Phase 1 of a Small Employer Tax Credit went into effect for eligible small businesses  Less than 25 full-time equivalent employees with an average wage of under $50,000 A Temporary Reinsurance Program began on 6/29/2010:  For employers who provide retiree health coverage for employees over age 55  $5 billion was allocated and all used up by the spring of 2012  Most funding went to Unions, Public Entities and Large Employers with retiree health benefits1/29/2013 7
  • 2010: What happened… Section 105(h) non-discrimination rules were to have gone into effect for plan years beginning after 9/30/2010 for all fully insured plans:  Employer penalties of $100/day per Highly Compensated employee (similar to HIPAA)  Enforcement delayed as of 12/22/2010 and will waive penalties for non-compliance in the absence of official “guidance”  Expect regulations on this after 11/6/2012 A National High-Risk Pool for people with a pre-existing condition in effect on 7/1/2010:  Works through existing State pools  Employers penalized if they place employees or dependents into the pool  Financed by $5 billion Federal appropriation  Ends on 12/31/20131/29/2013 8
  • 2010: What happened… Secretary of Health and Human Services (HHS) and States developed Information Portal Options for state residents to obtain uniform information on sources of affordable coverage (including an Internet site)  www.healthcare.gov rolled out 7/1/2010  A Federal grant program for small employers providing wellness programs to their employees went into effect on 10/1/2010:  No grants have been applied for, therefore none have been awarded…1/29/2013 9
  • 2010: What happened… Plan years beginning after 9/30/2010:  All individual and group plans (including self insured) were required to:  Eliminate all lifetime benefit limits  This includes grandfathered plans  And a prohibition on annual benefit limits will go into effect by 1/1/2014;  No longer permits coverage rescissions in all markets except for cases of fraud or misrepresentation;  Treat all emergency services as in-network regardless of provider used *;  Allow enrollees to designate any in-network provider as their primary care physician *;  A new coverage appeal process was to have been implemented; *both of these have been delayed…1/29/2013 10
  • 2010: What happened… Beginning plan years after 9/30/2010:  All individual and group plans (including self insured) are required to:  Cover dependents up to age 26:  Includes married dependents  Through 2014, grandfathered plans only have to cover dependents that do not have another source of employer-based coverage;  Cover pre-existing conditions for children 19 and under :  Grandfathered status applies for group health plans;  Carriers restricted plan offerings to children as a result of this, but this seems to be easing up 1/29/2013 11
  • 2010: What happened… Also for plan years after 9/30/2010:  All individual and group plans (including self insured) will be required to:  Provide specific preventive care services with no cost sharing (i.e. deductibles, coinsurance, copays);  Offer minimum covered services based on existing Federal guidelines on specific topics  There were rate adjustments as of 10/1/2010 to offset this benefit increase  Grandfathered plans were exempted from this until they lose that status1/29/2013 12
  • 2010: What happened… Federal review of health insurance rates was to have been established by 10/1/2010  Secretary of HHS – will have authority to monitor carrier premium increases  To prevent unreasonable rate increases  Publicly disclose the information  Carriers may be barred from participating in an exchange if they have a “pattern of unreasonable increases”  $250 million grant to States to help them increase their review and approval process of health insurer rate increases  Most States applied for and have received a portion of grant funding in 2010 including CA  Secretary HHS has elected to work through existing State regulators…1/29/2013 13
  • 2010: What happened… Minimum Loss Ratio (MLR) requirements:  Large group (100+) MLR is 85%, Small group (under 100) and Individual MLR is 80%  Carriers will have to issue a premium rebate for plans that fail to meet the minimum MLR requirements  First premium rebates went out in August, 2012 for the 2011 policy year for both individuals and employers  Employers have asked for guidance on how to distribute rebate dollars to employees who contributed:  Some will issue employee refunds  Most will take a credit against future payments1/29/2013 14
  • 2011: What happened… The tax for non-qualified distributions from an H.S.A. increased from 10% to 20% Required Over-The-Counter (OTC) drugs to be prescribed in order to be reimbursed from FSA/HSA/HRA plans A public Long Term Care program (CLASS Act) was to have started on 1/1/2011 but was delayed indefinitely on 10/14/2010:  Would have generated $90 billion in payroll taxes for five years before benefits paid  Found to be actuarially unsound The “1099 reporting provision” was to have gone into effect, but was repealed by congress (bi-partisan)1/29/2013 15
  • 2012: What happened… A federal tax on fully insured and self- funded group plans to fund federal comparative effectiveness research  Tax will be $2.00 per enrollee per year  Paid in 2013 for 2012 plan participants Employers required to include the aggregate cost of employer-sponsored health benefits on an employee’s W-2 for tax years beginning in 2011 (issued in 2012)  Excludes contributions to FSA/HSA/HRA plans  Includes total amount paid by both Employer and Employee  This has been delayed by a year for employers with less than 250 W-2’s  Report is for “informational purposes”1/29/2013 16
  • 2013: What will happen… The Medicare tax (2.9%) is increased an additional .9% for employees and self employed on their earnings above $200k/single ($250k/joint)  This additional tax is not deductible by self employed individuals The 3.8% Medicare tax be levied on certain unearned income for individuals with AGI of $200k/single ($250k/joint) A $2,500 cap on Medical F.S.A. contributions by employers (annually indexed for inflation)1/29/2013 17
  • 2013: What will happen… Threshold for itemized deduction for unreimbursed medical expenses (schedule A) will be increased from 7.5% to 10% of AGI:  Increase will be waived for individuals age 65 and older for tax years 2013 through 2016 States have to indicate by 1/1/2013 if they are going to set up a Health Insurance Exchange for their residents:  Federal Fallback Exchange would be developed for States who fail to set one up themselves (“Partnership Arrangement”)  Exchanges will begin open enrollment of individuals and small employer groups on 10/1/20131/29/2013 18
  • 2014: The Individual Mandate All American citizens and legal residents will be required to purchase “essential” health insurance coverage or pay a fine (“tax”) Exceptions will be allowed for:  Religious objectors  Incarcerated individuals  Hardship waivers, individuals with income less than 100% of FPL  Members of Indian Tribes  People with no income tax liability  Individuals not „lawfully present‟  Those who were not covered for a period of less than three months during the year1/29/2013 19
  • 2014: The Individual Mandate The penalty for non-compliance of the individual mandate is the higher of:  A percentage of gross household income equal to:  1% in 2014  2% in 2015  2.5% in 2016  Capped at the value of the average bronze-level insurance premium (60% actuarial value), or  A flat amount equal to:  $325 per person in 2015  $696 per person in 2016 Mandate applies to employed and unemployed persons:  If their employer does not provide an essential benefit plan, they must still comply and pay penalty if they fail to obtain essential coverage1/29/2013 20
  • 2014: Federal Premium Subsidy A Federal health insurance “premium subsidy” becomes available to qualified individuals:  A sliding-scale refundable tax credit paid to the carrier (through the Exchange) for individuals or families with incomes of between 133% and 400% of Federal Poverty Level*  (Family of 4 @ $22,000 = 100% of FPL)  Subsidy only available through an Exchange  Not available to employees of employers who offer “affordable” and the “minimum value” coverage to their employees  Amount of subsidy based on the “Silver” level benefit in the exchange rating area where the person resides and is higher for families than for individuals *Subsidy can be changed in 2019 if total exceeds .504% of Gross Domestic Product 1/29/2013 21
  • 2014: Market Reforms All health insurance coverage will be guaranteed issue and guaranteed renewable in all markets (Individual, Small Group, Large Group) Pre-existing condition exclusions will be prohibited in all markets (Individual, Small Group, Large Group) Full prohibition on any annual or lifetime limits in all individual, group and self funded plans  The “Phase In” from 2010 will be eliminated Benefit plans will become more standardized with some variance allowed on a State-by-State basis:  Small employers will be offered only “essential” benefit plans  “Excepted” plans will be available1/29/2013 22
  • 2014: Market Reforms Redefines the small group market as 1- 100 employees  States may elect to reduce this to 1-50 for plan years prior to 1/1/2016 (California is) All fully insured individual and group policies up to 100 lives must abide by strict community rating standards:  Premium variations only allowed for:  Age (3:1 price ratio)  Tobacco use (1.5:1 price ratio)  Family composition  Geography (regions defined by States)  Experience rating will be prohibited  Wellness discounts are allowed for group plans under specific circumstances1/29/2013 23
  • 2014: The Employer Mandate Employers with the equivalent of 50+ full time employees* must provide health benefits to full time employees that:  Meet a “minimum value” standard, and;  Meet an “affordability” test with regard to how much an employee must pay for such coverage Mandate applies regardless of whether an employer is fully insured or self funded Failure to do this will result in a fine paid by the employer, which is the lesser of:  $2,000 x no. of full time employees (less 30), or  $3,000 x no. of full time employees who receive an exchange premium subsidy Employers are NOT required to provide coverage to part time employees** 50 full time employee definition includes pro-rated part time employees based on 30+ hours per week; Seasonal employees who work less than 120 days per year are excluded from the count. 1/29/2013 24
  • 2014: The Employer Mandate Expect that “minimum value” will parallel “essential benefits” definition which applies to individual and small employer plans  Designated covered, limited and excluded expenses  Maximum cost sharing provisions (deductibles, coinsurance, copayments)  Allow for “catastrophic” plans for employees under age 30 “Affordability” test based on employees share of single coverage for the lowest benefit tier plan cost less than 9.5% of employee‟s W-2 income (not household income per proposed regulation)1/29/2013 25
  • If the employer has 25 or Penalties doStart Does the employer have at not apply to fewer employees and  least 50 full-time NO  small  average wage up to $50,000, it may beHere equivalent employees? employers. eligible for a health insurance tax credit. YES  The penalty is $2,000 Did at least one The employer annually times the employee receive a must pay a number of full-time Does the employer offer coverage to its workers? NO  premium tax credit or cost sharing YES  penalty for  employees minus 30. The penalty is increased each subsidy in an not offering year by the growth in Exchange? coverage. insurance premiums. YES  Employees can Does the coverage pay for choose to buy at least 60% of covered coverage in an health care expenses for a NO  Exchange and  The penalty is $3,000 annually for each full- typical population? receive a premium The employer time employee receiving subsidy. must pay a a premium subsidy, up to a maximum of $2,000 YES penalty for times the number of full-  not offering affordable  time employees minus 30. The penalty is Those employees Do any employees have to increased each year by can choose to buy coverage. pay more than 9.5% of coverage in an the growth in insurance family income for the YES  Exchange and  premiums. employer coverage? receive a premium subsidy. NO  Information provided by No employer penalty The Henry J. Kaiser Family Foundation1/29/2013 26
  • 2014: The Employer Mandate All employers must give notice of the existence of a health benefit exchange Limits employee waiting periods to 90 days Expect that the Section 105(h) non- discrimination requirements to be enforced ($100/day penalty) Expect the Auto-Enrollment for groups of 200+ to be enforced  Employees will be able to opt-out if they have other coverage HIPAA workplace wellness rules will change – incentive values increase from 30% to 50% 1/29/2013 27
  • 2014: Health Insurance Exchanges Exchanges are a key part of how health insurance will be delivered:  States are expected to either establish exchanges by 2014 or the Feds will do it for them if they haven‟t acted by 2013  Federal grant funding available to the States up to 2015 to offset set-up costs*  Feds provide broad outline of benefits, services and features but will leave details to the States Exchanges will have the exclusive administration of subsidies in 2014:  Individual premium subsidy  Small Employer Health Insurance Tax Credit  They are developing an online administrative program for the qualification of these subsidies* California has received nearly $250 million by August 2012… 1/29/2013 28
  • 2014: Health Insurance Exchanges Exchange functions include:  Certifying, re-certifying & de-certifying Qualified Health Plans to participate  Establish a toll-free hotline & internet website  Transfer data to the U.S. Treasury  Rating Qualified Health Plans  Providing standardized information on benefits  Screening & enrolling into the Exchange, Medi-Cal, Healthy Families  Granting exemptions from the individual mandate  Provide employer notification  Determine eligibility for Premium Subsidy and Tax Credits  Establish a Navigator program  Submit to annual audit of performance 1/29/2013 29
  • 2014: Health Insurance Exchanges Primary focus is for sale of qualified plans to individuals, however:  Must also create “SHOP Exchanges” for Small Employers to purchase coverage  States are allowed to create a single exchange serving both individual and small group markets or separate exchanges for each of those markets  California will have two separate exchanges operating under one jurisdiction (“Covered California”) PPACA allows large employer groups to participate in State exchanges beginning in 2017 Prior to 2012 election, state response was mixed with many rejecting funds and declining to move forward Following election, Feds are reaching out again to try to incentivize States to take action 1/29/2013 30
  • Employer attitude about Exchanges A high number of small employers may drop group coverage and encourage employee enrollment into an exchange to take advantage of the subsidy Larger employers are less likely to do this and in fact seem to be leaning toward joining private exchange arrangements  Also weighing the cost of the “play or pay” penalties ($2,000/$3,000) versus changing plan and continuing forward with group coverage Exchange concept appeals to employers with low paid workforce, smaller in size and in high turnover industries The exchange concept makes sense in more competitive markets1/29/2013 31
  •  California is the first state to enact legislation to set up an exchange  SB-900 (Alquist) and AB-1602 (Perez) were signed into law on 9/30/2010 by Gov. Schwarzenegger Visit their website at www.healthexchange.ca.gov  View “Grant Reporting” section of the site to track progress per Federal requirements  All other public documents are posted for review:  Minutes of board meetings and related materials  Quarterly grant reports1/29/2013 32
  •  Five Board Members have been appointed:  Kimberly Belshé  Diana S. Dooley, Chair  Paul Fearer  Susan Kennedy  Robert Ross, MD The Executive Director is Peter V. Lee (formerly of Pacific Business Group on Health and CMS) HBEX has received nearly $250 million in Federal Grant funding since it‟s start up in January, 2011 They are dealing with key issues  Information Technology (IT)  Stakeholders  RFP’s for services including TPA and Navigator grant funding  Plan design, carrier selection, agent relations Recently named itself “Covered California”1/29/2013 33
  •  Federal grants will end on 12/31/2014 – after that all Exchanges will be self sufficient Private 501-c foundations are also granting money and in-kind services to States to assist in building Exchanges  Blue Shield of California (actuarial)  California Health Care Foundation (IT) The Feds are looking at California as the example of how to do this:  There is bi-partisan support in California for an exchange for small businesses  Moving traditional Medi-Cal members into a managed care program – budget issues  Forging consensus among parties to make it work and be self sufficient1/29/2013 34
  • What about Exchange Navigators? Navigator Duties & Responsibilities  Make available information that is fair, accurate and impartial;  Conduct public education activities to raise awareness of plans in the Exchange:  Facilitate enrollment in qualified health plans;  Provide referrals for any enrollee with a grievance, complaint, or question regarding their health plan, coverage, or a determination under such plan or coverage; and  Provide culturally and linguistically appropriate information for the population being served by the Exchange. PPACA specifically bars a Navigator from receiving consideration (i.e. commission) directly or indirectly from any health insurer 351/29/2013
  • What about Exchange Navigators? Entities that may be Navigators  Trade, industry, and professional associations, Ranching and farming organizations, Community and consumer-focused nonprofit groups,  Chambers of commerce, Unions,  Small business development centers,  Licensed insurance agents and brokers,  Other entities that can carry out the required duties, meet the required standards and provide fair, impartial and accurate information  Insurers & Health Plans and their employees are specifically prohibited from being Navigators1/29/2013 36
  • Exchanges and Insurance Agents No Federal prohibition on agents placing business with an Exchange  Leave it up to States to determine the role of agents California Exchange has embraced agents as part of the solution of insuring the uninsured  Will allow agents to sell individual and SHOP (small group) products  Will allow agents to be paid “market level” compensation for placing business  Has agreed to work with General Agents for the SHOP exchange  Included agents as stakeholders in the process of developing the Exchange  Relationship is not exclusive as Navigators will be appointed too…1/29/2013 37
  • 2014: What else will happen Allows states to apply for a waiver for up to five years of requirements relating to:  Qualified health plans  Exchanges  Cost-sharing reductions  Tax Credits  The Individual responsibility mandate  The Employer shared responsibility mandate  Providing that the State creates its own programs meeting specific standards Imposes annual taxes on private health insurers based on net premiums  Self Funded plans are exempt from this tax1/29/2013 38
  • After 2014: More to come 1/1/2018 - implementation of a 40% excise tax on insurers of employer sponsored health plans with aggregate values that exceed $10,200* for singles and $27,500* for families (*adjusted for inflation annually):  Transition relief would be provided for 17 identified high-cost states;  The above values include reimbursements from F.S.A.‟s, H.R.A.‟s and employer contributions to H.S.A.‟s;  Stand-alone dental and vision are excluded from the calculation;  Premium values are indexed to the CPI;  Plans will be allowed to take into consideration age, gender and certain other factors that impact premium costs.1/29/2013 39
  • Concluding thoughts… The role for advisors has never been more important than today  Employers need help in strategizing their benefits offering, especially with regard to cost, plan design and funding issues  Consumers will need help in purchasing and paying for coverage they were not eligible for in the past, especially in the area of Premium Subsidy and plan selection  Both Employers and Consumers are facing serious compliance issues and penalties that will require assistance to navigate over the next 2-3 years  Navigators may help individuals but are unlicensed and have narrow knowledge and not well suited to assist businesses in any of this Licensed insurance advisors have an opportunity to cross sell other products besides health insurance  Ancillary benefits, personal lines, supplemental products, Medicare/Senior products A multi-lines agency will need support from trained professionals in compliance, product and legal issues related to PPACA for individuals and small businesses1/29/2013 40
  • Information provided by Proud members of the 2140 Professional Drive, Suite 150 Roseville, CA 95661 Telephone: 1-877-361-7342 Telefax: 1-888-360-7342 Email: Insurance@sheplerfear.com1/29/2013 41