Fall Seminar 2010
Health Reform and the Longer View
Presenters:
Jeanne Keller, President of Keller & Fuller, Inc.
Catherine Hamilton, VP Planning, BCBSVT
Today’s Agenda
 Results of 2010 VT legislative session
 Key federal reforms to understand between 2010 and
2014
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Grandfathering- Advantages/Disadvantages
Small Business Tax Credit
Employer Reporting Requirements
The “Pay or Play” Decision
General design of the State-based insurance exchanges
 What decisions does the State of Vermont need to
make and how these decisions could impact
employers
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2010 Vermont Legislative Action
 Health Care System Design and Implementation
Plan
• Study prepared for Legislative Commission on Reform
• Five months, $300,000 – hired in June
• Task: Design three options –
• (1) “a government-administered and publicly financed "singlepayer" health benefits system decoupled from employment and
allows for private insurance coverage only of supplemental
health services.
• (2) a public health benefit option administered by state
government, which allows individuals to choose between the
public option and private insurance coverage and allows for fair
and robust competition among public and private plans.
• (3) a third and any additional options shall be designed by the
consultant, in consultation with the commission”
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Study - continued
 “Each design option shall include sufficient detail to
allow the governor and the general assembly to
consider the adoption of one design during the 2011
legislative session and to initiate implementation of
the new system through a phased process
beginning no later than July 1, 2012.”
 Conflicts with federal law already cited by state’s
consultant: Affordable Care Act, ERISA, Fed
Qualified Health Centers $, VA, Fed Employees,
Medicaid, Medicare, Tricare
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2010 Legislative Action
 Blueprint Expansion and Payment Reform Pilots –
create “medical home” model and examine
alternatives to fee-for-service
 Hospital Budget Caps
• 2011 and 2012, “the commissioner shall aim to minimize rate
increases for each hospital to ensure that the system wide
increase shall be lower than the prior year's increase.”
• 2011, the total system wide net patient revenue increase for
all hospitals reviewed by the commissioner shall not exceed
4.5 percent.
• For fiscal year 2012, the total system wide net patient revenue
increase for all hospitals reviewed by the commissioner shall
not exceed 4.0 percent.
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2010 New Mandates
 Anesthesia Coverage for Certain Dental Procedures
• (1) a child seven years of age or younger who is determined
by a dentist to be unable to receive needed dental treatment
in an outpatient setting or
• (2) a child 12 years of age or younger with documented
phobias or a documented mental illness whose dental needs
are complex and urgent or
• (3) a person who has exceptional medical circumstances or a
developmental disability

Coverage for Tobacco Cessation Programs
• at least one three-month supply per year of tobacco cessation
medication, including over-the-counter medication, if
prescribed by a licensed health care practitioner for an
individual insured under the plan.
• A health insurance plan may require the individual to pay the
plan's applicable prescription drug co-payment for the tobacco
cessation medication.
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2010 Mandates – continued
 Autism Spectrum Disorders
• Diagnosis and treatment of autism spectrum disorders,
including applied behavior analysis supervised by a nationally
board-certified behavior analyst,
• Beginning at 18 months of age and continuing until the child
reaches age six or enters the first grade, whichever occurs
first.
• Treatment includes: habilitative or rehabilitative care;
pharmacy care; psychiatric care; psychological care; and
therapeutic care (includes services provided by licensed or
certified speech language pathologists, occupational
therapists, physical therapists, or social workers), if the
physician or psychologist determines the care to be medically
necessary.
• The provisions go into effect on or after July 1, 2011, on such
date as a health insurer offers, issues, or renews the health
insurance plan, but in no event later than July 1, 2012.
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PPACA: “The Affordability Act”
New
Insurance
Reforms
Exchanges
Benefit
Changes
20102014
Taxes &
Penalties
Individual
Mandate
Subsidies
Medicaid
Expansion
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Key Provisions: Insurance Reforms/Plan Requirements
Plan Years
Beginning
Enactment
3/23/10
June/July ‘10
• Review of
“unreasonable”
rates
Sept 2010+
2014
• National high
risk pool
Compliance
“Pay or Play”
• No pre-ex for kids
• GI/CR
• HHS web portal
• Dependent coverage to 26
• Age band (3:1)
• Early retiree
reinsurance
• Limits on rescissions
• Risk adjustment
• Internal/external appeals
• Exchanges
• MLRs (80% individual/ small
group; 85% group)
• No lifetime limits
• No preventive cost-sharing
• Patient protections
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Patient’s Rights:
Removal of Lifetime and Annual Limits
No Lifetime Limits
No Annual Limits
• Prohibits annual dollar
• Prohibits lifetime dollar
limits on essential benefits limits on essential benefits
beginning 2014 with
a transition schedule
• Special enrollment
required for any individual as follows:
– $750,000 in 2010
whose coverage ended due
– $1.25 M in 2011
to reaching a
– $2 M in 2012
lifetime limit prior to
the effective date
• No restrictions on day,
visit, or other non-dollar
limitations
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Dependent Coverage
• Each young adults 19-25 who is not enrolled in a parent’s plan must be
“offered the opportunity to become enrolled” without regard to
whether the young adult is:
–
–
–
–
Financially dependent on the subscriber
A student
Married
Living with the subscriber
– Employed*
– Residing in Vermont
• The child must be given 30 days to enroll, with the enrollment
effective on the first day of the plan year
• Employers are required to provide their employee’s with 30 days
notification about the open enrollment period for dependents
– *Grandfathered plans may opt to provide coverage only to dependents that do not
have alternative group coverage.
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Preventive Care Services
• Effective September 23, 2010,
Preventive services must be
covered without copayments or
coinsurance or deductible
– if provided by a network provider.
• Covered under preventive if the US
Preventive Services Task Force
labeled it “A or B” rated
• Age, gender, diagnosis restrictions
apply
• (applies to non-grandfathered
plans only)
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Grandfathering
1. Grandfathered plans are excluded from complying
with certain PPACA requirements.
–
Can opt out of preventive care w/ no cost sharing
–
Can opt to not cover dependents 19-25 if the dependent has
alternate group coverage option
–
Patient protections such as guaranteed access to OB/GYN’s
and pediatricians (already VT state law)
–
Special notices to employees not required
2. Status of plan renewals in Vermont
–
BCBSVT: all plans in the small group market will not be
grandfathered AND will be PPACA compliant, so grandfathering
not an issue.
–
Optional for large groups
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Advantages and Disadvantages of Grandfathering
Pros
Cons
•Avoid the elimination of copayments
on preventive services.
•Limits decreases in
employer contributions
•Deferral of dependent coverage up
to age 26 for those eligible for
alternative employer-sponsored
coverage until 2014.
•Limits employee cost-share features
(such as copayments) or specified
dollar maximums
•Limits employee cost-share
(co-insurance) increases
•Limits ability to change benefits
•Requires additional disclosure and
record retention
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Grandfathering & 2011 Renewals
MVP and CIGNA
 All carriers agree loss of GF status has little impact
in VT compared to other states
 MVP
– all plans in small and large group market will be
grandfathered unless employer makes changes
– All plans will be PPACA compliant as of 1/1/2011
 CIGNA / VACE
– Changes by VACE to out-of-pocket maximums in some
plans will trigger loss of grandfathering
– CIGNA / VACE assuming most employers will make
plan choices that will trigger loss this year or next
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Small Employer Tax Credit
Eligibility:
•Firm Size: Employers < 25 employees
•Average Annual Wages: < $50,000/year average wages
•Employer Contribution: > 50% of premium
Amount of credit:
•2010-2013: sliding scale credit up to 35% of employer
costs (25% if tax exempt)
•2014+: credit up to 50% of employer costs (35% if tax
exempt) for first 2 years; limited to exchange only
 Calculator: http://smallbusinessmajority.org/tax-credit-calculator
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Small Employer Tax Credit Summary
Chart
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Small Employer Tax Credit
How to claim the credit:
1. Fill out form 8941 to calculate the credit
2. Include the amount of credit on income tax return (taxexempt businesses will include it on a revised Form
990-T after 2011 filing season)
3. Money is distributed as a credit, NOT as cash
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More Changes - 2011
 All of these take effect – as soon as regulations are issued…
 Auto-enrollment of ees in health plan (employers >200)
 National voluntary long term care insurance program (CLASS
Act) (eer chooses offering; ee may opt out)
 5-yr demonstration grants to states on tort reform
 Requires chains (>20 restaurants) to post calorie and fat
content
 Owners of >20 vending machines “shall provide a sign in close
proximity to each article of food or the selection button that
includes a clear and conspicuous statement disclosing the
number of calories contained in the article." (e.g. small bag of
Fritos = 350 calories)
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Summary: Major Impacts in 2010-2011
 Among the most significant health care reform changes for 20102011 are:
• Coverage of adult children up to age 26
• Preventive care
• Lifetime and annual limit removal/restriction
• Inclusion of the cost of medical coverage on employees’ W-2s
• Exclusion of over-the-counter medications as reimbursable expenses
under FSAs/HRAs (with the exception of Insulin), unless prescribed
by a physician
• Tax credits for small businesses
• Wellness grants for small businesses
• W-2 reporting requirements
• Auto-enrollment of employees for plans >200
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2012 - New W-2 Requirements
 2012 health coverage value to be reported on
W-2 forms
• Purpose: Congress wants to know how much employers
actually spend on health care. (Doesn’t change tax
treatment; only a reporting requirement)
• Must be available to all employees with W-2s issued in
Jan 2013
• Regulations may require that forms be available to exemployees (who worked in 2012) within 30 days of
request, e.g. no later than Feb 1, 2012
Note: Original implementation was for 2011 W-2s issued in 2012. On Oct
12th, IRS announced giving employers one addnl year to implement.
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W-2 Requirements – cont

Plans for which coverage
costs must be reported
include:
•
•
•
•
•
•
•
Medical, dental and vision
plans
Prescription drug plans.
Executive physicals
On-site clinics if they provide
more than de minimus care
Medicare supplemental
policies
Employee assistance
programs
HRA reimbursements
 Not included:
• Employee FSA and HSA
contributions
• disease-specific plans
• stand-alone dental and
vision plans
 Valuation:
• Estimate with COBRA
minus the 2%, plus any
benefit NOT included in
your COBRA calculation –
e.g. onsite clinics, EAP
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W-2 Requirements – cont
 Caveats:
• Start now: in or outside payroll needs to be planning
• Watch for rules on how to value things like onsite clinics,
where a clear PM/PM isn’t available
• May also apply to persons for whom you don’t normally
issue a W-2 (retirees, COBRA)?
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Other Reporting Requirements 2012 +
1. Uniform Explanation of Coverage (March, 2012)
2. 60-Day Advance Notice of Plan Modification
(March, 2012)
3. Employee Notice about Exchanges (March,
2013)
4. Certification of Health Care Coverage (January,
2014)
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Play or Pay in 2014
 What does it take to “Play?”
• If you employ >50 FTE, to avoid “Pay” ….
• Must offer plan to any FTEs (30+ hr/wk) with HH incomes 100400% of FPL
• No min. employer contribution required
• Coverage must pay >60% of actuarial value
• Coverage must be “affordable” (< 9.5% of hh income)
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Play or Pay 2014 - continued
 When do you Pay?
• You will pay if any employee applies for coverage thru
Exchange AND
• If employer does not offer at all: penalty = $2000/FTE in
excess of 30 ees
• If employer does offer some coverage, but it doesn’t meet
the >60% and <9.5% of income rules for employee who
goes to Exchange: penalty = lesser of $3000/employee
covered by Exchange or $2000/FTE
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General Design: 2014 Exchange
• State-based Exchanges with a federal fallback plan for
states who fail to establish an Exchange on their own.
• Available to eligible individuals and small employers
under 100
– States can opt to limit to 50 and under until 2016
– Federal subsidies for individuals and tax credits for employers
available ONLY thru Exchange
• Maintain internet website that allows Americans to
“shop” for insurance easily
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Timeline for Health Insurance Exchanges
2011
2012
March
Exchange
grants
May
Final
regulations
Develop Plans
of Operations
States Issue RFPs
(e.g.,IT, Enrollment)
2013
March
Employer
notice
requirements
due to
employees
Sept. - Oct.
Plans begin
marketing
Website
active
Nov. - Dec.
Initial
enrollment
2014
Exchanges
operational
< 51
employees
2015
2016
< 100
employees
2017
> 100
employees
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2014: Products in the Exchange
Richest coverage
Qualified high
Deductible plans
will still exist under
these parameters
Gold
Silver
Bronze
$2,000 Deductible*
Catastrophic
Covers 90% of
Benefit Costs
Platinum:
$500 deductible*
Covers 80% of
Benefit Costs
Covers 70% of Benefit Costs
Covers 60% of Benefit Costs
3 PCP visits and deductable
level set at HSA level
*Estimated
Lowest coverage
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Decisions the State of Vermont Will Need to
Make RE Exchanges
• Who will administer exchanges
• Number/Composition of exchange
• Eligible populations (Groups 51-100 optional from 2014-2015, 2017 open
to groups over 100)
• Certification of health plans
• Qualified health plans
• Risk adjustment
• Enrollment through agents and brokers
• Exchange surcharge
• Contracting to carry out exchange functions
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Questions?
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Thanks for Coming!
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