Healthcare Reform Analysis Prepared by Lewis & Ellis, Inc. Last Revised:

Healthcare Reform Analysis
Prepared by Lewis & Ellis, Inc.
Last Revised:
July 22, 2010
Health Insurance and Market Reform Overview - H.R. 3590 and H.R. 4872
Last Revised:
7/22/2010
On March 23, 2010 President Obama signed H.R. 3590 the Patient Protection and Affordable Care Act (PPACA) into law. On March 30, 2010 he signed H.R. 4872
the Health Care and Education Reconciliation Act (HCERA) into law. There are many significant reforms and changes included in these laws. The following
easy-to-use format summarizes the insurance, benefits and market reforms that our clients may need to address.
These Reforms Include
Page
Revised
Key Definitions
2
7/22/2010
Coverage and Benefit Reforms
3
7/22/2010
Grandfather Rules
7
7/22/2010
Subsidies for Individuals and Employers
10
4/14/2010
Individual Mandates
12
4/14/2010
Employer Requirements
13
5/27/2010
Insurance Reforms
14
7/22/2010
Benefit Exchanges
17
5/27/2010
Medicaid - CHIP Changes
20
4/14/2010
Medicare Changes
20
5/27/2010
Revenue Generating Provisions - Taxes and Fees
21
7/22/2010
Special Reinsurance and Risk Pool Provisions
23
7/22/2010
Glossary
26
4/14/2010
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Indicates current revisions
Lewis & Ellis has spent many hours studying H.R. 3590 and H.R. 4872 and various other publications and has prepared the following as a Summary of the key
provisions of these significant pieces of legislation. There will be additional information and clarification in the coming weeks from HHS and state regulators as
to how the various elements will be regulated or interpreted. We will keep our website up to date when clarifications are released. These bills impact employers,
health insurers, providers of care, Medicare and Medicaid.
We hope you find this useful. Please contact the Health Reform task force team at the Lewis & Ellis Overland Park office if you have questions or need
additional assistance. The primary contact person is Tom Handley at 913-491-3388 or email at [email protected]
Health Reform Analysis - Prepared by Lewis & Ellis
Page 1
KEY DEFINITIONS
Grandfathered Health
Plans
Last Revised:
7/22/2010
Any group health plan or health insurance coverage effective on date of enactment (March 23, 2010) and in which an individual enrolled.
Can be insured or self-insured
While not completely clear, it would appear that the plan can be changed and not lose grandfather status
This will be one of the ongoing issues of the Reform Q&A and regulations
Loss ratio and reporting requirements may not apply. Regulations will hopefully clarify
Small Group
Any employer with at least one employee but not more than 100 employees
Large Group
Any employer with more than 100 employees
Full Time Employee (FTE) Works at least 30 hours per week
Part time employees (PTE) converted to FTE using # PTE hours per month / 120
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Group Health Plan
An employee welfare benefit plan as defined by ERISA that provides medical care to employees or their dependents directly or
through insurance, reimbursement or otherwise
Health Insurance Issuer
Means an insurance company, insurance service or insurance organization (including an HMO) which is licensed to engage in the
business of insurance in a State and which is subject to State law which regulates insurance
Medical Inflation
Increase since March 2010 in overall medical component of CPI-U (unadjusted)
Overall medical component as of March 2010 = 387.142
Maximum Percentage
Increase
Increase in Medical Inflation since March 2010 plus 15%
Health Reform Analysis - Prepared by Lewis & Ellis
Page 2
COVERAGE AND BENEFIT REFORMS
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Last Revised:
Dependent Coverage for
Provide coverage for a dependent child up to age 26 - individual and group if not covered under other employer plan.
Children
This is only an offer of coverage to child - either parent or child can pay premium.
Effective for plan years beginning 10-1-2010 and later.
7/22/2010
Provide coverage for a dependent child up to age 26 - individual and group even if eligible under other employer plan.
Effective for plan years beginning 1-1-2014 and later.
This eligibility applies even if the child: a) no longer resides with the parent; b) is not a dependent on the parent's tax return;
c) is married; or d) is no longer a student. This requirement applies to self-funded plans as well.
Lifetime Limits
Prohibited for individual and group health plans.
Effective for plan years beginning 10-1-2010 and later.
Lifetime limits may continue for some types of services such as in vitro fertilization.
Similarly there may be limits on the number of days of coverage or visits per lifetime.
Annual Limits
Prohibited for individual and group health plans.
Effective for plan years beginning 1-1-2014 and later.
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Allowed Annual Limits (until 2014)
First year
Second year
Third year
$750,000
$1,250,000
$2,000,000
Applies to all plans issued or renewed after 9-23-2010
L&E Estimated Impact (% of claims)
Low
Best Est
High
0.56%
0.86%
1.36%
0.11%
0.11%
0.43%
minimal
Children's Pre-existing
Exclusions
Prohibited for children under age 19.
Effective for plan years beginning 10-1-2010 and later.
Rescission of Coverage
Prohibited for individual and group health insurers. Except in case of fraud.
Effective for plan years beginning 10-1-2010 and later.
Waiting Periods for
Coverage
Waiting period greater than 90 days is prohibited.
Effective 1-1-2014
Pre-Existing Exclusions
Plans may not impose any pre-existing conditions exclusions or limitations regardless of age.
Effective 1-1-2014
Health Reform Analysis - Prepared by Lewis & Ellis
Page 3
COVERAGE AND BENEFIT REFORMS
Preventive Services
Prohibit cost sharing for preventive services at network providers.
Includes: Immunizations, Screenings and Preventive Services as recommended by US Preventive Services Task Force
Effective for plan years beginning 10-1-2010 and later.
If office visit billed separately from preventive services, then cost-sharing can be applied.
Does not apply to Grandfathered Plans
Preauthorization
Preauthorization of services for OB/Gyn, Pediatric and ER services is prohibited.
Does not apply to Grandfathered Plans
Coverage Documents
Uniform coverage documents and standardized definitions developed by HHS (with NAIC)
There will be a 60 day notice requirement for plan changes
Effective 1-1-2011
Reporting Requirements
For Quality of Care
Applies to health insurance issuers and group health plans which will include Third Party Administrators (TPA).
Make available to enrollees during open enrollment.
Provide reports on benefits or provider reimbursement structures that:
- improve health outcomes through case management, care coordination, chronic disease management, etc.
- implement activities to prevent hospital readmissions
- implement activities to improve patient safety and reduce medical errors
- implement wellness and health promotion activities
Effective 4-1-2012
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Last Revised:
Health Reform Analysis - Prepared by Lewis & Ellis
7/22/2010
Page 4
COVERAGE AND BENEFIT REFORMS
New Benefit Standards
Last Revised:
7/22/2010
Will apply to New Plans. Individual or Group Health Plans in existence on March 23, 2010 are exempt from complying.
Effective 1-1-2014
Essential Health Benefits
(includes at least)
Ambulatory patient services
Emergency services
Hospitalization
Maternity and newborn care
Mental health and substance abuse
Prescription drugs
Rehabilitative services and devices
Laboratory services
Preventive and wellness services and chronic disease management
Pediatric services, including oral and vision care
Small Employer Maximum
Deductible (single)
$2,000
Indexed for years after 2014
Levels of Coverage
Effective 1-1-2014
Bronze
Silver
Gold
Platinum
60% of full actuarial value
70% of full actuarial value
80% of full actuarial value
90% of full actuarial value
Limits on Annual
Cost-Sharing
Uses current HSA law - $5,950 single and $11,900 family for 2010.
Indexed for years beyond 2010.
Does not apply to Grandfathered Plans.
Health Reform Analysis - Prepared by Lewis & Ellis
Page 5
COVERAGE AND BENEFIT REFORMS
Wellness Programs
Last Revised:
Grants to small employers that establish wellness programs.
Permit employers to offer discounts / waivers of cost sharing up to 30% of coverage cost, for participating in wellness program(s)
and meeting certain health-related standards.
Effective for plan years beginning 10-1-2010 and later.
Wellness and Health
Promotion Activities
Questions / Opportunities
7/22/2010
Smoking cessation
Weight management
Stress management
Physical fitness
Nutrition
Heart disease prevention
Healthy lifestyle support
Diabetes prevention
There are several plan changes to be made on your next plan anniversary or renewal (10-1-2010 and later)
There will be a number of additional changes effective in 2014
Some of these changes will have a significant financial and administrative impact to plan sponsors as well as health insurers
What impact will the "actuarial value" have? Not fully defined at this point although we have tested what we think it is
The actuarial value calculation will include a value estimate for the employer share of HRA and HSA accounts
What is a "Grandfathered Plan" and how long will that exemption last?
Health Reform Analysis - Prepared by Lewis & Ellis
Page 6
GRANDFATHER PLANS - WHAT IS DIFFERENT?
Last Revised:
7/22/2010
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Dependent Coverage for
Provide coverage for a dependent child up to age 26 - individual and group if not covered under other employer plan.
Children
This is only an offer of coverage to child - either parent or child can pay premium.
Effective for plan years beginning 10-1-2010 and later.
Grandfather
Does not have to offer if child is eligible for an employer plan.
Provide coverage for a dependent child up to age 26 - individual and group even if eligible under other employer plan.
Effective for plan years beginning 1-1-2014 and later.
This eligibility applies even if the child: a) no longer resides with the parent; b) is not a dependent on the parent's tax return;
c) is married; or d) is no longer a student. This requirement applies to self-funded plans as well.
Preventive Services
Prohibit cost sharing for preventive services at network providers.
Includes: Immunizations, Screenings and Preventive Services as recommended by US Preventive Services Task Force
Effective for plan years beginning 10-1-2010 and later.
If office visit billed separately from preventive services, then cost-sharing can be applied.
Grandfather
Preauthorization
Preauthorization of services for OB/Gyn, Pediatric and ER services is prohibited.
Grandfather
Requirements for Plan
Does not have to cover at 100%. Can keep existing cost-sharing
Can still require preauthorization if currently do.
Must have continuously covered someone since 3-23-10.
Not necessarily the same persons but at least one person.
Must disclose that plan is grandfathered. (model language is provided in regs)
Must maintain records documenting status as grandfathered plan
Health Reform Analysis - Prepared by Lewis & Ellis
Page 7
CHANGES THAT CAN RESULT IN LOSS OF GRANDFATHER STATUS
Plan or carrier changes
Last Revised:
7/22/2010
If employer buys new policy after 3-23-10 with different insurer then plan no longer is grand fathered.
Transferring employees from one plan (discontinued) to another would cause the transferee plan to lose grandfather status
(Even if considered an amendment of old plan) (transferee plan could be considered GF if legitimate employment-based reason)
Does allow switching of employees from one option plan to another option plan at open enrollment if both previously GF
(assumes both plans still available)
Changes in Cost-sharing
Provisions
(Includes deductible,
co-pay and OOP max)
Any increase in % coinsurance will cause loss of GF status (for example, from 10% to 20%)
% Increase in deductible or Out of Pocket (OOP) limit that is > Max % Incr
If total increase in fixed copay amount exceeds greater of
A - $ increase in fixed copay that is > $5 increased by medical inflation OR
B - % Increase in a fixed copay (such as office visit) that is > Max % Incr
Medical inflation = overall medical care component (OMCC) of CPI-U change since March 2010
OMCC = 387.142 for March 2010
Max Incr % = medical inflation since 3-23-10 plus 15%
Maximum Change Table
(Assumes 4% annual
change in OMCC)
Deductible
Co-pay
Employer Contribution
Year
2010
2011
2013
2015
Year
2010
2011
2013
2015
Maximum
OMCC % Deductible OOP Maximum
500
4.0%
592
4.0%
634
4.0%
679
OMCC %
4.0%
4.0%
4.0%
Maximum
Co-pay-B
20
24
25
27
Year
2010
2011
2013
2015
OMCC %
4.0%
4.0%
4.0%
Maximum
OOP Max
1,000
1,183
1,268
1,359
Maximum Copay-A
20
25
26
26
Decrease in employer contribution of more than 5 percentage points for any tier will cause loss of GF status
Health Reform Analysis - Prepared by Lewis & Ellis
Page 8
GRANDFATHER PLAN - ADVANTAGE OR DISADVANTAGE?
Advantages
Last Revised:
7/22/2010
1 - Do not have to cover preventive services at 100%
2 - If plan did not cover certain services (such as mental, nervous and substance abuse) at 3-23-2010 then does not have to cover.
3 - Can still have preauthorization of ER, OB-Gyn and Pediatric services or providers
The cost value of 1 and 3 are not significant but value of 2 could be depending on services not covered.
Disadvantages
(Assumes employer wants
to protect GF status)
Cannot change carriers
Limited ability to change (decrease) plan benefits
Limited ability to change (decrease) contribution to health plan
Questions / Opportunities
Is maintaining Grandfather status that important?
Being grandfathered means that you are tied to current benefit plan, current carrier and current level of contributions.
Health Reform Analysis - Prepared by Lewis & Ellis
Page 9
SUBSIDIES FOR INDIVIDUALS AND EMPLOYERS
Last Revised:
4/14/2010
Premium and Cost Sharing Provide refundable and advanceable premium credits to individuals and families with incomes between 100%-400% FPL to
Subsidies to Individuals
purchase insurance through the Benefit Exchanges.
Effective 1-1-2014
Limited to US citizens and legal immigrants.
Employees who are offered coverage by an employer are not eligible unless the employer plan does not have actuarial value of at
least 60% or if the employee share of premium > 9.5% of income.
Premium credits tied to second-lowest cost silver plan in the Benefit Exchange.
Premium credit such that individual's premium contribution limited as follows:
Income Level
Up to 133% FPL
133-150% FPL
150-200% FPL
200-250% FPL
250-300% FPL
300-400% FPL
Premium Contribution as % of income (sliding scale)
2.00%
3.00 - 4.00% Means 3% at 133% FPL up to 4% at 150% FPL
4.00 - 6.30%
6.30 - 8.05%
8.05 - 9.50%
9.50%
Cost-sharing subsidies to eligible individuals and families with incomes between 100%-400% FPL
Subsidy reduces cost-sharing amounts so that actuarial value increased to the percentage below:
Income Level
100%-150% FPL
150%-200% FPL
200%-250% FPL
250%-400% FPL
Percentage
94%
85%
73%
70%
Health Reform Analysis - Prepared by Lewis & Ellis
Page 10
SUBSIDIES FOR INDIVIDUALS AND EMPLOYERS
Premium Subsidies to
Employers
Last Revised:
4/14/2010
Tax credit for small employers who purchase coverage and pay at least 50% of total premium or 50% of benchmark premium.
Small Employer = No more than 25 employees and average annual wages < $50,000
Tax Credit
2010-2013
Varies by size of employer and average annual wage
If ≤ 10 employees and average annual wage < $25,000
Credit = 35% of employer contribution (25% for tax exempt)
Reduced by number of employees over 10 but less than 25 and average annual wage
over $25,000. Credit will not be below 0%.
Example 1: 15 employees and an average wage of $25,000
Credit =
23.3% of employer contribution
Example 2: 8 employees and an average wage of $30,000
Credit =
28.0% of employer contribution
2014-2015
Must purchase through Benefit Exchange to get credit
Employer contributes at least 50% of total premium cost
Credit = 50% of employer contribution (35% for tax exempt)
Reduced by number of employees over 10 but less than 25 and average annual wage
over $25,000 (indexed for inflation after 2013). Credit will not be below 0%.
Questions / Opportunities
The premium subsidies are primarily for small employers.
However, once subsidies are available to individuals and they enroll through an Exchange, the employer could be affected.
(See penalties in section on Requirements).
Health Reform Analysis - Prepared by Lewis & Ellis
Page 11
INDIVIDUAL MANDATES
Mandate for Individuals
Last Revised:
4/14/2010
Requires US citizens and legal residents to have coverage or there is a tax penalty.
If an individual has employer-sponsored coverage then mandate is satisfied.
Year
2010
2011
2012
2013
2014
2015
2016
There are some exceptions for the tax penalty.
Tax Penalty - Annual
(For individuals with
No Coverage)
Questions for Individuals
Penalty
None
None
None
None
Greater of $95 per person in household to a max of 3 OR 1.0% of taxable income
Greater of $325 per person in household to a max of 3 OR 2.0% of taxable income
Greater of $695 per person in household to a max of 3 OR 2.5% of taxable income
Where should they get coverage? Through employer? Through Exchange?
How do they get tax subsidies?
Do they pass on coverage and just pay tax penalty?
What about the high risk pools for coverage prior to 2014?
Health Reform Analysis - Prepared by Lewis & Ellis
Page 12
EMPLOYER REQUIREMENTS
Employer Requirements
Last Revised:
5/27/2010
Required to offer coverage.
Employers with more than 200 employees are required to automatically enroll employees into health plan. Employee may opt out.
Health Cost on W-2
Employer will be required to include the cost of employer-sponsored coverage on W-2.
Employer will need to start working with their payroll vendor to add this value.
This value has not been defined yet.
Effective 1-1-2011
Penalty Fee - No Offer
50 or fewer employees
None
Penalty Fee - No Offer
More than 50 employees
Effective 1-1-2014
Also has at least one employee who receives premium tax credit
Fee = $2,000 per full-time employee (FTE) per year (excludes first 30 employees)
Penalty Fee - With Offer
More than 50 employees
Effective 1-1-2014
Has at least one employee who receives premium tax credit
Fee = lesser of $3,000 for each employee receiving credit OR
$2,000 per full-time employee per year
Penalties are not tax deductible
Free Choice Voucher
Effective 1-1-2014
Employers offering coverage are required to provide a free choice voucher to full time employees
with incomes less than 400% FPL whose share of premium > 8% but < 9.8% of their
income and choose to enroll in a Benefit Exchange.
Voucher = Amount employer would have paid toward employee's coverage under the employer plan,
including dependent coverage if the employee purchases Family coverage from the Exchange
Voucher Incentive
Questions for Employers
Employer will not be subject to penalty for employees receiving premium credits.
How does employer plan actuarial value compare to the Four standard classes - Bronze, Silver, Gold, Platinum?
How does employer calculate the cost for the W-2?
Should employer offer coverage through the Exchanges when they are operational?
What is the impact of some of the coverage expansions? Children to age 26? No pre-existing condition limitations?
What will be the cost of eliminating the lifetime limit?
What impact will the fees on insurers, pharmacy manufacturers and medical device manufacturers have?
What will be the impact of the guaranteed insurability? How much will it change my cost?
Health Reform Analysis - Prepared by Lewis & Ellis
Page 13
INSURANCE REFORMS
Medical Loss Ratios
Last Revised:
7/22/2010
Minimum loss ratio requirement.
Effective for plan years beginning 10-1-2010 and later.
Rebate required if loss ratio < minimum requirement.
Large Groups
Small Groups - Individual
Loss Ratio =
85%
80%
Reimbursement for clinical services plus activities that improve health care quality
Premium less federal and state taxes and fees
Rebates would be paid beginning 2011 for plan years beginning 2010.
Insurers need to begin tracking loss ratios now since rebates start in 2011.
HHS has asked the NAIC to provide their input on MLR guidelines, definition and calculations by June 1, 2010.
NAIC continues to work on guidelines but does not expect to have recommendations to HHS until August.
There is extensive debate as to what activities constitute services that improve quality of care.
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Rating Limitations
Applies to health insurance issuers in the individual or small employer markets.
Effective for plan years beginning 1-1-2014 and later.
Allowed variables for rating:
Coverage Type
Area
Age
Tobacco Use
Single versus Family
One or more in each state as established by state
Will not vary by more than 3 to 1 for adults
Permissible age bands defined by Secretary HHS and NAIC
Will not vary by more than 1.5 to 1
Gender is not allowed as a rating variable.
Agree to charge the same rate for a qualified health benefit plan offered in an Exchange as well as outside the Exchange.
Single Risk Pool
Single risk pools will be used by health insurance issuers for all enrollees in all health plans (individual and small group markets).
Individual Market
Small Group Market
Enrollees in Exchange and enrollees not in Exchange
Enrollees in Exchange and enrollees not in Exchange
Grandfathered health plans are excluded
Health Reform Analysis - Prepared by Lewis & Ellis
Page 14
INSURANCE REFORMS
Last Revised:
7/22/2010
Prohibiting Discrimination
Based on Health Status
Group Health Plan or Health Insurance Issuer of group or individual coverage may not limit eligibility of an individual to enroll based on:
Health status
Medical history
Medical condition
Genetic information
Claims experience
Evidence of insurability
Receipt of health care
Disability
Effective 1-1-2014
Guarantee Issue
Each health Insurance Issuer must accept every employer or individual who applies.
Can restrict enrollment to open enrollment or special enrollment periods.
Effective 1-1-2014
Guaranteed Renewable
Health insurance issuer required to renew coverage as long as they continue to offer in the market.
Effective 1-1-2014
Premium Review Process
Establish an annual review of unreasonable increases in premiums.
Insurers will be required to submit to HHS and the relevant state a justification for increase prior to implementation.
Justification will be posted on Insurer website.
Insurers with patterns of excessive increases may be excluded from participating in Benefit Exchanges.
Effective for plan years beginning after 9-23-2010.
Beginning in 2014 HHS and States will monitor premium increases both within a Benefit Exchange and outside a Benefit Exchange.
What is an unreasonable or excessive increase?
Reporting Requirements
For Quality of Care
Applies to health insurance issuers and group health plans which will include Third Party Administrators (TPA).
Make report available to enrollees during open enrollment.
Provide reports on benefits or provider reimbursement structures that:
- improve health outcomes through case management, care coordination, chronic disease management, etc.
- implement activities to prevent hospital readmissions
- implement activities to improve patient safety and reduce medical errors
- implement wellness and health promotion activities
Health Reform Analysis - Prepared by Lewis & Ellis
Page 15
INSURANCE REFORMS
Questions / Opportunities
Last Revised:
4/29/2010
Health insurance issuers will need to revise their underwriting and rating structures and methodologies.
Provider contracting just became more important as way to distinguish your products.
Guaranteed Issue - what does this mean? Open enrollment rules will be critical? What rating options will HHS, states allow?
Will there be a minimum period for enrollee (especially open enrollment) to maintain coverage? 6 months? 12 months?
What is meant by clinical services and activities that improve quality in MLR discussion?
Will the MLR calculation apply by group? State? Company in total?
How will reinsurance be accounted for?
Health Reform Analysis - Prepared by Lewis & Ellis
Page 16
BENEFIT EXCHANGES
American Health Benefit
Exchange
Last Revised:
5/27/2010
Each State, not later than 1-1-2014, shall establish a Benefit Exchange that:
1) facilitates the purchase of qualified health plans;
2) provides for the establishment of a Small Business Health Options Plan (SHOP)
Administered by a governmental agency or non-profit organization.
Individuals and small employers with up to 100 employees can purchase qualified coverage through Exchange.
Individual employees can choose coverage through the Exchange instead of the company plan.
Can have more than one Benefit Exchange in State as long as each Benefit Exchange serves a specific geographic area.
State-licensed health insurers will be required to participate.
Enrollment periods
An initial open enrollment period for 2014 to be determined by5/27/2010
HHS.
Requirements for Exchange Make available qualified health plans
Implement procedures for certification, recertification and decertification of qualified health plans
Provide a toll-free hotline for assistance
Maintain an internet website that has comparative information on qualified health plans
Assign a rating to each Qualified Health Plan (uses relative quality and price measures to be developed)
Utilize a standardized format for presenting health benefit plan options
Inform individuals of eligibility requirements for Medicaid Programs
Make available (electronically) a calculator to determine cost of coverage after any premium tax credits
Establish a Navigator program
Be self sustaining beginning 2015 by charging assessments or user fees to health insurers
Publish sources of revenue and how funds are used - cannot be wasteful
Premium Considerations
Qualified Health Plans (QHP) will need to submit justification for any premium increase
Qualified Health Plans will display this information on their website
Benefit Exchange will consider excess of premium increases outside Exchange versus iinside Exchange
Excessive or unjustified premium increases could lead to decertification of QHP
Rating limitations in Insurance Reforms section will apply
Benefit Plans
See New Benefit Standards Effective 1-1-2014
Health Reform Analysis - Prepared by Lewis & Ellis
Page 17
BENEFIT EXCHANGES
Navigators
Qualified Health Plans
Last Revised:
5/27/2010
Can be chosen by Benefit Exchange to perform duties listed below. Funded by grants from the Benefit Exchange.
Duties Include
Conduct public education on availability of Qualified Health Plans
Distribute fair and impartial information on QHP and premium tax credits
Facilitate enrollment in QHP
Provide referrals to an office of consumer assistance for consumer complaints or grievance
Eligible Entities
Cannot be a health insurance issuer
Cannot receive any consideration from health insurance issuer for an Exchange enrollee
Trade, industry or professional association
Consumer focused nonprofit group
Chamber of Commerce or Union
Licensed insurance agents or broker
Qualified or licensed, if applicable, entity to engage in the Navigator duties
Minimum requirements to be certified as a Qualified Health Plan:
a) Meet marketing requirements. Do not employ practices that discourage enrollment of individuals of significant health needs.
b) Ensure a sufficient choice of providers. Provide information on availability of network and non-network providers.
c) Include essential community providers within network where available.
d) Be accredited with respect to quality and performance measures such as HEDIS and CAHPS.
e) Implement a quality improvement strategy.
f) Utilize a uniform enrollment form that qualified individuals and qualified employers may use.
g) Utilize the standard format for presenting plan options.
Charge the same premium rate for each benefit plan whether in Benefit Exchange or offered (direct) outside Exchange
Options-Consumer and
Qualified Health Plan
Qualified Health Plan can still offer health plans to individuals or groups outside the Benefit Exchange.
Qualified individual or employer can select a health plan offered outside the Benefit Exchange.
Qualified individual may enroll in any Qualified Health Plan.
Agents or brokers may enroll individuals or employers in any Qualified Health Plan offered through Exchange.
Procedures and compensation to be established by HHS.
Eligible Individuals or
Employers
Must be a US resident or legal immigrant.
Employers of at least one employee but not more than 100 are eligible (States could change limit to 50).
States can allow large employers (100 plus) to enroll in Exchange
Effective 2017
Health Reform Analysis - Prepared by Lewis & Ellis
Page 18
BENEFIT EXCHANGES
Questions / Opportunities
Last Revised:
5/27/2010
If state allows in 2017, can large employers (100 plus) select against Exchange QHP if it has bad experience
and can get lower "community rates" in Exchange?
Health Reform Analysis - Prepared by Lewis & Ellis
Page 19
MEDICAID - CHIP CHANGES
Last Revised:
Expansion of Medicaid
Expand Medicaid to all individuals under 65 with incomes up to 133% FPL.
All newly eligible adults guaranteed a benchmark benefit package that at least provides the essential health benefits.
Effective 1-1-2014
Year
Funding
Financing of Plan
2014
Funded 100% by federal government
(For newly eligible)
2015
Funded 100% by federal government
2016
Funded 100% by federal government
2017 & later Shared by states and federal govt. with increases
in federal medical assistance percentage (FMAP)
Treatment of CHIP
(Children's Health
Insurance Program)
Require states to maintain current income eligibility levels for children in Medicaid and CHIP until 2019.
Extend funding for CHIP through 2015.
Questions / Opportunities
For Medicaid plans, what kind of risk is the newly eligible adult member?
Will the network need modifying to accommodate more adult members?
What will the states allow from a pricing standpoint?
MEDICARE CHANGES
Part D Benefits
Last Revised:
4/14/2010
5/27/2010
Provide a $250 rebate to Medicare beneficiaries who reach Part D coverage gap in 2010.
Gradually increase coinsurance paid by Medicare in coverage gap from 0% in 2010 to 75% by 2020.
Require 50% discount from Drug Manufacturers on brand name drugs filled in coverage gap beginning 2011.
Part D premiums will become income-related
RDS amounts no longer excluded from taxable income, necessitating a change to employer's deferred tax asset
Effective 1-1-2013
Medicare Advantage
Freezes Medicare Advantage payments in 2011.
Reductions in Medicare Advantage payments begin in 2012.
Questions / Opportunities
It may be time to restructure retiree prescription drug benefits
Health Reform Analysis - Prepared by Lewis & Ellis
Page 20
REVENUE GENERATING PROVISIONS - TAXES AND FEES
Changes to Flexible
Spending Accounts (FSA)
Last Revised:
7/22/2010
Over-the-counter drugs not prescribed by doctor are excluded from reimbursement.
Effective 1-1-2011
Annual contributions for medical expense limited to $2,500.
Effective 1-1-2013
Increased by cost of living adjustment for years after 2013
Changes to Health Savings
Accounts (HSA)
Over-the-counter drugs not prescribed by doctor are excluded from reimbursement.
Effective 1-1-2011
Increase tax on distributions not used for qualified medical expenses to 20% (from 10%) of disbursed amount.
Effective 1-1-2011
Medicare Part A Tax Rate
Tax rate from 1.45% to 2.35% on wages > $200,000 (single) or $250,000 (married filing joint).
Effective 1-1-2013
Excise Tax on Insurers of
High Cost Employer Plans
"Cadillac Plan Tax"
Applies to the health insurance company or TPA for self insured.
Effective 1-1-2018
Tax = 40% of value of plan over threshold amounts.
Threshold Amounts:
«
Single
Family
If annual trend to 2018 is:
Maximum Monthly
Single
Premiums in 2010
Family
«
Medicare Part D Retiree
Drug Subsidy
$10,200
$27,500
8.7%
436.10
1,175.75
6.0%
533.30
1,437.82
5.0%
575.31
1,551.09
10.0%
396.53
1,069.08
Higher limits for:
early retirees (55-64)
high-risk occupations
Plan Value includes:
Reimbursement for medical expenses from FSA or HRA
Employer contributions to HSA
Coverage for supplementary health insurance (excluding dental and vision)
Eliminate tax deduction for employers who receive Part D subsidy - subsidy will be considered income.
Effective 1-1-2013
Health Reform Analysis - Prepared by Lewis & Ellis
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REVENUE GENERATING PROVISIONS - TAXES AND FEES
Annual Fee for Drug
Manufacturer
Annual Fee for Medical
Device Manufacturer
Annual Fee on Health
Insurers and TPA's
Last Revised:
7/22/2010
Fee is for sales of brand name drugs.
The revenue collected goes to the Medicare Part B Trust Fund.
Effective 1-1-2012
Year
Revenue to be Generated
2012
$2.8 billion
(estimated by L&E to be equivalent to 0.25% - 0.40% of health plan premium)
2013
$2.8 billion
2014
$3.0 billion
2015
$3.0 billion
2016
$3.0 billion
2017
$4.0 billion
2018
$4.1 billion
In the form of an excise tax.
Tax = 2.9% of the sale of any taxable medical device.
Excludes: Eyeglasses, Contacts, Hearing aids
Effective 1-1-2013
Applies to health insurance premiums and third party administrator (TPA) fees.
Year
2014
2015
2016
2017
2018
Revenue to be Generated
$8.0 billion
(estimated by L&E to be equivalent to 0.65% - 0.90% of health plan premium)
$11.3 billion
$11.3 billion
$13.9 billion
$14.3 billion
There are some exclusions (non profit insurers-only 50% of premium and others).
Comparative Effectiveness
Research Fee
Fee used to fund Comparative Effectiveness Research and will be paid by employer
Fee = $1 per participant in first year and $2 per participant thereafter
Effective for each policy year ending after 9-30-2012
Ends in plan years after 9/30/2019
Questions / Opportunities
Can health insurance issuers pass on these new fees?
How will they impact the medical loss ratio requirement?
The tax change on the retiree drug subsidy will impact those employers who are taxable. Will employers maintain the drug plan?
Will employer plan hit the high cost threshold for the excise tax in 2018?
Health Reform Analysis - Prepared by Lewis & Ellis
Page 22
SPECIAL REINSURANCE AND RISK POOL PROVISIONS
Reinsurance for Retirees
over age 55 not eligible
for Medicare
Last Revised:
7/22/2010
National program administered by Secretary of HHS. Funded up to $5 Billion.
Covers retirees age 55 and over plus their eligible spouses or dependents.
Reimburses employers or their insurers.
Reimburses 80% of retiree claims between $15,000 and $90,000
Participation limited to program funding.
Employer to use reimbursement to lower costs from plan.
Reduce Premium Contributions
Lower Co-pays, Deductible, Coinsurance or Out-of-pocket Costs
Employer must apply for program and be approved
Effective 90 days after enactment through 1-1-2014.
Application will be available in June.
The process will be similar to process used for Retiree Drug Subsidy.
Both self-funded and insured programs are eligible.
Payments are retroactive for a plan year.
Important to begin determining portion of costs between $15,000 and $90,000 so can be ready to apply in June.
«
Some of the information that must be provided identified to date:
Applicant's name, address, federal tax ID and other contact information
Assurances that sponsor has agreement with insurer or plan that information will be provided to HHS
Assurances that sponsor has procedures to detect fraud, waste and abuse
Summary of sponsor's procedures to generate cost savings for participants with chronic conditions
Projected amounts of reimbursements for first two years
List of all benefit options under plan for which early retiree is eligible and can claim reimbursement
Reimbursements must be used to reduce sponsor's premiums or benefit costs or reduce plan participant's health plan contributions
Must not be used as general revenue for sponsor
Can deposit reimbursements back in trust or fund if used solely for benefit of participants
Only claims incurred after 6-1-2010 can be reimbursed but those incurred prior can satisfy $15,000 initial threshold
«
Estimated annual value of reinsurance per retiree (2010) using L&E clients =
«
All applicants will be accepted. Reinsurance reimbursements on a first come first served basis until money runs out.
Health Reform Analysis - Prepared by Lewis & Ellis
$1,900
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SPECIAL REINSURANCE AND RISK POOL PROVISIONS
Temporary High-Risk Pool
7/22/2010
Establish a temporary national high-risk pool to provide coverage to persons with pre-existing conditions.
Must have pre-existing condition and uninsured for at least 6 months.
Premiums will be subsidized.
Premiums for pool established for a standard population with a 4 to 1 limit on age variance.
Benefits
Benefit payments > 65% of allowed costs.
Maximum out-of-pocket limits are $5,950 single and $11,900 family in 2010.
Funding
Premiums from participants, plus $5 billion to fund shortfall of premiums for term of program.
Term of program
Administration
Transitional Reinsurance
Program
Last Revised:
Effective 90 days after enactment through 1-1-2014.
Directly administered by Secretary HHS or by a State or nonprofit private entity approved by HHS.
Federal fallback (used by over 20 states) is being administered by GEHA.
Effective for years 2014 through 2016. Established by the states.
State will establish or contract with one or more reinsurance entities to cover high risk individuals in the Individual market.
Reinsurer makes payments to health insurance issuers that cover high risk persons in the Individual market.
High Risk individual identified as person with one of 50 - 100 medical conditions identified as high risk.
Funded by payments from health insurance issuers and TPAs (for group health plans) that will aggregate to:
Year
2014
2015
2016
Payments
$12 billion
$8 billion
$5 billion
Health insurance issuer payment in proportion to their revenue and benefit costs of high risk persons
Effective 2014-2016
Risk Adjustment
Applies to health plans and health insurance issuers in the Individual and Small Group markets in a State
(Both in the Exchange and outside the Exchange)
Low Actuarial Risk Plan
Actuarial risk of enrollees in the plan < average actuarial risk of all enrollees in all plans
High Actuarial Risk Plan
Actuarial risk of enrollees in the plan > average actuarial risk of all enrollees in all plans
Low Risk Plan
High Risk Plan
Effective 2014
Assessed a charge by the State
Payment provided by the State
Will not include self insured plans (subject to ERISA) or grandfathered plans
Health Reform Analysis - Prepared by Lewis & Ellis
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SPECIAL REINSURANCE AND RISK POOL PROVISIONS
«
Questions / Opportunities
Last Revised:
7/22/2010
Reinsurance for retirees (55-64) can reduce some expense of providing this benefit but employers need to act quickly.
The temporary high-risk pool - will funding of $5 billion be enough?
How does a health insurance issuer adjust for the risk adjustment in their pricing?
How will standard premiums for temporary high risk pool be determined? (100% of standard non-group rate)
Will these premiums vary by area? Premium for temporary high risk (PCIP) is a state-wide rate.
Health Reform Analysis - Prepared by Lewis & Ellis
Page 25
GLOSSARY
Last Revised:
Actuarial Value
The percentage of the total covered expenses the health plan will cover.
Undefined in the healthcare bills. Regulations will hopefully clarify.
CAHPS
Consumer Assessment of Healthcare Providers and Systems Program
A public-private initiative to develop standardized surveys of patients' experiences with ambulatory and facility-level care.
CHIP
Children's Health Insurance Program
FSA
Flexible Spending Account
Full Time Employee (FTE)
Works at least 30 hours per week.
Part time employees (PTE) converted to FTE using # PTE hours per month / 120
4/14/2010
4/14/2010
Some of information that must be provided identified to date
Applicant's name, address, federal tax ID and other contact information
Assurances that sponsor has agreement with insurer or plan that information will be provided to HHS
Assurances that sponsor has procedures to detect fraud, waste and abuse
Summary of sponsor's procedures to generate cost savings for participants with chronic conditions
Projected amounts of reimbursements for first two years
List of all benefit options under plan for which early retiree is eligible and can claim reimbursement
Reimbursements must be used to reduce sponsor's premiums or benefit costs or reduce plan participant's health plan contributions.
Must not be used as general revenue for sponsor
Can deposit reimbursements back in trust or fund if used solely for benefit of participants
Only claims incurred after 6-1-2010 can be reimbursed but those incurred prior can satisfy $15,000 initial threshold,
Estimated annual value of reinsurance per retiree (2010) using L&E clients =
Grandfathered Health Plans
$1,900
Any group health plan or health insurance coverage effective on date on enactment (March 23, 2010) in which an individual enrolled.
Can be insured or self-insured.
While not completely clear, it would appear that the plan can be changed and not lose grandfather status.
This will be one of the ongoing issues of the Reform Q&A and Regulations.
Loss ratio and reporting requirements may not apply. Regulations will hopefully clarify.
Health Reform Analysis - Prepared by Lewis & Ellis
Page 26
GLOSSARY
Last Revised:
4/14/2010
Group Health Plan
An employee welfare benefit plan as defined by ERISA that provides medical care to employees or their dependents directly or
through insurance, reimbursement or otherwise.
Health Insurance Issuer
Means an insurance company, insurance service or insurance organization (including an HMO) which is licensed to engage in the
business of insurance in a State and which is subject to State law which regulates insurance.
HEDIS
Healthcare Effectiveness Data and Information Set
Used to measure performance on important dimensions of care and service.
HHS
United States Department of Health and Human Services
HRA
Health Reimbursement Account
HSA
Health Savings Account
Large Group
Any employer with more than 100 employees.
NAIC
National Association of Insurance Commissioners
Part Time Employee (PTE)
Works less than 30 hours per week.
QHP
Qualified Health Plan
Small Group
Any employer with at least one employee but not more than 100 employees.
Health Reform Analysis - Prepared by Lewis & Ellis
Page 27