health insurance reform 2010 executive forum clinton presidential library

Health Insurance Reform2010 Executive Forum

Clinton Presidential Library

Health Care Changes – 2010

22,000-28,000 pages of regulation

Age 26 – 206 pages of regulation


Economic stimulus package for:

CPAs Lawyers Employee Benefit Advisors

Sections Of The Law That We Will Not Discuss Today

Health Care Quality Improvement Rural Protections Disease Prevention and Wellness Patient-Centered Outcomes Research Access to Innovative Medical Therapies 1099 for Vendors at $600 Level

Probability of Medical Problems

Diagnostic Category

AsthmaCADCancerCongestive Heart FailureDepressionDiabetesHypertensionLower Back Pain

Patients per 1,000 Insured

2421835

2055

13246

Why Your Health Insurance Costs Are So High

USA AR

Children 80% 75% 6% Lower

Adults - Physical Activity Rate 49% 46% 6% Lower

Adults - Smoking Rate 18% 22% 22% Higher

Adults - Overweight/Obese Rate 63% 66% 5% Higher

Adults - Disability Rate 13% 19% 46% Higher

Prescription Drugs Per Capita 12 18 50% Higher

Adults - Diabetes Rate 8% 10% 25% Higher

Emergency Room Visits Per 1,000 401 457 14% Higher

Hospital Admissions Per 1,000 117 129 10% Higher

Diabetes-Related Deaths Per 100,000 23 27 17% Higher

Heart Disease - Related Deaths per 100,000 200 233 16% Higher

Source: State Health Facts Survey, The Henry J. Kaiser Family Foundation, www.statehealthfacts.org, 11/09/2009

Implementation Timeline For The Implementation Timeline For The Federal Health Care Reform MeasureFederal Health Care Reform Measure

20102010 Establishes federal grant program for

small employers providing wellness programs Employers eligible to receive grants must

employ less than 100 employees who work 25 hours or more per week.

The grant program will be conducted for a five-year period and is authorized to allocate $200 million for fiscal years 2011 through 2015.

Health Care Changes – 2010 To qualify, a wellness program must include:

Health awareness initiatives (such as health education, preventive screenings and health risk assessments.

Efforts to maximize employee development and participation

Initiatives to change unhealthy behaviors and lifestyle choices (such as counseling , seminars and self-help materials)

Workplace policies to encourage healthy lifestyles, healthy eating, increased physical activity and improved mental health.

Eligible employers must submit an application to the HHS, which should contain a proposal for implementing a comprehensive wellness program that meets the above criteria.

Health Care Changes – 2010 Impose 10% tax on indoor UV tanning

(7/1/10) Prohibits lifetime and annual benefit

spending limits (plan years beginning 9/23/10)

Requires plans to cover, at no charge, most preventive care (plan years beginning 9/23/10) Value based benefit designs preferred by HHS


Allows dependents to stay on parents’ policies until age 26 (plan years beginning 9/23/10)

Marital Status

Dependents


Provides protections to children with pre-existing conditions (plan years beginning 9/23/10)

Standard Health Plan Documents (4 Pages

vs. state regulations) 9/23/10 Modification Notices – 60 Days before

the effective date of the modification (fine $1,000 per employee) 9/23/10

Internet Portal for coverage information www.healthcare.gov

Monthly Cost

Annual Deductible

Annual

Out of

Pocket

Max.

Doctor Visit

Generic RX

Emergency Room

Hospital Stay

Silver Low As low as $825

$1,000 (ind)

$2,000 (fam)

$2,000 (ind)

$4,000 (fam)

$20 Copay

$15 Copay

Annual Deductible, then $100

Copay

Annual Deductible,

then no Copay

Silver Medium

As low as $937

$1,000 (ind)

$2,000 (fam)

$2,000 (ind)

$4,000 (fam)

$20 Copay

$15 Copay

$100 Copay Annual Deductible,

then no Copay

Silver High

As low as $892

None $2,000 (ind)

$4,000 (fam)

$25

Copay

$15 Copay

$100 Copay $500 Copay

Massachusetts Exchange

Grandfathered Plans Plans in place on March 23, 2010 that

have not been significantly changed. Avoid certain of the mandates, and certain of

the design features required in 2014

Regulations issued June 14, 2010 describe changes that will cause loss of grandfathered status: Elimination of all or substantially all benefits for

a particular condition

Grandfathered Plans Loss of grandfathered status (cont.):

Increasing a member’s coinsurance percentage by any amount

Increasing a plan’s annual deductible by more than medical inflation plus 15% in total from March 23,2010, forward

Increasing copayments to physicians or pharmacies by more than the greater of $5, or medical inflation plus 15% from March 23, 2010, forward

Decreasing an employer contribution by more than 5% from March 23, 2010, forward

Grandfathered Plans Most significant new requirements if not

grandfathered:

Preventive services with no cost sharing

Insured plans will be subject to nondiscrimination testing

Health Care Changes – 2010 Small Business Tax Credit [2010-2015]

Who would receive the small business tax credit? Employers with 25 or fewer employees and average

annual wages of less than $50,000 that provide group health coverage

For tax years 2010-2013, employer would receive tax credit of up to 35% of contribution toward health insurance premium if employer contributes at least 50% of total premium cost or 50% of a benchmark premium (Employee: $4,329; Family: $9,677)

Employers with 10 or fewer employees and average annual wages of less than $25,000 would be eligible for the full tax credit

Tax Credit – ends 2015

Small Business Health Care Tax Credit ScenariosExamples of Employers Receiving the Credit

Example 1: Auto Repair Shop with 10 Employees gets $24,000 Credit for 2010 Main Street Mechanic:

Employees: 10 Wages: $250,000 total, or $25,000 per worker Employee Health Care Costs: $70,000

2010 Tax Credit: $24,500 (35% credit)

2014 Tax Credit: $35,000 (50% credit) in exchange


Example 2: Restaurant with 40 part-time Employees Gets $28,000 Credit for 2010 Downtown Diner:

Employees: 40 half-time employees (the equivalent of 20 full-time workers)

Wages: $500,000 total, or $25,000 per full-time equivalent worker

Employee Health Care Costs: $240,0002010 Tax Credit: $28,000 (35% credit with phase-out)2014 Tax Credit: $40,000 (50% credit with phase-out) in

exchange


Example 3: Foster Care Non-Profit with 9 Employees Gets $18,000 Credit for 2010 First Street Family Services .org:

Employees: 9 Wages: $198,000 total, or $22,000 worker Employee Health Care Costs: $72,0002010 Payroll Tax Credit: $18,000 (25% credit)2014 Payroll Tax Credit: $40,000 (35% credit) in

exchange

Health Care Changes – 2011 Simple Cafeteria Plans

Under 100 Lives Discriminatory Benefits for highly compensated and key

employees Impose new annual tax (based on annual sales)

on brand name pharmaceutical companies – sales to government entities only

Penalties for non-qualified HSA and Archer MSA distributions double (to 20%)

Health plans required to spend a minimum of 80%/85% of premiums on medical claims (Medical Loss Ratio)

Community Living Assistance Services and Support (CLASS) -

2011 Automatic enrollment by an employer Alternative enrollment by an employee Pay premiums for at least 5 years Benefits cannot be less than $50 per

day No underwriting – except for age Five-year vesting period HHS and actuaries will set actuarially

sound benefit plans by October 1, 2012


Employers required to report value of health benefits on W-2

Additional funding for community health centers (5 years) - $34B

New tax ($2 per enrollee) on all private health insurance policies (including self-insured plans) to pay for comparative effectiveness research (plan years beginning FY12)

No longer allowed to use FSA, HSA, HRA, Archer MSA distributions for over-the-counter medicines


Nothing

Time out for elections?


A new tax applies to a single employee with compensation greater than $200,000, or an employee who is married and files jointly where the family income is greater than $250,000 (employee and employee spouse)

Employers will need to adjust their payroll systems to include the new 0.9% Medicare tax on employees (in addition to the current 1.45% tax on each)


Impose $2,500 annual cap on FSA contributions (indexed to CPI)

Generally increases (7.5% to 10%) threshold at which medical expenses, as a % of adjusted gross income, can be deductible

Impose 2.3% excise tax on medical devices

CO-OP Program: Secretary awards loans and grants for establishing nonprofit health insurers


Individual Mandate [2014-2016]

Those without health insurance coverage would be required to a pay penalty tax of the greater of $695 per year, up to a maximum of three times that amount per family ($2,085), or 2.5% of household income

The penalty would be phased in accordingly: $95 in 2014, or 1.0% of taxable income $325 in 2015, or 2.0% of taxable income $695 in 2016, or 2.5% of taxable income


Health Insurance Exchanges State-based American Health Benefit Exchanges

and Small Business Health Options Programs (“SHOP”) Exchanges will be created

Would allow individuals and small employers with up to 100 employees to purchase qualified coverage

Employers with more than 100 employees would be able to purchase coverage in the SHOP Exchange in 2017

Levels of Coverage Insurance plans must include

government-defined “essential benefits” and coverage levels Bronze – the level of coverage must

provide benefits that are actuarially equivalent to 60% of the full actuarial value of the benefits provided under the plan.

Silver – increases to 70% Gold – increases to 80% Platinum – increases to 90%


Employer Mandate: Play or Pay (50+) Employers who offer coverage must either:

Provide coverage that is “qualifying coverage” , affordable (at 8%/9.5% of income) and pay at least 60% of the cost, or

Pay the lesser of $3,000 for each employee receiving a premium credit, or $2,000 for each full-time employee, if one person qualifies (4X FPL)

Employers who don’t offer coverage must pay $2,000 for each full-time employee, excluding the first 30 employees


Insurers cannot impose any coverage restrictions on pre-existing conditions (guaranteed issue/renewability)

Modified community rating: individual or family coverage; geography; 3:1 ratio for age; 1.5 :1 for smoking

Insurers must offer coverage to anyone wanting a policy and every policy has to be renewed

OPM must offer at least two multi-state plans in every state (Public Option)

Employers must provide notice to employees about the availability of coverage through the State sponsored health insurance exchanges

Group Health Insurance waiting periods may not exceed 90 days (1st of month or date of hire – premium?)


Employers must report annually to HHS information about whether essential minimum health coverage has been offered to its employees

The employer must also provide a notice to each individual whose name is included in the annual notice to HHS

Impose tax on private health insurance plans ($8 billion in 2014, $11.3 billion in 2015 and 2016, $13.9 billion in 2017, $14.3 billion in 2018, and indexed to medical cost growth thereafter); based upon firm’s market share starting in 2013

Health Care Changes – 2014 Free Choice Voucher

Employers that offer group health coverage would be required to provide:

vouchers to employees making less than 400% of the Federal Poverty Level

whose share of the total premium exceeds 8% but less than 9.8% of their income

who choose to enroll in a plan offered in a state insurance exchange

Health Care Changes – 2014 Free Choice Voucher

Voucher amount must equal what the employer would have otherwise paid to provide coverage under the employer’s plan

Voucher can be used by the employee to offset the cost of premiums in insurance exchanges

Employers who provide free choice vouchers would not be subject to play or pay penalties for employees who enroll in the insurance exchange

Employee can keep excess employer premium

Premium Assistance Credit

The premium assistance credit operates on a sliding scale that begins at 2% of income for taxpayers at 100% of the FPL and phases out at 9.5% of income for those at 300-400% of the FPL.

Taxpayers who purchase silver-level coverage may also qualify for cost-sharing subsidies to help pay for deductibles, co-payments, etc.

Health Care Changes

20162016

States can form interstate insurance compacts coverage with HHS approval

20172017 Physician pay-for-quality program begins for all physicians States may allow large employers and multi-employer health plans to

purchase coverage in the Exchange

20182018 Impose “Cadillac tax on “high cost” plans, 40% tax on the benefit value

above a certain threshold: ($10,200 individual coverage, $27,500 family or self-only union multiemployer coverage)

Health Reform Cost & Revenue Estimates

$107 Billion in newtaxes on InsuranceCarriers, Drug Mfg,& Medical Device

Mfg

$69 Billion in newrevenue in finesfrom uninsured

individuals &employers

$32 Billion in newrevenue from tax on

high cost plans

$930 Billion

Cost over 10 Years

$210 Billion new revenuefrom increased Medicarepayroll taxes & a new

Medicare tax oninvestments. Both apply tothose earning $200k (Ind) or

$250k (Families)

$455 Billion reduction inMedicare spending by

reducing fees to providers,payments to Medicare

Advantage Plans & reducedfraud / waste

$57 Billion of newtax revenue from

FSA limit of $2,500 & a 10% new tax on

tanning