Health Care Reform After The Supreme Court Ruling

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Health Care Reform after the Supreme Court Ruling

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Health Care Reform After The Supreme Court Ruling

  1. 1. August 23, 2012 Jim Wisdom, CFPJames L. Wisdom Insurance Services
  2. 2.  Introduction Summary of Supreme Court Ruling Impact of „12 Election on Health Care Reform What to expect prior to 1/1/14 The Main Event: What to expect after 1/1/14 Impact on Employers/Providers/Insurers/Brokers Key Benefits of Health Care Reform Trends / Consequences of Health Care Reform Impact on your firm What can you do to assist your clients? Q&A
  3. 3.  Employed in the Insurance/Financial Services Industry since 1985 Insurance Broker/Consultant since 1996 Started James L. Wisdom Insurance Services in 2003 Goal: To share my perspective/opinions in hopes that we can more effectively serve our clients in the coming years. Note: We do not provide tax or legal advice
  4. 4.  Individual mandate deemed unconstitutional under the Commerce Clause Individual mandate (effective 1/1/14) deemed constitutional under taxing power States can‟t be compelled to comply with enhancements to Medicaid effective 1/1/14
  5. 5.  Health Care Reform likely to stay regardless of our next President Any chance of GOP Repeal efforts would require 1) keeping the House; 2) winning the White House; and 3) a filibuster proof (60+) majority in the Senate Budget reconciliation a possibility for certain provisions
  6. 6.  Certain provisions already in effect Insurance carriers will avoid rate increases greater than10% per year (bad P.R.) Carriers will control health care claims costs via reduced benefits, tiered networks and more pre-authorization New taxes to pay for PPACA
  7. 7.  Reduced benefits Increased Out-of-Pocket Maximums Increased Deductibles Separate buckets for Network and Non- Network Deductibles Separate buckets for Network and Non- Network Out-of-Pocket Maximums Increased Coinsurance % paid by insureds
  8. 8.  Ways that carriers can use tiered networks: Create a subset of their existing HMO networks (“most cost-effective providers”) Ditto for existing PPO networks The bottom line: reduction in patient access to providers
  9. 9.  Employees: +.9% Medicare tax on earnings ($200K for singles; $250K for joint filers) 3.8% tax on net investment income (not indexed for inflation) Flex Spending Accounts capped at $2,500/yr. 2.3% excise tax on Medical Device manufacturers Itemized deduction threshold for unreimbursed medical expenses rises to 10% of AGI from 7.5% of AGI ◦ This tax postponed for those over 65 until 2017
  10. 10.  It‟s a whole new ball game State Based Exchanges start up Individual mandate kicks in Guaranteed Issue applies Employer “pay or play” provision applies 3:1 ratio in pricing between youngest and oldest age bands 40% “Cadillac Tax” effective 1/1/18 ◦ This tax is not indexed for inflation
  11. 11.  To be up and running by 1/1/14 CA is leading the way Exchanges are state-created marketplaces where insurance products can be easily compared. Available to individuals and small groups Some states are creating exchanges, others are not Fed. Govt. can establish a state-based exchange if the state doesn‟t do so
  12. 12.  16 states have created exchanges as of August 1, 2012 Subsidies in the form of tax credits available to people who earn up to 400% of FPL ◦ In 2012, 400% of FPL= $44,680 (individual) and $92,200 (family of four)
  13. 13.  Some individuals who obtain Exchange coverage eligible for federal subsidies Subsidies available for Exchanges established by states It is unclear if subsidies will be available in federally-run state Exchanges. ◦ If no, then no penalty may apply
  14. 14.  Individuals must prove they purchased minimum essential coverage or face a penalty Penalty increases from 2014 to the greater of $695/year or 2.5% of income (indexed thereafter) Federal premium subsidies available on a sliding scale for individuals up to 400% of FPL as described earlier (available only through Exchanges)
  15. 15.  Health Insurers must take all applicants No Pre-Existing Conditions No Underwriting
  16. 16.  Applies to employers with 50+ Full Time Employees (and their Dependents) or 50+Full Time Equivalent Employees (and their Dependents) Employer must offer minimum essential coverage to all Employees and Dependents
  17. 17.  Annual Tax of $2,000 for each F/T Employee (less the first 30), if at least one F/T Employee obtains federally subsidized coverage through an “Exchange”
  18. 18.  If one F/T Employee obtains federally subsidized coverage through an Exchange, the employer must pay an annual tax of the lesser of (1) $3,000 per subsidized F/T Employee; or (2) $2,000 for each F/T Employee (less the first 30 F/T Employees)
  19. 19.  Employer pays $2,000 X the number of F/T employees, if at least one F/T employee obtains subsidized health coverage in an Exchange Employer can subtract the first 30 employees from this calculation Annual Penalty = (51 Employees – 30 Employees) X $2,000= $42,000 1/12 of penalty assessed monthly
  20. 20.  Employer offers minimum essential coverage Three employees purchase subsidized health coverage through the Exchange Employer pays the lesser of (1) $3,000 X number of F/T employees who received subsidized coverage through the exchange OR (2) $2,000 X the number of F/T employees. Employer can subtract the first 30 employees from this calculation
  21. 21.  Employer pays the lesser of: $3,000 X 3 Employees= $9,000 $2,000 X (51Employees – 30 Employees) = $42,000 Employer pays $9,000 per year 1/12 of penalty assessed monthly
  22. 22. Young adults not only have to buy coverage, but their premiums may double or triple. Example: 2012 Age Rating (6:1 Ratio) 62 yr. old - $600/month 28 yr. old- $100/month 2014 Example (3:1 Ratio) 62 yr. old- $600/month 28 yr. old- $200/month
  23. 23.  For industries that haven‟t offered Health Insurance- premiums likely to increase significantly. Industries that have offered Health Insurance ◦ Unknown: The rates/benefits of the CA Exchange ◦ Employers offering H.S.A. plans may be forced to offer lower deductible plans (increased premiums) ◦ Guarantee Issue Underwriting is likely to drive up premiums
  24. 24.  For industries that haven‟t offered Health Insurance - Costs likely to increase significantly For industries that have offered Health Insurance- ◦ Incentive to reduce # of F/T Employees below 50 to avoid penalties ◦ Guarantee Issue should raise premiums ◦ Unknown: The rates/benefits of the CA Exchange
  25. 25.  35 Million More Insureds Supply of providers fairly constant Demand for services likely to increase substantially Expect longer wait times Examples: Canada, Massachusetts More doctors may forgo insurance and practice concierge medicine
  26. 26.  More customers= more premiums However, profits regulated due to Medical Loss Ratio (Medical Loss Ratio) requirements After 2014 (Guaranteed Issue), maintaining profitability may prove to be difficult
  27. 27.  Ranks of Agents specializing in individual health insurance is declining Commissions likely to be reduced Agents/Brokers are diversifying their books of business prior to 1/1/4 Unclear of whether Agents/Brokers will have a role in the Exchanges
  28. 28.  You may be able to buy insurance you cannot now afford If you have a pre-existing condition, you will be able to buy insurance for the same premium as that paid by people in good health If you have a very expensive, ongoing health problem, there will be no annual limitation for your health coverage No charge for routine preventive care 35 Million more Americans will be insured Strong incentives for employers to adopt a company sponsored wellness program
  29. 29.  Value Based Plans will gain popularity Ditto for Company Sponsored Wellness Programs Enrollment in Health Savings Accounts will decline somewhat Costs may escalate due to many factors: more insureds, guarantee issue, watered down penalty Young adults will be forced to buy coverage at a high rate to subsidize the older folks The Exchanges are an unknown at this point Certain industries will shrink and/or raise prices substantially Some employers may drop health coverage and pay the penalty IPAB could prove to be controversial
  30. 30.  You will probably start getting more questions on this topic (if not already) A lot of confusion about this comprehensive, complex law This law will be fully implemented in 2018 A number of new taxes- however, they won‟t apply to many Americans There will be administrative requirements ◦ Example: Employee notice of benefit summary
  31. 31.  Pay particular attention to employers who may be subject to a penalty (50+ employees) Your clients will have questions-we can assist Develop a business relationship with a broker/agent that is knowledgeable about this law Keep your broker/agent informed of what CPA‟s are being told regarding Health Care Reform The regulations are still being written
  32. 32.  Jim Wisdom, CFP James L. Wisdom Insurance Services 4607 Lakeview Canyon Road - Suite 482 Westlake Village, CA 91361 Work: (805)497-9264 Cell: (818)469-6640 E-Mail: jim@wisdomhealthplans.com Web Site: www.wisdomhealthplans.com Blog: www.jimwisdom.wordpress.com Also on Linked In, Twitter and Facebook

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