National Health Care Reform Outlook

National Healthcare Reform Outlook

October 20, 2009

Presented by:Cathy Ficara, MDAHU Legislative Chair

Overview of What’s Going on In Congress The initial goal was committee

passage by the July 4th recess and passage by House and Senate by the August recess

Three House committees with responsibility over health care marked up and passed HR 3200 in July

Senate HELP committee has marked up their bill and passed it out of committee in July

Senate Finance Committee “Gang of Six” conducted bipartisan negotiations over the August recess. Bill was passed out of committee last week

Flow Chart for H.R. 3200

White House Plan• Key promises:

– Illegal aliens would not be covered– No public financing of abortions– If you like your plan you can keep it– Existing coverage will not change, just

become better and less expensive– Public option, if there is one, will be

limited to small employers and uninsured individuals

– Bill will not increase federal deficit by one penny

– Bill will cost about $900 billion and be financed through administrative savings and cuts to waste, fraud and abuse in the current system

President Obama’s speech to the joint session of Congress on September 9 was short on specifics

Polling indicates a short-term increase in support

Key Issues of the Legislation

• Gateway/Exchanges• Individual Mandate• Essential Benefits• Grandfathered Plans• Public Plan Option• Employer Mandates• Small Business Assistance• Wellness Provisions

The Gateway/Exchange

• Mechanisms that facilitate purchase of health insurance coverage that satisfies requirements for affordability and quality

• Key issue: State vs. Federal/ How regulatory?

Gateway/Exchange

House Bill = Exchange – Federally-based – Governed by "Health Choices Administration," a new,

independent Federal agency– All individuals are eligible unless they are enrolled in a

"qualified health benefits plan" or other "acceptable coverage"

– Federal Credits for up to 400% of FPL– Plans must meet the requirements to be a "Qualified

Health Benefits Plan”– Categories of people and businesses would be

phased in over 5 years, i.e. Individuals and groups up to 10 would be allowed the first year

The Gateway/Exchange

Senate HELP = Gateway – Primarily state-based– Governed by the Secretary of HHS, who

works with the National Association of Insurance Commissioners ("NAIC") to establish the federal requirements

– Available to "Qualified Individuals" who are not eligible for other coverage

– Federal Credits for up to 400% FPL– Plans must be approved for sale

Gateway/Exchange

Senate Finance Bill – Creates state insurance exchanges that offer

competing plans to the uninsured– All individual and small group market insurers must

participate in the state-based exchanges by July, 2013

– In the event a CO-OP is not in every state, the Secretary of HHS is authorized to use planning grants to encourage formation or expansion

– The exchanges will be based on a model web-based portal to direct individuals that will provide options, tax credit information and determine public program eligibility

Individual Mandate• Individuals who do not participate in coverage that

satisfies the minimum requirements must pay additional taxes, with certain exceptions– House Bill: Tax 2.5% of the excess of the taxpayer's

modified adjusted gross income– Senate HELP: The penalty may not be less than 50

percent of the average annual premium under the "basic plan" for the preceding calendar year

– Senate Finance Bill: Individuals would be required to buy health coverage or face a fee of $750 to $950 per year. Families would face a fee of $1,500 to $3,800 and employers would have to pay if they did not offer coverage

Insurance Market ReformsInsured Benefits

• Rating Limits– Insurers only may vary premium based on age (subject to

maximum ratio of 2:1), geographic area, and family structure.

• House – rating limits apply to individual, small, and large group markets.

• Senate HELP- Limits to individual and small group markets, also allows rating based on tobacco use

– Senate Finance – 4:1 age rating, 1.5:1 tobacco rating, applies to individual, small group markets

Insurance Market ReformsInsured & Self-Funded Benefits

• Guaranteed Issue / Renewability– Applies in large group market, as well as

individual and small group markets.– No Pre-Existing Condition Exclusions– No Annual or Lifetime Limits– Must Cover Dependents to Age 26 (Senate HELP

and House bill only)

"Essential" BenefitsInsured & Self-Funded Benefits

• Preventive care and immunizations without cost-sharing

• Extension of mental health parity to individual and small group markets

• Cost-Sharing Limits– House: Limited to $5,000 individual / $10,000 family

and must be limited to 30% of actuarial value of benefit.

– Senate: Limited to high deductible plans only and must be limited to 24% of actuarial value of benefits (applies to Gateway plans only)

"Essential" Benefits - HouseInsured & Self-Funded Benefits

• Hospitalization• Outpatient hospital & clinic• Physician services• Services, equipment, & supplies incident to care• Prescription drugs• Rehabilitative services• Mental health & substance use disorder services • Preventive services & vaccines• Maternity benefits• Well baby & child care • Oral, vision, health, & hearing services, equipment, &

supplies for children under 21

"Essential" Benefits – Senate HELPInsured & Self-Funded Benefits

• Ambulatory patient services• Emergency services• Hospitalization• Maternity & newborn care• Mental health & substance abuse services• Prescription drugs• Rehabilitative services & devices• Laboratory services• Preventive & wellness services • Pediatric services, including oral & vision care

"Essential" Benefits- Senate FinanceInsured & Self-Funded Benefits

• Establishes a standard of minimum creditable coverage based on four benefit categories with the following actuarial values

• Bronze (minimum creditable coverage) = 65%

• Silver = 73%• Gold = 81%• Platinum = 90%

"Essential" Benefits- Senate FinanceInsured & Self-Funded Benefits

• Preventive and primary care• Emergency services• Hospitalization• Physician services• Outpatient services• Same day surgery and related anesthesia• Diagnostic imaging and screening• Maternity and newborn care• Pediatric services (including dental and vision)• Medical/Surgical care• Prescription drugs• Radiation and chemotherapy• If plans rates for tobacco usage, must provide a

comprehensive tobacco cessation program

Grandfathered Group Plans

• All bills allow you to keep plan if a dependent is removed or added

• House– Existing employment-based group plans

grandfathered for 5 years, starting 1/1/13

• Senate HELP– Existing group plans grandfathered indefinitely, as

long as not "modified to a significant extent“

• Senate Finance– Existing small group plans would be allowed to phase

in reform requirements over 5 years

Public Plan Option

• The federal government will contract with entities to administer the option, but no risk will be transferred to the contracting entity

• Critics say:– Difficult for insurers to compete because of uneven

playing field– Physicians and hospitals may lose money, as the

reimbursement rates may be lower under both of options, and they may attempt to recover these losses by charging higher rates to non-public plans

Public Plan Option House Bill = "Public Health Insurance Option"

– Looks like Medicare in many ways (e.g., reimbursement rates for providers will be the same as Medicare, with allowances for geographic variations)

– Required to comply with the requirements that are applicable to all Exchange–participating health benefit plans

– Will offer at least three levels of coverage– Public Plan must negotiate rates (Energy and

Commerce amendment)

Public Plan Option

Senate HELP Bill = "Community Health Insurance Option" – Still looks a lot like Medicare, but includes provisions

to try to mitigate criticisms that were made about the public plan option

• Premiums must cover costs• Rates for provider reimbursement shall be

negotiated by HHS • Consumer protection laws of a state shall apply • Start-up funds allocated to a federal trust fund must

be repaid within 10 years • Health care providers are not required to participate

Public Plan Option• Senate Finance bill does not create a new

government-run public plan option

Employer Mandates

House bill– Employer must offer coverage that meets minimum

requirements- qualified health benefit plans or grandfathered plans as permitted

– For full-time employees, must contribute at least 72.5% for individual / 65% for family of contributions payable under employer’s lowest cost plan that meets essential benefits package.

– For part-time employees, must contribute proportionate amount. – If do not elect or substantially comply, subject to excise tax of

8% of payroll• Small employers with annual payroll up to $500,000 are

exempt from the requirement• Payroll from $500,000 - $750,000 would pay from 2 – 6% for

non-compliance

Employer Mandates

Senate HELP– Must contribute at least 60% of monthly

premiums or pay a fine of $750 per year for each FT employee ($375 for PT employee) that is not covered

– Coverage must meet the essential benefits requirement

– Employers with less than 25 employees are exempt

Employer Mandates

Senate Finance– No employer mandate but it does provide a free rider

penalty and extensive firewall • Firewall = if an employee is offered ESI, the

individual is ineligible to receive tax credit to purchase through an exchange

• Free Rider – employers with 50 or more full time employees, working over 30 hours that do not offer coverage, must pay a non tax deductible fine for each employee who receives a tax credit through the exchange

– These fees would not benefit the employees but be deposited into U.S. general funds

Small Business Assistance

House bill• Provides a health insurance tax credit equal to

50% of the cost of the coverage where the average compensation is less than $20,000

• Firms with 10 or fewer employees are eligible for the full credit, which phases out entirely for firms with more than 25 employees.

• Individuals with incomes over $80,000 do not count for purposes of determining the credit amount

Small Business Assistance

Senate HELP• Provides $1,000 tax credit for employee and

$2,000 tax credit for employee + family if employers pay a wage of less than $50,000 and pay at least 60% of employee health expenses

• Credit is adjusted for group size and number of covered months

• Bonuses are paid for larger employer payments

Small Business Assistance

Senate Finance• Provides tax credits for qualified small employer

contributions to purchase coverage for employees

• To be eligible for the full credit, an employer could have no more than 10 employees whose average annual salaries did not exceed $20,000

• The credit would phase out for employers with 25 or more employees with average annual salaries exceeding $40,000

Wellness Provisions

House bill– – Employer-based wellness programs are not

included– Creates national task force on evidence-

based prevention and wellness– Increases Medicare and Medicaid access to

proven preventive care services

Wellness Provisions

Senate HELP• Allows participation in a workplace wellness program to

be used as a factor in determining small group rates• Improves HIPAA wellness program rules and increases

the value of workplace wellness incentives to 30% of premium, with the potential for expansion up to 50% with federal approval

• Creates a prevention and public health investment fund• Creates a federal grant program to implement and

evaluate proven community preventive health activities, reduce chronic diseases and address health disparities

Wellness ProvisionsSenate Finance• Improves HIPAA wellness program rules and increases the

value of workplace wellness incentives to 30% of premium, with the potential for expansion up to 50% with federal approval

• For small businesses, establishes a $200 million five-year grant program for businesses with less than 100 employees to create workplace wellness programs

• Expands wellness program rules to the FEBHP and sets up a 10-state pilot program for the individual market, with potential expansion to all states after 2017

• Calls for a new study on wellness program effectiveness and cost savings

• Creates a federal grant program to implement and evaluate proven community preventive health activities, reduce chronic diseases and address health disparities

Costs, Costs, Costs!!!• CBO preliminary analysis states that to cover only 1/3 of

the uninsured, for H.R. 3200 the cost will be more than $1.3 trillion dollars and that it will not contain costs at all

• H.R. 3200 also would increase the federal budget deficit by more than $200 billion

• Senate HELP proposal also scores at over $1 trillion

• Senate Finance :– Establishes a new $6 billion health insurance fee– CBO score: $774 billion/ 10 yrs

Cost is a political concern and a barrier to moving more aggressive reform

Call to ActionSenator Debbie Stabenow Senator Carl Levin243 W. Congress, Suite 550 30500 Van Dyke, Suite 206Detroit, MI 48226 Warren, MI 48093 313-961-4330 586-573-9145 [email protected] [email protected]

To find and contact your House of Representatives member, please visit www.house.gov

For more information on Healthcare Reform, please visit:• www.nahu.org The National Association of Health Underwriters• www.ahip.org America’s Health Insurance Plans• www.gethealthcarereformright.org The coalition of organizations to

ensure choices in healthcare• www.ciab.com Council of Insurance Agents and Brokers• www.kff.org Kaiser Family Foundation – customizable side by sides of

the legislation and key issues