Understanding National Health Reform: A Focus on Employers


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On February 4, 2011, Pam Silberman, president & CEO of North Carolina Institute of Medicine, made this presentation to Chamber members about federal health reform.

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  • Sec. 1001: `(a) In General- A group health plan and a health insurance issuer offering group or individual health insurance coverage shall, at a minimum provide coverage for and shall not impose any cost sharing requirements for--`(1) evidence-based items or services that have in effect a rating of `A' or `B' in the current recommendations of the United States Preventive Services Task Force;`(2) immunizations that have in effect a recommendation from the Advisory Committee on Immunization Practices of the Centers for Disease Control and Prevention with respect to the individual involved; and`(3) with respect to infants, children, and adolescents, evidence-informed preventive care and screenings provided for in the comprehensive guidelines supported by the Health Resources and Services Administration.`(4) with respect to women, such additional preventive care and screenings not described in paragraph (1) as provided for in comprehensive guidelines supported by the Health Resources and Services Administration for purposes of this paragraph.`(5) for the purposes of this Act, and for the purposes of any other provision of law, the current recommendations of the United States Preventive Service Task Force regarding breast cancer screening, mammography, and prevention shall be considered the most current other than those issued in or around November 2009.
  • Employees are eligible for the premium credit if offered coverage by an employer that does not meet requirements for minimum essential benefits (60% actuarial value) or if the premium for employee-only coverage exceeds 9.5% of the employee’s annual income. (Sec. 1401(c)(2)(C) as amended by Sec. 1001 of Reconciliation; Sec. 1501 creating 5000A of Internal Revenue Code of 1986)
  • Full-time employee includes anyone working 30 or more hours/week. Excludes full-time seasonal employees who work less than 120 days/yearHours of part-time employees counted in determining number of full-time employeesDetermined by taking number of monthly hours worked by part-time employees and dividing by 120Example: Employer has 3 part-time employees that work 20 hours/week (80 hours/month). 3 employees x 80 hours = 240 / 120 = 2 full-time employeesWhile number of FT employees counted in determining whether employer must offer coverage, penalty only applies to employees who DO work full-timeCongressional Research Service. Summary of Potential Employer Penalties. April 5, 2010
  • (d) Free Choice Voucher-(1) AMOUNT-(A) IN GENERAL- The amount of any free choice voucher provided under subsection (a) shall be equal to the monthly portion of the cost of the eligible employer-sponsored plan which would have been paid by the employer if the employee were covered under the plan with respect to which the employer pays the largest portion of the cost of the plan. Such amount shall be equal to the amount the employer would pay for an employee with self-only coverage unless such employee elects family coverage (in which case such amount shall be the amount the employer would pay for family coverage).
  • No longer considered “grandfathered” plan if:Eliminates all or substantially all benefits to diagnose or treat a particular conditionDecreases contribution rate by more than 5 percentage pointsChanges coinsurance percentage (ie, 20% to 25% of specific type of service)Fixed-amount cost sharing:Deductibles, out-of-pocket limits: if increase in amount since 3-23-2010 is greater than the maximum percentage increase (medical inflation plus 15 percentage points)Copayments: the greater of either the maximum percentage increase, or $5 increased by medical inflationSource: Interim Final Rules. 75 Fed. Reg. 34538-34570 (June 17, 2010)For group coverage:~31% of small employers and ~18% of large employers will make changes that will require them to lose grandfather status in 2011~66% of small employers and ~45% of large employers will lose their grandfather status by the end of 2013.For non-group coverage:40-67% of policies are in effect for less than one year
  • `(D) The full reward under the wellness program shall be made available to all similarly situated individuals. For such purpose, among other things:`(i) The reward is not available to all similarly situated individuals for a period unless the wellness program allows--`(I) for a reasonable alternative standard (or waiver of the otherwise applicable standard) for obtaining the reward for any individual for whom, for that period, it is unreasonably difficult due to a medical condition to satisfy the otherwise applicable standard; and`(II) for a reasonable alternative standard (or waiver of the otherwise applicable standard) for obtaining the reward for any individual for whom, for that period, it is medically inadvisable to attempt to satisfy the otherwise applicable standard.
  • Understanding National Health Reform: A Focus on Employers

    1. 1. 11Understanding NationalHealth Reform: A Focus onEmployersChapel Hill-Carrboro Chamber ofCommercePam Silberman, JD, DrPHPresident & CEONorth Carolina Institute of MedicineFebruary 4, 2011
    2. 2. Agenda A word about the NC Institute of Medicine Overview of the Patient Protection andAffordable Care Act (ACA) NC Implementation Efforts2
    3. 3. A Word About the NCInstitute of Medicine Quasi-state agency chartered in 1983 by theNC General Assembly to: Be concerned with the health of the people of NorthCarolina Monitor and study health matters Respond authoritatively when found advisable Respond to requests from outside sources foranalysis and advice when this will aid in forming abasis for health policy decisionsNCGS 90-4703
    4. 4. Agenda A word about the NC Institute of Medicine Overview of the Patient Protection and AffordableCare Act (ACA) Background Coverage Other ACA provisions Cost containment and financing Congressional Budget Office estimates NC Implementation Efforts4
    5. 5. 55Background Estimates of the uninsured: Recent Census numbers showed approximately 1.7million non-elderly uninsured in NC (2009) Lack of health insurance impacts on a person’s health People who are uninsured are less likely to receivepreventive services, more likely to end up in the hospitalfor preventable conditions or late stage cancer, andmore likely to die prematurely Lack of insurance coverage affects a family’s financialsecuritySource: US Census. Health Insurance Coverage Status and Type of Coverageby State—Persons Under 65. Table HIA-6.
    6. 6. 66US Health Care Costs RisingMore Rapidly Than Inflationor Earnings (1999-2009)Source: Kaiser/HRET Survey of Employer-Sponsored Health Benefits, 2000-2008. Bureau ofLabor Statistics, Consumer Price Index, U.S. City Average of Annual Inflation (April toApril), 2000-2008; Bureau of Labor Statistics, Seasonally Adjusted Data from the CurrentEmployment Statistics Survey, 2000-2008 (April to April). Claxton G. et. al. Job-BasedHealth Insurance: Costs Climb at a Moderate Rate. Health Affairs. Sept. 15, 2009.
    7. 7. 77National Health ReformLegislation Patient Protection and Affordable Care Act (HR3590) (signed into law March 23, 2010) Health Care and Education Affordability Act of2010 (HR 4872) (also referred to as“reconciliation”) The combined bills are often referred to as theAffordable Care Act (or ACA)
    8. 8. 8Overview of Health Reform By 2014, the bill requires most people to have healthinsurance and large employers (50+ employees) toprovide health insurance--or pay a penalty. Builds on our current system of public coverage,employer-sponsored insurance, and individual (non-group) coverage New funding for prevention, expansion of the healthworkforce, long-term care services, increasing thehealthcare safety net, and improving quality8
    9. 9. Agenda A word about the NC Institute of Medicine Overview of the Patient Protection and AffordableCare Act (ACA) Background Coverage• Public• Private Other ACA provisions Cost containment and financing Congressional Budget Office estimates NC Implementation Efforts9
    10. 10. Expansion of PublicCoverage Currently, childless, non-elderly, non-disabledadults are not eligible for Medicaid—regardless ofhow poor they are Beginning in January 2014, adults will be able toqualify for Medicaid if their income is no greaterthan 138% of the federal poverty guidelines (FPL)* 138% FPL = $30,429/year for a family of four Undocumented immigrants are not eligible forMedicaid or any other insurance coverage madeavailable through this bill10The ACA mandates that states expand coverage up to 133% FPL, but alsoincludes a 5% income disregard, effectively raising eligibility limits to 138% FPL.
    11. 11. 11Medicare Enhances preventive services (Effective Jan 1, 2011 Sec. 4103-4105, 10402,10406) Phases out the gap in the Part D “donut hole” by2020 (Sec. 3301, 3315, as amended by1101 Reconciliation) Strengthens the financial solvency of the Medicareprogram by 12 years (2017-2029)11
    12. 12. Agenda A word about the NC Institute of Medicine Overview of the Patient Protection and AffordableCare Act (ACA) Background Coverage• Public• Private Other ACA provisions Cost containment and financing Congressional Budget Office estimates NC Implementation Efforts12
    13. 13. 13Essential BenefitsPackage HHS Secretary will recommend an essential health carebenefits package that includes a comprehensive set ofservices:* (Sec. 1302) Hospital services; professional services; prescription drugs;rehabilitation and habilitative services; mental health and substanceuse disorders; and maternity care Well-baby, well-child care, oral health and vision services for childrenunder age 21 (Sec. 1001, 1302) Recommended preventive services with no cost-sharing and allrecommended immunizations (Sec. 1001, 10406) Mental health parity law applies to qualified health plans (Sec. 1311(j))13* With some exceptions, existing grandfathered plans not required to meetnew benefit standards or essential health benefits.
    14. 14. 14Essential BenefitsPackage Four levels of plans, all must cover essential benefitspackage: (Sec. 1302(d)) Bronze (minimum creditable coverage): must cover 60% of thebenefit costs of the plan Silver: 70% of the benefits costs* Gold: 80% of the benefit costs Platinum: 90% of the benefit costs Catastrophic plan (only available to people up to age 30 or ifexempt from coverage mandate) (Sec. 1302(e)) With some exceptions, existing grandfathered plansnot required to meet new benefit standards(Sec. 1251, 10103 as amended Sec. 2301 of Reconciliation)14*Subsidies tied to second lowest cost silver plan in the HBE.
    15. 15. 1515Individual Mandate Citizens and legal immigrants will be required to paypenalty if they do not have qualified health insurance,unless exempt. (Sec. 1312(d), 1501, amended Sec. 1002 in Reconciliation) Penalties: Must pay the greater of: $95/person or 1% taxableincome (2014); $325 or 2.0% (2015); or $695 or 2.5% (2016),increased by cost-of living adjustment* Some of the exemptions include people who are not requiredto file taxes, and those for whom the lowest cost plan exceeds8% of an individual’s income (Sec. 1501(d)(2)-(4),(e))*Families of 3 or more will pay the greater of the percentage of income, orthree times the individual penalty amount. The maximum penalty is equal tothe amount the individual or family would have paid for the lowest cost bronzeplan (minus any allowable subsidy).
    16. 16. Subsidies to Individuals Refundable, advanceable premium credits willbe available to individuals with incomes up to400% FPL on a sliding scale basis ($43,320/yr. for oneperson, $58,280 for two, $73,240 for three, $88,200 for a family of four in2010).* (Sec. 1401, as amended by Sec. 1001 of Reconciliation) Individuals are generally not eligible for subsidies ifthey have employer-based coverage, TRICARE, VA,Medicaid, or Medicare (Sec. 1401(c)(2)(B)(C), 1501) In comparison: North Carolina’s median householdincome in 2008 was $46,574 (avg. household = 2.5 people).16*2010 Federal Poverty Levels are: $10,830 for an individual, $14,570 for afamily of two, $18,310 for a family of three, or $22,050 for a family of four. USCensus Bureau. North Carolina. Quick Facts.http://quickfacts.census.gov/qfd/states/37000.html
    17. 17. 17Employer Responsibilities Employers with 50 or more full-time equivalentemployees required to offer insurance or pay penalty(Sec. 1201, 1513, amended Sec. 1003 Reconciliation) Must offer affordable coverage to employee and dependents May not have waiting period of more than 90 days Not required to pay for any part of the premium However, subject to a penalty if:• Employer does not offer coverage that meets essentialcoverage requirements (premium covers 60% of the actuarialcosts of the plan)• Employees qualify for and receive a subsidy in the healthinsurance exchange• Employer penalty only for full-time employees, not dependents
    18. 18. 1818Employer Responsibilities Potential penalties for employers with more than 50 full-time equivalent employees (Sec. 1513, amended by Sec. 1003 Reconciliation) If employer does not offer coverage, the employer must pay $2,000per full-time employee, excluding first 30 employees. If an employer does offer coverage, but at least one full-timeemployee qualifies for and receives a subsidy, then the employermust pay $3,000 for any full-time employee who receives a subsidy(but in no event more than $2,000 per FT employee, excluding thefirst 30 employees). Penalty determined on monthly basis. Employers with 50 or fewer employees exempt frompenalties. (Sec. 1513(d)(2))
    19. 19. 19Free Choice Voucher Employers that offer essential coverage and pay aportion of the costs must provide a “free choicevoucher” to certain employees. (Sec. 10108) If premium is between 8-9.8% of the employee’s annualhousehold income Employee does not participate in the employer-sponsoredinsurance (ESI) Amount of free choice voucher equal to amount employerwould have paid if the individual participated in ESI Employee can use the free choice voucher to purchaseinsurance through the Health Insurance Exchange19
    20. 20. 20Additional EmployerResponsibilities New reporting requirements. For example: (Secs. 1502, 1512,1514, 9002) Employers must report full value of employer-sponsored health insurance (including employee andemployer share and contributions to FSAs) on W-2forms (2011) Employers will be required to report on whether theyoffer essential minimum coverage to full-timeemployees and dependents, length of the waitingperiod, information about each full-time employee whowas covered (2014)
    21. 21. 21Special Rules for DifferentSized Employers Small employers (<100 employees): Deductiblescannot exceed $2,000 (individual) or $4,000 (family)in small group market (Sec. 1302(c)(2), 1304) Large employers (200+ employees): If employeroffers coverage, the employer must automaticallyenroll employees into health insurance plans ifoffered by the employers. (Sec. 1511) Employees can opt out of coverage
    22. 22. 22Tax Credits for SmallEmployers Employers with 25 or fewer employees and averageannual wages of less than $50,000 can receive a taxcredit (Sec. 1421, Sec. 10105) Phase I (2010-2013): 35% tax credit if for-profit employer providescoverage and pays at least 50% of total premium cost. (Full creditlimited to employers with 10 or fewer employees and average annualwages of less than $25,000. Credit phases out for larger employersor higher average wages. Non-profit organization only eligible for25%.) Phase II (2014-later): Maximum of 50% tax credit for up to 2 years(with similar targeting and phase-out, non-profits eligible for up to35% tax credit). Subsidies only available for coverage purchasedthrough the Health Insurance Exchange.22
    23. 23. 23Health Benefits Exchange(HBE) States will create a Health Benefits Exchange forindividuals and small businesses. (Sec. 1311, 1321) Limited to citizens and lawful residents who do nothave access to employer-sponsored or governmental-supported health insurance and to small businesseswith 100 or fewer employees. (Sec. 1312(f)) Exchanges will: Provide standardized information (including qualityand costs) to help consumers choose between plans Determine eligibility for the subsidy
    24. 24. Health Benefits Exchange The following individuals or groups must obtaincoverage through the HBE: Individuals seeking premium and cost-sharing subsidies Small businesses seeking tax credit Individuals given the free choice voucher The following individuals or groups may obtaincoverage through the HBE: Any other qualified individual (ie, a citizen or lawfullypresent immigrant) Small business (as defined by the state)24
    25. 25. Immediate InsuranceProvisions: 2010 (Selected Provisions) New federal website with standardized format to helpconsumers identify affordable insurance (Sec. 1103)(www.healthcare.gov) Effective July 2010, $5B to create a temporary reinsuranceprogram for employers providing health insurancecoverage to early retirees ages 55-64 (2010). (Sec. 1102)25
    26. 26. 26Immediate Insurance-Related Provisions Effective for plan years that begin after September 23, 2010: Prohibits insurers from imposing pre-existing conditionexclusions for children (Sec. 10103(e)) Prohibits insurers from dropping coverage to people whenthey get sick (Sec. 1001) Prohibits plans from imposing lifetime caps; and restricts useof annual caps (annual caps prohibited 2014) (Sec. 1001, as amendedSec. 2301 of Reconciliation) Extends coverage for young people up to 26th birthday throughparents coverage (Sec. 1001) New private plans must cover preventive services with no costsharing (Sec. 1001)26
    27. 27. 2727Insurance Reform: 2014(Selected provisions) Insurers are prohibited from: Discriminating against people or charge them morebased on preexisting health problems (Effective 2014; Sec.1201) Including annual or lifetime limits for essential benefits (Sec.1001, 10101) Insurers are required to: Limit the differences in premiums charged to differentpeople based on age (3:1 variation allowed), and certainother rating factors (Effective 2014; Sec. 1201)
    28. 28. Grandfathered Plans Some of the new insurance protections do not apply tograndfathered plans. For example: Coverage of clinical preventive services New appeal rights Grandfathered plans are group and non-group plansthat were in effect on March 23, 2010 Maintains grandfather status even if some new people enterand others leave the plan, as long as plan has continuouslycovered someone since March 23, 2010. Loses grandfather status if changes made in covered benefitsor significant changes in cost sharing arrangements28
    29. 29. 2929Basics of National HealthReform--Overview Overview of health reform legislation Immediate implementation Private coverage Other provisions Cost containment and financing CBO estimates29
    30. 30. 30Prevention and Wellness:Overview Federal government will provide more funding tosupport prevention efforts at national, state andlocal levels Grant funds will be made available for prevention,wellness and public health activities Some of the focus areas include: healthy lifestylechanges, reduction and control of chronic diseases,health disparities, public health infrastructure, obesityand tobacco reduction, improved oral health,immunizations, maternal and child health, worksitewellness30
    31. 31. 31Prevention and Wellness:Employers Worksite wellness initiatives CDC to provide technical assistance, and there may begrants available to small businesses to offer wellnessprograms (Sec. 4303; Authorizes $200M FY 2011-2015, Sec. 10408) Employers can have wellness programs that includerequirements that enrollees satisfy health status factors (i.e.,tobacco cessation or weight) if the financial consequences(reward or penalty) do not exceed 30% of the costs ofcoverage (Sec. 1201) Employer requirements for breastfeeding employeesfor businesses with 50 or more employees. (Sec. 4207)31
    32. 32. 32Workforce Overview32 Provisions aim to expand and promote better training forthe health professional workforce By enhancing training for quality, interdisciplinary and integratedcare and encouraging diversity By increasing the supply of health professionals in underservedareas By offering loan forgiveness and scholarships to train primarycare, nursing, long-term care, mental health/substance abuse,dental health, public health, allied health and direct careworkforce
    33. 33. 33Quality Overview Providers and payers will be required to report data tomeasure quality of care HHS Secretary will develop quality measures fordifferent populations and organizations Data will be made available to the public Increased emphasis on value-based payments toproviders and insurers Efforts to test new models of care to improve qualityand efficiency Patient-centered medical home, accountable careorganizations, bundled payments33
    34. 34. 3434Long-Term Care Establishes a national voluntary insurance program topurchase community living assistance services andsupports (CLASS) financed through payroll deduction.(Sec. 8001-8002, 10801) Plans provide for a 5-year vesting period and cash benefitsof not less than an average of $50/day to purchase non-medical services and supports Financed through automatic payroll deduction (unless opt-out)
    35. 35. 3535Basics of National HealthReform--Overview Overview of health reform Immediate implementation Private coverage Other provisions Cost containment and financing CBO estimates35
    36. 36. 36Cost Containment &Financing Reduction in existing health care costs through: Increased emphasis on: reducing fraud & abuse,administrative simplification, reducing excessprovider/insurance payments Increased revenues through: Fees paid by individuals/employers for failure tohave/offer insurance Taxes/fees on insurers, pharmaceuticals, tanningsalons, “Cadillac” insurance plans, wealthierindividuals36
    37. 37. 3737Basics of National HealthReform--Overview Overview of health reform Immediate implementation Private coverage Other provisions Cost containment and financing CBO estimates37
    38. 38. 3838Congressional BudgetOffice (CBO) Projections Covers 92% of all nonelderly residents (94% of legal,nonelderly residents) Would cover an additional 32 million people (leaving 23million nonelderly residents uninsured by 2019) In North Carolina, the ACA may expand coverage tomore than 1 million uninsured. Expansion of insurance coverage and newappropriations included in PPACA will cost $938 billionover 10 years. However, with new revenues and other spending cuts,PPACA is estimated to reduce the federal deficit by $124billion over 10 years.*
    39. 39. PPACA: Summary of SomeKey Employer ProvisionsAll employers:•May not discriminate againstlower-paid employees (2010)•Payroll deduction for new CLASS(long-term care insurance) (2011)•Provide information toemployees about healthinsurance exchange (2014)•Offer free choice voucher if offerand pay portion of premium costs(2014)•New reporting requirements (costof health coverage on W-2s, reporting to IRS if offercoverage) (2011, 2014)Large employers:•Offer affordable healthinsurance coverage or pay apenalty (50+ employees) (2014)•Auto-enroll employees inhealth insurance, if offercoverage (200+ employees)(2014)Small employers:•Tax credit available to smallestemployers (<25 employees)with low-wage workers (2010)39
    40. 40. Other NCIOM Resources What Does Health ReformMean for North Carolina?North Carolina MedicalJournal, May/June 2010;71:3 NCIOM: North Carolina data onthe uninsuredhttp://www.nciom.org/data/uninsured.shtml Other resources on healthreform are available at:www.nciom.org/data/healthreform.php40
    41. 41. 4141National Health ReformResources Senate Bill: Patient Protection and Affordable Care Act(HR 3590 signed into law March 23, 2010)http://frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?dbname=111_cong_bills&docid=f:h3590enr.txt.pdf Health Care and Education Reconciliation Act of 2010(HR 4872 signed into law March 30, 2010)http://frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?dbname=111_cong_bills&docid=f:h4872eh.txt.pdf US Health Reform website: www.healthcare.gov Kaiser Family Foundationhttp://healthreform.kff.org/ Congressional Budget Officehttp://www.cbo.gov/ftpdocs/113xx/doc11379/ManagersAmendmenttoReconciliationProposal.pdfhttp://www.cbo.gov/ftpdocs/114xx/doc11490/LewisLtr_HR3590.pdfhttp://www.cbo.gov/ftpdocs/114xx/doc11493/Additional_Information_PPACA_Discretionary.pdf
    42. 42. 42Sliding Scale SubsidiesIndividual orfamily incomeMaximumpremiums(Percent offamilyincome)Out-of-pocketcost sharing:*Out-of-pocket cost sharinglimits**<133% FPL 2% ofincome6% $1,983 (ind)/ $3,967 (fam)(1/3rd HSA limits)133-150% FPL 3-4% 6% $1,983 / $3,967150-200% FPL 4-6.3% 13% $1,983/ $3,967200-250% FPL 6.3-8.05% 27% $2,975/ $5,950 (1/2 HSA limit)250-300% FPL 8.05-9.5% 30% $2,975/ $5,950300-400% FPL 9.5% 30% $3,967/ $7,934 (2/3rds HSAlimit)42*Out-of-pocket cost sharing includes deductibles, coinsurance, copays.**Out of pocket limits do not include premium costs. Annual cost sharing limited to:$5,950 per individual and $11,900 family in 2010 (HSA limits) (Sec.1302(c), 1401, 1402, as amended by Sec. 1001 of Reconciliation)