Health+Benefits the May 2010 issue

Basics of the New Healthcare Reform Law

Large-Group Insured Plans, Small-Group Plans and Self-Insured Plans

By Barbara Haugen Posted on May 1, 2010

The best broker consultants—those most valued by their clients (who happen to be also the most profitable)—like to say: “change equals opportunity.” While the new healthcare reform law’s market impact poses many challenges, analysts and entrepreneurial brokers are focused on how it can enhance the benefits broker-consultant business model.

Here are highlights of the new law to consider as you develop a business strategy to take advantage of the new opportunities and minimize the problems the law poses.

For Plans Years Starting After Sept. 23, 2010

A ban on lifetime benefit limits.
Department Health and Human Services (HHS) can set rules that dictate annual limits on coverage.
Insurers cannot rescind coverage except in cases of fraud.
Plans must provide free coverage of preventive care (grandfathered plans excepted).
Plans that offer dependent coverage must extend it to employees’ dependents until age 26. Until 2014, grandfathered plans need only provide it to dependents who are not eligible for coverage from their own employer.
Plans must provide coverage of pre-existing conditions for children up to age 19.
Enrollees may designate a primary care provider and have access to emergency services, pediatricians and OB/GYNs without pre-approval (except grandfathered plans).
A ban on discrimination in favor of highly compensated workers will be extended to insured plans (except grandfathered plans).
A temporary reinsurance program will be established for employer plans that cover early retirees.
Insured plans will be subject to minimum medical loss ratios (MLR) (80% for small groups; 85% for large groups). Many predict this will put pressure on commissions.
Insurers must begin reporting the percentage of premium dollars that is spent on medical care.
Large employers must provide automatic plan enrollment for all employees (likely effective when governing regulations are issued).
HHS and states will establish a process for annual review of “unreasonable” premium increases, beginning with the 2010 plan year. Insurers will be required to submit justifications for unreasonable premium increases before implementing the increase.
Insurers must provide an appeals process for coverage determinations.

EFFECTIVE 2011

Plans that fail to meet their minimum MLR requirements must pay rebates to policyholders.
HHS to establish grant program for newly created wellness programs for small businesses (expected at beginning of FY 2011).

By 2012

HHS expected to establish a voluntary long-term care plan to provide cash benefits for insureds who cannot perform at least two activities of daily living (such as dressing and bathing). Employees would enroll and pay a monthly premium for coverage through participating employers.
Uniform summary of coverage documents and forms available for applicants and enrollees.

Effective 2013

Uniform standards for the electronic exchange of health information are created.

Effective 2014

A ban on annual benefit limits.
Plans must cover pre-existing conditions for everyone.
There will be basic health benefits required of all plans in the individual and small group markets (except grandfathered plans), and any plan sold through the exchanges.
Insurers in the individual market cannot discriminate based on health status, medical condition or history, claims experience, genetic information, disability, evidence of insurability or any factor that HHS deems appropriate. (Current law bans discrimination by self insured plans and plans in the group markets.)
A limit on out-of-pocket costs (except for grandfathered plans).
There is a guarantee of issuance and renewal of health plans.
A maximum 90-day limit on waiting periods now in place for coverage.
Coverage must extend to clinical trials (except for grandfathered plans).
Only rate variation that is based on age (with ratios no more than 3:1), tobacco use, family composition and geographic area will be permitted, for plans in the individual and small group markets, and for any plan sold through the exchanges (except grandfathered plans).

Other Employer Responsibilities

Businesses with more than 50 full-time employees will pay a penalty if they do not offer them “minimum essential coverage.” If they do not, the penalty will be equal to $2,000 times the number of full-time employees (the first 30 full-time employees are not counted for purposes of calculating this penalty). If the employer does offer coverage and they have just one employee receiving a premium assistance tax credit (based on their income) to buy insurance through an exchange, the employer will be fined the lesser amount of either $3,000 for each employee receiving a premium credit, or $2,000 times the total number of full-time employees (minus 30) . To determine employer size, hours worked by part-time employees are converted to full-time equivalents.

Insurance Exchanges (Effective 2014)

States must establish health insurance exchanges to provide a marketplace for small businesses and individuals to buy health insurance.
The exchanges can be governmental agencies or nonprofits set up by the state government.
Agents and brokers are expressly permitted to assist small business and individuals seeking to buy through the exchanges. Agents and brokers may also be qualified to serve as “navigators”— individuals and entities that provide information and assist with enrollment in exchanges. HHS can set the licensing requirements for navigators.
States can participate in regional exchanges with other states if permitted under state law and approved by HHS.
If a state fails to create an exchange, HHS will establish one.
Beginning July 1, 2013, states can create interstate compacts to facilitate the purchase of health insurance.
Businesses with 100 or fewer employees will have access to the exchanges. Those with more than 100 employees may have access to exchanges if their state approves it, beginning in 2017.
Catastrophic coverage plans must be available through the exchanges to qualified individuals under age 30.
The federal Office of Personnel Management, which oversees benefit plans for federal employees, will contract with private insurers to provide at least two multi-state plans to be offered in each state exchange.
Workers can obtain “Wyden vouchers,” which allow them to take their employer contribution in lieu of coverage through a group plan and join an exchange plan—if the worker’s family income is less that 400% of the federal poverty level (about $88,000) and if the cost of premiums for their employer’s plan amounts to between 8% and 9.5% of their income.

Taxes

Individuals

2011—Increase to 20% HSA/MSA non-medical expense distributions tax
2013—0.9% Medicare tax on high-income individuals and self-employment income
2013—3.8% Medicare unearned income tax on high-income individuals
2013—$2,500 FSA contributions limit
2014—Individual mandate penalties
2018—40% “Cadillac plan” excise tax on health coverage with annual value exceeding $10,200 for individuals and $27,500 for families. Threshold values will be indexed to the Consumer Price Index. For calculation purposes, the value of stand-alone dental and vision benefits are excluded.

Employers

2011—W-2 forms must report the value of health care coverage for the employee.
2012—Executive compensation deductibility limit of $500,000
2013—Medicare Part D subsidy eliminated
2014—Employer mandate penalties

Tax Credits

2010-2014—From 2010 to 2013, businesses with 25 or fewer employees and average annual wages below $50,000 may receive a tax credit equal to 35% of the employer contribution to health plan costs—if the employer contributes at least 50% of the total premium cost or 50% of a benchmark premium. The credit rises to 50% starting in 2014. The credit will vary depending on the firm’s size. Generally, the full amount will be available to businesses with 10 or fewer employees and wages averaging less than $25,000.

Prevention And Wellness

The law places a new emphasis on prevention and wellness programs, with HHS heading a range of programs aimed at increasing preventive services, educating patients and developing criteria for workplace programs.
Small businesses that establish wellness programs will be eligible for grants under a new program to be developed by HHS.
Businesses may offer employee rewards of up to 30% of their coverage costs to participate in a wellness program and meet certain health standards.

Individuals

Individuals will be required to purchase health insurance.
In 2010, the federal government will create a temporary high-risk insurance pool for individuals with pre-existing conditions.

The Council’s Healthcare Reform Center

Visit CIAB.com for updates on reform.

Because reform is not over but just beginning, The Council will constantly update its online member’s only “Healthcare Reform Center” at www.CIAB.com.

Get all of the latest information and legal interpretations as they become available. Learn about new regulations when they happen. Reform will take years to implement, so the site will be constantly change with new updates.

Got a question? Go online; we’ve probably already got the answer. If we don’t, just ask.

Need help informing your clients about the changes? We’ve got a complete webinar that your firm can brand and use to present to clients.