Thursday, December 31, 2009
Although we are still awaiting the final reconciliation of the House and Senate versions of health care reform, small businesses will likely be impacted greater than any other business entity. The House’s version of health care defines “small” by sub-dividing this group designation into three categories: Smallest, 25 or less employees, Smaller, 26 to 50 employees, and Small, 51 to 100 employees. The Senate’s version defines “small” as from 1 to 100 employees. Currently, the Health Insurance Portability and Accountability Act (HIPAA) defines small group size as those businesses with 2-50 employees. The National Association of Insurance Commissioners (NAIC) defines small group size as those businesses with 50 or fewer employees with mid-sized being defined as 51 to 100 employees. America's Health Insurance Plans (AHIP, http://www.ahip.org) defines a small group size for health insurance to be 50 of fewer employees. AHIP is the member association of some 1,300 member companies that provide health insurance to over 200 million Americans.
How are small businesses important to the US economy? Small firms:
• Represent 99% of employers.
• Employ over 50% of private sector employees.
• Pay 44% of US private payrolls.
• Generated 64% of new jobs in past 15 years.
• Create more than half of nonfarm GDP.
• Hire 40% of high tech workers.
• Are 97% percent of exporters.
• Produced 30% of export value in FY 2007.
• Produce 13 times more patents than large firms
U.S. Dept. of Commerce, Bureau of the Census and International Trade Admin
http://web.sba.gov/faqs/faqindex.cfm?areaID=24
It is apparent that “small” businesses play a sigfincat role in the US and global economies and whatever impacts those businesses ripples throughout the entrie business economic system. One of those “impactors” is healthcare. Health care for new small businesses is expensive and difficult to obtain even though HIPAA guarantees issue and renewal of groups under 50 employees. However, HIPAA does not control the cost of coverage.
Typically, groups that lack creditable claims experience are rated (quoted/priced) for premiums using the carrier’s “standard” or “book” rates for fully insured groups based on the group’s demographic and occupational characteristics. Typically, standard rates are those rates approved by the carrier’s respective “commissioner of insurance” for similar unrated groups. The issue for small business is that these rates are often high due to the unknown and unpredictable nature of the small group’s future claims experience.
Since there is a high degree of unpredictability relative to the cost of small group coverage, small businesses may be reluctant to offer health care to their employees. While renewal for groups under 50 is mandated by HIPAA and the renewal rates are NOT; small businesses may be reluctant to offer coverage that they may discontinue in the future. Carriers generally require both a minimum enrollment by eligible employees and financial contributions by the employer; however, small businesses may have difficulty meeting both requirements. Small groups are highly sensitive to a small number of high dollar claims; even 1 or 2 large claims can result in significant premium increases at the next renewal time. Finally, many carriers simply decline to quote new small groups due to the instability of the business entity and the volatility of claims.
The House and Senate versions of health care reform attempt to bring stability to small group rates by placing limits on rates, rate increases, and the methodology of how rates are calculated. In addition, by offering coverage through “Exchanges” small business will have an alternative to traditional carrier coverage.
Thursday, December 31, 2009
Monday, December 28, 2009
Excise Tax on High-Dollar Health Care Plans
Monday, December 28, 2009
The Senate’s version of health care reform contains a provision to impose a 40% tax on excess benefits for individuals with premiums above $8,500 for single coverage and $23,000 for family coverage, commencing in the 2013 plan year. The House’s version does not contain a similar provision. In order for the Senate’s (or some variation of it) version to find its way into the final law, the two houses must reach a mutual agreement on its features. The tax is designed to impact those individuals, presumably top corporate employees, who have access to “Cadillac” style plans. By including such a provision, it can only be assumed that the Senate’s intent is to limit or restrict benefits above this level in a manner similar to restrictions on Highly Compensated Employees found within 401(k) plans. However, this feature could have the reverse affect for those individuals who have higher than normal premiums due their current claims expense.
From the view of someone who has designed and administered health care plans for a number of years and employers, it takes more than a “premium” to make a plan a “Cadillac”. It is necessary to look at a number of factors including: the plan sponsor’s industry, competitors, out-of-pocket expenses (deductible, co-pay, and co-insurance payments), geographical location(s), financial position, and the overall (total rewards strategy) compensation philosophy of the sponsor. These are typical factors when attempting to determine the relative nature of a given plan compared to the marketplace and competitors.
It is not uncommon for a plan sponsor to offer a number of health care plans to its employees depending on factors such as: business line, geographical location, union vs. non-union, executive, vs. non-executive, salaried vs. hourly, … etc. In addition, a sponsor may offer a diversity of plan types that include: PPO’s, POS’s, and HMO’s. And within such choices, there may even be a High Deductible, HSA, and/or HRA (consumer-directed health care) style options as well. Plan sponsors do this in an effort to attract and retain their desired workforce in a financially effective manner. One feature I have personally used is to differentially price one type of plan, i.e., PPO, POS or HMO, in a way that focuses enrollments on a specific plan type that is more financially effective for the plan sponsor.
Health care is expensive, in its 2009 Health Care Cost Survey, Towers Perrin reported US employers participating in the survey spent an average of $9,660 per employee for health care benefits in 2009, an increase of 32% from 2004. As costs have risen, plan sponsors have absorbed the larger part of the increase while employees have picked up the remainder. The Towers’ survey reports that employers have taken on 73% and employees 27% of the 2004-2009 cost increase respectively. During this time plan designs have been amended to reflect higher employee out-of-pocket expenses in an effort to shift direct service costs to the employee. Finally, Towers reports employee salary increases as indexed to health acre cost increases have lagged behind at a rate of 33% vs.148% for the period 1999 to 2007. (Towers Perrin 2009 Health Care Cost Survey) http://www.towersperrin.com/tp/showdctmdoc.jsp?url=Master_Brand_2/USA/Press_Releases/2008/20080924/2008_09_24b.htm&country=global
While the Towers’ survey was directed at health care costs, the survey’s finding does point to one in disputable fact; better performing (financially) organizations have lower overall health care costs for both the employer and the employee and a higher degree of employee engagement in the process of managing those costs. Tower’s report this is accomplished by:
o Clearly articulate their strategies............................... o Engage leaders
o Understand their employee populations.................... io Engage employees
o Optimize investments................................................ io Support employee health
o Measure for success
For more information on the Towers Perrin 2009 Health Care Cost Survey, please contact: Joe Conway, Towers Perrin, Phone:(914) 745-4175, joseph.p.conway@towersperrin.com
The Senate’s version of health care reform contains a provision to impose a 40% tax on excess benefits for individuals with premiums above $8,500 for single coverage and $23,000 for family coverage, commencing in the 2013 plan year. The House’s version does not contain a similar provision. In order for the Senate’s (or some variation of it) version to find its way into the final law, the two houses must reach a mutual agreement on its features. The tax is designed to impact those individuals, presumably top corporate employees, who have access to “Cadillac” style plans. By including such a provision, it can only be assumed that the Senate’s intent is to limit or restrict benefits above this level in a manner similar to restrictions on Highly Compensated Employees found within 401(k) plans. However, this feature could have the reverse affect for those individuals who have higher than normal premiums due their current claims expense.
From the view of someone who has designed and administered health care plans for a number of years and employers, it takes more than a “premium” to make a plan a “Cadillac”. It is necessary to look at a number of factors including: the plan sponsor’s industry, competitors, out-of-pocket expenses (deductible, co-pay, and co-insurance payments), geographical location(s), financial position, and the overall (total rewards strategy) compensation philosophy of the sponsor. These are typical factors when attempting to determine the relative nature of a given plan compared to the marketplace and competitors.
It is not uncommon for a plan sponsor to offer a number of health care plans to its employees depending on factors such as: business line, geographical location, union vs. non-union, executive, vs. non-executive, salaried vs. hourly, … etc. In addition, a sponsor may offer a diversity of plan types that include: PPO’s, POS’s, and HMO’s. And within such choices, there may even be a High Deductible, HSA, and/or HRA (consumer-directed health care) style options as well. Plan sponsors do this in an effort to attract and retain their desired workforce in a financially effective manner. One feature I have personally used is to differentially price one type of plan, i.e., PPO, POS or HMO, in a way that focuses enrollments on a specific plan type that is more financially effective for the plan sponsor.
Health care is expensive, in its 2009 Health Care Cost Survey, Towers Perrin reported US employers participating in the survey spent an average of $9,660 per employee for health care benefits in 2009, an increase of 32% from 2004. As costs have risen, plan sponsors have absorbed the larger part of the increase while employees have picked up the remainder. The Towers’ survey reports that employers have taken on 73% and employees 27% of the 2004-2009 cost increase respectively. During this time plan designs have been amended to reflect higher employee out-of-pocket expenses in an effort to shift direct service costs to the employee. Finally, Towers reports employee salary increases as indexed to health acre cost increases have lagged behind at a rate of 33% vs.148% for the period 1999 to 2007. (Towers Perrin 2009 Health Care Cost Survey) http://www.towersperrin.com/tp/showdctmdoc.jsp?url=Master_Brand_2/USA/Press_Releases/2008/20080924/2008_09_24b.htm&country=global
While the Towers’ survey was directed at health care costs, the survey’s finding does point to one in disputable fact; better performing (financially) organizations have lower overall health care costs for both the employer and the employee and a higher degree of employee engagement in the process of managing those costs. Tower’s report this is accomplished by:
o Clearly articulate their strategies............................... o Engage leaders
o Understand their employee populations.................... io Engage employees
o Optimize investments................................................ io Support employee health
o Measure for success
For more information on the Towers Perrin 2009 Health Care Cost Survey, please contact: Joe Conway, Towers Perrin, Phone:(914) 745-4175, joseph.p.conway@towersperrin.com
Wednesday, December 23, 2009
COBRA Subsidy Extended
Wednesday, December 23, 2009
On Monday, December 21, President Obama signed intro law the Department of Defense Appropriations Act for 2010 (HR 3326) that contained amendments extending the 65% COBRA health insurance premium subsidies for an additional six months. Assistance Eligible Individuals (AEI's) will have the ability to extend subsidized COBRA coverage for 15 rather than the original 9 months of coverage as mandated in the American Recovery and Reinvestment Act (ARRA). The new provisions effective retroactively amends ARRA, enacted earlier this year. Plan sponsors and COBRA administrators will need to take action now in order to meet the upcoming compliance deadlines.
ARRA was scheduled to expire on 12/31/2009, however, the amendments extends eligibly for the 65% subsidy through 02/28/2010. AEI’s were eligible for a 65% subsidy of their COBRA premiums for a period up to nine months, provided their loss of group health coverage resulted from “involuntary” separation of employment, excluding gross misconduct and the qualifying event occurred within the period from 09/01/2008 to 12/32/2009. AEI’s are now eligible for the COBRA subsidy if the qualifying event (involuntary separation) occurs by 02/28/2010.
In summary:
The subsidy time frame is expanded from 9 to 15 months.
The eligibility period for a qualifying event is expanded from 09/01/2008 – 12/31/2009 to 09/01/2008 – 02/28/2010.
The new law requires only that the COBRA qualifying event occurs by 02/01/2010 and NOT the commencement of COBRA coverage by that date.
COBRA participants who failed to pay or made partial payments, will have the ability to make-up missed payments during a transition period i.e., 01/01/2010 to 02/28/2010.
During the transition period, COBRA participants will be treated as having paid timely if they: were covered by COBRA preceding the transition period; i.e., 01/01/2010 to 02/28/2010 and the participant makes payment within 60 days after the law’s enactment date or within 30 days after the new notices are distributed.
If the AEI paid the full COBRA amount (up to 102%) during the transition period, the new law allows for the AEI to be reimbursed for the excess amounts.
Plan sponsors or their administrators must notify, wintin 60 days, current COBRA participants and individuals who have a qualifying event of the law’s extension rights. This applies to AEI’s on or after 10/31/2009 through 02/28/2010.
Plan sponsors can expect the departments of Labor and Health and Human Services as well as the Internal Revenue Service to possibly issue guidance concerning the subsidy extension. However, there is no certainty that any of these agencies will produce any instructions quickly.
Plan sponsors should contact their legal council or COBRA administrator to determine the next steps required to ensure they are in full compliance with the amended law.
Tuesday, December 22, 2009
Senate Passes Health Care Reform
Tuesday, December 22, 2009
Over the past weekend, the Senate passed its version of health care reform. Now the two houses must work together to reconcile the two separate versions to iron out any differences. The goal is to have a reconciled version before the end of the year, some hope by Christmas. While many of the features in the two versions are the same or similar, as I am often fond of saying, “the devil is in the details”. Even what may seem like a small insignificant point to the casual reader, could present a stumbling block to our elected officials. Even a point that appears to be a minor issue could have far reaching and unintended consequences to millions of individuals and thousands of employers.
Both houses passed legislation that eliminates the pre-existing medical condition rules. The Health Insurance Portability and Accountability Act of 1996 or “HIPAA” currently limits how far back a carrier or plan sponsor may apply a pre-existing medical condition. Six months is the maximum amount of time that a plan may impose for a pre-existing medical condition and then only if actual medical advice, diagnosis, care or treatment was recommended/received during the 6 months prior to the member’s initial enrollment date. HIPPA also limits the amount of time coverage that a pre-existing medical condition may be excluded from coverage. A carrier or plan sponsor may, under HIPPA, exclude coverage for specific pre-existing medical conditions for up to 12 months, 18 months for late enrollees, i.e., after their initial enrollment date.
As with most things, there are exceptions to HIPPA’s 6/12/18 month rules. As long as the member can show proof, in the form of a Certificate of Creditable Coverage, and any break in coverage is less than 63 days; a carrier or plan sponsor cannot apply a pre-existing exclusionary rule. So, as long as prior medical coverage, including COBRA, did not lapse for more than 63 days and that coverage was “creditable”; the member is treated as if they had continuous coverage with no breaks.
Plan sponsors who self-insure their members have had the managerial capability to waive the pre-existing exclusionary rule. However, any claims incurred for the waived condition usually is excluded from the plan sponsor’s stop loss coverage. Should the member’s claims exceed the plan sponsor’s stop loss limit, claims above the limit become the responsibility of the plan sponsor and not the stop loss carrier. Plans that are fully insured, have not had the capability of waiving a pre-existing condition since the insurance carrier bears the sole risk associated with all claims.
The elimination of the pre-existing exclusionary rule. effectively means that a ”qualified health benefits plan” must accept all enrollees regardless of any gaps in coverage or the type of prior coverage, creditable or non-creditable. Even if a new member previously sought medical treatment and ignored the advice of their physician, they will be permitted to enroll in and be provided with treatment for that condition. Thus members may be entering plans in an advanced stage of medical need and therefore incurring higher medical costs than would otherwise be the case. All other things being equal, will this not drive the overall costs up for that specific plan and its members and plan sponsor? Does this create an incentive for plan sponsors to drop their health care plans and allow individuals to purchase their coverage through an Exchange? Wouldn’t Exchanges be practicing a kind of “community” style of rating and underwriting where the risk and costs are borne by a wide segment of the general population? Does this sound similar to HMO’s that are community rated rather that rated to a specific group?
Over the past weekend, the Senate passed its version of health care reform. Now the two houses must work together to reconcile the two separate versions to iron out any differences. The goal is to have a reconciled version before the end of the year, some hope by Christmas. While many of the features in the two versions are the same or similar, as I am often fond of saying, “the devil is in the details”. Even what may seem like a small insignificant point to the casual reader, could present a stumbling block to our elected officials. Even a point that appears to be a minor issue could have far reaching and unintended consequences to millions of individuals and thousands of employers.
Both houses passed legislation that eliminates the pre-existing medical condition rules. The Health Insurance Portability and Accountability Act of 1996 or “HIPAA” currently limits how far back a carrier or plan sponsor may apply a pre-existing medical condition. Six months is the maximum amount of time that a plan may impose for a pre-existing medical condition and then only if actual medical advice, diagnosis, care or treatment was recommended/received during the 6 months prior to the member’s initial enrollment date. HIPPA also limits the amount of time coverage that a pre-existing medical condition may be excluded from coverage. A carrier or plan sponsor may, under HIPPA, exclude coverage for specific pre-existing medical conditions for up to 12 months, 18 months for late enrollees, i.e., after their initial enrollment date.
As with most things, there are exceptions to HIPPA’s 6/12/18 month rules. As long as the member can show proof, in the form of a Certificate of Creditable Coverage, and any break in coverage is less than 63 days; a carrier or plan sponsor cannot apply a pre-existing exclusionary rule. So, as long as prior medical coverage, including COBRA, did not lapse for more than 63 days and that coverage was “creditable”; the member is treated as if they had continuous coverage with no breaks.
Plan sponsors who self-insure their members have had the managerial capability to waive the pre-existing exclusionary rule. However, any claims incurred for the waived condition usually is excluded from the plan sponsor’s stop loss coverage. Should the member’s claims exceed the plan sponsor’s stop loss limit, claims above the limit become the responsibility of the plan sponsor and not the stop loss carrier. Plans that are fully insured, have not had the capability of waiving a pre-existing condition since the insurance carrier bears the sole risk associated with all claims.
The elimination of the pre-existing exclusionary rule. effectively means that a ”qualified health benefits plan” must accept all enrollees regardless of any gaps in coverage or the type of prior coverage, creditable or non-creditable. Even if a new member previously sought medical treatment and ignored the advice of their physician, they will be permitted to enroll in and be provided with treatment for that condition. Thus members may be entering plans in an advanced stage of medical need and therefore incurring higher medical costs than would otherwise be the case. All other things being equal, will this not drive the overall costs up for that specific plan and its members and plan sponsor? Does this create an incentive for plan sponsors to drop their health care plans and allow individuals to purchase their coverage through an Exchange? Wouldn’t Exchanges be practicing a kind of “community” style of rating and underwriting where the risk and costs are borne by a wide segment of the general population? Does this sound similar to HMO’s that are community rated rather that rated to a specific group?
Monday, December 21, 2009
Health Insurance Exchange-Benefit Options
Monday, December 21, 2009Monday, December 21, 2009
The Health Insurance Exchange is required to offer a Basic, Enhanced, Premium, and/or Premium Plus health care plans. To participate in the Exchange, a carrier must offer at least a Basic plan within the carrier’s service area (geographical premium rating area). It appears the carrier will be restricted to one Basic plan within the service area. (Will there be more than one carrier per geographical premium rating area, most likely.) The carrier may also offer one Enhanced plan within the specified service area. In addition, if the carrier offers an Enhanced plan, they may also offer one Premium plan, within the service area. Finally, if the carrier offers a Premium plan, the carrier will be allowed to offer “one or more” Premium Plus plans for the service areas. (Will there be a restriction on the number of Premium Plus plans offered?)
The Basic plan is actuarially equivalent to 70 percent of the full value of the benefits provided under the reference benefits package, i.e., “essential benefits package”. Special attention is applied to Affordable Credit Eligible Individuals who are covered by the Exchange plans. The benefits offered in the Basic plan are adjusted to provide reduced cost-sharing based on their respective income tier. (Does this mean the “benefits” are reduced OR does it mean that the deductibles, co-pays, and/or co-insurances are modified for lower income individuals?) The Enhanced and Premium plans both offer the same benefits found in the Basic and also offer lower levels of member cost sharing, i.e., less out-of-pocket expenses for the member. (Premium levels will have to be adjusted to reflect the actuarial offset between the Basic and the Enhanced and Premium plans cost-sharing amounts.) The Premium Plus Plan offers the same benefits found in the Basic plan and also includes dental and vision care; provided those benefits have been approved by the Commissioner. The costs of these additional benefits are to be separate and distinct from the health care costs.
The Act directs the Commissioner to create a range of permissible variations in the cost-sharing for the Basic, Enhanced, and Enhanced plans. That variation is within the range of plus or minus 10%. Tiering in cost-sharing is also permitted relative to participation of preferred providers and prescription drugs. (The concept here is that carriers may be able to negotiate discounts, as they do today, with certain providers (provider networks) and pharmaceutical firms (formularies), allowing some cost sharing to passed on to the members.)
Over the years, many individual states have mandated that certain medical procedures be included in individual and group insurance policies sold within their respective states. Health care plans that are “self-insured” are generally exempt from such mandated benefits while those that are “fully-insured” are not. The Act does not exempt Exchange plans from offering state specific mandated benefits. However, states must reimburse the Commissioner for premiums amounts above the affordability premium credits, if such mandated benefits result in a net increase.
As might be expected, carriers will be allowed to provide health care plans thorough the Exchange only after successfully completing a bid solicitation, review, and negotiation process overseen by the Commissioner. The Commissioner will also be able to deny those premiums and/or premium increases that are “excessive”. (Of course this later step will have some form of an appeals process.)
The Health Insurance Exchange is required to offer a Basic, Enhanced, Premium, and/or Premium Plus health care plans. To participate in the Exchange, a carrier must offer at least a Basic plan within the carrier’s service area (geographical premium rating area). It appears the carrier will be restricted to one Basic plan within the service area. (Will there be more than one carrier per geographical premium rating area, most likely.) The carrier may also offer one Enhanced plan within the specified service area. In addition, if the carrier offers an Enhanced plan, they may also offer one Premium plan, within the service area. Finally, if the carrier offers a Premium plan, the carrier will be allowed to offer “one or more” Premium Plus plans for the service areas. (Will there be a restriction on the number of Premium Plus plans offered?)
The Basic plan is actuarially equivalent to 70 percent of the full value of the benefits provided under the reference benefits package, i.e., “essential benefits package”. Special attention is applied to Affordable Credit Eligible Individuals who are covered by the Exchange plans. The benefits offered in the Basic plan are adjusted to provide reduced cost-sharing based on their respective income tier. (Does this mean the “benefits” are reduced OR does it mean that the deductibles, co-pays, and/or co-insurances are modified for lower income individuals?) The Enhanced and Premium plans both offer the same benefits found in the Basic and also offer lower levels of member cost sharing, i.e., less out-of-pocket expenses for the member. (Premium levels will have to be adjusted to reflect the actuarial offset between the Basic and the Enhanced and Premium plans cost-sharing amounts.) The Premium Plus Plan offers the same benefits found in the Basic plan and also includes dental and vision care; provided those benefits have been approved by the Commissioner. The costs of these additional benefits are to be separate and distinct from the health care costs.
The Act directs the Commissioner to create a range of permissible variations in the cost-sharing for the Basic, Enhanced, and Enhanced plans. That variation is within the range of plus or minus 10%. Tiering in cost-sharing is also permitted relative to participation of preferred providers and prescription drugs. (The concept here is that carriers may be able to negotiate discounts, as they do today, with certain providers (provider networks) and pharmaceutical firms (formularies), allowing some cost sharing to passed on to the members.)
Over the years, many individual states have mandated that certain medical procedures be included in individual and group insurance policies sold within their respective states. Health care plans that are “self-insured” are generally exempt from such mandated benefits while those that are “fully-insured” are not. The Act does not exempt Exchange plans from offering state specific mandated benefits. However, states must reimburse the Commissioner for premiums amounts above the affordability premium credits, if such mandated benefits result in a net increase.
As might be expected, carriers will be allowed to provide health care plans thorough the Exchange only after successfully completing a bid solicitation, review, and negotiation process overseen by the Commissioner. The Commissioner will also be able to deny those premiums and/or premium increases that are “excessive”. (Of course this later step will have some form of an appeals process.)
Friday, December 18, 2009
Health Insurance Exchange
Thursday, December 17, 2009
The Affordable Health Care for America Act directs that a “Health Insurance Exchange” be created within Health Choices Administration under the oversight of Commissioner. The role of the Exchange to provide affordable access to quality health insurance and includes provisions for a “public health insurance option”. (As we know, the public option may not be included in the reconciled House and Senate bills.) Assuming that it is included in the final bills, the Commissioner will set the standard for health care, i.e., the reference or essential health care benefits package, negotiate with health care insurance carriers, facilitate enrollment of members and employers, and create risking pooling methods.
Who is eligible to enroll via the Exchange? Anyone who is NOT enrolled in a qualified health care plan or who otherwise has “acceptable coverage”, including legal dependents. Employers are considered eligible to enroll if they fall into one of three categories: smallest (1-25 ees), smaller (26-50 ees), and small (51-100 ees). After 2 years following enactment, the Commissioner may define employers with greater than 100 employees as “Exchange-eligible employers”. The plan is to phase in these categories over the first, second, and third years following the enactment date, starting with the smallest employers. Since we are over half way through the month, it seems unlikely the Senate can finalize and pass their version of health care for a January 1, 2010 effective date.
Who is exempted from Exchange plans? Individuals enrolled in a qualified “group” health care plan, Medicare/Medicaid members, individuals covered by the Child Insurance Health Insurance Plan (CHIP), members of the military, VA participants, and individuals covered by an approved state high-risk pool. It is therefore possible that individuals could move into and out of edibility status over time as their personal circumstances change. Consider the active employee who becomes eligible for Medicare or the child of an employee who is approved for CHIP.
Will Exchange eligible employers be required to make a financial contrition towards the cost of a qualified health care plan? Yes, for full time employees, 72.5% for individual and 65% for family coverage of the lowest cost qualified health benefits plan offered. The contribution for part time employees, will be a proportion based on the employee’s weekly hours and the full time threshold hours set by the Commissioner and the Secretaries of Labor, Health and Human Services, and Treasury. Will Exchange eligible employers be required to make a contribution for employees who are covered as a spouse by another employer’s plan? No, however, if the employee declines coverage in the employer’s Exchange plan and then enrolls in an individual Exchange plan, the employer will be financially responsible.
This later point seems to be in contradiction to the language of the Act that speaks to automatic enrollment of Exchange eligible employees. If it works like auto enrollment in 401(k) plans, at the employee’s plan entry date, the employee is automatically enrolled with a default contribution and investment option. However, the employee is provided an opportunity to cancel/chnage prior to commencement of the actual deductions. Why would the employee be allowed to decline the employer’s plan and opt for individual coverage? It must be in the name of choice. Under traditional insurance underwriting rules, an employer sponsored plan generally must meet minimum contribution and participation levels. Allowing individuals to selectively decline enrollment would undermine those underwriting rules. Will this create an opportunity for adverse selection to occur among and between employer Exchange group plan and individual Exchange plans? Do the traditional underwriting rules and adverse selection even apply under the concept of “universal coverage”?
The Affordable Health Care for America Act directs that a “Health Insurance Exchange” be created within Health Choices Administration under the oversight of Commissioner. The role of the Exchange to provide affordable access to quality health insurance and includes provisions for a “public health insurance option”. (As we know, the public option may not be included in the reconciled House and Senate bills.) Assuming that it is included in the final bills, the Commissioner will set the standard for health care, i.e., the reference or essential health care benefits package, negotiate with health care insurance carriers, facilitate enrollment of members and employers, and create risking pooling methods.
Who is eligible to enroll via the Exchange? Anyone who is NOT enrolled in a qualified health care plan or who otherwise has “acceptable coverage”, including legal dependents. Employers are considered eligible to enroll if they fall into one of three categories: smallest (1-25 ees), smaller (26-50 ees), and small (51-100 ees). After 2 years following enactment, the Commissioner may define employers with greater than 100 employees as “Exchange-eligible employers”. The plan is to phase in these categories over the first, second, and third years following the enactment date, starting with the smallest employers. Since we are over half way through the month, it seems unlikely the Senate can finalize and pass their version of health care for a January 1, 2010 effective date.
Who is exempted from Exchange plans? Individuals enrolled in a qualified “group” health care plan, Medicare/Medicaid members, individuals covered by the Child Insurance Health Insurance Plan (CHIP), members of the military, VA participants, and individuals covered by an approved state high-risk pool. It is therefore possible that individuals could move into and out of edibility status over time as their personal circumstances change. Consider the active employee who becomes eligible for Medicare or the child of an employee who is approved for CHIP.
Will Exchange eligible employers be required to make a financial contrition towards the cost of a qualified health care plan? Yes, for full time employees, 72.5% for individual and 65% for family coverage of the lowest cost qualified health benefits plan offered. The contribution for part time employees, will be a proportion based on the employee’s weekly hours and the full time threshold hours set by the Commissioner and the Secretaries of Labor, Health and Human Services, and Treasury. Will Exchange eligible employers be required to make a contribution for employees who are covered as a spouse by another employer’s plan? No, however, if the employee declines coverage in the employer’s Exchange plan and then enrolls in an individual Exchange plan, the employer will be financially responsible.
This later point seems to be in contradiction to the language of the Act that speaks to automatic enrollment of Exchange eligible employees. If it works like auto enrollment in 401(k) plans, at the employee’s plan entry date, the employee is automatically enrolled with a default contribution and investment option. However, the employee is provided an opportunity to cancel/chnage prior to commencement of the actual deductions. Why would the employee be allowed to decline the employer’s plan and opt for individual coverage? It must be in the name of choice. Under traditional insurance underwriting rules, an employer sponsored plan generally must meet minimum contribution and participation levels. Allowing individuals to selectively decline enrollment would undermine those underwriting rules. Will this create an opportunity for adverse selection to occur among and between employer Exchange group plan and individual Exchange plans? Do the traditional underwriting rules and adverse selection even apply under the concept of “universal coverage”?
Thursday, December 17, 2009
Health Care Reform: House vs. Senate
Wednesday, December 16, 2009
While the House passed its version (HR 3962) of national health care reform earlier this month, the Senate continues to debate its own bill (HR 3590). It now appears that a number of changes are being considered, including the so-called “public option”. Regardless of the contents of the Senate’s final version, the two separate laws must eventually be reconciled to eliminate any differences between the House and Senate versions before the “law” can be implemented. The task of reconciling almost 4,000 pages contained in the combined documents is no mean undertaking (the devil is in the details). Although, the reconciled version will most assuredly not contain 4,000 pages, it can be expected that the final version will still be a significantly sized document. What’s more, you can expect that the final law will be amended over time, as is the case for virtually all major legislative acts, i.e., ERISA.
Whether you are a supporter or not of a public health care option, you must acknowledge that today we have a number of such options funded in part by local, State, and/or Federal taxpayer monies in the form of Medicare, Medicaid, Children's Health Insurance Program (CHIP), State high-risk pool programs, VA, TriCare, FEP, … et al. In addition, many health care providers write-off indigent care and care provided to others who fail to pay. In the case of indigent care, these write-offs may be fully or partially reimbursed by local, State, and/or Federal entities. And in the cases of taxable organizations, such write-offs (bad debt) may be deductible against earnings. In any case, the cost of such care eventually becomes the financial burden of the taxpaying public either directly through taxation or higher health care costs, i.e., increased insurance premiums.
Based on the findings of a USA Today/Gallup poll released yesterday, December 16, 2009, 48% of those polled would advise their Senators to vote against healthcare and 46% to vote in favor of healthcare, with 6% offering no opinion. The poll was based on phone interviews with 1,025 adults, 18 and older taken between 12/11 and 12/13, 2009. The poll had a 95% confidence level with a margin of error of ±4 percentage points. See the complete poll at:
http://www.gallup.com/poll/124715/Majority-Americans-Not-Backing-Healthcare-Bill.aspx
While 48% is not an absolute majority, there are a number of individuals who are unable to put their full support behind the current health care legislation. On the other hand, 46% (no small number) of those polled felt that legislative action was needed and they are willing to support their elected officials in national health care reform. It is safe to say, that Americans are almost equally divided between what course of action to take relative to this debate. Whatever is the final outcome, half of Americans are going to be dissatisfied with the results, at best. At worst, no one will be pleased with the final product and it will be a source of discontent for both supporters and non-supporters.
There is much at stake with health care reform. It is suggested that as a nation, we are at a competitive disadvantage relative to other nations due to the added cost the American health care system places on our manufactured goods. We are told that Americans spend more on health care per capta than others and receive less value than those who spend less, i.e., Britain, France, Germany. It is reported that a significant portion (47m +/-) of the US population is uninsured and thus represents a loss of productivity for those Americans and an avoidable and unnecessary economic burden on the country.
As someone who has witnessed the growth in health care expenses and the difficult decisions individuals, employees, and employers have been forced to make, the outcome of the current national health care reform will have a far reaching impact.
While the House passed its version (HR 3962) of national health care reform earlier this month, the Senate continues to debate its own bill (HR 3590). It now appears that a number of changes are being considered, including the so-called “public option”. Regardless of the contents of the Senate’s final version, the two separate laws must eventually be reconciled to eliminate any differences between the House and Senate versions before the “law” can be implemented. The task of reconciling almost 4,000 pages contained in the combined documents is no mean undertaking (the devil is in the details). Although, the reconciled version will most assuredly not contain 4,000 pages, it can be expected that the final version will still be a significantly sized document. What’s more, you can expect that the final law will be amended over time, as is the case for virtually all major legislative acts, i.e., ERISA.
Whether you are a supporter or not of a public health care option, you must acknowledge that today we have a number of such options funded in part by local, State, and/or Federal taxpayer monies in the form of Medicare, Medicaid, Children's Health Insurance Program (CHIP), State high-risk pool programs, VA, TriCare, FEP, … et al. In addition, many health care providers write-off indigent care and care provided to others who fail to pay. In the case of indigent care, these write-offs may be fully or partially reimbursed by local, State, and/or Federal entities. And in the cases of taxable organizations, such write-offs (bad debt) may be deductible against earnings. In any case, the cost of such care eventually becomes the financial burden of the taxpaying public either directly through taxation or higher health care costs, i.e., increased insurance premiums.
Based on the findings of a USA Today/Gallup poll released yesterday, December 16, 2009, 48% of those polled would advise their Senators to vote against healthcare and 46% to vote in favor of healthcare, with 6% offering no opinion. The poll was based on phone interviews with 1,025 adults, 18 and older taken between 12/11 and 12/13, 2009. The poll had a 95% confidence level with a margin of error of ±4 percentage points. See the complete poll at:
http://www.gallup.com/poll/124715/Majority-Americans-Not-Backing-Healthcare-Bill.aspx
While 48% is not an absolute majority, there are a number of individuals who are unable to put their full support behind the current health care legislation. On the other hand, 46% (no small number) of those polled felt that legislative action was needed and they are willing to support their elected officials in national health care reform. It is safe to say, that Americans are almost equally divided between what course of action to take relative to this debate. Whatever is the final outcome, half of Americans are going to be dissatisfied with the results, at best. At worst, no one will be pleased with the final product and it will be a source of discontent for both supporters and non-supporters.
There is much at stake with health care reform. It is suggested that as a nation, we are at a competitive disadvantage relative to other nations due to the added cost the American health care system places on our manufactured goods. We are told that Americans spend more on health care per capta than others and receive less value than those who spend less, i.e., Britain, France, Germany. It is reported that a significant portion (47m +/-) of the US population is uninsured and thus represents a loss of productivity for those Americans and an avoidable and unnecessary economic burden on the country.
As someone who has witnessed the growth in health care expenses and the difficult decisions individuals, employees, and employers have been forced to make, the outcome of the current national health care reform will have a far reaching impact.
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