The Hundred Years’ War for Healthcare Reform
Original article from https://inthesetimes.com
By A.W. Gaffney
The story of healthcare reform in the United states begins not with Obama, Clinton or even Johnson, but almost a century ago, in the years leading up to World War I. Although the Socialist Party of America had called for insurance for workers “against accident, sickness and lack of employment” as early as 1904, it wasn’t until 1912, when the platform of Theodore Roosevelt’s Progressive Party called for a system of health insurance, that it emerged as a major political issue. Roosevelt lost the election, but progressives were nonetheless optimistic that healthcare legislation could be passed at the state level, and in 1916, progressive state legislators submitted “compulsory” health insurance bills to the legislatures of New York, Massachusetts and New Jersey. Much like the “employer mandate” of the Affordable Care Act, these plans would have required industrial employers to contribute to medical coverage and sick pay for workers and their families.
These were bold ideas, but they met with unfortunate timing, as two developments in Europe furnished powerful ideological weapons to those who opposed the legislation: in April 1917, the United states entered the war against Germany, and the following October, the Bolsheviks seized power in Moscow.
These global events proved politically useful to physicians in the American Medical Association (AMA), who had come to see health insurance legislation as a threat to both their independence and income. The AMA could now paint state-based health insurance as both pro-German (given its roots in Otto von Bismarck’s 19th-century social insurance) and pro-Bolshevik. Though the former claim had far more basis in fact, the latter smear was to prove the more enduring—throughout the healthcare reform debate of 2009-2010, even the most moderate of reform proposals were lambasted as communist by the Right. The effect in 1918 was a turning of the tide against the promising state plans that ended in their total defeat and decades of inaction.
For the next 90-odd years, efforts at sweeping healthcare reform in the United States were a series of failures. New Dealers picked up healthcare reform again in the 1930s, seeking to weave it into the new social safety net. However, fear of the physician lobby—which had flexed its newfound political muscle so effectively in the state-based campaigns of 1916-1918—encouraged Franklin D. Roosevelt to leave health insurance out of his landmark Social Security Act. Still, over time, Roosevelt leaned toward a system of universal healthcare, arguing in his famous 1944 “Second Bill of Rights” State of the Union Address for the “right to adequate medical care and the opportunity to achieve and enjoy good health.”
Though Roosevelt died the following year, the New Deal conception of universal healthcare lived on in the series of “Wagner-Murray-Dingell” (WMD) health bills of the Truman years. In its 1945 version, the WMD bill would have established universal national health insurance based on the European model. The AMA, still opposed to reform, again won the old-fashioned way, by red-baiting WMD to its grave.
Branding the bill with the hammer and sickle turned the fight over universal healthcare into yet another front of the developing Cold War, so much so that when the Johnson administration again sought to remake American healthcare in the 1960s, it strategically pursued reforms only for those individuals who were the least able to afford medical care and therefore the most politically inoffensive: the poor and the elderly. Thus Medicare and Medicaid were born.
Subsequent decades saw a number of universal healthcare proposals crash and burn: Ted Kennedy’s “health security” plan in 1970, Nixon’s plan in 1974, and Clinton’s in 1993.
This series of missteps and lost opportunities gives a sense of the stakes when the healthcare debate again took center stage after the election of Obama in 2008. But Obama also had to contend with a corporate healthcare industry that had grown enormously in power and influence in the hundred years between the WWI-era campaigns and his first term. Indeed, the relatively crude public relations campaign of the AMA in the 1910s was nothing compared to the massive lobbying machines of the insurance and pharmaceutical industries in the 21st century. These corporate “stakeholders” were to critically influence the terms of the healthcare reform debate of 2009-2010.
For instance, the health insurance lobby agreed to support the elimination of “pre-existing” conditions in exchange for a number of industry-favorable provisions, such as an individual mandate. Similarly, the pharmaceutical lobby agreed to support reform legislation so long as it did not allow Medicare to negotiate directly with pharmaceutical companies over drug prices, areform that by one estimate could have saved the government between $230 billion and $541 billion over ten years. And there’s no doubt that industry influences limited reform in other, less obvious ways, whether it was the early exclusion a single-payer system or the elimination of a “public option” from the final bill.
But clearly, these various, intertwined historical dynamics—stretching back 100 years—contributed crucially to the final form of the landmark legislation that lay upon Obama’s desk on March 23, 2010.
With a $2,000 deductible Is the Affordable Care Act 'affordable'?
Original article from https://money.cnn.com
By Tami Luhby
Until now, much of the debate swirling around the Affordable Care Act has focused on the cost of premiums in the state-based health insurance exchanges. But what will enrollees actually get for that monthly charge?
States are starting to roll out details about the exchanges, providing a look at just how affordable coverage under the Affordable Care Act will be. Some potential participants may be surprised at the figures: $2,000 deductibles, $45 primary care visit co-pays, and $250 emergency room tabs.
Those are just some of the charges enrollees will incur in a silver-level plan in California, which recently unveiled an overview of the benefits and charges associated with its exchange. That's on top of the $321 average monthly premium.
For some, this will be great news since it will allow them to see the doctor without breaking the bank. But others may not want to shell out a few thousand bucks in addition to a monthly premium.
"The hardest question is will it be a good deal and will consumers be able to afford it," said Marian Mulkey, director of the health reform initiative at the California Healthcare Foundation. "The jury is still out. It depends on their circumstances."
A quick refresher on Obamacare: People who don't have affordable health insurance through their employers will be able to sign up for coverage through state-based exchanges. Enrollment is set to begin in October, with coverage taking effect in January. You must have some form of coverage next year, or you will face annual penalties of $95 or 1% of family income (whichever is greater) initially and more in subsequent years.
Each state will offer four levels of coverage: platinum, gold, silver and bronze. Platinum plans come with the highest premiums, but lowest out-of-pocket expenses, while bronze plans carry lower monthly charges but require more cost-sharing. Gold and silver fall in the middle.
The federal government will offer premium subsidies to those with incomes of up to four times the federal poverty level. This year, that's $45,960 for an individual or $94,200 for a family of four. There will be additional help to cover out-of-pocket expenses for those earning less than 250% of the poverty line: $28,725 for a single person and $58,875 for a family of four. The subsidies are tied to the cost of the state's silver level plans.
Related: I'm signing up for Obamacare
California offers insight into how much participants will actually have to pay under Obamacare. The state, unlike most others, is requiring insurers to offer a standard set of benefits and charges in each plan level. The only variables are monthly premiums, doctor networks and carriers in your area.
For those in need of frequent medical care, the platinum or gold plans would reduce out-of-pocket costs for treatment. These plans have no deductible, and doctors' visits and medication are cheaper. But the trade-off is that they have higher monthly premiums. California has not yet released the premium range for these tiers.
On the flip side, a young man who never visits the doctor and wants to minimize his monthly charge could opt for a bronze plan. A 40-year-old enrolling in this plan could pay as little as $219 a month. But, if he did get sick, he'd get socked with a $5,000 deductible, $60 co-pays for primary care visits and a $300 emergency room charge.
The Patient Protection and Affordable Care Act provides protection for those who need a lot of care by placing a cap on out-of-pocket expenses. The maximum a person in an individual platinum plan will spend a year is $4,000, while those in the other tiers will shell out no more than $6,400.
"Insurance is expensive. It's hard for anyone who isn't well off to afford it," said Gary Claxton, director of the health care marketplace project at the Kaiser Family Foundation. "But it is good enough that you can afford to get sick without bankrupting yourself."
Whether potential enrollees find these plans affordable will depend on how healthy they are and whether they are currently insured.
Many individual insurance offerings currently available come with much higher deductibles, cover fewer expenses and limits on how much they'll pay out in a year. Plans on the exchange, on the other hand, are required to cover a variety of "essential benefits," including maternity care, mental health services and medication.
"In many cases, depending on the plan, the coverage will be more comprehensive than what the enrollee currently has," said Anne Gonzalez, a spokeswoman with Covered California, which is running the state's exchange.
Large employers won't cut worker hours due to PPACA
Original article from https://www.businessinsurance.com
By Jerry Geisel
Nearly all large employers are not considering reducing the number of hours employees work in response to the health care reform law, according to a survey released Thursday.
Ninety-eight percent of employers surveyed by Towers Watson & Co. said they have not and are not considering asking full-time employees to move to part-time status due to the Patient Protection and Affordable Care Act.
Under the health care reform law, employers must extend coverage to employees working at least 30 hours a week starting next year or pay a $2,000 penalty for each full-time employee.
The threat of the penalty has led to numerous predictions that some employers would reduce hours of employees now working at least 30 hours per week who are not offered health care plan coverage to avoid the penalty in the future.
But few employers appear willing to take such action.
“It's clear that most employers are hesitant to rush and implement changes that will negatively affect workers,” Laura Sejen, New York-based global head of rewards for Towers Watson, said in a statement.
In fact, some employers are easing health care plan eligibility requirements. Earlier this week, for example, Cumberland Gulf Group of Framingham, Mass., said employees working as few as 32 hours a week will be eligible for group coverage effective Oct. 1, down from the current 40-hour-a-week requirement.
The Towers Watson survey is based on the responses of 113 employers, all of which have at least 1,000 employees.
ACA prep: Now, this year and in 2014
Original article from https://ebn.benefitnews.com
By Robert J. Lowe
The Patient Protection and Affordable Care Act includes many requirements applicable to employer group health plans. Some of these requirements are already effective but some of the most significant requirements will become effective in 2014. Employers should now be considering what they need to do to comply with ACA requirements that will become effective in 2014.
ACA provisions that are already effective
Employer group health plan should already be complying with the following requirements that are already effective:
- Coverage for young adults to age 26
- Deletion of lifetime and annual dollar limits
- Limits on pre-existing condition exclusions and rescission of coverage
- Medical loss ratio rebates paid by insurance companies
- Summary of benefits and coverage provided to participants explaining the terms of the plan
- W-2 reporting of cost of coverage
- $2,500 limit on health care flexible spending accounts
In addition, plans that do not have “grandfathered” status under ACA, as a result of changes to the plans adopted since enactment of the Act, are already subject to the following rules:
- Modified claims and appeals rules including external review requirements
- No cost preventative care
- Non-discrimination rules for insured plans (although these rules are not being enforced currently pending release of regulations)
What happens in 2014
Effective in 2014, employers that are treated as “applicable large employers” under ACA will have to comply with one of the central requirements of the Act, the requirement to offer employees health plan coverage that complies with ACA requirements or otherwise become subject to penalties under the Internal Revenue Code, referred to as “assessable payments.”
Assessable payment rules
There are two types of assessable payment under ACA.
Under one type of assessable payment, if an “applicable large employer” offers health coverage to all employees who work 30 or more hours a week and their dependents but the coverage does not qualify as “minimum essential coverage” or the employer offers coverage that is not “affordable” or does not provide “minimum value” and at least one employee enrolls in a plan offered through a state health insurance exchange for which a premium tax credit or cost sharing reduction is allowed, then the employer subject to “assessable payment” of up to $3,000 for each affected employee per year.
Compliance is determined on a monthly basis with a $250 assessable payment (one-twelfth of $3,000) due for each month for which the affected employee is entitled to a premium tax credit or cost sharing reduction as a result of the purchase of coverage on the exchange. Not all employees will be eligible for the premium tax credit or cost sharing for purchase of this insurance. Only employees earning less than four times the federal poverty limit will be entitled to these benefits. However, employers will not have to make this determination. If the IRS determines that the employee is entitled to these benefits, it will issue the assessment to the employer. This assessable payment is determined only with respect to those employees who purchase the insurance on the exchange and are eligible for the premium tax assistance or cost sharing.
Another type of assessable payment applies if the applicable large employer fails to offer minimum essential coverage at all to 95 percent of its employees who work 30 or more hours per week and their dependents, regardless of whether it is “affordable” or provides “minimum value” and at least one employee purchases coverage through a state health insurance exchange for which a premium tax credit or cost sharing reduction is allowed. Under these rules, the employer can be assessed a penalty equal to $2,000 per year, but multiplied by the number of full time employees employed by the employer reduced by 30.
Who is an “applicable large employer”
As in initial matter, it will be very important for each employer to determine if it is an “applicable large employer.” For this purpose, an employer is an “applicable large employer” if the employer employed an average of at least 50 full-time employees on business days during the preceding calendar year. The parent-subsidiary and brother-sister controlled group rules of the Internal Revenue Code apply in making this determination. Thus, for example, in determining whether the 50-employee test has been met, all subsidiaries that are at least 80 percent owned directly or indirectly, by the parent corporation will be treated as a single employer with the parent corporation. Also, two part-time employees who work an average of at least 15 hours a week are considered a single full time employee for purposes of making this determination.
There is an exception to the definition of “applicable large employer” for employers whose work force exceeded 50 full time employees only because of “seasonal workers” employed for 120 or fewer days during calendar year.
The determination for a particular calendar year is based on the employer’s average number of employees during the prior calendar year using the entire prior year for that purpose. However, for 2014 only there is a special transitional rule that allows an employer to determine if it is an applicable large employer using any period of six consecutive calendar months during calendar year 2013 rather than using the entire year.
What is affordable coverage
If the employer determines that it is an applicable large employer, it will also be necessary to determine if the coverage it is offering is “affordable.” If the coverage is not affordable, and an employee obtains coverage on an exchange for which it obtains a premium tax credit or cost sharing benefit, the employer will be liable for an assessable payment for that employee.
Coverage is affordable if the employee’s required contribution does not exceed 9.5 percent of the employee’s household income for the year. The coverage to which this rule applies is the employee portion of the self-only premium for the employer’s lowest cost coverage that provides minimum value. Thus, the employer can charge higher amounts for spouse or dependent coverage without having the coverage cease to be treated as affordable for this purpose.
The IRS regulations offer a variety of methods for determining the employee’s household income. However, most employers will find it easiest to make this determination using the safe harbor method based on Form W-2 wages as set forth in box 1 of the W-2.
Determining if an employee is full-time
In most cases it will be clear if an employee is a full time employee or not. However, in some cases, it will be difficult for an employer to make this determination.
The basic definition is that a full time employee for this purpose is an employee who is employed on average at least 30 hours of service per week. However, in some cases, the employer will not know in advance if an employee will satisfy that requirement. For this purpose, the IRS proposed regulations provide special rules for “variable hour employees” if it cannot be determined when the employee begins work if the employee is reasonably expected to work 30 hours per week.
Also, under a special transitional rule for calendar year 2014 only, a new employee who is expected to work initially at least 30 hours per week may also be a variable hour employee if, based on the facts and circumstances at the start date, the employee is expected to work 30 or more hours per week but the period of employment at more than 30 hours per week is reasonably expected to be of limited duration and it cannot be determined that the employee is reasonably expected to work on average at least 30 hours per week during the entire initial measurement period. However, effective January 1, 2015, such a limited duration employee will have to be treated as a full time employee.
To determine whether coverage is required for these variable hours employees, the IRS provided the option to use a “look back/stability period” safe harbor. Under this approach, the employer “looks back” at a period of three to twelve months to determine if during the measurement period the employee averaged at least 30 hours per week.
If the employee is determined to be full-time during the measurement period, the employee is treated as full-time during a subsequent stability period of six to twelve months, regardless of the number of hours worked during the stability period.
There can also be an “administrative period” of up to 90 days under certain circumstances between the end of the measurement period and the beginning of the stability period.
Variable hour employee examples
These rules can be illustrated by the following example of use of the look-back/stability period rules for ongoing employees:
Assumptions:
- Employer uses a look-back period of 12 months ending October 15 and a stability period of the calendar year.
- During the period from October 16, 2012 through October 15, 2013, an employee is tested to determine if he or she satisfies the full-time employee requirements.
If the employee works an average of 30 hours per week during the look back period, the employee would be entitled to coverage effective with the stability period beginning January 1, 2014. Coverage would be available for all of 2014 regardless of hours worked in 2014 as long as the employee remains employed. If, however, the employee does not work an average of 30 hours per week during the look back period, then the employer does not have to treat the employee as a full time employee for the entire stability period of 2014 regardless of the number of hours worked in 2014 and no assessable payment could be due with respect to the employee for that period.
Similar rules are applicable with respect to new employees as illustrated by the following example applicable to use of the look-back/stability period rules for new employees:
Assumptions:
- Employer uses a 12-month initial measurement period from date of hire and 12-month stability period.
- Administrative period from end of measurement period to end of first calendar month beginning after the measurement period.
If an employee has a date of hire of February 10, 2013, the measurement period would end twelve months later on February 9, 2014.
If the employee worked an average of 30 hours per week during this measurement period, the employee would be treated as full-time and would be entitled to coverage for the stability period from April 1, 2014 through March 30, 2015. If the employee did not work an average of 30 hours per week during that measurement period, the employee would not be treated as a full time employee during the stability period.
In addition, the employee would have to be tested as an ongoing employee as well. Therefore, using the look-back/stability period rules discussed above for ongoing employees and using the same assumptions as set forth above, then the employee would also have to be tested for the measurement period from October 16, 2013 through October 15, 2014 (applicable to ongoing employees) to determine calendar 2015 coverage. If the employee was treated as a full time employee during the look back period beginning on the date of hire, but not during the look back period beginning October 16, 2013, the employee would be entitled to coverage for the period from April 1, 2014 through March 30, 2015, but would not be treated as a full time employee for the balance of 2015.
Conclusion
Employers who wish to avoid liability under the assessable payment rules that become effective in 2014 should be analyzing their health plans and employee populations to determine if they already comply with the new rules and, if not, what changes they will have to make before January 1, 2014.
Employers Gear Up For Health Care Changes
Original article from insurancenewsnet.com
By Cyril Tuohy
With the enrollment period for health care coverage under the Affordable Care Act (ACA) little more than four months away, employers are gearing up to inform their workers of the big changes ahead.
For employers who have not yet decided whether to continue offering health coverage or pay the fine for dropping coverage, “now is the time to think about that,” Andrew Molloy, assistant vice president of health management and insurance programs at Unum, said in an interview with InsuranceNewsNet.
So far, it appears the vast majority of employers will keep their coverage for full-time workers, according to a recent poll by the Foundation of Employee Benefit Plans. The survey found that 69 percent of employers will “definitely” continue to provide employer-sponsored health care when the exchanges go live Jan. 1, 2014.
Proponents of health reform, including President Barack Obama, said workers who receive good coverage under their employer-sponsored plan are likely to maintain that coverage, either with existing plans or something very similar.
Employees have an advantage under employer-sponsored coverage models, thanks to the power of group health pricing. Employers benefit as well because of the tax advantages associated with offering workplace-based coverage.
Corporate human resources departments, therefore, are working overtime to inform employees of the big changes. Everyone from insurance carriers to benefits brokers to payroll administrators are racing to inform clients of the changes through brochures, podcasts, blog postings, webinars and dedicated webpages.
“We know that everybody needs to comply with the Affordable Care Act and they are going to try as hard as they can to reduce cost under their respective health care plan and certainly you need a health care compliance strategy to achieve that,” Dave Sanders, health and benefits legal practice with AonHewitt, said in a recent webcast.
For now, companies can focus on the compliance strategy. But, in the long term, they also will need a health care strategy, he said.
Government websites also are full of information about what employers and employees need to know before employees make an enrollment decision. Earlier this month, for instance, the Department of Labor issued guidance to companies on notification procedures of coverage options to employees under Section 18(B) of the Fair Labor Standards Act.
Unum, which offers, life, disability and voluntary benefits coverage, believes a more informed employer makes life easier for employees and insurance carriers.
“It’s important in our role that we educate our clients, and we mean it so that requires us to help our clients, or in some cases brokers, to understand what their implications are on their total benefit of decision making,” Molloy said. “We recognize that medical is the biggest driver of the benefit decision.”
The majority of employer-sponsored health plans begin coverage Jan. 1, 2014, following the three-month enrollment period from Oct. 1 to Dec. 31.
“Some employees will qualify for subsidies and qualify for the exchanges, and employees will be asking questions,” he said. If employees are not asking lots and lots of questions they really should be, Molloy said.
Unum clients and brokers, who play a key role in advising clients, have snapped up the company’s 50-page pamphlet outlining key steps and strategies companies should think about for 2014 and beyond, Molloy also said.
Big-picture questions many employers will want answers to include:
- whether to “pay or play,” meaning to pay the fine or play in the employer-sponsored health benefits marketplace
- whether they meet the 50 full-time-equivalent threshold under which they don’t have to offer coverage
- which states have a state-run exchange or have elected to default to the federal exchange (Fewer than half the states are establishing an exchange.)
The finer points of the law -- such as compliance with deductible limits and out-of-pocket expenses, the contributions to the Transitional Reinsurance Program by sponsors of self-insured group health plans, new limitations on Flexible Spending Accounts, who qualifies for subsidies and levies on medical device manufacturers -- are better left to benefits brokers and advisors.
Still, employers need to be informed in upcoming discussions with their brokers, and with Memorial Day weekend around the corner, many advisors and corporate benefits experts can expect this to be, if not a hot summer, then at least a long one.
“If you are a company that’s going to play and you haven’t thought about it, it’s time,” Molloy said.
© Entire contents copyright 2013 by InsuranceNewsNet.com, Inc. All rights reserved. No part of this article may be reprinted without the expressed written consent from InsuranceNewsNet.com.
Employers’ confidence in health plans rising
Original article from ebn.benefitnews.com
By Tristan Lejeune
The vast majority of employers are actively developing tactics to work within the Affordable Care Act and companies’ confidence in employer-sponsored health care is up. These are among the results of the International Foundation of Employee Benefit Plans’ 2013 survey, released ahead of the group’s Washington Legislative Update conference, held today and tomorrow.
Only 10% of employers are still in a “wait-and-see mode” regarding health care reform regulations, according to the survey 2013 Employer-Sponsored Health Care: ACA’s Impact; the rest are busy taking steps to deal with reform’s rules and regulations.
Sixty-nine percent of employers tell the IFEBP that they definitely plan to provide employer-sponsored health care when exchanges begin in 2014; in 2012, only 46% of companies were willing to commit to that. An additional 25% say they are very likely to continue the offering.
Changes, however, are coming. Eighteen percent of employers have increased plan participants’ share of premiums, and a quarter plans to do so over the next year. Of those making changes, 25% are upping their emphasis on high-deductible health plans and health savings accounts, and 14% are assessing the feasibility of adding one.
“Employers across the country have to deal with the impact of implementing the ACA while still being able to provide competitive benefits for their employees,” says Julie Stich, research director for the IFEBP. “Employees across the board can expect to see changes in how their employer-sponsored health care plans operate.”
Benefits leaders are also doing more to spur healthy behavior: 19% are either developing an organized wellness program, or expanding an existing one. Fourteen percent of respondents are either adopting or expanding healthy-lifestyle financial incentives, and another 25% plan to do so in the next year.
“We are seeing trends that indicate more changes may be on the horizon. More and more organizations are losing their grandfathered status, dropping from 45% in 2011 to 27% in 2013,” says Stich. “Also many organizations are redesigning their plans to avoid the 2018 excise tax on high-cost or so called ‘Cadillac plans.’ In 2011, only one-in-ten indicated they were redesigning their plan to avoid the additional tax, but we’ve seen a steady increase over the past two years that shows the number will soon double.”
3-year anniversary: Important milestones for PPACA
Source: https://eba.benefitnews.com
By Gillian Roberts
On the third anniversary of President Barack Obama signing the Patient Protection and Affordable Care Act, we take a quick look at important dates on the passage, implementation and ongoing struggles about the law that’s set to change America.
- March 23, 2010: The day Obama signed PPACA into effect. He reflects on that day in a statement released Saturday, “Three years ago today, I signed into law the principle that in the wealthiest nation on Earth, no one should go broke just because they get sick.”
- June, 2013: Kathleen Sebelius, Secretary of the Department of Health and Human Services, made multiple media appearances at the end of last week around the anniversary. She authored a blog on the Huffington Post, discussing another step to come: “In June, the site will be unveiling the new Marketplace. You'll be able to learn everything you need to know about the Marketplace, including how it works, the benefits of health insurance, how to choose a plan based on your needs and lifestyle, and more. Then in the fall, you can use this site to enroll in a plan from home, or from any place you can access the Web.”
- Oct. 1, 2013: The day the state, federal and partnership exchanges are scheduled to begin open enrollment for those who are currently uninsured or looking to switch to the exchanges. There has been growing speculation growing over the amount of work HHS has yet to do to meet this deadline. Earlier in March the executive director of the National Governors Association, Dan Crippen, told a crowd of carriers at AHIP’s policy conference that there is a chance some of the exchanges won’t be ready by Oct. 1, but HHS will continue to work hard towards the deadline.
- Jan. 1, 2014: The day coverage begins for those who have enrolled on the public exchanges. The Congressional Budget Office released updated predictions in February of this year that 6 - 7 million people will gain coverage on the exchange in the first year. This is a decrease of 13 million people from CBO’s initial projections about health reform in March 2010.
The Long Arm Of The U.S. Healthcare Ruling
Source: https://www.insurancebroadcasting.com
The Supreme Court ruling to uphold the core of President Barack Obama's 2010 healthcare law has wide-ranging political and economic implications.
Here is a snap analysis of what it means for Americans, healthcare providers, insurers, the law and the presidential campaign.
How does the ruling affect the average American?
* Working families with annual household incomes up to nearly $90,000 will be able to purchase private insurance through new state insurance markets at prices subsidized according to income level, beginning in 2014. But people with household incomes of around $29,000, who qualify for coverage under the Medicaid government health insurance program for the poor, may have to wait for their respective state governments to decide whether they will join the program's huge expansion. Preventive healthcare measures including mammograms and other cancer screenings will be available without deductibles or co-pays. Adult children up to age 26 can remain on their parents' health insurance plans. Senior citizens can expect to continue receiving discounts on prescription drugs aimed at closing the Medicare coverage gap known as the "doughnut hole." Health insurers will continue to pay rebates on premiums not sufficiently targeted at healthcare services. Beginning in 2014, insurers will no longer be able to deny coverage to adults with pre-existing medical conditions and would be required to stop or curb discriminatory pricing based on gender, age and health status.
What about healthcare providers?
* The ruling removes one cloud of uncertainty over the future of healthcare reform and would help the administration's efforts to implement it fully by January 1, 2014, when the law is scheduled to go into effect. Under the decision, physicians and hospitals continue to move away from the traditional fee-for-service healthcare business model and toward more efficient systems that coordinate care. For healthcare providers, the affirmation represents millions of potential new patients, either through private plans or the government's Medicaid program for the poor. Some, however, would be under added pressure to enact more savings, which could cut into revenues. The administration still faces some fairly tall hurdles, such as establishing regulated health insurance markets in all 50 states so consumers can purchase subsidized coverage. Up until now, over a dozen states have done little or nothing to create such exchanges, partly because of the uncertainty over the fate of the law. Down the road, if Republicans succeed in taking control of the White House and the Senate in November (they already control the House of Representatives), they would likely try to repeal the law in 2013.
Where does the ruling leave health insurers?
* The health insurance industry can expect premium revenue from millions of new, healthy customers through state exchanges. But the industry will also have to operate with new consumer protections that require coverage access for people with pre-existing medical conditions and other health status issues, and mandate preventive care without customary charges.
How might the ruling influence the presidential campaign?
* This is a big victory for Obama, who has weathered years of criticism from conservatives about his reforms. The decision could energize the president and his supporters, while undercutting presumptive Republican presidential nominee Mitt Romney, who introduced similar reforms as Massachusetts governor but opposes their use as national policy. But there could be a silver lining for Republicans: the opinion could light a fire under party candidates and constituents who want a president who would repeal the law in 2013.
(Reporting by David Morgan and Lewis Krauskopf; Editing by Michele Gershberg and Will Dunham)
OVERVIEW OF MEDICAL LOSS RATIO REBATES
The Affordable Care Act requires health insurers to spend a minimum percentage of their premium dollars on medical claims and quality improvement. Insurers in the large group market must achieve a medical loss ratio (MLR) of 85%, while insurers in the individual and small group markets must achieve an MLR of 80%. Insurers that fail to achieve these percentages must issue rebates to their policyholders. The first of these MLR rebates are due in August of 2012, so plan sponsors should begin planning how to handle any rebates they might receive.
Which Plans Are Covered?
The MLR rules apply to all fully insured health plans (even grandfathered plans). Self-funded plans are exempt. Certain types of insured coverage, such as fixed indemnity, stand-alone dental and vision, and long-term disability, are also exempt.
If a rebate is payable to a group policyholder, the insurer must issue a single rebate check to the plan. The plan sponsor must then decide whether and how to pass the rebate on to the plan's participants.
Calculating a Medical Loss Ratio
The calculation of an MLR is not specific to each policyholder, but is a state-by-state aggregate of the insurer's overall MLR within a particular market segment (e.g., individual, small group, or large group). Thus, even if a specific employer plan has a low MLR (i.e., favorable claims experience), the employer may not necessarily receive a rebate.
States are permitted to set higher MLR targets. In those states, insurers must comply with the more stringent state requirements.
Notices to Subscribers
Insurers must send written notices to their subscribers, informing them that a rebate will be issued. Plan sponsors should be prepared to respond to questions from participants who receive these notices, particularly if the sponsor does not intend to share any of the rebate with those participants.
Likewise, even if an insurer meets the MLR requirements, it must notify subscribers that no rebate will be issued. This notice must be included with the first plan document provided to enrollees on or after July 1, 2012. Model notices<https://cciio.cms.gov/programs/marketreforms/mlr/index.html> are available on the Centers for Medicare & Medicaid Services website.
How to Allocate MLR Rebates
The Department of Labor (DOL) issued Technical Release 2011-04<https://www.dol.gov/ebsa/newsroom/tr11-04.html>, summarizing how ERISA plan sponsors should handle MLR rebates. To the extent that all or a portion of the rebate constitutes a "plan asset," the sponsor may have a fiduciary duty to share the rebate with plan participants.
In the absence of specific plan or policy language, the determination of whether an MLR rebate is considered to be a plan asset will depend, in part, on the identity of the group policyholder. If the plan or trust is the policyholder, the MLR rebate will likely be considered a plan asset under ordinary notions of property rights.
However, if the employer is the policyholder, the determination will hinge on the source of the premium payments and the percentage of premiums paid by the employer, as opposed to plan participants. If the premiums were paid entirely out of plan assets, the DOL's view is that the entire amount of the rebate would be considered a plan asset. In other circumstances, only the portion of the rebate that is attributable to participant contributions will be considered a plan asset.
If all or a portion of a rebate does constitute a plan asset, then the plan sponsor will have to determine how and to whom to allocate the rebate. For example, must a portion of the rebate be allocated to former plan participants? The selection of an allocation method must be reasonable and it must be made solely in the interest of plan participants and beneficiaries.
However, a plan fiduciary may weigh the costs to the plan - and the ultimate plan benefit - when deciding on an allocation method. Thus, for example, if the cost of calculating and distributing shares of a rebate to former participants approximates (or exceeds) the amount of the proceeds, a fiduciary is permitted to limit the allocation to current plan participants.
Similarly, if it is not cost-effective to distribute cash payments to plan participants (because the amounts are de minimis, or they would produce negative tax consequences for the participants), a fiduciary may use the rebate for other permissible plan purposes. These might include a credit against future participant premium payments or benefit enhancements.
Tax Consequences
Before deciding to pass an MLR rebate on to participants, a plan sponsor will want to understand the tax implications of doing so. The IRS has issued a set of questions and answers<https://www.irs.gov/newsroom/article/0,,id=256167,00.html> on this topic. Because this guidance is entirely in the form of examples, with few general principles provided, the tax treatment may not always be clear. What is clear is that a number of factors will affect the taxability of an MLR rebate.
For individual policyholders receiving an MLR rebate, the IRS treats the rebate as a return of premiums (i.e., a purchase price adjustment). As long as the premium payments were not deducted on the individual's federal tax return, the MLR rebate should not be taxable. However, if an individual did deduct the premium payments, the MLR rebate will be taxable to the extent the individual received a tax benefit from that deduction.
For participants in a group plan, the tax consequences will depend on factors such as the source of the premium payments (employer versus participant), whether participant premiums were paid on an after-tax or pre-tax basis, and whether a participant who paid premiums on an after-tax basis later deducted those premiums on his or her federal income tax return.
Another key factor is whether the rebates are passed through only to participants who participated in the plan during both the year to which the rebate relates and the year it is received, or to all participants who participate during the year the rebate is received (i.e., without regard to whether they also participated during the year to which the rebate relates).
For instance, if a participant paid premiums on an after-tax basis and the MLR rebate is specifically conditioned on the participant having participated in the plan during both the year to which the rebate relates and the year it is received, any rebate allocated to that participant will generally not be taxable - regardless of whether the rebate takes the form of a cash payment or a reduction in future premium payments. However, if the participant claimed a tax deduction for the premium payments (as might be the case for a self-employed individual), the rebate will be taxable to that participant.
On the other hand, if an MLR rebate is passed through to all current plan participants (regardless of whether they participated in the plan during the year to which the rebate relates), the rebate should not be taxable even if a participant took a tax deduction for premiums paid during that year.
Finally, if a participant paid premiums on a pre-tax basis (i.e., through a cafeteria plan), the return of those premiums - whether received in cash or as a credit against future premiums - will be subject to both income and employment taxes.
SUPREME COURT LARGELY UPHOLDS PPACA
The U.S. Supreme Court upheld the individual mandate and most of the Patient Protection and Affordable Care Act (PPACA). As expected, it was a close decision -- 5-4 -- with Chief Justice Roberts and Justices Breyer, Ginsburg, Kagan and Sotomayor agreeing that the individual mandate is a permissible tax. Because the individual mandate was found to be acceptable, most of the rest of the law (including the exchanges and the requirement that larger employers provide minimum coverage or pay penalties of their own) automatically stands.
Because PPACA has been upheld, employers need to move forward with implementing the changes required by the law. The most immediate requirements are:
- All group health plans, regardless of size, must provide "summaries of benefits coverage" (SBC) with the first open enrollment beginning on or after Sept. 23, 2012. The content and format of these SBCs must meet strict guidelines, and the penalties for not providing them are high (up to $1,000 per failure). Insurers will be expected to provide the SBCs for fully insured plans, while self-funded plans will be responsible for preparing their own.
--- - Employers that issued 250 or more W-2s in 2011 must report the total value of each employee's medical coverage on their 2012 W-2 (which is to be issued in January 2013).
--- - High income taxpayers (those with more than $250,000 in wages if married and filing jointly, or more than $200,00 if single) must pay additional Medicare tax, and employers will be responsible for deducting a part of the tax (an additional 0.9 percent on the employee's wages in excess of $200,000) from the employee's pay beginning in 2013.
--- - The maximum employee contribution to a health flexible spending account (FSA) will be $2,500 beginning with the 2013 plan year.
--- - The Patient Centered Outcomes fee (also called the comparative effectiveness fee) is due July 31, 2013. The fee is $1 per covered life for the 2012 year. Insurers will remit the fee on behalf of the plans they cover, while self-funded plans will pay the fee directly.
Politically, while House Republicans have pledged to repeal PPACA, it is unlikely a repeal bill would pass the Senate, and it would be vetoed in any event by President Barack Obama. The fall elections, of course, could result in a change in control of Congress and/or the White House, and Republican victories would likely re-energize efforts to repeal PPACA or to discontinue funding needed to implement various parts of the law.
The opinion is long (193 pages) and complex, and we will provide additional details -- through both written alerts and a webinar -- once there has been more time to study the opinion.