Wednesday, September 29th, 2010

Good Neighbor Insurance (www.gninsurance.com and www.gnazhealth.com) is continuing to update our clients on the new health insurance laws.   There are six major coverage options for those in the US and even though some of the rules and regulations are similar for all many differences are there and it all depends on how old you are and for whom you work.  Many critical details of this new insurance law will be clarified in the months and years to come. 

These six major coverage options are:

(1) Individual or family coverage ( www.gnazhealth.com/azhealthinsurance.asp )

(2) Employee/employer group option for small businesses (typically under 50 employees)

(3) Employee/employer group option for large businesses (typically larger than 50 employees)

(4) Exchange options through the state you are residing in (fully integrated 1-1-2014 and are quasi-government and private insurance coverage combined)

(5) Medicare (which include Parts A, B, C, and D) for those 65 years onwards  (www.gnazhealth.com/senior_health_plans.asp)

(6) Full government health plans like Medicaid, CHIP, TRICARE, VA and other coverage plans as may be designated by the Department of Health and Human Services based mostly on financial criteria and/or military service.

The president signed the Patient Protection and Affordable Care Act (PPACA) into law on March 23, 2010. Additionally, he signed the Health Care and Education Reconciliation Act of 2010 on March 30, 2010, which made amendments to the PPACA law. The president’s signature on the reform bills triggered a series of major changes to the health care system that will affect every American. There were several changes that became effective upon President Obama’s signature. The rest of the changes are scheduled to become effective at varying times over the next several years.

The law is wide-reaching and encompasses more than 2,700 pages and many more pages of expected new regulation. Many of the specific details are yet to be finalized by federal agencies and state officials. This guide outlines some of the major sections of the law, and we’ve indicated when guidelines are pending from the United States Department of Health and Human Services (HHS) and other federal or state agencies. These guidelines will help all health insurance companies comply more completely with the reforms.

Reforms in Effect on and after Sept. 23, 2010

Coverage of adult children: Allows children up to age 26 to receive dependent coverage under a parent’s group policy as long as they do not have access to insurance through their employer.

After 2014, no group may exclude from coverage a dependent age 19 to 26 even if the dependent has access to his or her own employer coverage. The adult child does not have to live at home or be a student and can be married. According to the PPACA, this goes into effect Sept. 23, 2010 or at the start of your group’s next plan year on or after Sept. 23, 2010.

Early retiree reinsurance: Employers may apply to receive reinsurance coverage if they provide health insurance coverage to early retirees, ages 55 to 64. The reinsurance covers 80 percent of claims between $15,000 and $90,000. The program expires in 2014 or when the $5 billion appropriation is exhausted. To be eligible, the employer’s plan must generate cost savings for people with chronic conditions, provide claim documentation, and the employer must apply to HHS for the coverage.

Network access:

• Emergency room – Out-of-network cost-sharing amounts must be the same as in-network cost sharing amounts for emergency room visits. A requirement for prior approval of emergency room visits is prohibited.

• Primary care – Insurance customers must be able to select any network primary care physician they want to see.

• OB/GYN – Women must have direct access to their network OB/GYN without requiring a referral from a primary care physician.

Appeals: Insurance customers will be able to object to coverage and payment decisions through internal and external appeals processes. Arizona law has long had similar requirements for insured business, but the external review provisions are new to self-funded plans.

Elimination of pre-existing condition exclusions for children: The law says children under age 19 can no longer be subject to pre-existing condition waiting periods. New HHS regulations amend   the definition of pre-existing condition so that plans may no longer deny an application of coverage to an individual under 19 due to a pre-existing condition. Additionally, waivers or pre- existing condition waiting periods to these individuals will not be applied. This regulation applies to all group plans and only non-grandfathered individual plans. It does not apply to grandfathered individual plans. The term grandfathering means policies that were in effect on March 23, 2010, are exempt from many of the health care reforms.

Prevention services: The law prohibits cost sharing (deductibles, copays, coinsurance, etc.) for certain prevention and wellness services. Specific guidelines on these exact services are still pending from HHS.

Rescissions: Insurers may not rescind – or void – a policy without a showing of fraud or intentional misrepresentation.

Lifetime limits: Insurance policies will no longer be allowed to require a specific dollar cap on essential benefits. New regulations also permit individuals who previously reached a lifetime maximum and who are otherwise still eligible for coverage an opportunity to re-enroll. The prohibition on lifetime limits applies to all group and individual plans.

Annual limits: This provision restricts and later prohibits insurance policies from imposing dollar amount-based annual limits on essential benefit plan services. Annual limits are restricted for plan years beginning on or after Sept. 23, 2010 and prohibited for plan years beginning on or after Jan. 1, 2014. The limitation on annual limits does not apply to individual grandfathered plans. The term grandfathering means policies that were in effect on March 23, 2010, are exempt from many of the health care reforms. Specific guidelines for what is defined as essential benefits are pending from HHS.

Administrative cost caps or medical loss ratio: Health plan administrative costs will be limited to 5 percent for large group products and 20 percent for individual and small group business. Beginning in 2011, plans will have to issue rebates to customers if they exceed these administrative expense caps. HHS will develop the definitions and calculations to determine the administrative cost after consulting with state insurance commissioners.

Reforms in Effect Starting in 2011

Health savings accounts and flexible spending accounts: Penalties for unqualified withdrawals from health savings accounts (HSAs) increase. Spending on over-the-counter products will no longer be permitted for HSAs and flexible spending accounts.

Employer wellness discounts: Allows employers to offer wellness premium discounts up to 30 percent of employee-only premium and provides grants to small employers to establish wellness programs.

Employer obligations:

• Employers must inform new hires of the exchange and their potential eligibility for subsidies in the exchange.

• Must disclose value of benefits on W-2 form.

Reforms in Effect Starting 2012

Uniform coverage documents: Health plans will be required to publish a description of the policy in a uniform format and provide it to enrollees upon enrollment and renewal. The document must be no more than four pages, use 12-point font and include definitions and examples.

Quality: Insurers must report to HHS and enrollees on their ability to promote quality of care. F or example, insurers must provide incentives for hospitals to reduce the number of readmissions. Consumers will also find it easier to compare how well their health plan is performing in the areas of promoting quality health care and wellness.

Reforms in Effect Starting 2013

Flexible spending account limits: The maximum amount of flexible spending accounts becomes $2,500.

Medicare tax: The hospital insurance tax will increase 0.9 percent for upper income individuals and will extend to investment income. Single taxpayers with income exceeding $200,000 and married taxpayers who file joint returns with income exceeding $250,000 are considered upper income.

Medical expense deductibility: Increases the threshold for deducting medical expenses from 7.5 percent to 10 percent of adjusted gross income.

Medicaid expansion: The legislation expands Medicaid eligibility nationwide to those earning up to 133 percent of the federal poverty level (FPL).

Comparative effectiveness research: Research will begin on assessing the best treatments for certain conditions and disseminating that information to health care providers. To fund this research, a fee of $2 ($1 until 2014) per insured life will be assessed to the policyholder.

Reforms in Effect Starting September 2014

Guaranteed issue: The new law requires insurance companies to issue coverage even if the applicant has a pre-existing condition. Community rating: Under the new law, insurers can only vary premiums based on where the person lives, family size, smoking status and age. The amount of variation is strictly limited.

Exchange: The federal government creates a new health insurance marketplace to enable individuals and small businesses (and large businesses, if a state elects) to compare and purchase policies and apply for subsidies. There will be a fee for using the exchange. A person must buy insurance through the state-based exchange to be eligible for subsidies (described below).

Individual mandate: Almost all Americans will be required to have health insurance, whether it is through an employer, a government program or the individual insurance market. The law penalizes people who fail to carry insurance. The penalty is phased in. When it is fully implemented in 2016, a person who fails to buy insurance will be subject to a penalty of $695 or 2.5 percent of their income, but not more than the cost of the lowest cost policy sold through the exchange. Penalties for uninsured children are half the adult penalty. Employers and insurers will report policy information to the Internal Revenue Service, which will play a role in enforcing the mandate. Subsidies: The law also offers subsidies to people who might have a difficult time buying insurance. Subsidies are available to those with household incomes of up to 400 percent of the federal poverty level (FPL). For a family of four, 400 percent FPL is $88,200. The subsidy is set up so that a person pays no more than a certain percentage of his or her income for health insurance. Subsidies are also available for cost-sharing expenses such as deductibles and copays. A person must buy insurance through the exchange to be eligible for subsidies. Employer requirements: The law requires employers to provide minimum essential coverage for full-time equivalent employees and dependents. Employers with more than 50 full-time employees (FTEs) that have any FTEs receiving subsidized coverage in the exchange are subject to penalties.

• If the employer does not offer coverage, the fine is $2,000 per FTE.*

• If the employer does offer coverage, but the coverage has less than 60 percent actuarial value, or the FTE’s share of premium exceeds 9.5 percent of income, the fine is $3,000 per FTE with subsidized coverage or $2,000 per FTE, whichever is less.*

* The penalties based on overall number of FTEs exclude the first 30 employees

Other employer obligations include:

• Employers with more than 200 employees must automatically enroll new full-time employees in coverage. • “Provide free choice vouchers.” Requires employers with more than 50 FTEs and who provide coverage to issue free choice vouchers to qualifying employees. Qualifying employees have a household income less than 400 percent of the FPL and their share for coverage is 8 percent to 9.8 percent of their household income. The free choice voucher enables the employee to buy coverage in the exchange with the employer’s usual contribution amount.

Employers issuing free choice vouchers are not subject to penalties. • Larger employers must report employee coverage information to the government. • Waiting periods in excess of 90 days are not allowed. Benefit requirements: Small group and individual policies sold on the exchange will have to meet federal standards. One of these standards is based on the policy’s actuarial value. Actuarial value represents the amount the insurer pays for an average claim versus the amount the customer pays in the form of cost sharing, such as deductibles and copays. The base level, or Bronze product, is established at 60 percent actuarial value. Richer benefit packages will also be available as follows:

• Silver – 70 percent actuarial value

• Gold – 80 percent actuarial value

• Platinum – 90 percent actuarial value

An insurer must offer the Silver and Gold plans if it wants to participate in the exchange. In addition to the actuarial value requirements, all policies, whether offered through the exchange or not, will have to cover “essential benefits.” The policies must contain specific coverage provisions, including:

• Mental health benefits comparable to health benefits

• Policies cannot deny participation in certain clinical trials or associated routine patient costs

• The rest of the major provisions in the essential health benefits list, which are pending clarification from HHS Even products that are not sold through the exchange, must meet cost-sharing limitations. They cannot exceed $2,000 for single coverage and $4,000 for family coverage.  These amounts will increase with inflation.

Insurer tax: Insurers will be assessed a new phased-in tax. This is an industry-wide assessment based on market share. When fully implemented in 2018, the tax is expected to cost the insurance industry $14.3 billion. Similar taxes will apply to drug and device manufacturers. Name-brand drug manufacturers will pay, on average, a $2.8 billion per-year assessment beginning in 2011. Medical device manufacturers will pay a 2.3 percent tax on non-retail sales beginning in 2013. All of these assessments will add to the costs of health care for consumers.

Reforms in Effect Starting September 2018

“Cadillac plan” tax: A new tax on high-value insurance policies will become effective in 2018. If the premium for a group insurance policy exceeds $10,200 for a single policy or $27,500 for a family policy, the excess amount will be subject to a 40 percent excise tax.

Doug Gulleson loves to scuba dive overseas and makes sure he has his US health care and overseas health care information with him at all times when he travels (check out his diving travels at www.douggulleson.com).  Keep our blog close by you, www.gntravelinsurance.com , for continual updates on the changes with the US health care system.