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Title: Federal Health Care Reform: Implications for the Marketplace


1
Federal Health Care Reform Implications for the
Marketplace
  • Name
  • Date

2
Agenda
  • Legislative overview
  • What it means for you
  • Continuing need for reform
  • How to stay informed

3
Patient Protection and Affordable Care Act
  • Signed March 23, 2010

4
Congressional Action on Federal Health Care Reform
  • 3/21/10 House vote on Senate bill
  • 3/21/10 House immediately votes on
    reconciliation sidecar
  • 3/23/10 Final bill signed by President
  • 3/23/10 Senate takes up reconciliation bill
    begins 20-hour debate
  • 3/25/10 Senate passes amended reconciliation
    bill, forcing House vote
  • 3/25/10 House passes amended reconciliation
    sidecar
  • 3/30/10 Reconciliation bill signed by President

5
Federal Reform Key Elements
  • .

Individual Mandate
Employer Mandate
Insurance Exchanges
New Taxes and Fees
Market Reforms
6
Key Elements New Taxes and Fees
New Taxes and Fees Effective in 2010 Annual tanning tax 10 tax on indoor tanning services (2.7 B) Effective in 2011 Annual pharmaceutical industry fee Begins at 2.5 billon per year (27 B) Effective in 2012 Annual medical device manufacturer fee Excise tax of 2.3 on the sale of any taxable medical device (20 B) Effective in 2013 Annual Medicare tax on high earners, and unearned income 0.9 increase in payroll tax. Unearned income tax of 3.8 (210.2 B) Effective in 2014 Annual insurer fee Applies to fully-insured business (60.1 B) Effective in 2018 Annual high-cost insurance tax 40 excise tax on Cadillac plans (32 B)
7
Key Elements Market Reforms
Market Reforms (2014) All health insurance products in all markets guaranteed issue No health status rating rating factors limited to Age 31 Tobacco 1.51 Family size Geography
Small Group (2014) Small Group redefined in most states from group size 2-50 to group size 1-100
Products Health insurance products must meet new benefit mandates and at least exhibit a 60 actuarial value
8
Key Elements Insurance Exchanges
  • Effective in 2014
  • Insurance Exchanges will act as a new sales
    channel beginning in 2014
  • Requires states to establish Exchanges for
    individuals small employers
  • Subsidies for individuals up to 400 of the
    federal poverty level, only available in exchange
  • Small employer tax credits available only in
    exchange
  • Potential role for agents/brokers

Insurance Exchanges
9
Key Elements Individual Responsibility
Individual Mandate (2014) All U.S. citizens and legal residents required to have coverage Penalty phased in 95 per year in 2014, phasing in to 695 per year by 2016, or 2.5 of taxable income Exempts low-income individuals
Subsidies (2014) Sliding scale, up to 400 of federal poverty level (88,000/year for family of 4) Only available through exchanges
Medicaid (2014) Expanded to 133 FPL in all states Mandatory enrollment under 100 of federal poverty level
10
Key Elements Employer Responsibility Play or
Pay
Requirement Play (2014) Employers with gt50 full-time employees (FTEs) must offer minimum coverage Part-time are included on FTE basis in calculating gt50 FTE Full-time employee averages 30 hours per week No minimum contribution Must provide essential coverage with 60 actuarial value minimum
Coverage Penalty Pay (2014) Employers with gt50 full-time employees Not offering coverage and at least one FTE receives tax credit 2,000 x total number of FTEs (minus first 30 FTEs) Offering coverage at least one FTE receives tax credit but actuarial value lt 60 or employee cost is gt 9.5 of household income Lesser of 2000 x total FTEs or 3000 x number of employees receiving tax credit
11
Key Elements Other Employer Responsibilities
Free Choice Voucher (2014) Employers must provide for use in exchange if Employee premium cost sharing is 8-9.5 of household income (gt400 federal poverty level)
Auto-Enrollment Employers gt200 employees must auto enroll FTE into health plan (employee may opt out)
Treasury Reporting Employers required to submit annual coverage reports
W-2 Reporting Must disclose cost of coverage
Early Retiree Reinsurance (2010) Temporary reinsurance for retirees 55-64
12
Key Elements Employer Tax Elements
Small Group Tax Credit (2010) Employers lt 25 employees and lt 50,000/year average wages contributing gt 50 of premium 2010-2013 sliding scale credit up to 35 of employer costs (25 if tax exempt) 2014 credit up to 50 of employer costs (35 if tax exempt) for first 2 years limited to exchange only
Retirees Drug Subsidy (2013) Eliminate tax exclusion for Part D subsidy payments
High Cost Plan Excise Tax (2018) 40 nondeductible tax For coverage that costs over 10,200 individual 27,500 family coverage Amounts indexed to standard inflation Excludes dental and vision
13
Other Federal Reform Key Elements
For internal and other select audiences
Product Framework (actuarial value) Four tiers based on actuarial value 60, 70, 80, 90 effective in 2014. Separate policies for young invincibles. Cost-sharing limits tied to the HDHP limits. Additionally, small group deductibles may not exceed 2,000/4,000.
Medical Loss Ratio Requirements In 2011, MLR is set at 85 for large group and 80 for small group and individual markets.
Insurance Rate Review Beginning in 2010, federal government to establish a process with states to require insurers to justify rate increases
Medicare Advantage Cuts Medicare Advantage by a total of 202 billion by freezing benchmarks for one year in 2011 and then reducing benchmarks to different percentages of fee-for-service Medicare spending, with bonuses for quality and enrollee satisfaction. Increases ability to reduce MA plan payments because of plan coding practices.
Administrative Simplification Requires the Secretary to adopt and regularly update standards, implementation specifications, and operating rules for the electronic exchange and use of health information for the purposes of financial and administrative transactions.
14
Agenda
  • Legislative overview
  • What it means for you
  • Continuing need for reform
  • How to stay informed

15
Immediate Provisions
  • Effective for the 2010 tax year
  • Tax credits for certain small employers
  • 250 rebate to Medicare beneficiaries who reach
    the Part D donut hole
  • Effective 90 days after enactment
  • Temporary high-risk pools and early-retiree
    reinsurance programs
  • Effective for plan years starting 6 months after
    enactment
  • Dependent coverage for adult children up to age
    26
  • No lifetime coverage limits
  • No cost-sharing for preventive services (applies
    only to individuals not grandfathered)

16
Dependent Coverage for Adult Children Up to Age 26
  • Who
  • Existing members dependents who would have lost
    dependent benefits on or after June 1, 2010,
    based on their birthday, will now be eligible to
    continue benefits
  • This includes specialty products such as vision,
    dental and pharmacy
  • Exceptions noted below
  • When
  • Beginning June 1, 2010
  • Why
  • The extension is designed to fill the coverage
    gap between June and September 23, 2010, when the
    dependent care provision in health care reform
    legislation takes effect
  • Exceptions
  • Administrative Services Only (ASO), fully or
    partially self funded accounts with more than 100
    lives, and fully insured accounts with more than
    100 lives are able to opt out of the extension
    we will work with these groups individually to
    meet their needs

17
Immediate Provisions
Delete this slide if not relevant to audience
  • Grandfathering of existing members
  • Grandfather provision allows existing members to
    keep their products, except, requires all
    products renewed after September 23, 2010 to
  • Allow members to add dependents up to age 26
    regardless of student status
  • Eliminate lifetime limits on policies
  • For new sales and subscribers who change policies
    after 3/23/10, we will be required to make
    additional changes beginning in approximately six
    months, such as removing any member cost sharing
    for "preventive" benefits, as defined by the
    legislation.

18
Effective Dates of Reform Provisions Beyond 2010
2011-2013 2014 2018
Medicare Advantage cuts Grants for small employer wellness programs All working adults enrolled in Community Living Assistance Services and Supports (CLASS) long-term care program, unless they opt out Cost-sharing for preventive services in Medicare eliminated Limit FSA contributions to 2,500 per year Individual mandate Individual market guaranteed issue Rating reforms for Individual and Small Group Employer mandate Insurance exchanges, with subsidies up to 400 of the federal poverty level Medicaid expansion Insurer fee, 8B, increasing to 14B in 2018 High-cost insurance tax 40 on single coverage over 10,200 and family coverage over 27,500
19
Effective Dates of Reform Provisions
For relevant internal audiences
2010 2011-2013 2014 2018
Rate justification New product requirements (dependents to age 26, no lifetime limits, etc.) Individual market rescission reform Prohibition on pre-ex exclusion for children Early retiree reinsurance program Federal-required high risk pool Tax credits for small employers Insurer compensation cap on deductibility of 500,000 per year Coverage of recommended preventive services Internet comparison shopping tool Consumer appeal process (inc. ASO) No benefit differences by employee salary Grants for states to enhance health insurance ombudsman programs Medical loss ratio requirement 80 for Individual and Small Group 85 for Large Group beginning in 2011 Medicare Advantage cuts Grants for small employer wellness programs Increased tax on non-qualified medical expenses for Archer Medical Savings Accounts Quality initiative reporting Limit FSA contributions to 2,500 per year Uniform coverage summaries Standard terms and conditions Individual mandate Employer mandate Individual market guarantee issue Rating reforms for Individual and Small Group Expands Small Group from 2-50 in most states to 1-100 Insurance exchanges (with government-run plan), subsidies up to 400 federal poverty level New product framework Medicaid expansion Insurer fee, 8B, increasing to 14B in 2018 High-cost insurance tax 40 on single coverage over 10,200 and family coverage over 27,500
20
Insurance Reforms / Plan Requirements
For relevant internal audiences
Plan Years Beginning
Enactment
Sept 2010
2014
3/23/10
June/July 10
  • Review of unreasonable rates
  • GI/CR
  • Age band (31)
  • Risk adjustment
  • Exchanges
  • SG 1-100
  • National high risk pool
  • HHS web portal
  • Temporary employer reinsurance
  • No pre-ex for kids
  • Dependent coverage to 26
  • Limits on rescissions
  • Internal/external appeals
  • MLRs (80 individual/ small group 85 group)
  • No lifetime limits
  • No preventive cost-sharing
  • Patient protections

Impact all plans
21
What It Means for You Implications for our
customers
  • No immediate changes to benefits, premiums,
    physician or hospital networks
  • Future impacts will vary depending on product
    type and company size
  • Legislation will be phased in over several years,
    and many provisions require federal agencies to
    issue more detailed regulations
  • Premiums may be impacted in future

22
What It Means for Large Groups
Delete this slide if not relevant to audience
  • Effective in 2010
  • New product requirements at renewal after 9/23/10
  • Early retiree reinsurance for certain eligible
    early retirees
  • Effective in 2011
  • Employees automatically enrolled in Community
    Living Assistance Services and Supports (CLASS)
    long-term care program, unless they opt out
  • Effective in 2013
  • Tax deduction for Medicare Part D retiree drug
    subsidies eliminated
  • Flexible Spending Account (FSA) contributions
    limited to 2,500 per year
  • Effective in 2014
  • Employer mandate (with auto-enrollment)
  • Products must meet new requirements, 60
    actuarial value
  • Health Insurance Exchange vouchers required for
    some employees
  • Effective in 2018
  • High-cost insurance tax 40 on Single coverage
    over 10,200 and family coverage over 27,500

23
What It Means for Small Groups
Delete this slide if not relevant to audience
  • Effective in 2010
  • New product requirements for renewals after
    9/23/10
  • Tax credits for certain employers
  • Effective in 2011
  • Grants for wellness programs
  • Employees automatically enrolled in Community
    Living Assistance Services and Supports (CLASS)
    long-term care program, unless they opt out
  • Effective in 2013
  • Limits Flexible Spending Account (FSA)
    contributions to 2,500 per year
  • Effective in 2014
  • Elimination of premium rate variables may result
    in a significant premium increase or reduction
  • New product requirements, prohibition on
    deductibles over 2,000/4,000
  • Health insurance exchange as new sales channel
  • New taxes built into premium costs
  • Effective in 2018
  • High-cost insurance tax 40 on Single coverage
    over 10,200 and family coverage over 27,500

24
What It Means for Individual Members
Delete this slide if not relevant to audience
  • Effective in 2010
  • New product requirements for renewals after
    9/23/10
  • Effective in 2014
  • Rating reforms with weak individual mandate will
    lead to substantial premium increases for many
    members
  • New product requirements with new framework
  • Health insurance exchange as new sales channel
  • New taxes built into premium costs

25
What It Means for Senior Members
Delete this slide if not relevant to audience
  • Effective in 2010
  • 250 rebate to offset the Part D donut hole
  • Coinsurance rate phases down to 25 by 2020
  • Effective in 2011
  • Reductions to Medicare Advantage program
    payments, which may result in reduced benefits
    and/or increase member cost-sharing
  • Cost-sharing for preventive services in Medicare
    eliminated
  • Discounts on prescriptions in the Medicare Part D
    donut hole begin to phase in

26
What It Means for Brokers
Delete this slide if not relevant to audience
  • Effective in 2010
  • Grandfather provision requires all products
    renewed after September 23, 2010 to
  • Allow members to add dependents up to age 26
    regardless of student status
  • Eliminate lifetime limits on policies
  • For new sales and subscribers who change policies
    after 3/23/10, we will be required to make
    additional changes beginning in approximately six
    months, such as removing any member cost sharing
    for "preventive" benefits, as defined by the
    legislation.
  • Effective in 2014
  • Health insurance exchange will exist as a new
    sales channel for individual and small group

27
Some Early Impacts Employers Facing New Expenses
  • Major American companies say they will face
    hundreds of millions of dollars in new health
    care costs
  • ATT (1 billion charge in 2010)
  • Deere Company (150 million charge in 2010)
  • Caterpillar (100 million charge in 2010)
  • 3M Company (85-90 million charge in 2010)

Source Associated Press articles, March 2010
28
Some Early Impacts Legal Challenges
  • The legislation faced immediate legal challenges
    from several parties
  • At least 21 states
  • Association of American Physicians and Surgeons
    (AAPS)
  • New Jersey Physicians Inc.

Source FierceHealthcare news, March 30, 2010
29
Agenda
  • Legislative overview
  • What it means for you
  • Continuing need for reform
  • How to stay informed

30
Medical Costs Continue to Rise
  • U.S. National Health Expenditures (trillions)

Source National Health Expenditure Accounts, CMS
31
Profit Misperceptions
Delete this slide for external presentations
  • How much profit do consumers think insurers make?
  • Less than 5
  • 15
  • 30
  • 50

32
Profit Misperceptions
Delete this slide for external presentations
  • Many consumers have an inaccurate
  • perception of health insurer profits

40 of consumers surveyed think we make a profit
of 30 or more.
33
Where Does Your Health Insurance Dollar Go?
34
Hospital Cost-Shifting
Aggregate Hospital Payment-to-Cost Ratios,
1981-2006
Source Avalere Health analysis of American
Hospital Association Annual Survey data, 2005,
for community hospitals. (1) Includes Medicaid
Disproportionate Share payments.
35
Lessons From Massachusetts
  • The results from Massachusetts demonstrate
    continued need to implement responsible reform
    that addresses cost and quality
  • Covered about half of the uninsured (already
    exhibited lowest uninsured rate in U.S.)
  • Premium costs for individuals in Massachusetts
    are the second highest in the U.S.
  • Overall, the costs of Massachusetts health
    reforms have been much higher than expected
  • Lack of an effective, enforceable individual
    mandate only exacerbates the cost issue in
    Massachusetts, and there is evidence of
    enrollment gaming

36
Agenda
  • Legislative overview
  • What it means for you
  • Continuing need for reform
  • How to stay informed

37
Implementation Communications
  • Several teams are working on implementing the
    various provisions with 2010 and 2011
    implementation dates
  • We will be sending communications to employers,
    individuals, and brokers about upcoming changes

38
Health Action Network
  • One-stop platform to follow and participate in
    the debate on health care reform
  • Contact Members of Congress
  • Register to receive weekly news on health care
    reform
  • Tell others about the Health Action Network

www.HealthActionNetwork.com
39
Health Action Network on Facebook
  • Articles and dialogue about health care reform
  • Take Action tab allows for conversions from fans
    to advocates
  • Interactive widget allows fans to easily promote
    health care reform to their friends
  • www.facebook.com/thehealthactionnetwork

40
  • Anthem Blue Cross and Blue Shield is the trade
    name of In Colorado and Nevada Rocky Mountain
    Hospital and Medical Service, Inc. In
    Connecticut Anthem Health Plans, Inc. In
    Indiana Anthem Insurance Companies, Inc. In
    Kentucky Anthem Health Plans of Kentucky, Inc.
    In Maine Anthem Health Plans of Maine, Inc. In
    Missouri (excluding 30 counties in the Kansas
    City area) RightCHOICE Managed Care, Inc.
    (RIT), Healthy Alliance Life Insurance Company
    (HALIC), and HMO Missouri, Inc. RIT and certain
    affiliates administer non-HMO benefits
    underwritten by HALIC and HMO benefits
    underwritten by HMO Missouri, Inc. RIT and
    certain affiliates only provide administrative
    services for self-funded plans and do not
    underwrite benefits. In New Hampshire Anthem
    Health Plans of New Hampshire, Inc. In Ohio
    Community Insurance Company. In Wisconsin Blue
    Cross Blue Shield of Wisconsin ("BCBSWi"),
    which underwrites or administers the PPO and
    indemnity policies Compcare Health Services
    Insurance Corporation ("Compcare"), which
    underwrites or administers the HMO policies and
    Compcare and BCBSWi collectively, which
    underwrite or administer the POS policies.
    Independent licensees of the Blue Cross and Blue
    Shield Association. ANTHEM is a registered
    trademark of Anthem Insurance Companies, Inc. The
    Blue Cross and Blue Shield names and symbols are
    registered marks of the Blue Cross and Blue
    Shield Association.
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