Federal Health Care Reform:
Implications for the Marketplace
Name
Date
Agenda
▪ Legislative overview
▪ What it means for you
▪ Continuing need for reform
▪ How to stay informed
2
Patient Protection and Affordable Care Act
Signed March 23, 2010
3
Congressional Action on
Federal Health Care Reform
3/21/10: House vote on Senate bill
3/21/10: House immediately votes on reconciliation “sidecar”
3/23/10: Final bill signed by President
3/23/10: Senate takes up reconciliation bill; begins 20-hour debate
3/25/10: Senate passes amended reconciliation bill, forcing House vote
3/25/10: House passes amended reconciliation sidecar
3/30/10: Reconciliation bill signed by President
4
Federal Reform Key Elements
.
New
Taxes
and Fees
Market
Reforms
Individual
Mandate
Insurance
Exchanges
Employer
Mandate
5
Key Elements: New Taxes and Fees
New Taxes
and Fees
Effective in 2010:
Annual tanning tax: 10% tax on indoor tanning services ($2.7 B)
Effective in 2011:
Annual pharmaceutical industry fee: Begins at $2.5 billon per year ($27 B)
Effective in 2012:
Annual medical device manufacturer fee: Excise tax of 2.3% on the sale of
any taxable medical device ($20 B)
Effective in 2013:
Annual Medicare tax on high earners, and unearned income: 0.9% increase
in payroll tax. Unearned income tax of 3.8% ($210.2 B)
Effective in 2014:
Annual insurer fee: Applies to fully-insured business ($60.1 B)
Effective in 2018:
Annual high-cost insurance tax: 40% excise tax on “Cadillac” plans ($32 B)
6
Key Elements: Market Reforms
Market
Reforms
(2014)
Small Group
(2014+)
Products
▪ All health insurance products in all markets “guaranteed
issue”
▪ No health status rating; rating factors limited to:
•
•
•
•
Age: 3:1
Tobacco: 1.5:1
Family size
Geography
▪ Small Group redefined in most states from group size 2-50
to group size 1-100
▪ Health insurance products must meet new benefit mandates
and at least exhibit a 60% “actuarial value”
7
Key Elements: Insurance Exchanges
Insurance
Exchanges
Effective in 2014:
▪Insurance Exchanges will act as a new sales
channel beginning in 2014
▪Requires states to establish Exchanges for
individuals & small employers
▪Subsidies for individuals up to 400% of the federal
poverty level, only available in exchange
▪Small employer tax credits available only in
exchange
▪Potential role for agents/brokers
8
Key Elements: Individual Responsibility
Individual
Mandate
(2014+)
▪ All U.S. citizens and legal residents required to have
coverage
Subsidies
(2014+)
▪ Sliding scale, up to 400% of federal poverty level
($88,000/year for family of 4)
Medicaid
(2014+)
▪ Expanded to 133% FPL in all states
▪ Penalty phased in
• $95 per year in 2014, phasing in to $695 per year by 2016, or 2.5% of
taxable income
• Exempts low-income individuals
• Only available through exchanges
• Mandatory enrollment under 100% of federal poverty level
9
Key Elements: Employer Responsibility
“Play or Pay”
Requirement:
“Play”
(2014+)
Coverage
Penalty:
“Pay”
(2014+)
Employers with >50 full-time employees (FTEs) must offer
minimum coverage:
▪
▪
▪
▪
Part-time are included on FTE basis in calculating >50 FTE
Full-time employee averages 30+ hours per week
No minimum contribution
Must provide “essential coverage” with 60% actuarial value minimum
Employers with >50 full-time employees:
▪ Not offering coverage and at least one FTE receives tax credit
• $2,000 x total number of FTEs (minus first 30 FTEs)
▪ Offering coverage at least one FTE receives tax credit but actuarial
value < 60% or employee cost is > 9.5% of household income
• Lesser of $2000 x total FTEs or $3000 x number of employees
receiving tax credit
10
Key Elements: Other Employer Responsibilities
Free Choice
Voucher (2014+)
Employers must provide for use in exchange if:
Auto-Enrollment
Employers >200 employees must auto enroll FTE into
health plan (employee may opt out)
Treasury Reporting
Employers required to submit annual coverage reports
W-2 Reporting
Early Retiree
Reinsurance (2010)
▪ Employee premium cost sharing is 8-9.5% of household income
(>400% federal poverty level)
Must disclose cost of coverage
Temporary reinsurance for retirees 55-64
11
Key Elements: Employer Tax Elements
Small Group
Tax Credit
(2010+)
Retirees Drug
Subsidy
(2013+)
High Cost
Plan Excise
Tax (2018+)
Employers < 25 employees and < $50,000/year average
wages contributing > 50% of premium
• 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
Eliminate tax exclusion for Part D subsidy payments
40% nondeductible tax
▪ For coverage that costs over $10,200 individual; $27,500 family coverage
▪ Amounts indexed to standard inflation
▪ Excludes dental and vision
12
For internal and other select audiences
Other Federal Reform Key Elements
Product
Framework
(actuarial value)
Four tiers based on actuarial value: 60%, 70%, 80%, 90% effective in 2014.
Separate policies for “young invincibles.”
Cost-sharing limits tied to the HDHP limits. Additionally, small group
deductibles may not exceed $2,000/$4,000.
Medical Loss
Ratio
Requirements
In 2011, MLR is set at 85% for large group and 80% for small group and
individual markets.
Insurance Rate
Review
Beginning in 2010, federal government to establish a process with states to
require insurers to justify rate increases
Medicare
Advantage
Cuts Medicare Advantage by a total of $202 billion by freezing benchmarks for
one year in 2011 and then reducing benchmarks to different percentages of feefor-service Medicare spending, with bonuses for quality and enrollee
satisfaction. Increases ability to reduce MA plan payments because of plan
coding practices.
Administrative
Simplification
Requires the Secretary to adopt and regularly update standards,
implementation specifications, and operating rules for the electronic exchange
and use of health information for the purposes of financial and administrative
transactions.
13
Agenda
▪ Legislative overview
▪ What it means for you
▪ Continuing need for reform
▪ How to stay informed
14
Immediate Provisions
Effective for the 2010 tax year:
▪ Tax credits for certain small employers
▪ $250 rebate to Medicare beneficiaries who reach the Part
D “donut hole”
Effective 90 days after enactment:
▪ Temporary high-risk pools and early-retiree reinsurance
programs
Effective for plan years starting 6 months after
enactment:
▪ Dependent coverage for adult children up to age 26
▪ No lifetime coverage limits
▪ No cost-sharing for preventive services (applies only to
individuals not “grandfathered”)
15
Dependent Coverage for Adult Children Up to Age 26
Who:
▪ Existing members’ dependents who would have lost dependent benefits on
or after June 1, 2010, based on their birthday, will now be eligible to
continue benefits
▪ This includes specialty products such as vision, dental and pharmacy
▪ Exceptions noted below
When:
▪ Beginning June 1, 2010
Why:
▪ The extension is designed to fill the coverage gap between June and
September 23, 2010, when the dependent care provision in health care
reform legislation takes effect
Exceptions:
▪ Administrative Services Only (ASO), fully or partially self funded accounts
with more than 100 lives, and fully insured accounts with more than 100
lives are able to opt out of the extension – we will work with these groups
individually to meet their needs
16
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Immediate Provisions
“Grandfathering” of existing members
▪ Grandfather provision allows existing members to
keep their products, except, requires all products
renewed after September 23, 2010 to:
• Allow members to add dependents up to age 26
regardless of student status
• Eliminate lifetime limits on policies
▪ For new sales and subscribers who change policies
after 3/23/10, we will be required to make additional
changes beginning in approximately six months,
such as removing any member cost sharing for
"preventive" benefits, as defined by the legislation.
17
Effective Dates of Reform
Provisions Beyond 2010
2011-2013
2014
 Medicare Advantage cuts
 Individual mandate
 Grants for small employer
wellness programs
 Individual market
guaranteed issue
 All working adults enrolled
in Community Living
Assistance Services and
Supports (CLASS) longterm care program, unless
they opt out
 Rating reforms for
Individual and Small
Group
 Cost-sharing for preventive
services in Medicare
eliminated
 Limit FSA contributions to
$2,500 per year
2018
 High-cost insurance tax
– 40% on single
coverage over $10,200
and family coverage
over $27,500
 Employer mandate
 Insurance exchanges, with
subsidies up to 400% of
the federal poverty level
 Medicaid expansion
 Insurer fee, $8B,
increasing to $14B in 2018
18
For relevant internal audiences
Effective Dates of Reform Provisions
2010
 Rate justification
 New product requirements
(dependents to age 26, no lifetime
limits, etc.)
 Individual market rescission reform
 Prohibition on pre-ex exclusion for
children
 Early retiree reinsurance program
 Federal-required high risk pool
 Tax credits for small employers
 Insurer compensation cap on
deductibility of $500,000 per year
 Coverage of recommended
preventive services
 Internet comparison shopping tool
 Consumer appeal process (inc. ASO)
 No benefit differences by employee
salary
 Grants for states to enhance health
insurance ombudsman programs
2011-2013
2014
 Medical loss ratio
requirement – 80% for
Individual and Small
Group; 85% for Large
Group beginning in 2011
 Individual mandate
 Medicare Advantage cuts
 Rating reforms for
Individual and Small
Group
 Grants for small employer
wellness programs
 Increased tax on nonqualified medical
expenses for Archer
Medical Savings
Accounts
 Quality initiative reporting
 Limit FSA contributions to
$2,500 per year
 Uniform coverage
summaries
 Standard terms and
conditions
 Employer mandate
 Individual market
guarantee issue
2018
 High-cost insurance tax
– 40% on single
coverage over $10,200
and family coverage
over $27,500
 Expands Small Group
from 2-50 in most
states to 1-100
 Insurance exchanges
(with government-run
plan), subsidies up to
400% federal poverty
level
 New product
framework
 Medicaid expansion
 Insurer fee, $8B,
increasing to $14B in
2018
19
For relevant internal audiences
Insurance Reforms / Plan Requirements
Plan Years
Beginning
Enactment
3/23/10
June/July ’10
• Review of
“unreasonable”
rates
• National high
risk pool
• HHS web portal
• Temporary
employer
reinsurance
Sept 2010+
2014
• No pre-ex for kids*
• GI/CR
• Dependent coverage to 26*
• Age band (3:1)
• Limits on rescissions
• Risk adjustment
• Internal/external appeals*
• Exchanges
• MLRs (80% individual/
small group; 85% group)
• SG = 1-100
• No lifetime limits*
• No preventive cost-sharing*
* Impact all plans
• Patient protections*
20
What It Means for You:
Implications for our customers
▪ No immediate changes to benefits, premiums,
physician or hospital networks
▪ Future impacts will vary depending on product type
and company size
▪ Legislation will be phased in over several years,
and many provisions require federal agencies to
issue more detailed regulations
▪ Premiums may be impacted in future
21
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What It Means for Large Groups
Effective in 2010:
▪ New product requirements at renewal after 9/23/10
▪ Early retiree reinsurance for certain eligible early retirees
Effective in 2011:
▪ Employees automatically enrolled in Community Living Assistance
Services and Supports (CLASS) long-term care program, unless they
opt out
Effective in 2013:
▪ Tax deduction for Medicare Part D retiree drug subsidies eliminated
▪ Flexible Spending Account (FSA) contributions limited to $2,500 per
year
Effective in 2014:
▪ Employer mandate (with auto-enrollment)
▪ Products must meet new requirements, 60% actuarial value
▪ Health Insurance Exchange vouchers required for some employees
Effective in 2018:
▪ High-cost insurance tax – 40% on Single coverage over $10,200 and
family coverage over $27,500
22
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What It Means for Small Groups
Effective in 2010:
▪ New product requirements for renewals after 9/23/10
▪ Tax credits for certain employers
Effective in 2011:
▪ Grants for wellness programs
▪ Employees automatically enrolled in Community Living Assistance Services
and Supports (CLASS) long-term care program, unless they opt out
Effective in 2013:
▪ Limits Flexible Spending Account (FSA) contributions to $2,500 per year
Effective in 2014:
▪ Elimination of premium rate variables may result in a significant premium
increase or reduction
▪ New product requirements, prohibition on deductibles over $2,000/$4,000
▪ Health insurance exchange as new sales channel
▪ New taxes built into premium costs
Effective in 2018:
▪ High-cost insurance tax – 40% on Single coverage over $10,200 and family
coverage over $27,500
23
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What It Means for Individual Members
Effective in 2010:
▪ New product requirements for renewals after 9/23/10
Effective in 2014:
▪ Rating reforms with weak individual mandate will lead to
substantial premium increases for many members
▪ New product requirements with new framework
▪ Health insurance exchange as new sales channel
▪ New taxes built into premium costs
24
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What It Means for Senior Members
Effective in 2010:
▪ $250 rebate to offset the Part D “donut hole”
• Coinsurance rate phases down to 25% by 2020
Effective in 2011:
▪ Reductions to Medicare Advantage program
payments, which may result in reduced benefits
and/or increase member cost-sharing
▪ Cost-sharing for preventive services in Medicare
eliminated
▪ Discounts on prescriptions in the Medicare Part
D “donut hole” begin to phase in
25
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What It Means for Brokers
Effective in 2010:
▪ Grandfather provision requires all products renewed after
September 23, 2010 to:
• Allow members to add dependents up to age 26
regardless of student status
• Eliminate lifetime limits on policies
▪ For new sales and subscribers who change policies after
3/23/10, we will be required to make additional changes
beginning in approximately six months, such as removing
any member cost sharing for "preventive" benefits, as
defined by the legislation.
Effective in 2014:
▪ Health insurance exchange will exist as a new sales channel
for individual and small group
26
Some Early Impacts:
Employers Facing New Expenses
Major American companies say they will face
hundreds of millions of dollars in new health
care costs:
▪ AT&T ($1 billion charge in 2010)
▪ Deere & Company ($150 million charge in
2010)
▪ Caterpillar ($100 million charge in 2010)
▪ 3M Company ($85-90 million charge in 2010)
Source: Associated Press articles, March 2010
27
Some Early Impacts:
Legal Challenges
The legislation faced immediate legal
challenges from several parties:
▪ At least 21 states
▪ Association of American Physicians and
Surgeons (AAPS)
▪ New Jersey Physicians Inc.
Source: FierceHealthcare news, March 30, 2010
28
Agenda
▪ Legislative overview
▪ What it means for you
▪ Continuing need for reform
▪ How to stay informed
29
Medical Costs Continue to Rise
U.S. National Health Expenditures (trillions)
$3.0
10%
8.6%
9.0%
9%
8.3%
$2.5
$2.40 (P)
8%
$2.24
$2.11
6.9%
$2.0
$1.98
7.0%
$1.85
$1.73
6.8%
7%
6.7%
$1.60
$1.5
6.1%
6.1% (P)
$1.47
6%
5%
$1.35
4%
$1.0
3%
2%
$0.5
1%
$0.0
0%
2000
2001
2002
2003
2004
2005
2006
2007
2008 (P)
Source: National Health Expenditure Accounts, CMS
30
Profit Misperceptions
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for external
presentations
How much profit do consumers think insurers make?
A. Less than 5%
B. 15%
C. 30%
D. 50%
31
Profit Misperceptions
Delete this slide
for external
presentations
Many consumers have an inaccurate
perception of health insurer profits
% profit
% consumers
41%+
25%
31-40%
15%
21-30%
20%
11-20%
21%
6-10%
0-5%
40% of consumers
surveyed think we make a
profit of 30% or more.
14%
6%
32
Where Does Your
Health Insurance Dollar Go?
33
Hospital Cost-Shifting
Aggregate Hospital Payment-to-Cost Ratios, 1981-2006
Cost shift
Source: Avalere Health analysis of American Hospital Association Annual Survey data, 2005, for community hospitals.
(1)
Includes Medicaid Disproportionate Share payments.
34
Lessons From Massachusetts
The results from Massachusetts demonstrate continued need to
implement responsible reform that addresses cost and quality:
▪ Covered about half of the uninsured (already exhibited lowest uninsured
rate in U.S.)
▪ Premium costs for individuals in Massachusetts are the second highest in
the U.S.
▪ Overall, the costs of Massachusetts health reforms have been much
higher than expected
▪ Lack of an effective, enforceable individual mandate only exacerbates the
cost issue in Massachusetts, and there is evidence of enrollment gaming
35
Agenda
▪ Legislative overview
▪ What it means for you
▪ Continuing need for reform
▪ How to stay informed
36
Implementation Communications
▪ Several teams are working on implementing the
various provisions with 2010 and 2011
implementation dates
▪ We will be sending communications to
employers, individuals, and brokers about
upcoming changes
37
Health Action Network
▪ One-stop platform to follow
and participate in the debate
on health care reform
▪ Contact Members of Congress
▪ Register to receive weekly
news on health care reform
▪ Tell others about the Health
Action Network
www.HealthActionNetwork.com
38
Health Action Network on Facebook
▪ Articles and dialogue
about health care
reform
▪ Take Action tab allows
for conversions from
fans to advocates
▪ Interactive widget
allows fans to easily
promote health care
reform to their friends
www.facebook.com/thehealthactionnetwork
39
Anthem Blue Cross and Blue Shield is the trade name of: In Colorado and Nevada: Rocky Mountain Hospital and
Medical Service, Inc. In Connecticut: Anthem Health Plans, Inc. In Indiana: Anthem Insurance Companies, Inc. In
Kentucky: Anthem Health Plans of Kentucky, Inc. In Maine: Anthem Health Plans of Maine, Inc. In Missouri (excluding 30
counties in the Kansas City area): RightCHOICE® Managed Care, Inc. (RIT), Healthy Alliance® Life Insurance Company
(HALIC), and HMO Missouri, Inc. RIT and certain affiliates administer non-HMO benefits underwritten by HALIC and HMO
benefits underwritten by HMO Missouri, Inc. RIT and certain affiliates only provide administrative services for selffunded plans and do not underwrite benefits. In New Hampshire: Anthem Health Plans of New Hampshire, Inc. In Ohio:
Community Insurance Company. In Wisconsin: Blue Cross Blue Shield of Wisconsin ("BCBSWi"), which underwrites or
administers the PPO and indemnity policies; Compcare Health Services Insurance Corporation ("Compcare"), which
underwrites or administers the HMO policies; and Compcare and BCBSWi collectively, which underwrite or administer
the POS policies. Independent licensees of the Blue Cross and Blue Shield Association. ® ANTHEM is a registered
trademark of Anthem Insurance Companies, Inc. The Blue Cross and Blue Shield names and symbols are registered
marks of the Blue Cross and Blue Shield Association.
40