Implementing Health Care Reform

Overview and Politics of the PPACA

National Association of Health UnderwritersJanuary 2011

Recap on Legislation• President signed Patient Protection and Affordable

Care Act (PPACA) on March 23• Makes significant statutory changes affecting the

regulation of and payment for many types of private health insurance – many insurance market reforms

• Will require almost all private sector employers to evaluate the health benefits they currently offer and consider whether they are compliant

• For those without access to employer coverage, new individual mandate to purchase and maintain minimum coverage

Election Results• Changes to Congress

– Historic number of new legislators– Tremendous turn-over in staff and committees– Need to off-set repeal changes with other spending cuts– House actions will be tempered by tight Democratic majority in the

Senate and President Obama– GOP will need to balance delivering on promises now and goals for

2012

• Election Results—Changes to States– New Governors will have a tremendous impact on PPACA

implementation– Potential change for 20 + state insurance commissioners– Historic number of new state legislators

Election Results• What will happen:– GOP-led repeal legislation will die in the Senate– Smaller reform pieces will be introduced– Oversight hearings

• What will not happen:– PPACA will not be repealed

• What may happen:– Some small reform pieces may be signed into law– Attempts to de-fund

Recent Regulations

• Most 2010 regulations have been issued:– Dependent to Age 26– Retiree Reinsurance Program– Insurance Plan “Grandfathering”– Annual and Lifetime Limits for “Essential Benefits”– Small Business Tax Credit– Preventive Services without Cost-Sharing– Limited Medical Benefit Plans– Minimum Loss Ratios

Grandfathered Plans• Essentially all plans in effect on date of PPACA

enactment (March 23, 2010) are “grandfathered” • Very few changes are permitted if a plan wants to

retain grandfathered status– Plans must provide a statement to participant that it

believes it is a “grandfathered” plan

• Plans that made changes between March 23 and June 14 have an opportunity to reverse any significant changes made without losing grandfathering status.– This must be done by the plan year following September

23, 2010

Medical Loss Ratios - 2011• Minimum loss ratio requirements will be established

for insurers in all markets• The MLR is 85% for large group plans and 80% for

individual and small group plans (100 and below)– May impact provisions that reduce claims cost, such as pay

for performance, nurse lines, disease management, etc.– May result in fewer carriers offering coverage in some

areas, particularly rural, resulting in less consumer choice

• Carriers will have to issue a premium rebate to individuals when MLR is too low (beginning 2012)

CLASS Act• New national long-term care program• Will not be fully implemented until DHHS

develops the CLASS Program, which is scheduled to be completed by October 1, 2012

• Voluntary and open to working individuals through their employer.

• Employers will not be required to participate but those who do would automatically enroll their employees.

Other Key Provisions in 2010 and 2011

• Small Business Premium Tax Credits• High-Risk Pool Program• Employer Reinsurance Program for Early Retirees• Wellness Program Grants for Small Businesses• W2 Reporting Requirements• 1099 Requirements• Simple Cafeteria Plan Rules for Small Groups Under 100 lives• HSA Changes (OTC exclusion and increased penalties)• Annual studies on self-funded plans using Form 5500 Data

Limited Medical Benefit Plans• PPACA allows only restricted annual dollar limits on essential

health benefits. • Employers can rely on a good-faith, reasonable interpretations

of “essential health benefits” until further rules are issued. • Many employers offer mini-med plans to certain employees,

which contain annual dollar limits. These plans typically are a lower-cost alternative for employees who may not otherwise be able to afford coverage.

• DHHS will waive compliance with the restricted annual dollar limits if the plan can demonstrate to HHS that keeping its current annual dollar limits in place is necessary to prevent a “significant decrease in access to benefits” or a “significant increase in premiums.”

PPACA in 2014• Coverage must be offered on a guarantee issue basis

in all markets and be guarantee renewable • Exclusions based on preexisting conditions would be

prohibited in all markets• Full prohibition on “essential benefit” annual and

lifetime limits in all group (including self-funded plans) or individual plan

• Redefines small group coverage as 1-100 employees. – States may also elect to reduce this number to 50 for plan

years prior to January 1, 2016

PPACA in 2014• Creates sliding-scale tax credits for non-Medicaid

eligible individuals with incomes up to 400% of FPL to buy coverage through the exchange

• The requirement that the subsidies are only available through the exchange is significant

• How will this affect employer-sponsored coverage?

PPACA in 2014 – Individual Mandate• Requires all American citizens and legal residents to purchase

qualified health insurance coverage • Legal challenges to the constitutionality of this requirement ongoing

—will go to the Supreme Court in all likelihood• In 2014, those without insurance will pay the greater of $95 or 1%

of household income that exceeds personal exemption for that year• Starting in 2016, the penalties rise, to the greater of $695 or 2.5% of

income. These penalties apply to EACH family member without coverage

• HOWEVER, for children, the per-person penalty is half the adult one. The maximum family penalty is the greater of 2.5%of income or three times the per-adult penalty ($2,085 in 2016)

• All penalties are capped at the cost of the lowest-priced conventional plan on the exchanges

PPACA in 2014 – Individual Mandate

• Exemptions to individual mandate for:– financial hardship– religious objections (see for reference IRC Sec. 1402 (g)(1))– American Indians– those without coverage for less than three months– undocumented immigrants, incarcerated individuals– those for whom the lowest cost plan option exceeds 8% of an

individual’s income, and those with incomes below the tax filing threshold

Essential Benefits Defined

• By 2014, the benefits that are considered to be “essential” will be fully defined

• These minimum benefit levels apply to all plans, except grandfathered plans and self-funded plans

• Currently an employer can use a “good faith standard” without penalty

Essential Benefits Defined

Section 1302(b) defines essential health benefits to include:• Ambulatory patient services• Emergency services• Hospitalization• Maternity and newborn care• Mental health and Substance use disorder services• Prescription drugs • Rehabilitative and habilitative services and devices; • Preventive and wellness services and chronic disease management• Pediatric services, including oral and vision care

Exchanges• By 2014, all states will be required to establish

insurance exchanges• What are they?– Regulatory bodies– Subsidy administrators– Enrollment portals– Information portals

©2010 Steptoe & Johnson LLP

Exchanges

A web portal “marketplace” for health

insurance

A web portal “marketplace” for health

insurance

Federal Government• sets criteria for plan participation and purchaser eligibility • provides subsidies for small

businesses and individuals

• sets up Exchange if a state fails to

Individuals (no subsidies for ones offered

employer-based coverage, unless that coverage is “unaffordable”)

Small Businesses If up to 100

employees, can buy thru Exchange

States• each sets up own Exchange• will be involved in premium

reasonableness reviews; can approve/reject as provided under state law

Self-insured plans not eligible to Participate

PPACA in 2018• 40% excise tax on insurers of employer-sponsored

health plans with aggregate values that exceed $10,200 for singles and from $27,500 for families takes effect in 2018

• The aggregation of various employer-sponsored plans may surprise some individuals who believe they are exempt from the assessment.

Employer Responsibilities

Employer Responsibilities• Effective starting January 1, 2014• Also the subject of lawsuits regarding

constitutionality of provision—likely to go to Supreme Court.

• Employer must count all full-time employees and part-time employees – on a full-time equivalent basis – in determining if they have 50 or more employees– Certain seasonal workers are not counted in determining if employer

has 50 workers– Full-time = 30 or more hours per week, determined on a monthly basis

• Penalties assessed for “no coverage” or coverage that is not “affordable”

Summary of Potential Employer Penalties under PPACA, Cong. Research Service May 14, 2010

Other Responsibilities• Employers must automatically enroll “new full-time

employees” in employer-sponsored coverage– Must provide adequate notice and opportunity to opt out– Applies to employers with “more than 200 full-time employees”– No effective date specified, but must be “in accordance with regulations

promulgated by the Secretary (of DOL)…” (so presumably not effective until regulations are issued)

• Notice to current employees and new hires about exchange and subsidies– Existence of exchange, services and how to obtain assistance– Availability of premium assistance if plan value below 60%– Loss of employer contribution and tax exclusion for contribution– Effective March 1, 2013

 

Concluding Remarks

Adam Brackemyre

Director of Federal Affairs- NAHU

abrackemyre@nahu.org

703-276-3808