EServing
UCLID MANAGERS
the independent agent since 1976
®
A Legislative Review Service by Euclid Managers
April 2010
EUCLID MANAGERS®
has served the independent agent
since 1976, offering a portfolio
of group health, professional
liability, individual life, health,
annuity and long-term
care products.
We proudly represent many
fine carriers including
Group Products:
UnitedHealthcare of Illinois
Delta Dental of Illinois
MetLife
Individual Products:
American General Life Companies
AXA/Equitable
Banner Life
Genworth Financial Insurance Co.
Guarantee Trust Life
HumanaOne
John Hancock Life
Lincoln National Life
Prudential Financial
RBC Insurance
Transamerica
West Coast Life
…and many more!
Contact Information
Reflections
Health Care Reform - Things to Know and Do Now!
Health reform – or health insurance reform – depending on one’s point of
view, has been years in the making. Perhaps, as a result, understanding
exactly what effect the new laws will have on the health care system will take
a while. In the meantime, this issue of Reflections will discuss some of the
things to know or do now.
Political Situation
The heat of the debate continues to foment. There are calls for repeal of
health reform. While these efforts are genuine and may bear fruit, it is unwise
continued on page 2
A letter from Karen Knippen
The good news about health reform passing is that I will have a lot more
time on my hands now that I am not consumed with the debate. The bad
news is that I will have to spend a lot more time analyzing the changes and
adapting to them.
I know that you may be “shell-shocked." Moreover, you’re being quizzed by
your clients on what they should do and what is going to happen. You are
not alone in trying to figure things out.
We will be working through these laws with you and Legislative Review
and Reflections issues will be addressing health reform in depth for the
near term.
Sincerely yours,
234 Spring Lake Drive
Itasca, Illinois 60143
Phone: (630) 238-1900
Outside Chicagoland:
(800) 345-7868
Fax: (630) 773-8790
Visit us at:
www.euclidmanagers.com
Karen Knippen, RHU, REBC, CLTC
EUCLID MANAGERS® has been serving the independent agent since 1976 with a portfolio of group health, professional
liability and individual life and health, annuity and long-term care products. We proudly represent UnitedHealthcare,
Delta Dental of Illinois, MetLife and HumanaOne. We encourage your feedback and suggestions. Please call your
EUCLID MANAGERS® Marketing Representative or Marcy Graefen at (630) 238-2915 for more information. Outside
Chicagoland, call (800) 345-7868. Website: www.euclidmanagers.com
to expect that repeal will occur. It is better to consider
implementation strategies and prepare for them.
children to age 26 and market reform provisions
regarding lifetime and annual dollar limits.
The action will now shift to rule making and state
actions. One can hope that states, including Illinois,
will hold off on ambitious health reforms of their own
and focus on implementation of federal reforms.
Understanding the Timeline
The lawsuits by more than a dozen state attorneys
general are likely to be the earliest challenges to be
resolved. Some experts, mostly those in favor of health
reform as passed, have said that challenges regarding
constitutionality or abridgment of states’ rights have
little chance of prevailing.
It will be especially challenging – and important – to
gain an understanding of what has passed and what
has not. Many Americans have a distorted expectation
of what will happen and when, based on comments
by politicians and media reports. For example, preexisting conditions for children were not eliminated
with the signing of the legislation. Instead, high-risk
pools must be expanded to accommodate those with
pre-existing conditions until 2014 when pre-existing
conditions limitations will be eliminated. In fact,
negotiations about this topic are occuring as this issue
goes to press.
Grandfather Coverage –
Can One Keep Current Coverage?
The likelihood of many individuals or employer group
plans meeting the grandfather provisions – or wanting
to use them – is slim. In order to be grandfathered,
coverage had to have already been in effect when the
bill was signed. Any subsequent changes to these policies
have to be very limited to retain the grandfather status.
Such allowable changes would include adding or
deleting new employees or dependents. Some provisions
of health reform apply to grandfathered plans as well
as new plans. These include coverage of dependent
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Reflections
Most of the insurance reform provisions do not take
full effect until 2014. Earlier reforms take place for
plan years that begin on or after six months after the
enactment date. This means that plans with a plan
year beginning October 1, 2010 or after will be affected.
Calendar year plans will be affected on January 1, 2011.
Tax provisions take effect with various effective dates.
In fact, tax credits for qualified small employers are
retroactive for premiums paid beginning after
December 31, 2009. Many of the tax credits are very
specific.
Important Considerations and
Provisions to Know Now
Rescissions will be prohibited in six (6) months in
all markets including individual, group and selfemployed groups. The exception is for fraud and
misrepresentation.
HSAs, FSAs and HRAs are still legal. There will be more
limits and requirements for these plans. These plans
will be barred, for example, from reimbursing for
over-the-counter prescription drugs. Distributions
taken from these plans that do not meet the definition
of a qualified medical expense will be taxed at 20%,
up from 10%.
Within 90 days of enactment, a person who has
been uninsured for at least six (6) months and has
a pre-existing medical condition will be eligible to
participate in a high-risk pool. Premiums in these
pools will be capped.
A minimum loss ratio requirement (MLR) will be
effective for all fully insured plans beginning on
January 1, 2011. The MLR is 85% for large group
plans and 80% for individual and small group plans.
Small group plans are defined as those 100 and below.
Medicare Advantage plans will be required to maintain
an 85% MLR to remain in the program.
The federal government now has the authority, in
cooperation with the states, to review and challenge
health insurance rate increases. Illinois will have to
develop a process for data to be reported from insurers.
Coverage for adult children up to age 26 is not
immediate. This provision kicks in six months after
the date of enactment as plans are renewed. It is
unclear at this time when the federal tax status for
these young adults will change. A number of states,
including Illinois, have laws that allow young adults
to remain on a parent’s plan but they have not
previously been eligible for favorable tax status.
A role for insurance brokers is included in the laws.
However, there are a number of situations where a
government entity or other entity may be competing
with a broker.
Opportunity to Offer Guidance
Many individuals and employers will be looking to
their insurance brokers to offer a path through the
reform thicket. It may be worthwhile reaching out to
attorneys, accountants and other trusted advisors to
work together to provide comprehensive counsel to
clients.
Employers that have a population of non-covered
workers may be concerned, for example, that the
fines for employers for non-covered employees will
be sizeable. There may be ways to restructure the
organization of the company or long-term financial
strategies that mitigate this concern. These are not
situations that are easily addressed, so it is better to
start the discussion – and the planning – soon.
Tax Provisions
There have been many reports that the government
will be hiring as many as 17,000 new Internal
Revenue Service employees to deal with the health
reform provisions. Whether this number is accurate or
not, the number and complexity of tax provisions is
not in dispute.
Small business tax credits will be available to a small
business that offers health coverage beginning in
2010. But, qualifying for the tax credit may be difficult.
The credits will be available on a sliding scale to small
businesses with fewer than 25 employees and average
annual wages of less than $50,000. The full credit will
be available to employers with 10 or fewer employees
and average annual wages of less than $25,000.
Once the exchanges are operational in 2014, there
will be tax credits for businesses and individuals and
their families.
Other taxes include:
• Excise tax on uninsured individuals for tax years
beginning after 2013
• Employer responsibility tax triggered when any fulltime employee is certified to the employer as having
purchased health insurance through a state exchange
and a tax credit or cost-sharing reduction is allowed
or paid to the employee
• Excise tax on high-cost employer plans effective for
tax years after December 31, 2017
• Tax on indoor tanning services after July 1, 2010.
There also was an expansion of the maximum adoption
credit. It was increased to $13,170 per eligible child,
an increase of $1,000. The adoption credit was also
made refundable. The new limit applies to tax years
beginning after December 31, 2010. Financial and tax
advisors should be consulted before counting on a tax
provision to ensure that all requirements are met.
Reflections
-3-
EServing
UCLID MANAGERS
the independent agent since 1976
®
A Legislative Review Service by Euclid Managers
April 2010
Reflections
A service publication for brokers from
Euclid Managers®, proudly representing
UnitedHealthcare of Illinois, Delta Dental of Illinois,
MetLife and HumanaOne.
EUCLID MANAGERS
®
Serving the independent agent since 1976
Visit us online www.euclidmanagers.com.
Editor: Pamela D. Mitroff
Legislative Review is published by Euclid Managers®, 234 Spring Lake Drive., Itasca, IL 60143. For more information, contact your Marketing Representative or Marcy Graefen
at (630) 238-2915 or fax your request to (630) 773-8790. Outside Chicagoland: (800) 345-7868, Fax (877) 444-2250. © Permission to quote with credit to source.
Health Care Reform - Things to Know and Do Now!
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EServing
UCLID MANAGERS
the independent agent since 1976
®