Pat. protection and affordable care act


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  • Pat. protection and affordable care act

    1. 1. Patient Protection, Affordable Care Act – Thomas E. Murphy 9/15/10 Thomas E. Murphy 1
    2. 2. Before ObamaCare - Economic Stimulus Legislation • Reduce the cost of COBRA to 35% of full premium for persons laid off. Government reimburses employer sponsors. Layoff must have occurred on or before May 30, 2011, and premium subsidy extends for 15 months. • Partial government funding of Electronic Medical Record mandate. • Free medical tuition for future MDs who practice in underserved communities. 9/15/10 Thomas E. Murphy 2
    3. 3. ObamaCare • Signed March 23, 2010 • Has several effective dates. Major provisions effective Jan. 1, 2014. • Plan design by Congressional and Senate Democratic leadership. • Everyone in the U.S. will be affected by it. 9/15/10 Thomas E. Murphy 3
    4. 4. What is “ObamaCare?” • An individual mandate to • State insurance exchanges acquire health care for eligible individuals and • An employer mandate to employers to buy offer health care. “affordable” health • Effective January 1, 2014 insurance. • Ban insurance restrictions • Enlarged eligibility for on life time and annual Medicaid (133% of FPL for limits, and rescissions single adult under age 65)) • Controlled premium • Reduced costs for Medicare increases, guaranteed ($500 billion) coverage, no exclusions of • Financed by new taxes, pre-existing conditions. fines, and expected Medicare savings. 9/15/10 Thomas E. Murphy 4
    5. 5. ObamaCare – a long and winding road? • Allows for “grandfathering” of plans that need not change their insurance. • Requires coverage of dependent children up to age 26 by employer offering “family coverage.” • Subsidies for employers and individuals who cannot afford mandate. 9/15/10 Thomas E. Murphy 5
    6. 6. Mandated Benefits Now Include Health Care FMLA COBRA USERRA 9/15/10 Thomas E. Murphy 6
    7. 7. Employer Discretionary Retirement Vacations Convenience 9/15/10 Thomas E. Murphy 7
    8. 8. Government Sponsored State Exchanges Medicaid Medicare Military and Social Long Term Veterans Security Care 9/15/10 Thomas E. Murphy 8
    9. 9. What About? HIPPA COBRA Discriminatory Benefits and Compensation? Impact of new taxes and controls on cost of benefits? 9/15/10 Thomas E. Murphy 9
    10. 10. Visualize . . . What will be the design? Based upon the preceding general points: What are the issues here? • How would it work? • What exceptions would have to be made? • How about definitions? • Timetables? • Think deeply – come down the ladder of abstraction 9/15/10 Thomas E. Murphy 10
    11. 11. Basic Economic/Social Theories • Uninsured cause cost shifting – uncompensated care -- mandating coverage will reduce costs. 1. • Restrictions on coverage due to pre-existing conditions, poor health, and annual or lifetime dollar limits on 2. coverage must be “reformed.” • State-based, non-profit insurance exchanges will provide “affordable” insurance to individuals and employers 3. 9/15/10 Thomas E. Murphy 11
    12. 12. Basic Economic/Social Theories • ObamaCare, including new eligibility standards for Medicaid, will insure 24 - 30 million currently uninsured 4. residents. • It will be financed by new taxes on certain industries, the wealthy, reductions in the cost of Medicare, and new fines 5. on non-complying individuals and employers. • ObamaCare will improve health care in the U.S. by increasing access to all. Fear of losing health care will no 6. longer be a concern among our residents. 9/15/10 Thomas E. Murphy 12
    13. 13. Some issues – Individual Mandate • Consequences of non- • How do I meet the new compliance? eligibility standards for • What if you cannot afford Medicaid? it? • Where do I go to buy • What plan of benefits insurance? must you acquire? • With “insurance reform” • What if your employer will the PPACA encourage offers a plan but you adverse selection? cannot afford the • How will Exchange plan required cost sharing? be more “affordable?” 9/15/10 Thomas E. Murphy 13
    14. 14. Issues - Employer Mandate • What consequences for • What plan of benefits non-compliance? must I offer? • What if I’m a small • Who decides this? employer and cannot • Can my plan be afford insurance? “grandfathered?” What’s • What is a “small the significance of this employer?” status? • What if I cover them, but • How will my sponsored the government says it’s health insurance be less too costly for my costly? employees? 9/15/10 Thomas E. Murphy 14
    15. 15. The Basic “Work Flow” Must offer or If Actuarial Value* Premium tax credit obtain Essential is too low or cost or free choice Health Benefits too high voucher Small employers and individuals can Non-compliance *Actuarial value = % of claim buy at State results in fines costs paid by insurance. Exchanges 9/15/10 Thomas E. Murphy 15
    16. 16. Questions? Any questions? “Bronze, platinum, and gold” What is allowable cost sharing by Olympics or plans offered by employer sponsor? Exchanges? What’s a “free choice Who must “auto voucher? enroll?” What’s a “Cadillac What are the new taxes? Plan?” Who must pay? 9/15/10 Thomas E. Murphy 16
    17. 17. Time Tables, Medicaid, & MLRs What are the respective effective dates? How will the additional Medicaid enrollees be financed? Insurance reform also includes premium reviews by government and controls over “medical loss ratios?” What’s this? 9/15/10 Thomas E. Murphy 17
    18. 18. Concerning Issues GAO says medical States are suing to Is ObamaCare costs will increase reverse Medicaid constitutional? not decrease. change Will employers Will individuals and Will new industry unwittingly lose some employers not taxes increase their grandfathered comply and simply health care costs to status? pay the fines? consumers? Does the PPACA Will the law effectively deal with Will Medicare encourage or mark the problem of participants suffer? the end of employer costs? coverage? 9/15/10 Thomas E. Murphy 18
    19. 19. Are we on the right trajectory? Costs will exceed All health estimates delivery and affect systems will deficit. change. 24-30 million Everyone newly affected. covered. 9/15/10 Thomas E. Murphy 19
    20. 20. Solution bigger than the problem? • When the problem was • This could have the uninsured immediately reduced • And the underlying health care costs and cause is our very high made health care more costs affordable. • Should we have simply • Immediately dealt with enlarged Medicaid, the problem of the created a quality-based legitimately uninsured. health care market, and • With much less executed a surge on complexity and cost cost reduction? 9/15/10 Thomas E. Murphy 20
    21. 21. Was the PPACA the right buy? Paying for a Lamborghini? Could aCinqua Cento solution worked better? 9/15/10 Thomas E. Murphy 21
    22. 22. The Timetable On enactment September 23, 2010 • No deductions for excessive • No lifetime limits and restricted annual limits insurance company • Adult children coverage, executive compensation, • First dollar coverage for temporary retiree preventive care reinsurance plan are • No pre-existing exclusion for effective on or 90 days after under 19 years, and non- discrimination premium rules enactment. • Internal and external appeal process, • New financial reporting and disclosure. 9/15/10 Thomas E. Murphy 22
    23. 23. The Timetable January 1, 2011 January 1, and March 23, 2012 • No HSA, FSA, • Uniform explanation of reimbursement for OTC coverage required drugs. • 60 day advance notice of • W-2 reporting for financial plan modifications value of benefits • Reporting and disclosure on • Payroll deductions for corporate service provider voluntary Long Term Care program 9/15/10 Thomas E. Murphy 23
    24. 24. The Timetable January 1, 2013/ March 1, 2013 And then . . . • New Medicare payroll tax on high earnings • Cap on FSA contributions • No deduction for retiree drug subsidy • Comparative effectiveness capitated fee for employers • March 1 – Required employer notification regarding Exchanges 9/15/10 Thomas E. Murphy 24
    25. 25. Timetable - January 1, 2014 • Exchanges operational • No annual limits • Employer and individual • 90 day time limit for mandates, opt-outs, enrollment waiting free choice vouchers, periods. cost sharing and • New wellness incentives premium credits, fines • Essential benefit must and penalties are include clinical trials for effective. life-threatening • No pre-existing diseases. condition exclusions for anyone 9/15/10 Thomas E. Murphy 25
    26. 26. Hogwarts - Ready for the flyover? • What are some of the definitions? • How will it all work? • How do certain provisions inter-relate? • What is the “fine print” of the Affordable Care Act? • See: All the Government Interpretative Rules 9/15/10 Thomas E. Murphy 26
    27. 27. What is Essential Coverage? A Plan Must Provide: And also: 1. out-patient services • 7. rehabilitative and 2. emergency services services and devices, 3. hospitalization, • 8. laboratory services, 4. maternity and pediatrics • 9. preventive and wellness 5. mental health and services, and chronic substance use disorder, disease management 6. prescription drugs • 10. pediatric services, including oral and vision care. 9/15/10 Thomas E. Murphy 27
    28. 28. Fines for non-complying employers • Employer who does not offer health insurance and who has > 50 employees and one FTE receives a premium tax credit to buy in an Exchange, employer must pay fine of $2,000 for each such employee (excluding the first 30) 9/15/10 Thomas E. Murphy 28
    29. 29. Premium Credits . . . . • For those whose annual • Premiums above these income is between 133% and 400% of the FPL, the amounts will be amount of the expected subsidized – a premium premium contribution made credit. by the individual shall range from 2% of annual income to 9.5% respectively of annual income and will be based upon the second level “silver plan” premium available in the Exchanges. 9/15/10 Thomas E. Murphy 29
    30. 30. Premium credits – a little help • The credits are refundable. • They can be advanced to the participant. • So, the idea is if you cannot afford to pay the whole premium, you will receive a premium credit to buy from an Exchange 9/15/10 Thomas E. Murphy 30
    31. 31. A Fine or a Free Choice Voucher Employer sponsor of health insurance Free Choice Voucher • If employer with > 50 • IF employer offers essential employees offers coverage coverage but employee’s and one FT employee premium exceeds 8% but is receives premium credit to less than 9.8% of income, buy in an Exchange, the fine and his income is under is $3,000 for each such 400% of FPL, employer must employee or $2000 for each provide a “free choice and every employee voucher,” and opportunity (excluding the first 30) to “opt out” and buy insurance in an Exchange. 9/15/10 Thomas E. Murphy 31
    32. 32. Free Choice Voucher Free Choice • In such case, no fine, Vouchers ! and the amount of the voucher roughly equals No Fine the employer’s cost. • So the employee “opting out” gets a subsidy from his employer to buy insurance in the Exchange 9/15/10 Thomas E. Murphy 32
    33. 33. Cost Sharing Credits – in addition to premium credits • If employer’s plan • The Actuarial Value provides less than 60% involves the percentage Actuarial Value, or the of claims paid by the employee’s share of the insurer and is affected premium exceeds 9.5% by deductibles, co-pays, of income, the co-insurance, and employee is eligible to annual out-of-pocket receive a cost sharing maximums. credit. 9/15/10 Thomas E. Murphy 33
    34. 34. Cost Sharing Credits • The cost-sharing credits • When income level is reduce the cost-sharing this % of FPL, then AV amounts and annual must be: cost-sharing limits and • 100-150% FPL: AV - 94% have the effect of • 150-200% FPL: AV - 87% increasing the Actuarial Value (AV) of the basic • 200-250% FPL: AV - 73% benefit plan to the • 250-400% FPL: AV -70% following percentages: 9/15/10 Thomas E. Murphy 34
    35. 35. Cost sharing credits – Quantitative Goal? Increase the Actuarial Value What’s the % of claims paid? • To increase the actuarial value of the plan up to 94% for those whose income is between 100 to 150% of the FPL, and it decreases to 70% for those with incomes between 250% and 400% of FPL. (Effective January 1, 2014) 9/15/10 Thomas E. Murphy 35
    36. 36. Remember . . . These subsidies are for buying “American Health Benefit through the Exchanges: Exchanges” • Premium Credits • Cost-sharing subsidies • Free Choice Vouchers • Access to Exchanges restricted to U.S. citizens and legal immigrants 9/15/10 Thomas E. Murphy 36
    37. 37. No Fine for Small Employer - Auto- Enrollment for large employers • An employer with fewer than 50 employees is not subject to a fine whether it offers health insurance or not. • Employer with > 200 employees who offers insurance must auto- enroll all employees in current health plan. 9/15/10 Thomas E. Murphy 37
    38. 38. Fines for non-complying individuals • The flat fee fines increase from $95 per year in 2014, $325 in 2015, $695 in 2016, or alternatively from 1% of taxable income in 2014 to 2.5% in 2016 with a cap of $2085 per year. . • There will be later COLA adjustments. 9/15/10 Thomas E. Murphy 38
    39. 39. What about small businesses? • Employers who offer health care with 25 or fewer employees whose average annual wages are less than $50,000 can receive a tax credit of up to 35% of the employer’s cost of the plan, provided this cost represents at least 50% of the total or 50% of the benchmark premium. (Effective: 2010-14). 9/15/10 Thomas E. Murphy 39
    40. 40. What about small businesses? • A 100% tax credit will be available for those employers with 10 or fewer employees whose annual average wages are less than $25,000. • After 2014, certain small businesses as defined by the law will be eligible to receive tax credits from 50% to 100% of the premium paid to an Insurance Exchange on behalf of their employees. 9/15/10 Thomas E. Murphy 40
    41. 41. Grandfathered Plans (In existence on March 23, 2010) • Grandfathered Plans must • Cannot rescind policies provide for the for health reasons. dependent coverage up • Cannot have enrollment to age 26, unless the waiting periods in excess person has coverage from of 90 days. other source. • Group plans must • Must eliminate all pre- eliminate life time and existing conditions for certain annual under age 19 now. maximums. • All pre-existing conditions • Must contain existing cost restrictions must go for sharing features to group plans by January 1, certain COLA increases. 2014 9/15/10 Thomas E. Murphy 41
    42. 42. Grandfathered Plans Maintain status Loss of Status? Then . . . • Insured Plans that are • No cost sharing for grandfathered must comply preventive care with Medical Loss Ratio • Guaranteed access to provisions. OB/GYN and Pediatricians • Plans that significantly cut • Guaranteed availability and benefits or increase cost renewability of coverage sharing will lose their • Coverage for defined grandfathered status. essential plan • Must provide for appeals • And more . . . 9/15/10 Thomas E. Murphy 42
    43. 43. The New Taxes – Financing of PPACA • Employer sponsors must • No deduction for excess pay a per-capita tax to executive compensation finance comparative at insurance companies. effectiveness. • New taxes on • 40% excise tax on Cadillac pharmaceutical, health plans that provide insurance companies, benefits valued at medical device makers, $10,200/$27,500 and tanning salons. (effective 01/01/2018) • New Medicare payroll tax • New tax of 3.8% on (from 1.45 to 3.5%) on unearned income for high high earners $200,000. income persons. (eff. 01/01/2013) • Fines for non-compliance • New taxes on deductibles 9/15/10 Thomas E. Murphy 43
    44. 44. Taxes – fine print • The law will increase the threshold • There will be a tax on individuals for deductible medical expenses without qualifying health care from 7.5% of adjusted gross income coverage of the greater of $695 up to to 10%; the increase not applicable a maximum of three times that to individuals over 65 for tax years amount or 2.5% of household 2013-2016. (Effective: January 1, income. This will be phased in 2013) beginning 2014 with an individual • Flexible spending account (FSAs) annual fine of $95; the fine increases contributions cannot exceed $2500 over time to the above-described annually and must apply to $695 levels. prescribed medicines and • An excise tax of 40% on the amount treatments, not over-the-counter of a health care plan that exceeds items. $10,200 (single) or $27,500 (family) • The excise tax on non-medical in aggregate value will be levied on distributions from HSAs will increase either the company that insures or from 10% to 20%. (Effective January the employer who sponsors such a 1, 2013) plan. This is often called the “Cadillac Plan tax.” N/A to high risk insurance. 9/15/10 Thomas E. Murphy 44
    45. 45. Taxes - the fine print • The ability of employers to take a tax • There will be a 2.3% excise tax on deduction for the $1300 Medicare the sale of any taxable medical Part D subsidies received from the devices. Effective: December 31, government in exchange for 2012. continuing to offer retiree health • There will be a special excise tax of care will be eliminated effective 10% on tanning studio services. January 1, 2013. • Annual compensation for executives • Special taxes on the pharmaceutical of health insurance providers in industry sector will be levied in excess of $500,000 per year will have aggregate amounts of $2.8 billion in limited deductibility. (Effective: 2012, to $4 billion in 2017, and $2.8 January 1, 2009) billion in 2019. • Similarly the insurance sector will pay aggregate additional taxes of $8 billion in 2014 to 14.3 billion in 2018. Future special taxes will be based on premium growth. • There are special exceptions for non- profit insurance companies. 9/15/10 Thomas E. Murphy 45
    46. 46. Other Provisions • Non-discrimination in • Reporting requirements premiums except to HHS regarding plan premium tiers for family design and details coverage, ratings, (“transparency actuarial value, age, and requirement”) tobacco use. • No premium or cost • Medicare “donut hole” sharing subsidies for deductible will be abortions except where phased out. necessary to save life of mother or is result of rape or incest. 9/15/10 Thomas E. Murphy 46
    47. 47. Claims and Appeals New Obligation to provide internal Will this lead to increased and external appeals of . . . litigation and costs? • Any adverse decision over coverage of a certain treatment, prescribed diagnostic procedure, or illness. • Any rescission of coverage • Process allows external appeal, is expedited, costs paid by employer, and binding final decision. 9/15/10 Thomas E. Murphy 47
    48. 48. Free Preventive Services • No more cost sharing for • Immunizations approved by evidence based care as CDC also must be “first defined by the U.S. dollar.” Preventive Services Task • Does cost sharing mean the Force deductible is not applicable, • The Task Force must give there are no co-pays, and the screening or preventive no co-insurance? care a grade of “A” or “B” in • What if the service is order to qualify for no cost delivered sharing. contemporaneously with • For women and children see non-preventive care? Health Resources and (Separate billing required?) Services Administration. • What’s the policy objective here? 9/15/10 Thomas E. Murphy 48
    49. 49. What are the Exchanges? • States must run • Later, in 2017 larger effective 2014. employers can • Provide low cost, participate in the “affordable” insurance Exchanges. • Available to individuals • Several levels of plans whose employer plan is can be available. too costly or do not have insurance. • Available to small employers. 9/15/10 Thomas E. Murphy 49
    50. 50. The Insurance Exchanges –Plans Types of Plans Affordable Plans • (1) Bronze - essential health • (2) Silver will provide 70% benefits and cover 60% of benefit cost coverage with the benefit costs with out- the same out-of-pocket of-pocket maximums of maximums $5950 (single) and $11,900 • (3) Gold will cover 80%, and (families). • (4) Platinum, 90%, and, • (5) catastrophic plans will be available to those up to 30 years of age and only in the individual market. 9/15/10 Thomas E. Murphy 50
    51. 51. Breast Feeding • The Act requires reasonable time and place for working mothers to breast feed. • Definition:DOL, Wage and Hour Division, Fact Sheet 22. • What do you think the issues are here? Hours worked? 9/15/10 Thomas E. Murphy 51
    52. 52. Long Term Care Program • Working adults must be • Will initially increase given opportunity to deficit enroll in this long term care program. Self-pay, government sponsored • Employer can auto enroll (with opt out) and must offer payroll deductions. • What’s the policy here? 9/15/10 Thomas E. Murphy 52
    53. 53. Flexible Spending Accounts – High Deductibles • FSAs limited to $2500 Smile, Michelle per year. Amounts above will be subject to excise tax. • No pre-tax purchase of over the counter drugs in FSAs, HSAs, or HRAs. • Cost sharing deductibles are limited to $5950 (individuals), $11,900 (family) 9/15/10 Thomas E. Murphy 53
    54. 54. Medical Loss Ratios • This means the insurance company’s Health Care Reform Magazine 17.09.10 percentage of expenses paid for health claims. The lower the OG&A and marketing expense the higher the medical loss ratio. • PPACA requires an 80% - 85% MLR for insurance companies. 9/15/10 Thomas E. Murphy 54
    55. 55. Legal Challenges • States have sued saying PPACA is unconstitutional because Congress cannot require individuals to buy health care, and • Medicaid expansion is an unfunded mandate. • ERISA and PPACA conflict? 9/15/10 Thomas E. Murphy 55
    56. 56. Lifetime, Annual Limits, Rescission, and Patient Protections • After 2014, no lifetime or • No cancellation of annual limits. coverage for health • “Reasonable” limits can reasons. Only for non- be imposed until 2014. payment of premium and • No pre-existing condition fraud. Effective exclusions for pre 19 September 23, 2010. year-olds, effective • Wellness incentive cap is September 23, 2010. increased to 30%. • None allowed after 2014. • Guaranteed issue – no turn downs due to health reasons. 9/15/10 Thomas E. Murphy 56
    57. 57. Interim Pre-Existing Condition Insurance Program Temporary Health Insurance Except for Green Beer Day • Creates a temporary high risk insurance pool. • Effective 90 days after enactment • Eligible will be those who have a pre-existing condition and were uninsured for 6 months. • Eligible to enroll 9/15/10 Thomas E. Murphy 57
    58. 58. Temporary Retiree Reinsurance Plan • Provides health • Payments from the insurance coverage to reinsurance program retirees over age 55 will be used to lower who are not eligible for the costs for enrollees Medicare. in the employer plan. • Program will reimburse (Effective 90 days employers or insurers following enactment for 80% of retiree through January 1, claims between 2014) $15,000 and $90,000. 9/15/10 Thomas E. Murphy 58
    59. 59. Some Questions without Answers • Will the the Exchanges • Will employers opt for provide affordable and no coverage, or attractive health • will employer coverage insurance for small (180 million) remain the employers and key means for most to individuals? obtain health • How? insurance? • What will happen to high deductible plans? 9/15/10 Thomas E. Murphy 59
    60. 60. Some FAQs • Will the cost of health • Will there be a care continue to rise? difference in employer • Will annual limit response to the law prohibition extend to depending on whether special, “non-essential” they are insured or self- health benefits (e.g. insured? “home health care”)? • How will employers • Who will determine provide W-2 preventive care in the information on the future--politicians or value of the health clinicians? plan? 9/15/10 Thomas E. Murphy 60
    61. 61. Questions . . . • Will the PPACA lead to • Will PPACA destroy health care rationing? private health insurance • What constitutes and altogether? who will determine • On what basis will the “acceptable coverage?” insurance companies in Is there room for choice the Exchanges here? compete? • Are the minimum • Will the government set Actuarial Values provider fees? realistic? Fair? 9/15/10 Thomas E. Murphy 61
    62. 62. Are you ready to advise? Come with me • See some DOL/EBSA to Gryffindor FAQs here. • What would you advise an employer with 50 employees who currently offers health care to do? • What about an employer with 200 employees who currently offers care? 9/15/10 Thomas E. Murphy 62
    63. 63. Ready to Advise? • What new Shoot 100 free throws per day! opportunities, products, services might be developed as a result of the PPACA? • What if your client has a grandfathered plan, but needs to increase cost sharing or change insurance companies? 9/15/10 Thomas E. Murphy 63
    64. 64. Big Picture – the Genesis of Reform New taxes, Financing State Insurance Exchanges Insurance reform Government Mandates 9/15/10 Thomas E. Murphy 64