Financial Executives International
Current Regulatory Developments and
Product Trends in Healthcare
(HSA’s and Other Timely Topics)
Patricia Huffman
Rod Turner
Vice President, Actuarial
Wellmark Blue Cross Blue Shield of Iowa
Vice President, Product Policy
America’s Health Insurance Plans
February 17, 2005
Agenda

Health Savings Accounts

Projected Federal Issues and Trends in 2005

HIPIowa
2
Health Savings Accounts
(HSA)
3
Eligibility for Health Savings Accounts

Must be covered by a qualified high deductible
health plan

Must not be covered by a low or no-deductible
health plan

Cannot be claimed as a dependent on
somebody else’s tax return
4
High Deductible Health Plan (HDHP)

Comprehensive health plan with an annual deductible
of at least:
 $1,000
 $2,000

for single coverage
for family coverage
Annual out-of-pocket maximums (OPM) of no more
than:
 $5,100
single
 $10,200 family

Only preventive health services may be exempted
from the deductible (these benefits may have “firstdollar” coverage)
5
High Deductible Health Plan (HDHP)
(cont.)
In the case of a network plan (PPO, HMO,
Exclusive Provider Organizations), the OPM
limit applies only to in-network services
 Deductible and OPM limits are indexed and
subject to change annually
 After 2005, prescription drugs must be subject
to the minimum annual deductible (thus
precluding most drug-card plans)

6
Contribution Rules

Maximum annual contribution by an
individual to their HSA is the lesser of 100%
of the deductible (e.g., $1,000) or an indexed
amount established by law.
 For
2005, the limit is $2,650 for single coverage
and $5,250 for family coverage

Contributions are permitted only for the
months that the individual has qualifying highdeductible health plan coverage
7
Distribution of Money from the HSA

Distributions from an HSA are tax-free if used
to pay for “qualified medical expenses” of the
account beneficiary, the spouse or dependents:
as defined by Code Section 213(d) –
similar to flexible spending account
 COBRA coverage
 Health insurance while unemployed
 Qualified long term care insurance
 Retirement health benefits except Medigap
 Expenses
8
Non-Medical Distributions

Income Taxes
 Amounts
distributed from an HSA that are not for qualified
medical expenses are subject to income tax

Excise Taxes
 Non-medical
distributions are also subject to an additional
10% excise tax
 Does not apply to distributions made after beneficiary’s



Death
Disability
Attainment of age 65
9
Projected Federal Issues
& Trends in 2005
10
Potential Legislation for 2005






Medical liability reform
Class action reform
Patient safety
Medicaid
Uninsured
Health Care CHOICE






Association health plans
Genetic nondiscrimination
Long-term care
Mental health parity
Recreational parity
SMART
11
Medical Liability Reform
Places caps on non-economic and punitive
damages
 Applies to health plans and providers
 Approved by House in March 2003
(229-196 vote)
 Outlook less favorable in Senate

 Supporters
of medical liability reform lost
procedural votes in July 2003 (49-48 vote) and
February 2004 (48-45) – needed 60 votes to win
12
Class Action Reform
Allows large, multi-state class action suits to
be adjudicated in federal court
 Approved by House in June 2003 (253-170
vote)
 Approved by Senate Judiciary Committee in
April 2003 (12-7 vote)
 Cloture motion defeated in Senate in October
2003 (59-39 vote, needed 60 votes to win)

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Patient Safety

Establishes legal protections for medical error
information voluntarily reported by providers

Approved by House in March 2003 (418-6
vote)

Approved by Senate HELP Committee in July
2003 (20-0 vote)
14
Medicaid
House Republican Medicaid Task Force
 Led by Rep. Heather Wilson (R-NM)
 Concerned about Medicaid’s impact on state
budgets
 Flexibility for states is high priority
 Energy and Commerce Committee Chairman,
Rep. Barton has placed a priority on Medicaid
reform in 109th Congress
15
Uninsured
Senate Republican Task Force
 Recommendations released in Spring 2004
 Senator Gregg (R-NH) says solutions should:
 Target
assistance to those with the greatest need
 Empower health care consumers
 Focus on care, not just coverage
 Encourage choice, competition, and quality
 Address health care costs to improve access
16
Association Health Plans
Allows small employers to form regional and
national AHPs that would be exempt from
state benefit mandates and other state
regulatory requirements
 Approved by House in June 2003 (262-162
vote)
 Faces opposition in Senate

17
Genetic Nondiscrimination
Prohibits discrimination based on genetic
information
 Approved by Senate in October 2003 (95-0
vote)
 Does not include sweeping private right of
action originally proposed by Senator Kennedy
 Does not prohibit health plans from
using/disclosing genetic information for health
care operations

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Long-Term Care

Makes long-term care insurance more affordable by:
 Establishing
a tax deduction for individuals who purchase
long-term care insurance
 Providing a $3,000 tax credit to caregivers
 Allowing long-term care insurance to be offered under
employer-sponsored cafeteria plans and flexible spending
arrangements


Introduced in House by Johnson (R-CT)/Pomeroy
(D-ND)
Introduced in Senate by Grassley (R-IA)/Graham (DFL)
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Mental Health Parity
Expands 1996 law by requiring parity for all
treatment limitations and all financial
requirements for all conditions listed in the
DSM-IV, except for substance abuse disorders
 67 cosponsors Senate (Domenici-Kennedy)
242 sponsors in House (Kennedy-Ramstad)
 Domenici compromise – not based on DSM-IV
 Opposition from House leadership

20
Recreational Parity
Prohibits health plans and insurers from
denying otherwise available benefits for
injuries resulting from legal transportation
and recreational activities
 Approved by Senate HELP Committee in
October 2003
 Introduced in House by Rep. Scott McInnis
(R-CO) – 167 cosponsors

21
CHOICE Act

Allows consumers to purchase health
insurance across state lines

Similar proposal included in President’s
budget

Likely to be issue for 109th Congress
22
SMART Act








Market Conduct Uniformity & Coordination
One Stop & Uniform Licensing of Agents
Streamlined Merger Oversight
Life and Health Insurance Interstate Compact for
Filing of Policies
Single Point of Filing of P&C and Reinsurance
Policies and Rates
Uniform Internal and External Review
Partnership Advisory Body to Congress
Removal of Rate Authority of All Lines
23
HIPIowa
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Background of State Individual Programs

State of Iowa has two separate health insurance programs
available to individuals not eligible for affordable insurance
coverage.

Iowa Comprehensive Health Association (ICHA) (also known as
the “high risk pool”)
 Basic and Standard (B&S Plans)

The number of individuals with ICHA coverage has been
reduced to under 200 due in large part to B&S Plans, which
are generally less expensive than ICHA Plans.

For calendar year 2003, there were 9,365 individuals covered
by B&S Plans.
25
Background of State Individual Programs
(cont.)

Under Iowa Code Chapter 513C, carriers offering B&S Plans
are reimbursed for their losses on these plans.

The mechanism for funding such losses is the Iowa Individual
Health Benefit Reinsurance Association (IIHBRA).




Members of IIHBRA are all carriers, organized delivery systems,
and public self-funded health plans.
Members are assessed on an annual basis for losses.
The past 5 years, the assessable losses have ranged
between $15.2 million to $18.7 million.
For the past 5 years, public self funded entities have been
responsible for $2 to $3 million of each assessment.
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House File 647

The Iowa Insurance Division was directed to
establish an Individual Health Insurance Task Force
 To conduct a study to review individual health
insurance market reform under Iowa Code Chapter
513C and the ICHA under Iowa Code Chapter 514E

The Insurance Commissioner was to select the
members of the Task Force that included
representatives from the ICHA, a public employee
governing body subject to Iowa Code Chapter
509A, and other health insurance-related parties or
experts as deemed appropriate by the Commissioner.
27
Overview of Proceedings and Deliberations

The review was divided among the following
categories:
1. Programs’ Eligibility
2. Programs’ Benefit Designs
3. Programs’ Rate Structures
4. Administration of the Programs
5. Funding of Assessments
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Overview of Proceedings and Deliberations
(cont.)



The Task Force concluded that the ICHA and B&S
programs should offer similar products. Assuming
similar products are offered, the two programs would
be redundant and only one program should be
necessary in the future.
The Task Force recommended that legislation be
passed that would result in abolishing the requirement
imposed on carriers to offer B&S Plans.
Carriers would continue to maintain the existing B&S
Plans until the individuals with these plans no longer
desired to keep their coverage under such plans.
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HIPIowa


Executive Director
Administrator
 Benefit

Commission
 $200

Management, Inc. (BMI)
finders fee
Premiums
 150%
of post 1996 rate of top five carriers
 Rates vary by gender and tobacco use
 Single only
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HIPIowa

General Eligibility Requirements
 You
are a resident of the State of Iowa
 You must also meet one of the Eligibility
Categories
Medical Eligibility
 Medical Condition
 Federal Eligibility
 Basic and Standard Eligibility

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HIPIowa Plans
All Plans Contain Preferred Provider Features
Plan A
Medicare Carveout
$1,000 Deductible
Plan B
Plan C
Plan D
$1,000 Deductible
$1,500 Deductible
$2,500 Deductible
80% / 60%
80% / 60%
80% / 60%
80% / 60%
$1,000 / $2,000
$1,000 / $2,000
$1,500 / $3,000
$2,500 / $5,000
$2,500 / $5,000
$2,500 / $5,000
$3,000 / $6,000
$5,000 / $10,000
$3 million
$3 million
$3 million
$3 million
Feature/Benefit
Coinsurance
(In-Network/Out-of-Network)
Deductible
(In-Network/Out-of-Network)
Out-of-Pocket Maximum (OOP)
(OOP includes deductible & coinsurance)
Lifetime Maximum Benefit
(1)
Doctor's office visits & related expenses,
No Copay
$20 Copay/visit
$30 copay/visit
$40 copay/visit
consultations, medical treatments,
in-network
in-network
in-network
office surgery
Office visit only. Other services subject to deductible and coinsurance.Out-of-network subject to deductible and coinsurance
(1)
$20 copay applies when the service is not covered by Medicare
32