HEALTHCARE REFORM. A Review of the Patient Protection and Affordable Care Act. Presented by Robert B. Evnen Keith A. Prettyman

Transcription

1 HEALTHCARE REFORM A Review of the Patient Protection and Affordable Care Act Presented by Robert B. Evnen Keith A. Prettyman

2 OVERVIEW OF HEALTHCARE REFORM Reasons for Reform Pre-Reform Landscape General Approach of PPACA

3 OVERVIEW OF HEALTHCARE REFORM Reasons for Reform the Basic Problems Improving access to and quality of care 2008 Census Bureau determination that 46.3 million people in the U.S. did not have health insurance 87 million were uninsured at some point in 2007 or 2008 Lack of health insurance ( access ) restricts access to preventive care resulting in more chronic or emergency (high cost) medical problems.

4 OVERVIEW OF HEALTHCARE REFORM Reining in the cost of health care Premiums for health care have more than doubled from Premiums have increased more than 3 times the rate of wage increases over last decade Financing enacted reforms Tax increases Fees and penalties Reduction in Medicare fraud, waste and abuse Streamlining the health care system

5 OVERVIEW OF HEALTHCARE REFORM Pre-Reform Landscape 177 million (59% of total population) have employer-based coverage 96% of employers of 50+ provide coverage Plan designs, definitions of those covered and limits/conditions/exclusions vary widely Continued access through employer-plans depends on economy Those not covered by employer plan (but covered) are provided access through individual policies (subject to annual premium increases and/or cancellation in many cases) and government funded or mandated plans

6 OVERVIEW OF HEALTHCARE REFORM General Approach of PPACA Individuals must have health coverage or pay an income tax penalty. Coverage can be from an employer, government plan (Medicare, Medicaid), or a state-based health benefit exchange. (Effective 2014) No employer mandate per se but employers with 50+ employees face penalties if employees are not covered (Effective 2014) Plans in existence at the time of enactment are grandfathered and won t have to comply with some of the benefit mandates Expand Medicaid eligibility to 133% of Federal Poverty Level (FPL). (Effective 2014) State-based American Health Benefit Exchanges for individual and small group health insurance purchases. Federal subsidies apply to low income individuals; tax credits apply to small employers. (Effective 2014) New health insurance regulations (varying Effective Dates)

7 OVERVIEW OF HEALTHCARE REFORM Grandfathered Plans If you like your current coverage, you will be able to keep it. Defined: Coverage provided by a group health plan in which an individual was enrolled on March 23, 2010 (date of PPACA enactment) Grandfathered plans are exempt from some (but not all) of the Act s mandates ( improvements and reforms ) Loss of grandfathered status Elimination of all benefits to diagnose or treat a particular condition Increases in deductibles, copays or co-insurance amounts Increasing employee contribution by more than 5% Changing dollar limits on benefits Changing carriers

8 Exchanges OVERVIEW OF HEALTHCARE REFORM Effective 2014: States must establish an American Health Benefits Exchange Brings health insurance buyers and sellers together via Web-based standardized enrollment applications and processes To pool risk and offer individuals access to group rates Allows only qualified benefit plans to be marketed Exchange would replace individual insurance market Tight regulations on insurance underwriting practices Subsidize insurance premiums for households with income up to 400% of FPL ($88,000) Private sector plans only; no new Medicare-type govt plan, though OPM will offer two qualified multi-state plans

9 LEGAL CHALLENGES TO HEALTHCARE REFORM

10 COVERAGE CHANGES DURING THE TRANSITION Prohibition on Lifetime and Annual Dollar Limits on Benefits Prohibition on Pre-existing Condition Exclusions for Children under Age 19 Coverage of Preventive Health Services Extension of Coverage for Children up to age 26 Mandated Appeals Process Prohibitions on Certain Rescissions Patient Protections

11 COVERAGE CHANGES DURING THE TRANSITION Prohibition of Lifetime and Annual Dollar Limits on Benefits Effective for plan years beginning after September 23, 2010 Applies to grandfathered plans Absolute prohibition on lifetime limits Phase-in of annual limits 9/23/10 9/23/11 - $750,000 9/23/11 9/23/12 - $1,250,000 9/23/12 12/31/13 - $2,000,000 Annual limits only apply to essential benefits (no regulation s yet)

12 COVERAGE CHANGES DURING THE TRANSITION Prohibition on Pre-existing Condition Exclusions for Children Under Age 19 (applies to grandfathered plans) Coverage of Preventive Health Services Does not apply to grandfathered plans Definition of preventive health services is extensive Evidence based services having an A or B rating from the U.S. Preventive Services Task Force Immunizations recommended by Advisory Committee on Immunization Practices Screenings for infants, children, adolescents and women recommended by the Health Resources and Services Administration Coverage must be provided without any cost-sharing requirements

13 COVERAGE CHANGES DURING THE TRANSITION Extension of Coverage for Children up to Age 26 Children are natural children, adopted children and stepchildren Dependency not required For grandfathered plans, until 2014, extension is not required if the adult child has employer-based coverage available Does not extend to adult child s spouse or children Does not mandate that dependent coverage must be provided (but if it is, these rules apply)

14 COVERAGE CHANGES DURING THE TRANSITION Mandated Appeals Process Does not apply to grandfathered plans Internal process as required by ERISA External process at a minimum level as contained in NAIC External Review Act Prohibition on Certain Rescissions Applies to grandfathered plans Rescissions is a retroactive termination as opposed to a prospective cancellation Rescissions can only be made for fraud, material misrepresentation and nonpayment of premiums Patient Protections Does not apply to grandfathered plans Designation of physicians specializing in pediatrics or obstetric s/gynecology as primary care physicians Coverage of Emergency Services without preauthorization requirements or subject to in or out of network distinctions or coverage differentials

15 Coverage Changes January 1, 2014

16 INDIVIDUAL MANDATE Cornerstone of national health care reform All applicable individuals are required to have minimum essential coverage or pay a tax penalty applicable individuals are American citizens other than those who qualify for a religious exemption or are incarcerated minimum essential coverage» Government sponsored programs» Qualifying employer coverage» Grandfathered employer coverage» Individual coverage through an exchange

17 INDIVIDUAL MANDATE Penalty Unless exempt an individual who does not have the required coverage will pay an annual penalty which is the greater of: Year Dollar Amount or % of Income 2014 $95 1% 2015 $325 2% 2016 (and after) $695 (indexed) 2.5% Exempt Those whose required (non-subsidized) lowest premium would exceed 8% of household income; Those who do not file a 1040 because they don t earn enough; Members of Indian tribes; Those not covered by required coverage for less then 3 months (exemption expires at end of 3 month period) 17

18 EMPLOYER PAY-OR PLAY MANDATE - Applies to large employers those with more than 50 FTEs - Full time is defined as 30 or more hours per week - Part time hours are combined for any month and divided by 120 to determine FTE - Must include part-time (FTE) to determine if employer is subject to mandate. Penalty only applies to actual full-time employees (30 or more hours/week)

19 EMPLOYER PAY-OR-PLAY MANDATE Two types of penalties - $2,000 per year ($166.67/month) for each employee (over the first 30 employees) who is not provided minimum essential coverage. Applies to large employers which do not provide qualifying coverage. - $3,000 per year ($250/month) for each employee who acquires coverage through an exchange if the employee s required contribution for employer coverage exceeds 9.5% of household income. Applies to large employers which provide qualifying coverage.

20 FREE CHOICE VOUCHERS Applies to any employer (no minimum size) which offers minimum essential coverage and pays any portion of the premium Such employers must provide certain employees a voucher for the amount the employer would have contributed toward employer coverage to use to purchase exchange coverage Voucher amount is tax deductible Must provide vouchers to employees With household incomes below 400% of FPL; and Whose contribution to the employer plan is between 8% and 9.8% of household income

21 Other January 1, 2014 Mandates Prohibition on pre-existing coverage exclusion for adults Guaranteed issue and renewal of all qualified insurance Prohibition on charging higher premium rates based on health status for individual health insurance Limits on premium differentials based on age and tobacco use Cannot vary by more than 3 to 1 for age Cannot vary by more than 1.5 to 1 for tobacco use No waiting periods in excess of 90 days Mandated overage for individuals participating in clinical trials (does not apply to grandfathered plans) Limits on out-of-pocket expenses for group health plans (does not apply to grandfathered plans) $2,000 individual $4,000 family

22 COST OF CHANGE Financing of Healthcare Reform Practical Examples of How the Law will Effect Individuals, Families and Employers

23 FINANCING OF HEALTHCARE REFORM Health care FSA annual limit of $2,500 (Effective 2013, indexed) Over the counter medications not reimbursable through an HRA or Health FSA (Effective 2011) prescribed medicines, drugs and insulin still qualify Non-health HSA distributions taxed at 20% (Effective 2011) Medicare cuts Medicare provider and Medicare Advantage cuts (various Effective Dates) Employer tax deduction for Medicare Part D retiree drug subsidy eliminated (Effective 2013)

24 FINANCING OF HEALTHCARE REFORM Tax on high income individuals 0.9% increase in Medicare Part A tax to 2.35% for earnings and wages over $200K/$250K (individual/joint returns) 3.8% tax on unearned income for those with adjusted gross income over $200K/$250K (individual/joint returns); unearned income includes income from interest, dividends, annuities, royalties, rents and capital gains Effective 2013 Other taxes 10% tax on indoor tanning services (Effective July 1, 2010) 10% limit on individual tax deductibility for unreimbursed medical expenses (from 71/2%, effective 2013)

25 FINANCING OF HEALTHCARE REFORM High Value Plan ( Cadillac Plan Tax) 40% tax on benefit values in excess of $10,200 for individuals and $27,500 families (indexed at CPI-U+1% for 2019 and CPI-U for 2020 and later) Tax is imposed on the issuer of insurance or plan administrator Includes reimbursements under a health FSA or HRA and employer HSA contributions, and coverage for supplementary health insurance coverage Excludes dental and vision Effective 2018

26 PRACTICAL EXAMPLES Source: Kaiser Family Foundation (kff.org) Subsidy Calculator Example One 40 year old; single coverage; household income of $35,000 Projected Premium - $4,500/year Government Subsidy - $2,774/year Employee Pays - $1,726/year; $143.83/month Large Employer Pays- $2,000/year penalty Example Two 40 year old head of household; family coverage (spouse and 2 children); household income $55,000 Projected Premium - $12,130/year Government Subsidy - $7,995/year Employee Pays - $4,135/year; $345/month Large Employer pays - $2,000/year penalty

27 Questions?

28 Bob Evnen Keith Prettyman

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