Health Insurance Reform Update

There are two new employer responsibilites with healthcare reform. One upcoming responsibility requires that employers must report to their employees the actual dollar value of their health insurance coverage under the group plan. However, the IRS and the Treasury Department have decided to make this requirement optional for 2011 to give employers additional time to adjust their payroll systems and prepare for this W-2 mandate.

Another new responsibility requires eligible employers to submit written confirmation regarding their contribution levels to their carriers in order to maintain grandfathered status. During the healthcare reform debate the Obama Administration promised that people who liked their current coverage would be able to keep it. That's called grandfathering and groups loose their grandfathered status if: (1) a group chooses a new carrier after March 23, 2010; (2) a group chooses any benefit changes after March 23, 2010; (3) an employer changes contribution levels after March 23, 2010; (4) a group does not maintain at least 1 employee at all times in all grandfathered plans. Employer groups with grandfathered plans must provide their carriers written confirmation at each renewal stating that their contribution levels have not been reduced by more than 5% since March 23, 2010. Carriers will send employers attestation letters that they will need to complete and fax back and contracts will be modified stating that employers must notify the carrier if they reduce contribution levels.

Employers should contact their tax or payroll professionals regarding implementation of the W-2 mandate.

Health Insurance Reform Update

September 23 has passed and ushered in a period of uncertainty for the health care industry with 3 more years of changes, ending with the individual mandates of 2014 and forcing insurers to do business within state based health insurance exchanges. Insurers are already adapting but the Republicans are now promising a vigorous campaign to chip away at the reforms with their new Pledge to America. Although health care reform is now law they could impact the funding if they regain control of Congress and President Obama's 2012 re-election occurs before the final reforms are scheduled to be implemented in 2014.

During the health care reform debate President Obama promised that people who liked their current coverage would be allowed to keep it. That's called grandfathering and employer group plans will only lose their grandfathered status if:

• The group chooses a new carrier after 3/23/10
• The group chooses any benefit changes after 3/23/10
• The employer changes contribution levels after 3/23/10
• The group does not maintain 1 enrollee at all times in all grandfathered plans

As the premiums continue to rise substantially employers may find it difficult, if not impossible, to maintain their grandfathered status. Changing carriers, making benefit changes to lower premiums, and cost shifting are almost a necessity for employers to continue to offer health insurance to employees amid the double digit rate increases this year. In fact, since 1999 the share of premiums paid by employees has increased 159%. But while employee contributions have grown significantly, the coverage has eroded substantially. This trend will probably only continue as the costs of health care reform are absorbed.

Health Insurance Reform Update

Well the day has finally arrived! Starting today, September 23, the health insurance reform mandates become applicable to all health insurance plans except those that are grandfathered.

The law requires that all plans include free preventive care with no co-pays, coinsurance, or deductibles applicable; no additional charges for emergencies outside the plan's network; a pediatrician or OB/GYN can be chosen as a Primary Care Physician; no lifetime limits or annual dollar limits on essential health benefits; parents can keep adult children on their health insurance until age 26; insurers must accept children under 19 with any pre-existing conditions; and insurers cannot rescind coverage when an insured gets ill and has expensive costs but can only rescind due to fraud and intentional misrepresentation.

From a humanitarian point of view these are all applaudable reforms and once the requirement to also accept adults with pre-existing conditions and the donut hole in Medicare prescription drug plans is closed in 2014 the social inequities of our healthcare system will have been corrected. However, the inevitable cost to insurers, the federal government, employers, and consumers has yet to be revealed and I suspect that cost will be high. Insurance premiums are continuing their upward spiral this year in the midst of healthcare reform and some insurers are opting out of certain markets that requires them to take possibly unprofitable business as evidenced by some insurance companies in Florida, Oklahoma, and now California suspending the sale of Children Only policies.

Many Americans are confused as to how healthcare reform will effect them. The benefit reforms are all positive and provide health insurance for those that were previously denied coverage. This would reduce the ranks of the uninsured if the premiums were affordable but the premiums for the gap coverage for adults with pre-existing conditions that most states have rolled out recently are exorbitant. And since Individual and Group plans have continued to renew with double digit rate increases it seems that unless and until the premium costs are reformed the goal of healthcare reform cannot be met. We'll see if the proposed exchanges to be implemented in 2014 will, indeed, drive down rates.

Health Insurance Reform Update

Until 2014 purchasing health insurance is voluntary (except in the state of Massachusetts) and insurance companies can charge higher risk individuals higher premiums. But in 2014 the rules change and everyone is required to have health insurance and insurers must accept those with pre-existing conditions at the same premium as those without. There will be government subsidies and state exchanges to assist those who need help with the premiums. And until then people who can't get coverage because of pre-existing conditions can buy insurance from new government insurance programs run by their individual states. These bridge programs are aimed at those who have been uninsured for at least 6 months who have health conditions that prevent them from getting coverage with private insurers.

During the transition I predict higher premiums due to the additional benefits and protections required of all health plans this year such as the prohibition of lifetime limits, the requirement to cover preventive services without co-pays, and allowing parents to keep their children on their plans until age 26. Another, often overlooked consequence of healthcare reform, has been the ability of consumers to appeal health plan decisions and proposed rate increases. Most notably was Blue Cross of California's proposed 39% rate increase on Individual & Family Plans in March of this year. Consumer outrage and adverse publicity caused the Dept. of Insurance to investigate and, although a more modest increase of 14% was approved and becomes effective on October 1, insurers have been put on notice that they will have to cost justify any rate increases moving forward. Also, a pattern of excessive and unjustifiable rate increases could cause an insurer to be excluded from the state exchanges. The new healthcare law requires insurance companies to spend at least 80 cents of every premium dollar on medical care or activities to improve quality.

Health Insurance Reform Update

Starting September 23, 2010 health insurance companies must remove lifetime limits and annual dollar limits on essential health benefits. The health care reform law allows a phased in implementation. The Dept of Health and Human Services will give a final definition of essential health benefits but the list is expected to include the following services:

• Alcoholism treatment services
• Asthma education
• Bariatric surgery
• Chiropractic
• Diabetic supplies
• Durable medical equipment
• Hearing aids
• Home health care
• Hospice
• Infusion therapy
• Kidney disease treatment
• Mental health/substance abuse
• Outpatient occupational, physical, and speech therapy
• Prescriptions
• Preventive care
• Prosthetic devices/limbs
• Skilled nursing services
• Transplants
• Treatment for TMJ

Although most of these benefits are already available on California health plans, benefits vary from state to state depending on state laws.

Health Insurance Reform Update

BREAKING NEWS! As a result of the new mandate prohibiting the exclusion or denial of health insurance for children under the age of 19 due to pre-existing medical conditions, some big insurers have decided to stop writing new coverage on kids. Employer sponsored plans are not affected but Blue Cross, Blue Shield, Aetna, and Golden Rule (United Healthcare) in Florida and some local insurers in Oklahoma have already notified their insurance commissioners that they will stop issuing individual policies for children. It should be noted that they will not cancel policies already issued but will not write new policies.

This is definitely an unintended consequence of the healthcare reform law but raises plausible concerns with the law. If insurers are required to accept all children, even those with serious medical issues, what would prevent parents from waiting until a child gets sick to enroll them, creating adverse selection, long a bane of insurance companies. Some insurers are proposing an open enrollment period for the guaranteed children's coverage where parents could only get guaranteed coverage during a designated time each year.

In my opinion, this seems like a fairly reasonable approach and would limit misuse of the healthcare system. Further discussion of this matter will be necessary as the guaranteed coverage is extended to adults in 2014. Although the federal law proposes a fine or penalty for individuals who do not purchase health insurance either privately or through the exchanges to be established, the same misuse could occur whereby an individual chooses to pay the fine until he/she becomes ill and needs health insurance. As long as the fine is less than the insurance premiums this will be yet another unintended consequence of healthcare reform that could threaten the solvency of big and small insurers and cause many to exit the market.

Health Insurance Reform Update

Interim final rules have been published regarding pre-existing conditions, limits, rescissions and other patient protections mandated by the new federal healthcare reform.

Pre-existing conditions: No longer allowed for children up to age 19 beginning with plan years/policy anniversaries after September 23, 2010. The prohibition of pre-existing condition exclusions and denial of health insurance due to pre-existing conditions begins for all others January 2014. Grandfathered individual plans are exempt from this provision, but not grandfathered group health plans or newly issued individual plans.

Rescissions: Rescissions must be based on fraud or intentional misrepresentation of material fact and a health plan can only be terminated prospectively, not retroactively. In the event of a valid rescission, a 30 day advance notification is required.

Lifetime and annual limits: Health insurance plans can no longer include annual or lifetime dollar limits. Individuals who have previously reached their annual or lifetime maximums must be given a special enrollment period to reinstate their benefits.

Patient protections: Health plans that require primary care physicians must allow members to choose any available in network doctor including a pediatrician for children. Plans must also allow members to receive OB/GYN care without a referral. Members needing emergency room services cannot be required to get preauthorization and insurers must cover out of network emergency room care at the same level as in network services.

As these were, perhaps, the most egregious issues with individual health insurance plans, these provisions should protect consumers against insurer abuses highlighted in recent years as stories of members being cancelled in the midst of expensive and life threatening illnesses have been reported.

Health Insurance Reform Update

The new healthcare reform is proving most advantageous for Small Employer groups and Individuals. Small business owners, those with 2-50 employees, have a new tax credit available starting this year that is rather significant. And, it applies to dental, vision, and a few other limited scope coverages as well as traditional health insurance.

The tax credit is available to small employers that pay at least 50% of the premiums for employee coverage; have less than 25 employees; and pay average annual wages of less than $50,000. This includes for-profit businesses and tax-exempt nonprofit organizations. For tax years 2010 to 2013 the maximum credit is 35% of premiums paid by for-profit employers and 25% for nonprofits. In 2014 the credit will increase to 50% and 35% for nonprofits.

The IRS is informing potentially eligible small business groups about this new federal tax credit. Business owners should consult their tax advisor and can also go to the IRS website for additional information, a 3-step worksheet to see if they qualify, and an informational video with frequently asked questions.

Health Insurance Reform Update

Starting today, July 1, individuals with pre-existing conditions can start applying for the new federal health coverage in most states except Michigan, Illinois, and California, to name a few of the states that will miss the deadline. One of the major components of the federal healthcare reform law was to provide for health insurance coverage for those individuals denied coverage due to serious medical conditions, such as cancer or diabetes, through high risk insurance pools. The Department of Health and Human Services decided the program would launch July 1 to coincide with the start of states' fiscal years, although the law required the program to be in place 90 days after its enactment.

Applications will be ready today for residents of about 20 states who opted to let HHS run the program. About 30 states chose to run the program themselves, of which about 20 will be operational by mid-July. Another 10 states are still working through legislative issues, among those is California which needs its legislature to pass 2 bills to allow it to run the program. If passed, California could begin taking applications in August and be fully up and running in September.

In addition to the premiums consumers will pay, the healthcare reform law allocates $5 billion for states to help run the program until 2014 when the pools are scheduled to be replaced by health insurance exchanges where everyone can buy insurance that cannot discriminate against those with medical conditions.

To qualify for the temporary insurance pool an individual must not have had health insurance for the past 6 months. Funds are limited so enrollment may be capped in some states.

Health Insurance Reform Update

The first round of $250 rebate checks were mailed to senior citizens who have reached the doughnut hole in Medicare RX. It is estimated that 80,000 seniors will get checks as they're already in the doughnut hole, which is reached when prescription costs exceed $2,830 but are less than $4,550. These rebate checks will go out monthly and represent a one time rebate payment. The good news is that seniors don't have to do anything to receive a rebate! The checks are automatically issued based on a Medicare beneficiary's billing history.

Future provisions of the healthcare reform law provide a 50% reduction in the cost of brand drugs when the doughnut is reached starting in 2011 and a 75% reduction in 2020.

This represents the healthcare reform law's first monetary benefit.