Health Insurance Reform Outlook

Transcription

1 Health Insurance Reform Outlook August 2009 by Janet Trautwein CEO, National Association of Health Underwriters

2 Introduction Legislating health care reform in 2009 is the major priority of the Obama administration and the Democratic Congress - such legislation could be the broadest and most expansive social reform since the enactment of Medicare in Partisan movement in both the House and Senate to move legislation forward has been at a steamroller pace, only recently slowed by the Congressional Budget Office (CBO) cost projections on covering a portion of the uninsured. Every employer and potentially every employee in America could be directly impacted depending on the breadth of the program.

3 What are the Objectives of Health Care Reform? The stated objective of President Obama s Health Care Reform is accessibility of affordable health care for all, focusing first on the 48.3 million uninsured population. The underlying objective potentially is placing control of health care delivery under government programs, thereby eliminating the current role of the private sector.

4 Among the questions that Americans should demand Congress answer before passage are: What will the breadth of the program be and what goals will it accomplish? What freedoms and flexibility in designing health plans to meet our own needs would be either lost or compromised? What impact would such a program have on our freedom to access quality care? What will the cost be? How will we pay for it?

5 Who are the uninsured? Half work for small business Young adults A third are the poor * Employee Benefit Research Institute, 2007

6 What s Happening in Washington? Senate and House committees have proposed and passed (with one exception) legislation. The initial goal was committee passage by the July 4 th recess and passage by House and Senate by the August recess. Senate HELP committee has marked up a bill and passed it out of committee. Three House Committees have marked up one combined bill and passed out of all three committees of jurisdiction. Senate Finance Committee ultimately will drive what the final package will be - delayed until after the recess due to CBO cost projections and building resistance.

7 Components of Plan Being Debated Individual Mandate of Insurance Coverage Employer mandate to provide health care coverage (Specifies benefit levels, funding requirements, and those to be covered) Government plan to compete with private plans Health Insurance Exchange

8 Proposals and Methods for Financing Medicare reimbursement cuts, already happening. Eliminate or cap tax-exclusion for employer provided health care and/or itemized deduction for health care expenses. Surcharge on top income earners.

9 Proposals and Methods for Financing Fines for individuals and employers for noncompliance with mandates. Overturn IRS ruling on the inclusion of over-thecounter drugs in FSA, HRA plans. Roll back tax benefits of HSAs either through taxing distributions or limiting contributions.

10 House Committees Individual mandate to buy health insurance 2.5% income tax penalty for non compliance. Employer mandate to offer health coverage and pay 72.5% of individual / 65% of family coverage. Small firms, payroll under $500,000 of annual payroll, are exempt. Employers failing to meet the requirement would pay 8% penalty for each employee not offered coverage up to average premium rate. Individual / family out-of-pockets could not exceed $5,000 / $10,000.

11 House Committees National health exchange for individual / small employers to select from private or new government-run public plan; eventually offer to large employers. Premium subsidies for individuals with annual gross income up to 400% of poverty level ($43,320 single, $88,200 family of 4). Proposed surtax on the wealthy Household Income Surtax $350,000 - $500,000 1% $500,000 - $1,000, % Over $1,000, %

12 Individual Mandate for Health Insurance The goal is good.. Many uninsured are young and healthy, and inclusion in the insured risk pool would stabilize costs. Insurance carriers would be willing to community rate / eliminate medical underwriting with a requirement that individuals purchase coverage. Subsidy would be necessary for low income. Regulation and enforcement would be difficult.

13 Government Plan to compete with Private Sector Government plans would pay doctors and hospitals less than private plans. This underpayment already happens today with Medicare and Medicaid payments to providers. Because of this underpayment, the shortage not paid by the government is shifted to private plans. Nationwide, $1,800 of the annual premium for an average family of four insured by a private plan is due to this cost shifting.

14 Government Plan to compete with Private Sector The government-run public plan would also not be required to comply with the same regulations as private plans. One of these regulations is the payment of state premium tax, which funds many state services such as firefighters and other essential services. State premium taxes fund $15 billion of state services each year.

15 Government Plan to compete with Private Sector Medicare reimbursement rates in the government plan for all would result in shortage of physicians and closures of hospitals. Much of the health reform being proposed today is modeled on the Massachusetts Health Plan. After health reform, Massachusetts has the longest waiting time in the country to see a primary care physician.

16 Health Insurance Exchange Also modeled after Massachusetts plan; every proposal creates an exchange for individuals / small employers to shop and compare private plans to government plans. A variety of private plans would be offered to individuals and small employers. The government-run public program would also be offered through the exchange.

17 Health Insurance Exchange The House bill would establish one big national exchange, while the Senate HELP bill establishes separate exchanges at the state level. Could result in higher costs for employers if young, healthy opt out of employer plans for government plan.

18 Employer Mandate 85% of the under 65 population is already insured through employers. There is NO NEED for this mandate. Employer mandates tell employers what kind of coverage they have to offer, who they must offer it to (including part time employees) and how much they have to pay for it. If employers don t comply with every specific of the mandate, they are fined, and the fine does not go toward the cost of coverage for employees. Both House and Senate exempt small employers (to a certain degree) from the mandate.

19 Medicare Reimbursement Cuts The Obama administration is already cutting Medicare reimbursement rates up to a target of 20%. Reduced reimbursement levels will drive many hospitals, particularly rural, out of business.. Physicians are and will refuse Medicare, reducing access to those in need. Ultimately, a government plan based upon Medicare reimbursement levels will become the single payor plan for all... The consequences: Shortage of physicians due to unprofitability Shortage of quality and accessible care Possible health care rationing

20 Eliminate or cap tax exclusions for employer-sponsored plans Current IRS code excludes employer paid health care from employees income tax. The same basis applies for HRAs and FSAs. Senate focus is to eliminate or cap at to be determined income levels. FSAs / HRAs would likely be eliminated as they exceed cap. Employers would also have an increased FICA match on employees whose benefits were taxed.

21 HSAs, HRAs and FSAs House Ways and Means passed bill overturns the IRS ruling allowing reimbursement of over-the-counter drugs in FSAs, HRAs, HSAs. Ironically, while this would contribute to financing via more tax dollars, it would make care less affordable to many who can afford it the least. There is also discussion of limiting the tax treatment of HSAs some minimum benefit plans would no longer allow this benefit structure.

22 Other Proposals... Bipartisan proposal by former Senate leaders Dole, Baker and Daschle to advocate compromise Invest in information technology Reshape markets to guarantee access and equitable premiums Advocate wellness / disease management Offer public plan options at state level, if private market reforms are not successful in 5 years, at federal level

23 Recent Interesting Developments CBO preliminary analysis states that to cover only 1/3 of the uninsured, the cost will be more than $1.3 trillion dollars and that it will not contain costs at all. Blue Dog democrats have created significant controversy in the House and held up committee work significantly before the August recess. Senate Finance is on hold until after the August recess. Grass roots concern about the cost is influencing middleground Democrats.

24 In Summary While our system is not perfect and is in need of fine-tuning, it continues to be superior to any other health care delivery system in the world. Reform should focus on the uninsured. Individual and small group insurance must be accessible and affordable. There are ways to accomplish this in the private sector building from the current employer-sponsored plan model. Whatever your views, get off the sidelines and make your voice heard NOW! If not for yourself, for your children and grandchildren.