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Healthcare Reform Update Leanne Gassaway Senior Regional Director – State Affairs Americas Health Insurance Plans.

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Presentation on theme: "Healthcare Reform Update Leanne Gassaway Senior Regional Director – State Affairs Americas Health Insurance Plans."— Presentation transcript:

1 Healthcare Reform Update Leanne Gassaway Senior Regional Director – State Affairs Americas Health Insurance Plans

2 2 AHIP-All Rights Reserved: © AHIP 2010

3 3 Outline of Presentation: I.Overview of Implementation Process II.Immediate/Near Term Reforms (2010 – 2011) III.Longer-Term Reforms (2014+) IV.Purchasing Incentives (2014+) V.Reforms on Products (CLASS, Dental, & Medigap) VI.Reform Financing AHIP-All Rights Reserved: © AHIP 2010

4 4 Federal Regulatory Process HHS to develop regulations and guidance in cooperation with DOL and Treasury NAIC directed to provide standards/definitions for some provisions (e.g., MLRs) NAIC – http://www.naic.orghttp://www.naic.org Key federal agency websites: DOL - http://www.dol.gov/ebsa/healthreform/http://www.dol.gov/ebsa/healthreform/ HHS - http://www.healthreform.gov/http://www.healthreform.gov/ White House - http://www.whitehouse.gov/healthreformhttp://www.whitehouse.gov/healthreform AHIP – All Rights Reserved: © AHIP 2010

5 5 Federal Regulatory Guidance/Regulations AHIP – All Rights Reserved: © AHIP 2010 TopicDate Issued in Federal Register Comment DeadlineEffective Date MLR RFIApril 14, 2010May 14, 2010n/a Premium Review RFIApril 14, 2010May 14, 2010n/a Internet Portal IFRMay 5, 2010June 4, 2010May 10, 2010 Early Retiree Reinsurance IFRMay 5, 2010June 4, 2010June 1, 2010 Dependent Coverage to 26 IFRMay 13, 2010August 11, 2010July 12, 2010 Grandfathered Plan IRFJune 17, 2010August 16, 2010June 14, 2010 Omnibus Market Reform IFR*June 28, 2010August 27, 2010 Preventive Care Benefits IFRJuly 19, 2010September 12, 2010 *The Omnibus Market Reform IFR includes guidance on the following PPACA provisions: (a) no pre existing condition exclusions for children under 19, (b) restrictions on rescissions, (c) prohibition on limitations on lifetime and annual dollar maximums, and (d) other patient protections.

6 6 Federal Regulatory Guidance/Regulations (Cont.) AHIP – All Rights Reserved: © AHIP 2010 TopicDate Issued in Federal Register Comment DeadlineEffective Date Pre-Existing Condition Insurance Plan (PCIP) IFRJuly 30, 2010September 29, 2010 Exchanges RFIAugust 3, 2010October 1, 2010 Premium Rate Review (2010)TBA Restricted Annual Limit Waiver* (2010)TBA Internal/External Appeals IFRJuly 23, 2010September 22, 2010 Nondiscrimination in Favor of Highly-Compensated Individuals (2010) TBA MLRs (2011)TBA Uniform Coverage Documents/Standard Definitions (2011/2012) TBA * The restricted annual dollar limit regulations allow the HHS Secretary to develop an application and waiver process for limited benefit plans (so called mini-med plans).

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9 9 Within 90 days of enactment, the Secretary and the states must administer a pool for high risk individuals until the establishment of the Exchange in 2014 $5 billion in appropriated funding available to carry out this provision Pool coverage must abide by the following requirements: Actuarial value of 65% Deductible levels and out-of-pocket caps that do not exceed those levels allowed for a HDHP-HSA Abide by 2014 premium variation restrictions (geography, family size, and tobacco use (1.5:1)), but allows a 4:1 age band Individuals are eligible for high risk pool coverage if they have preexisting conditions, as determined by the Secretary, and have not had creditable coverage for the six months prior to applying for coverage with the pool Health plans and employers will be penalized for incentivizing enrollees to drop coverage and enroll in the high risk pool or if the premium for prior coverage exceeds the premium level required by the pool National High Risk Pool AHIP – All Rights Reserved: © AHIP 2010

10 10 WA OR CA NV UT ID MT ND WY AZ NM CO SD NE KS OK TX AK LA AR MO IA MN FL MS AL GA WI IL MI INOH KY WV VA NCTN SC ME PA NY MD DE NJ CT RI VT MA NH Administrative Services Agreement Only AHIP-All Rights Reserved: © AHIP 2010 States Opting to Participate States Opting Not to Participate State Implementation of National High Risk Pool Program HI

11 11 Early Retiree Reinsurance 90 days after enactment, Secretary establishes a temporary reinsurance program to reimburse employment-based plans for the cost of health benefits to retirees (and to eligible spouses, surviving spouses and dependents) $5 billion appropriated to carry out this section Program ends on January 1, 2014 Eligible employers must have coverage offering that includes demonstration programs that generate cost savings for chronic and high-cost conditions Reinsurance amounts apply only to claims for individuals between ages 55 and 64 who are not active workers or dependents of active workers and are not Medicare eligible Secretary reimburses employers for 80% of the portion those costs that are between $15,000 and $90,000 annually adjusted by medical inflation (CPI) AHIP – All Rights Reserved: © AHIP 2010

12 12 Internet Portal By July 1, 2010, the Secretary is required to create an Internet Portal to facilitate consumer and small employer purchase of coverage Portal shall make information available about different coverage options including access to public programs, high risk pools and private market coverage options No later than 60 days after enactment, the Secretary shall develop a standardized format for presentation of coverage options and include information on the percentage of total premium revenue expended on nonclinical costs Ongoing efforts by plans and HHS to upload accurate information on carriers and products available on: www.healthcare.gov AHIP – All Rights Reserved: © AHIP 2010

13 13 Upon enactment (March 23, 2010), the HHS Secretary and the states have the authority to review unreasonable premium increases beginning with the 2010 plan year The term unreasonable increases has yet to be defined $250 million is provided to fund grants over a five-year period (beginning in FY2010) to assist states with the review and, if appropriate under state law, the approval of rate increases and to establish medical data reimbursement centers Medical Reimbursement Data Centers are established to develop fee schedules and other database tools that fairly and accurately reflect market rates for medical services accounting for geographic variation Health plans must submit a justification for an unreasonable premium increase prior to the implementation of the increase Beginning in 2014, the Secretary and the states will monitor premium increases for coverage offered inside and outside the Exchange. Federal Guidelines for Reasonableness of Rate Process AHIP – All Rights Reserved: © AHIP 2010

14 14 State Responses to Phase 1 Rate Review Grant Opportunity AHIP – All Rights Reserved: © AHIP 2010 OR CA NV UT ID MT ND WY AZ NM NE KS OK HI LA AR MO MN FL MS AL GA IL MI IN WV VA NC TN SC PA NY MD NJ CT RI MA NH DC WA VT OH CO AK TX SD IA WI DE ME KY States Applying for a Federal Rate Review Grant States Opting Not to Apply for Federal Rate Review Grant

15 15 Grandfathered Plans Grandfathered Plans are group health plans or group or individual health insurance coverage in which an individual was enrolled on March 23, 2010. PPACA allows for the addition of family members and employees to grandfathered coverage without impacting the plans special status, but does not provide guidance regarding other changes Grandfathered plans are exempt from many of the PPACA near-term (2010) and longer-term (2014) reforms AHIP – All Rights Reserved: © AHIP 2010

16 16 Grandfathered Plans – Proposed Rules Near Term Reforms (2010) that APPLY to Grandfathered Plans: MLR/Reporting Requirements Extensions of Dependent Coverage to Age 26 Restrictions on Rescissions No Lifetime Dollar Limits Restricted Annual Limits (Group Only) No Pre-Existing Condition Exclusion for Children (Group Only) Near Term Reforms (2010) that DO NOT Apply to Grandfathered Plans: Preventive Services Mandate Emergency Service Mandate Internal/External Appeals Requirement Direct Access to OB/GYN Restricted Annual Limits (Individual Only) No Pre-Existing Condition exclusions for Children (Individual Only) Access to Pediatricians Access to Primary Care Physicians

17 17 Grandfathered Plans – Proposed Rules Long-Term Reforms (2014) that APPLY to Grandfathered Plans: Prohibition on Excessive Waiting Periods Auto-Enrollment for Large Groups No Annual Dollar Limits (Group Only) No Pre-Existing Condition Exclusions (Group Only) Long-Term Reforms (2014) that DO NOT Apply to Grandfathered Plans: Adjusted Community Rating Essential Benefit Package Mandate Cancer Clinical Trials Mandate Guarantee Issue (Individual Only) No Pre-Existing Condition Exclusions (Individual Only) No Annual Dollar Limits (Individual Only) Federal Risk Corridor Program Transitional Reinsurance Program Risk Adjustment Program

18 18 Grandfathered Plans – Proposed Rules Changes that May Relinquish Grandfathering Status: Specified Mergers/Acquisitions Elimination of benefits Any increase in coinsurance Specified Changes to Annual Limits Increases in deductibles above statutory threshold Increases in copays above statutory threshold Increases in OOP limit above statutory threshold Decrease in employer contribution rate above statutory threshold Changes that May Not Relinquish Grandfathering Status: Addition of family members Addition of new employees Modification to conform to federal/state requirements Cessation of coverage of one or more enrollees Premium adjustments Voluntary compliance with PPACA TPA changes Early compliance with PPACA

19 19 Changes Definition of Pre-Existing Condition Exclusion: Preexisting condition exclusion means a limitation or exclusion of benefits (including a denial of coverage) based on the fact that the condition was present before the effective date of coverage (or if coverage is denied, the date of the denial) under a group health plan or group or individual health insurance coverage…whether or not any medical advice, diagnosis, care, or treatment was recommended or received before that day. -- Citation: 26 CFR §54.9801-2; 29 CFR §2590.701-2; 45 CFR §144.103 A preexisting condition exclusion includes any limitation or exclusion of benefits (including a denial of coverage) applicable to an individual as a result of information relating to an individuals health status before the individuals effective date of coverage (or if coverage is denied, the date of the denial) under a group health plan, or group or individual health insurance coverage…such as a condition identified as a result of a pre-enrollment questionnaire or physical examination given to the individual, or review of medical records relating to the pre-enrollment period. -- Citation: 26 CFR §54.9801-2; 29 CFR §2590.701- 2; 45 CFR §144.103 Prohibits pre-existing condition exclusions for all enrollees effective January 1, 2014 Provides an early applicability date for children under 19 (plan or policy year after September 23, 2010) PPACA No Pre-Existing Condition Exclusion for Children (Under 19) – Proposed Rules (IFR) AHIP-All Rights Reserved: © AHIP 2010

20 20 Prohibits annual dollar limits on essential health benefits, except that restricted annual dollar limits for essential health benefits (to be determined by the HHS Secretary) are allowed prior to January 1, 2014. Applies to GROUP grandfathered health plans Does NOT apply to individual grandfathered health plans. Provides that HHS will take into account good faith efforts to comply with a reasonable interpretation of essential health benefits Adopts a 3-year phase-in for restricted annual limits Permits annual dollar limits on benefits that are NOT essential health benefits Prohibits lifetime dollar limits on essential health benefits Applies to INDIVIDUAL and GROUP grandfathered health plans Permits lifetime dollar limits on benefits that are NOT essential health benefits Permits exclusion of all benefits for a condition (i.e., does not consider an exclusion to be an impermissible limit) PPACA Annual and Lifetime Dollar Limits – Rules (IFR) AHIP-All Rights Reserved: © AHIP 2010

21 21 Guarantee Availability/Guarantee Issue Mandates that health insurance issuers accept every employer and individual that applies for coverage. Allows the HHS Secretary to establish open and special enrollment periods to mitigate the potential for adverse selection. Long-Term Reforms (2014): Underwriting and Rating Requirements Prohibition on Pre-existing Condition Exclusions Prohibits the imposition of pre-existing condition exclusions. Risk Pooling Requires health insurance issuers to consider all enrollees in all individual market health plans (other than grandfathered plans) as a single pool. Requires health insurance issuers to consider all enrollees in all small group health plans (other than grandfathered plans) as a single pool. AHIP-All Rights Reserved: © AHIP 2010 Transitional Reinsurance/Risk Corridors/Risk Adjustment Programs Implements various risk spreading mechanisms in individual and small group markets

22 22 Federal Rate Review Process Beginning in the 2014 plan year, requires the HHS Secretary (in conjunction with the states) to monitor premium increases of health insurance coverage offered both inside and outside the Exchange. Long-Term Reforms (2014): Underwriting and Rating Requirements Adjusted Community Rating Allows for the use of the following factors: Age (up to 3:1) Family composition Geography Tobacco use (up to 1.5:1) Prohibits the use of any factor(s) not specifically identified. Note: This process will likely build on the rate review process that is developed as part of the immediate/near-term reforms. AHIP-All Rights Reserved: © AHIP 2010

23 23 Long-Term (2014) Reforms: Benefit Requirements Essential Health Benefits Package* Requires the Secretary to define an essential health benefits package (EHBP) that includes coverage for at least the following general categories: ambulatory patient services; emergency services; hospitalization; maternity and newborn care; mental health/substance use disorder services; prescription drugs; rehabilitative and habilitative services and devices; laboratory services; preventive and wellness services and chronic disease management; and pediatric services, including oral and vision care. * The EHBP will need to be defined in the context of some of the immediate reform s.

24 24 Long-Term (2014) Reforms: Benefit Requirements Essential Health Benefits Package* Coverage must fall into one of four benefit levels Bronze with an actuarial value of 60% Silver with an actuarial value of 70% Gold with an actuarial value of 80% Platinum with an actuarial value of 90% In addition, health plans offering coverage through an Exchange must offer a child- only policy (under 21) and may offer a catastrophic-only policy to young adults (under 30). * The EHBP will need to be defined in the context of some of the immediate reform s. AHIP-All Rights Reserved: © AHIP 2010

25 25 Requires the HHS Secretary to issue regulations as soon as practical after enactment with respect to Exchanges. Requires states to establish an Exchange for the individual and small group markets no later than January 1, 2014. Defines small group as employers with at least one full-time employee and no more than 100 full-time employees. State option for plan years before January 1, 2016, to define "small group" between 1 and 50 FTEs. State option to expand access to large groups beginning in 2017. Federal funding is provided to create and operate state-based Exchanges by January 1, 2014. States exchanges must be self-sustaining beginning on January 1, 2015, by placing an assessment or user fee on participating health insurance issuers or another funding mechanism. Exchanges AHIP-All Rights Reserved: © AHIP 2010

26 26 Within the Exchange health plans may only sell Qualified Health Benefits Plans – those plans that cover the essential health benefits package – to individuals and small groups. Health plans must be certified by an Exchange by meeting multiple requirements, including: specified marketing and network adequacy requirements use uniform enrollment forms Implementation of quality improvement strategies accreditation of, among other things, clinical quality measures, utilization management, consumer access, provider credentialing, and appeals. Exchanges (continued) AHIP-All Rights Reserved: © AHIP 2010

27 27 AHIP-All Rights Reserved: © AHIP 2010 Multi-State Plans and CO-OPs Multi-State Plans: The Director of the Office of Personnel and Management (OPM) must contract with health plans to offer at least two multi-state qualified health plans within each state Exchange. Such plans must offer individual and small group coverage, meet all requirements with respect to a Qualified Health Benefits Plan, offer the plan in all geographic regions and in all states that have adopted adjusted community rating before the date of enactment, and provide for premium determinations based on specified rating requirements. CO-OPs: The HHS Secretary must distribute $6 billion in loans and grants to assist in the creation of CO-OPs in each of the states. Entities operating a CO-OP must meet all requirements of state law with respect to solvency, licensure, payments to providers, network adequacy, rate and form filing, and any applicable premium assessments. CO-OPs must meet all insurance market reforms outlined in the Patient Protection and Affordable Care Act.

28 28 Incentives to Purchase Coverage Personal Coverage Requirement Requires U.S. citizens and legal residents, by 2014, to purchase coverage or face a penalty (unless otherwise exempt from the mandate). Examples of exemptions from penalty include individuals: who qualify because of religious conscience reasons, below the income tax filing threshold, whose period without coverage does not exceed 3 months, and whose premium contributions for the calendar year exceed 8% of household income. AHIP-All Rights Reserved: © AHIP 2010

29 29 Incentives to Purchase Coverage Personal Coverage Requirement The penalty charged for failing to maintain coverage is the greater of: 1)a flat fee of $695/year, or 2)2.5% of income, phased in over time in the following manner YearPenalty Amount 2014The greater of $95 or 1% of income 2015The greater of $325 or 2% of income 2016The greater of $695 of 2.5% of income 2017 and thereafterThe greater of $695 (+ COLA) or 2.5 % of income AHIP-All Rights Reserved: © AHIP 2010

30 30 Incentives to Purchase Coverage Tax Credits for Health Insurance Premiums Provides refundable tax credits to individuals with incomes between 100 and 400% federal poverty level (FPL), as follows: FPL Percent Premium assistance percentage Up to 1332 133 – 1503 – 4 150 – 2004 – 6.3 200 – 2506.3 – 8.05 250 – 3008.05 – 9.5 300 – 4009.5 AHIP-All Rights Reserved: © AHIP 2010

31 31 87% Incentives to Purchase Coverage Tax Credits for Health Insurance Cost-Sharing Obligations Increases cost-sharing subsidies for individuals with household incomes between 100 and 400% of the federal poverty level (FPL), as follows: FPL PercentAmount of Subsidy Percent 100 – 15094 151 – 20087 201 – 25073 251 – 40070 AHIP-All Rights Reserved: © AHIP 2010

32 32 Incentives to Purchase Coverage Employer Responsibility Requirement Large employers that do not offer coverage and that have at least one full-time employee (FTE) receiving a tax credit through the Exchange must pay a penalty equal to the number of FTEs (minus 30 FTEs) for that month multiplied by 1/12 of $2,000. Large employers that offer coverage and that have at least one FTE receiving a tax credit through the Exchange must pay a penalty equal to the number of FTEs that are receiving the credit for that month multiplied by 1/12 of $3,000. Applies to employers with at least 50 employees and counts part-time employees for purposes of determining if an employer has 50 employees. AHIP-All Rights Reserved: © AHIP 2010

33 33 Provisions Impacting Products Long Term Care National, voluntary insurance program established, the CLASS Independence Benefit Plan, to provide community living assistance services and supports, with enrollment beginning in 2012. Features include: Voluntary opt-out for employers/employees Premiums $123 - $240 per month Benefit not less than $50/day No underwriting No lifetime caps on benefits HIPAA benefit triggers Dental Pediatric dental and visions services required as a part of essential benefits packages that will need to be offered in the commercial market and through the Exchange beginning in 2014 These benefits will be allowed to be offered as standalone plans through the Exchange Medigap In 2015, calls for increased cost-sharing in Medigap plans C & F AHIP-All Rights Reserved: © AHIP 2010

34 34 20102011201220132014 Enactment of CLASS ACT March 23, 2010 Enactment of CLASS ACT March 23, 2010 Extension of National LTC Clearinghouse funding to 2015 Extension of National LTC Clearinghouse funding to 2015 Secretary to establish procedures for assessment of eligibility by January 1, 2012 Secretary to designate a CLASS benefit plan by October 1, 2012 Issuance of Annual Secretary Reports to Congress Beginning January 1, 2014 Formation of CLASS Advisory Council and development of alternative CLASS benefit plans Establishment of CLASS Independence Fund and Formation of Board of Trustees for CLASS Independence Fund Establishment of procedures on enrollment, disenrollment, payroll deductions Establishment of eligibility assessment system in all states Formation of CLASS Advisory Council and development of alternative CLASS benefit plans Establishment of CLASS Independence Fund and Formation of Board of Trustees for CLASS Independence Fund Establishment of procedures on enrollment, disenrollment, payroll deductions Establishment of eligibility assessment system in all states Timeline for Class Act Implementation AHIP-All Rights Reserved: © AHIP 2010

35 35 Financing the Coverage Expansion: Revenue Provisions Excise tax on high-cost insurance Beginning in 2018, imposes tax equal to 40 percent of the aggregate value of employer-sponsored health coverage that exceeds the threshold amount of $10,200 (individual policy) and $27,500 (family policy), indexed to CPI plus one percent. Allows for threshold adjustments for retired persons over age 55, employees engaged in high risk professions, and instances in which firms have higher health costs due to the age or gender of the workforce. Annual fee on health insurance providers Beginning in 2014, imposes premium tax on health insurance sector, allocated by market share. Increases industry liability as follows: $8 billion in 2014, $11.3 billion in each of years 2015 and 2016, $13.9 in 2017, and $14.3 billion in 2018 (adjusted in subsequent years per premium growth). Delay of limitation on health FSAs under cafeteria plans Imposes $2,500 cap on contributions beginning in 2013. Annual fee on pharmaceutical manufacturers and importers Excise tax on medical device manufacturers AHIP-All Rights Reserved: © AHIP 2010

36 36 Thank You! Leanne Gassaway Senior Regional Director, State Affairs AHIP-All Rights Reserved: © AHIP 2010


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