Don’t Let Health Insurance “Kill” Your Business” Ann B. Chiodini, CPA,CMA,FHFMA Principal Partners in Healthcare Management Solutions, LLC

Everything Old is New Again Health Care Reform in the United States– A Timeline 1900’s American Medical Association (AMA) becomes a powerful national force. Railroads are the leading industry to develop extensive employee medical programs. 1910’s American Association for Labor Legislation (AALL) organizes first national conference on “social insurance,”which is gaining support among Progressives. Opposition from physicians and interest groups and the entry of the U.S’ into WWI in 1917 undermine reform effort. 1920’s General Motors signs a contract with Metropolitan Life to insure 180,000 workers. Penicillin is discovered, but it will be twenty years before it is used to combat infection.

And again, and again……. 1930’s The Depression changes priority to unemployment insurance and "old age" benefits. Social Security Act is passed, omitting health insurance. Blue Cross begins offering private coverage for hospital care in dozens of states. 1940’s Penicillin comes into use. Prepaid group healthcare begins, seen as radical. Truman offers a national health program plan, proposing a single system that would include all of Americans. The plan is denounced by the American Medical Association (AMA), and is called “a Communist plot” by a House subcommittee.

1950’s At the start of the decade, national health care expenditures are 4.5 percent of the Gross National Product. Attention turns to Korea and away from health reform; A system of private insurance exists for those who can afford it and welfare services for the poor. Federal responsibility for the sick poor is firmly established. 1960’s Over 700 insurance companies selling health insurance. Major medical insurance endorses high-cost medicine. President Lyndon Johnson signs Medicare and Medicaid into law. The number of doctors reporting themselves as full-time specialists grows from 55% in 1960 to 69%. 1970’s President Nixon's plan for national health insurance rejected by liberals & labor unions, but his "War on Cancer” centralizes research at the NIH. The number of women entering the medical profession rises to 25%. World Health Organization declares smallpox eradicated.

1980’s Corporations begin to integrate the hospital system (previously a decentralized structure). Enter many other healthcare-related businesses, consolidating control and shifting toward privatization Under President Reagan, Medicare shifts to payment by diagnosis (DRG) instead of by treatment. Private plans quickly follow suit. "Capitation" payments to doctors become more common. 1990’s Health care costs rise at double the rate of inflation. Expansion of managed care helps to moderate increases in health care costs. Federal health care reform legislation fails again to pass in the U.S. Congress. By million uninsured Americans, 16% of the nation. Human Genome Project to find >100,000 genes in human DNA begins. By June 1990, 139,765 in the US have HIV/AIDS, with a 60 % mortality rate. 2000’s Health care costs are on the rise again. Medicare is viewed by some as unsustainable and must be "rescued". Changing demographics of the workplace jeopardizes employer-based system Human Genome Project is completed a full two years ahead of schedule Direct-to-consumer advertising for drugs and medical devices is increasing March 23, 2010 The Patient Protection & Affordable Care Act (PPACA) becomes law To take effect over the next eight years.

PPACA 2010 Areas of Discussion: Why we need health care reform The major changes to health insurance regulation Key provisions and timeline for implementation The Future of Health Care

Why do we need reform ? All individuals need access to high-quality, affordable care or we all pay Individuals who are poor or sick find it very difficult to access health care. In today’s system there is no financial incentive for keeping people well. Care is often uncoordinated, duplicative and unsafe. As a result, Americans are not getting the right care at the right time, and what they often do get is wasteful. At the current rate of excess cost growth and the impact of aging, health care costs will bankrupt the United States by 2085 Healthy communities and a healthy environment are critical to individual health and wellness, but there is a disparity in what we fund.

The major changes to health insurance regulation Establish a national high-risk pool for individuals with pre- existing conditions Provide dependent coverage for adult children up to age 26 for all individual & group policies Prohibit individual & group plans from placing lifetime limits on coverage – prior to 2014, only annual limits allowed by Secretary. Prohibit insurers from rescinding coverage except in cases of fraud No pre-existing condition exclusions for children Require health plans to provide a minimum coverage without cost sharing for preventive services.

Major changes cont’d…… Provide tax credits to small employers (<25 employees with average annual wages <$50,000) Create a temporary reinsurance program for employers providing health insurance to retirees of age 55 who are not eligible for Medicare. Businesses approved receive reinsurance for the claims of high-cost retirees and their families (80 percent of the costs from $15,000 to $90,000). The program ends on 1/1/2014, when State health insurance exchanges are running. Require health plans to report Medical Loss Ratios & provide rebates to consumers when MLR is less than 85% for large groups and 80% for individuals and small groups. Establish a process for reviewing increases in health plan premiums and require plans to justify increases.

Major changes cont’d…… Require states to report on trends in premium increases and recommend whether certain plans should be excluded from Exchanges. Medicare - Medicare Part D $250 rebate for enrollees who reach the gap Medicaid – Create a state option to cover childless adults immediately; starting in 2014 Medicaid will be available to all individuals under age 65 and with income below 133% of FPL (approximately $14,000 for an individual and $29,000 for a family of 4)

Implementation timelines for key reforms 2010 –Prohibiting denying coverage of children based on pre- existing conditions –Prohibiting insurance companies from rescinding coverage –Eliminating lifetime limits, regulates annual limits on insurance coverage –Appealing insurance company decisions can be made through an external review process –Provide small business health insurance tax credits –Offer $250 relief to seniors who hit the Part D “donut hole” –New plans must provide free preventive care –A new $15 billion Prevention & Public Health Fund will in vest in programs such as smoking cessation to combating obesity

More 2010… –New pre-existing condition insurance plan at state level, or federal level, if state chooses not to participate –Young adults up to age 26 may be covered in parents’ plans –Expanding coverage for early retirees through employer reinsurance –Rebuilding the Primary Care workforce – funding for scholarships, loan repayments for practicing in underserved areas –Holding insurance companies accountable for unreasonable rate hikes –Increasing payments to rural health providers –Strengthening community health centers –New funding to crack down on healthcare fraud

Cont’d…… Offering 50% prescription drug discounts to seniors reaching the coverage gap -Providing free preventive care care for seniors – development of national strategy for quality improvement in health care -Improving care for seniors when leaving the hospital – Community Care Transition Programs to avoid unnecessary readmissions -Independent Payment Advisory Board to develop proposals to entend the life of the Medicare Trust Fund -Community First Choice Option to allow States to offer home & community based services through Medicaid (an alternative to nursing home care)

More….. -Holding insurance companies accountable for medical loss ratios less than 85% for large groups and 80% for small groups and individuals -Bringing equilibrium between payments for Medicare Advantage plans and Traditional Medicare, with bonus payments to plans that provide high quality care Linking payment to quality outcomes in Medicare - Encouraging Integrated Health Systems – Accountable Care Organizations (ACOs)

More…. - Reducing Paperwork & Administrative Costs requiring health plans to adopt and implement rules for secure, confidential, electronic exchange of health information. EHRs - Development of a Federal program to collect and report racial, ethnic and language data to understand and reduce disparities -New, voluntary Options for Long-Term Care Insurance, called CLASS, to provide cash benefits to adults who become disabled Increasing Medicaid payments for Primary Care Doctors - Providing additional funding for CHIP kids

The End…..maybe Prohibiting Discrimination due to pre-existing conditions or gender - Eliminating annual limits on insurance coverage - Ensuring coverage for individuals participating in clinical trials - Tax credits and reduced cost sharing to make it easier for middle class to afford insurance for people with income 133 – 400% of FPL who are not eligible for other affordable coverage - Increase small business tax credit - Increase access to Medicaid - Individual responsibility to obtain basic insurance or pay a fee to help offset the cost of caring for uninsured Americans, and…

Establishing Health Insurance Exchanges -Department of Health and Human Services announced the availability of up to $1 million in grants per state to help states begin work to establish these Exchanges and called for public input on the rules that Exchanges will be required to follow. -Starting in 2014, if an employer does not offer insurance, you will be able to buy directly in an Exchange. -Exchanges will offer a choice of health plans that meet certain benefits and cost standards. This already exists in Massachusetts. -Starting in 2014, members of Congress will get their insurance through Exchanges Physicians will be paid based on value, not volume.

The Future….is now We need … -data, connectivity, accessibility, and absolute confidentiality -real time data to support patient care -systems that provide medical science as well as medical records. -systems that link patients to doctors, doctors to doctors, doctors to nurses and care team members, laboratories to databases, imaging centers to databases -monitoring equipment to computer oversight systems that provide a new safety nets for care -the ability for patients to do e-scheduling, e-visits, e-referrals, e- tests results, and electronic secure messaging with their caregivers -systems that are so electronic that the administrative overhead linked to paper sorting, filing, generating, and processing should be instantaneous and extremely accurate -paper medical records that are the rare exception rather than the rule

The Future can’t wait…. -imaging results should go directly from the scanners to the physicians with no film or files to be lost in transit. -patients in their own homes able to link up in telemedicine consults with their doctors and nurses—avoiding major transportation headaches and providing instant responses to in- home crises and potential problems. -homes with scales linked to caregivers for congestive heart failure crisis and motion monitors for patients with hip or stroke issues. -safe reliable in-home care as the expectation of most patients. The challenge is to have a vision of what ultimate connectivity looks like and then build it.

Some Key Health Reform Terms Accountable Care Organization: A network of health care providers that bank together to provide the full continuum of care for patients. Annual Benefit Limit: Insurer limit on the amount of claims they will pay in a given year for an individual. Prohibited in Basic Health Plan: An option given to States in 2014 to provide coverage to individuals between 133 and 200 % of FPL in lieu of having these individuals enroll in the health insurance exchange and receive premium subsidies. The Feds will pay states 95% of the exchange equivalent to provide this plan. CLASS Program: Community Living Assistance Services & Supports – a national voluntary insurance program for purchasing non-medical services and supports necessary for individuals with functional limitations to maintain community residence. Enrollment begins 1/1/2011, and will target working adults who will make voluntary premium contributions through payroll deductions or directly, with benefits beginning in 2016.

Deductible: Consumer-paid health care costs up to a specified amount, after which the health insurer begins to pay for health care services. Beginning in 2014, deductibles for new plans sold in the small group market will be limited to $2,000 for individuals and $4,000 for families. Employer Health Care Tax Credit: Enables employers with 25 or fewer employees and average annual wages of less than $50,000 to deduct a percentage of the contribution they make toward their employees’ health insurance premium. These are refundable credits. Employer Mandate: An approach that requires all employers, or at least employers meeting size or revenue thresholds, to offer health benefits that meet a defined standard and who pay a set portion of the cost on behalf of their employees. Hawaii is the only state in the U.S. to have an employer mandate. Grandfathered Plan: A health plan that was in place on March 23, 2010, is exempt from complying with some parts of the health reform law, so long as the plan does not make significant changes to its policy, such as reducing benefits to treat a specific disease, increase cost-sharing or reduce the employer contribution toward premiums. Health Care Cooperative: A non-profit, member-run health insurance organization, governed by a board of directors elected by its members. Co-ops provide insurance to individuals and small businesses and can operate at various levels.

Health Insurance Exchange/Connector: An arrangement through which insurers offer smaller employers and individuals health insurance plans for purchase. Under health reform, state-based health insurance exchanges will be established to set standards for what benefits are to be covered, how much insurers can charge, and the rules insurers must follow in order to participate in the insurance market. These begin in Income-Related Premium: Premiums for Medicare Part B and D that apply to higher-income Medicare beneficiaries (this was passed in 2003 for individuals earning more than $85,000 and couples, more than $170,000. This continues under health care reform and is not indexed to increase annually through Medical Loss Ratio: The percentage of premium dollars and insurance company spends on medical care, as opposed to administrative costs or profits. Health reform requires insurers in the large group market to have an MLR of no less than 85% and 80% in the small group and individual markets. Pay for Performance: A health care payment system in which providers receive incentives for meeting or exceeding quality and cost benchmarks. The goal of this system is to improve quality of care over time.

Public Plan Option: a proposal to create a new insurance plan administered and funded by federal or state government and offered along with private plans in ahealth insurance exchange.Single-Payer System: A health care system in which a single entity pays for health care services. This entity collects health care fees and pays for all health care costs,but is not involved in the delivery of health care.Socialized Medicine: a health care system in which the government operates and administers health care facilities and employs health care professionals.Value-based Purchasing : a payment reform where hospitals and providers ar given bonuses based upon their performance against quality measures. The healthreform law establishes a value-based purchasing program in medicare for hospitalsand requires the development of similar programs for nursing homes, home healthagencies and ambulatory surgical centers, and the testing of pilot programs for otherproviders, including psychiatric hospitals, long-term care hospitals, rehabilitationhospitals and hospice programs.

The End…….not ! Websites with excellent information, including much of what you’ve seen here, can be found at: search “Affordable Care Act tax provisions” Home Base for information Kaiser Permanente Healthcare Financial Management Association get the insurance industry perspective Center for Medicare/Medicaid Service – lots on programs to encourage electronic health records and accountable care organizations