Sunday, July 25, 2010

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.

Friday, July 23, 2010

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.

Monday, July 19, 2010

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.

Thursday, July 1, 2010

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.