The Nebraska BLUES

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The Nebraska BLUES

• Reform Impact Study
• Pat Bourne

2
The Need for Reform

• We agree the U.S. health care system is broken.
• As the debate intensified, we promised to be open
  to change, stay engaged, keep Nebraskans
  informed.
• We began analysis with actual House and Senate
  proposals on the table.
• Recently released our Nebraska BLUES Reform
  Impact Study

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Reform Impact Study SUMMARY

• Utilized industry research and actuarial methods
• Applied measures from both bills to popular
  BCBSNE insurance products (BlueEssentials 500
  and BluePride 1,000)
• Projected monthly premiums for approximately
  95,000 members of different ages and health
  status
• Rate increases in many casessome as much as
  triple-digit percentage increases. Rate decreases
  for older, less-healthy populations.

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Monthly Health Insurance Costs
Healthy 25-year-old male
Post Reform
Current
5
Monthly Health Insurance Costs
Average health 40-year-old couple with 2 children
Post Reform
Current
6
Monthly Health Insurance Costs
Less healthy 60-year-old couple
Post Reform
Current
7
Monthly Health Insurance Costs
Small business owner
Post Reform
Current
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Key Drivers of Rate Increases

• Guaranteed issue coupled with an ineffective
  individual incentive to purchase insurance
• Elimination of health status discounts
• New taxes to pay for the reform package
• Requiring higher benefit levels
• Limiting age ratio and eliminating gender rating

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Putting it in Perspective

• A one-size-fits-all solution does not benefit
  Nebraska
• Increased premium costs will not draw uninsured
  people into the system in fact, many may leave
• Weak individual incentives penalize Nebraskans
  currently in the system
• Small businesses are already strugglingincreasing
  health care costs and coverage is another hit
• Current reform bills dont address rising costs,
  or bring us closer to affordable, attainable and
  accessible care

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Broken Promises material

• More detailed information available at
• bcbsbne.com/brokenpromises

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Healthcare Reform Procedure

• With the special election of Republican Scott
  Brown in Massachusetts to replace the late Sen.
  Kennedy, Democrats no longer have a 60-vote super
  majority needed to defeat a GOP filibuster.
• Leaves the Democrats with a few options
• No bill
• A skinny bill (basically start over)
• House passes the Senate bill as is
• House passes a modified Senate bill with a budget
  reconciliation amendment

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Procedure (2)

• If the House passes the Senate bill/reconciliation
  bill package, Senate would only need 51 votes
  for final passage
• Still approximately 50 major discrepancies
  between the House and Senate bills
• Senator Nelson has not ruled out voting for a
  bill under a reconciliation process
• Senator Reid We are in no rush
• Likely no action until end of February

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Important Provisions House Bill

• Guaranteed issue required for all markets
  (generally consistent with current small group
  requirements)
• Age band rating set at 21
• No pre-ex for all markets between 1/1/10 and
  2013, limits pre-ex to 3-month exclusion and
  30-day look-back for group markets
• Reinsurance for early retirees with employer
  coverage
• Temporary high-risk pool ending with operational
  Exchange premiums set at 125 with 21 age band
• COBRA extended until operational Exchange

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Important Provisions House Bill (2)

• National Exchange with limited state ability to
  opt-out and operate a state or regional-based
  Exchange
• CHIP enrollees allowed into Exchange in 2014
• Small employers with 25 or fewer employees
  allowed in Exchange in Year 1 and 50 or fewer in
  Year 2
• Exchange eligibility could be expanded to larger
  employers in Year 3
• Essential benefits package and tiered benefit
  packages required for Exchange beginning at 70
  actuarial value
• All products outside Exchange must meet essential
  benefits package and have 70 actuarial

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Important Provisions House Bill (3)

• New Medicare-like government plan to compete with
  private plans
• HHS is allowed to negotiate payment rates with
  providers
• 5 billion for state-based non-profit co-ops
• Individual mandate with penalty of 2.5 modified
  adjusted gross income
• Employer mandate with penalty of 8 payroll and
  8 tax on average employee wages for employee
  that declines employer coverage and enrolls in
  the Exchange.
• Small employers w/ payroll under 500K exempt.

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Important Provisions House Bill (4)

• Individual subsides for persons earning up to
  400 FPL
• Medicaid expansion to 150 FPL
• Repeals CHIP funding effective October 31, 2013.
  Gradual phase-out. CHIP children above 150 FPL
  go to exchange and below 150 FPL to Medicaid
• Medicare Part D donut hole gets phased-out
• Cuts about 500 billion from Medicare

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Important Provisions Senate Bill

• Note similar to House bill except for noted
  provisions.
• Age band rating set at 31
• Temporary national high-risk pool premiums are
  100 standard rate with 41 age band
• State-based Exchanges (rather than national)
  established. Allows for continued offering of
  individual and group coverage outside Exchanges.
• Small group Exchange eligibility defined as 1-100
  workers
• Essential benefits package actuarial value begins
  at 60

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Important Provisions Senate Bill (2)

• Individual mandate with 95 penalty beginning in
  2014, graduating in 2016 to 750 or 2 of income,
  whichever is greater.
• Employer mandate with 750 penalty per full-time
  worker
• Medicaid expansion to 133 FPL (NE Medicaid
  expansion fully funded forever for now.)
• Maintains CHIP program.
• Raises Medicare part D donut hole initial
  coverage limit point by 500 in 2010

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Important Provisions Senate Bill (3)

• 40 excise tax on insurance companies selling
  Cadillac plans (8,500/individual and
  23,000/family)
• BCBSNE is waived from annual tax imposed on
  health insurers, so long as medical loss ratio is
  not less than 89 after 2011

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What now?

• Speaker Pelosi said the House is willing to pass
  the Senate bill with the additional
  reconciliation bill
• However, she has demands
• Remove the Cornhusker kickback language
• More subsidies
• National exchange
• Close Medicare D prescription coverage gap
  completely
• Raising the Medicare payroll and unearned income
  tax on families making more than 250,000
• And others
• Now we wait