Insuring Resources Commentary:
So what has happened in the three months since health care reform passed Congress and Pres. Obama signed it March 23rd?
Premiums have continued to rise and health care reform rules are slowly taking shape. In the end will the new rules help?
I believe in some ways they will, more people will become insured, young adults will have greater access through their parent's plans, pre-x will be eliminted for children this October and in 2014 for adults.
BUT, will premiums go down? Probably not because the bill does virtually nothing to stem the tide of rising health CARE costs, that's where the price drivers are.
We need incentives for quality and efficiency.
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See this article concerning new premium increases PRIOR to health care reforms implementation.
http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2010/06/26/ED011D46ND.DTL&type=health
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Tuesday, June 29, 2010
Thursday, June 10, 2010
PPACA puts niche health insurance market in jeopardy
Insuring Resources Commentary:
Because the PPACA mandates an "essential (or minimum) benefits package starting this fall many individuals on limited cover plans may see their benefits at risk.
As noted below, a cadre of employers and trade associations, have asked the administration to allow the plans — at least through 2014, when the insurance exchanges are set up and tax credits become available for low-wage workers.
This is another indication that not every item in this reform package was well thought out and also illustrates how politics intervened. Because the administration wanted the consumer friendly pieces right away there is some disconnect on how provisions, like this, add up.
--- ---- ----
Part of the health care overhaul due to kick in this September could strip more than 1 million people of their insurance coverage, violating a key goal of President Barack Obama’s reforms.
Under the provision, insurance companies will no longer be able to apply broad annual caps on the amount of money they pay out on health policies. Employer groups say the ban could essentially wipe out a niche insurance market that many part-time workers and retail and restaurant employees have come to rely on.
This market’s limited-benefit plans, also called mini-med plans, are priced low because they can, among other things, restrict the number of covered doctor visits or impose a maximum on insurance payouts in a year. The plans are commonly offered by retail or restaurant companies to low-wage workers who cannot afford more expensive, comprehensive coverage.
Depending on how strictly the administration implements the provision, the ban could in effect outlaw the plans or make them so restrictive that insurance companies would raise rates to the point they become unaffordable.
A cadre of employers and trade associations, including 7-Eleven, Lowe’s, the National Restaurant Association, the National Retail Federation and the U.S. Chamber of Commerce, have asked the administration to allow the plans — at least through 2014, when the insurance exchanges are set up and tax credits become available for low-wage workers.
The struggle over the provision highlights the importance of the new law’s implementation timetable and the way its parts interlock with one another. The legislation was front-loaded with consumer-friendly reforms, such as the ban on most annual limits, in hopes the law would become more popular. Polls show the legislation is supported by about half the public.
But many of the more comprehensive features of the overhaul, such as the insurance exchanges and tax credits that would help cover those who use limited-benefit plans, don’t come into play until 2014.
That means, for nearly three years, the effect of the ban on annual limits could be costly for the low-wage, seasonal or temporary workers who most often use limited-benefit plans. The full effect won’t be known until the administration releases regulations that detail how the provision will be implemented.
The ban on annual caps is designed to improve the quality of all health coverage. It will prevent patients from “maxing out” of their health coverage if they are diagnosed with catastrophic illnesses or sustain costly injuries.
Because the PPACA mandates an "essential (or minimum) benefits package starting this fall many individuals on limited cover plans may see their benefits at risk.
As noted below, a cadre of employers and trade associations, have asked the administration to allow the plans — at least through 2014, when the insurance exchanges are set up and tax credits become available for low-wage workers.
This is another indication that not every item in this reform package was well thought out and also illustrates how politics intervened. Because the administration wanted the consumer friendly pieces right away there is some disconnect on how provisions, like this, add up.
--- ---- ----
Part of the health care overhaul due to kick in this September could strip more than 1 million people of their insurance coverage, violating a key goal of President Barack Obama’s reforms.
Under the provision, insurance companies will no longer be able to apply broad annual caps on the amount of money they pay out on health policies. Employer groups say the ban could essentially wipe out a niche insurance market that many part-time workers and retail and restaurant employees have come to rely on.
This market’s limited-benefit plans, also called mini-med plans, are priced low because they can, among other things, restrict the number of covered doctor visits or impose a maximum on insurance payouts in a year. The plans are commonly offered by retail or restaurant companies to low-wage workers who cannot afford more expensive, comprehensive coverage.
Depending on how strictly the administration implements the provision, the ban could in effect outlaw the plans or make them so restrictive that insurance companies would raise rates to the point they become unaffordable.
A cadre of employers and trade associations, including 7-Eleven, Lowe’s, the National Restaurant Association, the National Retail Federation and the U.S. Chamber of Commerce, have asked the administration to allow the plans — at least through 2014, when the insurance exchanges are set up and tax credits become available for low-wage workers.
The struggle over the provision highlights the importance of the new law’s implementation timetable and the way its parts interlock with one another. The legislation was front-loaded with consumer-friendly reforms, such as the ban on most annual limits, in hopes the law would become more popular. Polls show the legislation is supported by about half the public.
But many of the more comprehensive features of the overhaul, such as the insurance exchanges and tax credits that would help cover those who use limited-benefit plans, don’t come into play until 2014.
That means, for nearly three years, the effect of the ban on annual limits could be costly for the low-wage, seasonal or temporary workers who most often use limited-benefit plans. The full effect won’t be known until the administration releases regulations that detail how the provision will be implemented.
The ban on annual caps is designed to improve the quality of all health coverage. It will prevent patients from “maxing out” of their health coverage if they are diagnosed with catastrophic illnesses or sustain costly injuries.
Sunday, June 6, 2010
Understanding the Grandfather Rules
Insuring Resources Commentary:
A key talking point or sound bite from the effort to reform health care and insurance access for the last year has been, “ if you like your health plan, you can keep it.” Well, here are the details in the article below.
Essentially very few changes are required of “grandfathered plans” but I’ll detail here the key issues and or requirements that ARE required of these “grandfathered plans”.
Plans that are “granted” grandfather status will be able to maintain the benefits they have and their contracted providers. However these requirements do apply:
1) the mandatory requirement to include the value of coverage on each employee's Form W-2 (effective January 1, 2011),
2) the large-employer mandate to offer affordable coverage to full-time employees (effective January 1, 2014),
3) the high-cost health plan excise tax (effective January 1, 2018) and
4) the mandatory automatic enrollment requirement (effective once regulations are issued).
For more details see the italicized highlights below within the article
---------------- ------------------
Health Care Reform: Understanding the Grandfather Rules
June 04, 2010 | Mondaq Business Briefing
Copyright 2010 Gale Group, Inc.
The coverage mandates and insurance reforms in Subtitles A and C of the Patient Protection and Affordable Care Act (PPACA) will require significant changes to employer-sponsored health plans. Several of the mandates become effective in 2010 or 2011, requiring immediate attention, while others become effective over the next several years. Also, though PPACA generally applies to all group health plans and health insurance coverage going forward, certain existing plans and coverage are exempted, or "grandfathered," from a number of the new requirements. The grandfather provision delays the time a new rule will apply to a grandfathered plan in some cases and in other cases seems to provide a complete exemption from the rules.
The grandfather provision, found in section 1251 of PPACA1, is intended to provide plan sponsors and insurers with greater certainty regarding their current benefit arrangements. Grandfathered plans will be able to maintain many of their current coverage provisions and will require fewer changes to plan documents and administrative procedures in order to comply with the new law. However, with its caveats, ambiguities and exceptions, the grandfather provision has raised as many questions as it has answered, particularly for large employers with complex benefits arrangements.
This article addresses the ten most frequently asked questions regarding grandfather protection for large employer-sponsored group health plans. The article also includes a quick-reference chart with details on key provisions that are applicable to grandfathered plans, as well as a final section summarizing the rules that grandfathered plans are able to avoid - at least for the time being.
Q-1: What is a grandfathered group health plan? A-1: A grandfathered group health plan is a plan in which an individual was enrolled on March 23, 2010. A grandfathered plan can be a single employer plan, a multi-employer plan, or a multiple employer plan; it can also be an insured or a self-insured arrangement.
Q-2: My plan appears to be grandfathered. What does that mean?
A-2: Depending on the provision, grandfathered plans may benefit from either a delayed effective date for compliance with, or a total exception from, certain insurance market reforms and coverage mandates under Subtitles A and C of PPACA. However, it is important to note that grandfathering does not protect a plan from the reforms found in other parts of the statute, including, for example, the mandatory requirement to include the value of coverage on each employee's Form W-2 (effective January 1, 2011), the large-employer mandate to offer affordable coverage to full-time employees (effective January 1, 2014), the high-cost health plan excise tax (effective January 1, 2018) and the mandatory automatic enrollment requirement (effective once regulations are issued).
Q-3: Is grandfathering indefinite? In other words, for any rule that does not expressly include a delayed effective date, does the grandfather rule mean that we will never need to amend the plan for that provision? A-3: While the grandfather provision does not include a general sunset date for non-collectively bargained grandfathered plans, it is unlikely that these plans will have a permanent exception from compliance with any of the insurance market reforms and coverage mandates in the statute that do not expressly include a delayed effective date. Given the flexibility of the language of the grandfather rule, the federal agencies invested with regulatory authority over the new law (specifically, the Internal Revenue Service, the Department of Labor, and the Department of Health and Human Services) are likely to issue guidance that places certain parameters around grandfather protection. Q-4: If I add new employees (or new enrollees) to my currently grandfathered plan, does the plan lose its grandfathered status?
A-4: No. Section 1251(c) of PPACA specifically provides that a grandfathered plan may enroll new employees and their families in the plan without losing the plan's grandfather status. In addition, the statute also states that grandfathering continues to apply to the coverage of an individual covered by the plan on the date of enactment regardless of whether the individual renews coverage or adds family members after the date of enactment. Although the statute does not specifically state that a plan may add other new enrollees (i.e., current employees who have not previously enrolled in the plan), it is unlikely that enrollment of such employees in the ordinary course will cause the plan to lose its grandfathered status. Guidance is needed as to whether more significant changes in enrollment will cause a plan to lose grandfather status (e.g., the enrollment of a large group of employees following a corporate acquisition).
Q-5: Can I amend my grandfathered plan without losing the grandfathered status?
A-5: Presumably some amendments are permitted, but the complete answer to this question is still unclear. Unlike the grandfather provisions of other legislation, section 1251 of PPACA does not expressly prohibit amendments to a grandfathered plan, nor does it contain a mandate requiring plan sponsors to maintain benefits at current levels in order to preserve grandfather status. Arguably, this means that plan sponsors may freely amend their grandfathered plans without jeopardizing the plan's grandfathered status. However, it is unlikely that such a liberal reading of the provision accurately reflects legislative intent. Until further guidance is issued, plan sponsors must consider amendments to grandfathered plans on a case-by-case basis to determine (1) whether the amendment substantively alters the nature of the plan's coverage in a manner that may jeopardize the plan's grandfathered status, and (2) the true cost impact of losing grandfather status.
Q-6: How does the grandfather rule apply to collectively bargained plans?
A-6: Section 1251(d) of PPACA provides that health insurance coverage maintained pursuant to one or more collective bargaining agreements that were ratified before March 23, 2010, is not subject to the insurance market reforms and coverage mandates in Subtitles A and C of PPACA until the date on which the last collective bargaining agreement relating to coverage terminates. The provision also states that any coverage amendments made pursuant to a collective bargaining agreement that amends the coverage to conform with Subtitles A or C will not cause the plan to lose its grandfathered status. However, the application of the rule to collectively bargained plans remains unclear in several respects. For instance, the statute does not clarify whether the termination of the collective bargaining agreement subjects the collectively bargained plan to all provisions of Subtitles A and C, or whether "regular" grandfathering (as described above) will then apply. In addition, the language of the statute suggests that grandfathering may only apply to fully insured (not self-insured) collectively bargained plans. Finally, it is also unclear how the grandfather rule will apply to plans subject to "evergreen" bargaining agreements.
Q-7: Are all of my medical plans that covered employees as of March 23, 2010, grandfathered?
A-7: Grandfathering applies to all group health plans that are welfare benefit plans under ERISA section 3(1) and all health insurance coverage to the extent that the plan or coverage provides medical care to employees and their dependents through insurance, reimbursement, or otherwise, even if coverage is offered through a medical service policy or an HMO offered by a health insurance issuer.
Q-8: Will my grandfathered plan satisfy the minimum essential coverage requirement under Section 5000A and 4980H of PPACA?
A-8: PPACA creates a new section 5000A of the Internal Revenue Code (IRC), which mandates that individuals maintain "minimum essential coverage." PPACA also creates new IRC section 4980H, which mandates that large employers offer the minimum essential coverage to their full-time employees. Each of these provisions becomes effective January 1, 2014. To the extent that an individual is covered under, or an employer offers, a grandfathered plan (that otherwise meets the provisions of the PPACA, as amended) the individual and the employer will be treated as satisfying the respective mandates as of the effective date.
Q-9: When will I need to make amendments to the plan to comply with the market reform provisions that are applicable to grandfathered plans? A-9: The effective date for each of the provisions applicable to grandfathered plans is outlined on the attached chart. Grandfathered plans should be amended to comply with these provisions before each applicable effective date. However, depending on individual circumstances, some employers that are in the process of drafting amendments for the 2011 plan year may consider making one set of amendments to comply with provisions that become effective as late as 2014. The last section of the chart lists provisions that it currently appears will never apply to grandfathered plans.
Q-10: Are the agencies planning to issue guidance on the grandfather provisions in PPACA in the near future?
A-10: While it is difficult to predict when any particular PPACA guidance will be issued, agency officials have informally indicated that clarifying the grandfather rules is an important issue that will likely receive priority as guidance is developed.
A key talking point or sound bite from the effort to reform health care and insurance access for the last year has been, “ if you like your health plan, you can keep it.” Well, here are the details in the article below.
Essentially very few changes are required of “grandfathered plans” but I’ll detail here the key issues and or requirements that ARE required of these “grandfathered plans”.
Plans that are “granted” grandfather status will be able to maintain the benefits they have and their contracted providers. However these requirements do apply:
1) the mandatory requirement to include the value of coverage on each employee's Form W-2 (effective January 1, 2011),
2) the large-employer mandate to offer affordable coverage to full-time employees (effective January 1, 2014),
3) the high-cost health plan excise tax (effective January 1, 2018) and
4) the mandatory automatic enrollment requirement (effective once regulations are issued).
For more details see the italicized highlights below within the article
---------------- ------------------
Health Care Reform: Understanding the Grandfather Rules
June 04, 2010 | Mondaq Business Briefing
Copyright 2010 Gale Group, Inc.
The coverage mandates and insurance reforms in Subtitles A and C of the Patient Protection and Affordable Care Act (PPACA) will require significant changes to employer-sponsored health plans. Several of the mandates become effective in 2010 or 2011, requiring immediate attention, while others become effective over the next several years. Also, though PPACA generally applies to all group health plans and health insurance coverage going forward, certain existing plans and coverage are exempted, or "grandfathered," from a number of the new requirements. The grandfather provision delays the time a new rule will apply to a grandfathered plan in some cases and in other cases seems to provide a complete exemption from the rules.
The grandfather provision, found in section 1251 of PPACA1, is intended to provide plan sponsors and insurers with greater certainty regarding their current benefit arrangements. Grandfathered plans will be able to maintain many of their current coverage provisions and will require fewer changes to plan documents and administrative procedures in order to comply with the new law. However, with its caveats, ambiguities and exceptions, the grandfather provision has raised as many questions as it has answered, particularly for large employers with complex benefits arrangements.
This article addresses the ten most frequently asked questions regarding grandfather protection for large employer-sponsored group health plans. The article also includes a quick-reference chart with details on key provisions that are applicable to grandfathered plans, as well as a final section summarizing the rules that grandfathered plans are able to avoid - at least for the time being.
Q-1: What is a grandfathered group health plan? A-1: A grandfathered group health plan is a plan in which an individual was enrolled on March 23, 2010. A grandfathered plan can be a single employer plan, a multi-employer plan, or a multiple employer plan; it can also be an insured or a self-insured arrangement.
Q-2: My plan appears to be grandfathered. What does that mean?
A-2: Depending on the provision, grandfathered plans may benefit from either a delayed effective date for compliance with, or a total exception from, certain insurance market reforms and coverage mandates under Subtitles A and C of PPACA. However, it is important to note that grandfathering does not protect a plan from the reforms found in other parts of the statute, including, for example, the mandatory requirement to include the value of coverage on each employee's Form W-2 (effective January 1, 2011), the large-employer mandate to offer affordable coverage to full-time employees (effective January 1, 2014), the high-cost health plan excise tax (effective January 1, 2018) and the mandatory automatic enrollment requirement (effective once regulations are issued).
Q-3: Is grandfathering indefinite? In other words, for any rule that does not expressly include a delayed effective date, does the grandfather rule mean that we will never need to amend the plan for that provision? A-3: While the grandfather provision does not include a general sunset date for non-collectively bargained grandfathered plans, it is unlikely that these plans will have a permanent exception from compliance with any of the insurance market reforms and coverage mandates in the statute that do not expressly include a delayed effective date. Given the flexibility of the language of the grandfather rule, the federal agencies invested with regulatory authority over the new law (specifically, the Internal Revenue Service, the Department of Labor, and the Department of Health and Human Services) are likely to issue guidance that places certain parameters around grandfather protection. Q-4: If I add new employees (or new enrollees) to my currently grandfathered plan, does the plan lose its grandfathered status?
A-4: No. Section 1251(c) of PPACA specifically provides that a grandfathered plan may enroll new employees and their families in the plan without losing the plan's grandfather status. In addition, the statute also states that grandfathering continues to apply to the coverage of an individual covered by the plan on the date of enactment regardless of whether the individual renews coverage or adds family members after the date of enactment. Although the statute does not specifically state that a plan may add other new enrollees (i.e., current employees who have not previously enrolled in the plan), it is unlikely that enrollment of such employees in the ordinary course will cause the plan to lose its grandfathered status. Guidance is needed as to whether more significant changes in enrollment will cause a plan to lose grandfather status (e.g., the enrollment of a large group of employees following a corporate acquisition).
Q-5: Can I amend my grandfathered plan without losing the grandfathered status?
A-5: Presumably some amendments are permitted, but the complete answer to this question is still unclear. Unlike the grandfather provisions of other legislation, section 1251 of PPACA does not expressly prohibit amendments to a grandfathered plan, nor does it contain a mandate requiring plan sponsors to maintain benefits at current levels in order to preserve grandfather status. Arguably, this means that plan sponsors may freely amend their grandfathered plans without jeopardizing the plan's grandfathered status. However, it is unlikely that such a liberal reading of the provision accurately reflects legislative intent. Until further guidance is issued, plan sponsors must consider amendments to grandfathered plans on a case-by-case basis to determine (1) whether the amendment substantively alters the nature of the plan's coverage in a manner that may jeopardize the plan's grandfathered status, and (2) the true cost impact of losing grandfather status.
Q-6: How does the grandfather rule apply to collectively bargained plans?
A-6: Section 1251(d) of PPACA provides that health insurance coverage maintained pursuant to one or more collective bargaining agreements that were ratified before March 23, 2010, is not subject to the insurance market reforms and coverage mandates in Subtitles A and C of PPACA until the date on which the last collective bargaining agreement relating to coverage terminates. The provision also states that any coverage amendments made pursuant to a collective bargaining agreement that amends the coverage to conform with Subtitles A or C will not cause the plan to lose its grandfathered status. However, the application of the rule to collectively bargained plans remains unclear in several respects. For instance, the statute does not clarify whether the termination of the collective bargaining agreement subjects the collectively bargained plan to all provisions of Subtitles A and C, or whether "regular" grandfathering (as described above) will then apply. In addition, the language of the statute suggests that grandfathering may only apply to fully insured (not self-insured) collectively bargained plans. Finally, it is also unclear how the grandfather rule will apply to plans subject to "evergreen" bargaining agreements.
Q-7: Are all of my medical plans that covered employees as of March 23, 2010, grandfathered?
A-7: Grandfathering applies to all group health plans that are welfare benefit plans under ERISA section 3(1) and all health insurance coverage to the extent that the plan or coverage provides medical care to employees and their dependents through insurance, reimbursement, or otherwise, even if coverage is offered through a medical service policy or an HMO offered by a health insurance issuer.
Q-8: Will my grandfathered plan satisfy the minimum essential coverage requirement under Section 5000A and 4980H of PPACA?
A-8: PPACA creates a new section 5000A of the Internal Revenue Code (IRC), which mandates that individuals maintain "minimum essential coverage." PPACA also creates new IRC section 4980H, which mandates that large employers offer the minimum essential coverage to their full-time employees. Each of these provisions becomes effective January 1, 2014. To the extent that an individual is covered under, or an employer offers, a grandfathered plan (that otherwise meets the provisions of the PPACA, as amended) the individual and the employer will be treated as satisfying the respective mandates as of the effective date.
Q-9: When will I need to make amendments to the plan to comply with the market reform provisions that are applicable to grandfathered plans? A-9: The effective date for each of the provisions applicable to grandfathered plans is outlined on the attached chart. Grandfathered plans should be amended to comply with these provisions before each applicable effective date. However, depending on individual circumstances, some employers that are in the process of drafting amendments for the 2011 plan year may consider making one set of amendments to comply with provisions that become effective as late as 2014. The last section of the chart lists provisions that it currently appears will never apply to grandfathered plans.
Q-10: Are the agencies planning to issue guidance on the grandfather provisions in PPACA in the near future?
A-10: While it is difficult to predict when any particular PPACA guidance will be issued, agency officials have informally indicated that clarifying the grandfather rules is an important issue that will likely receive priority as guidance is developed.
Wednesday, June 2, 2010
In Business Madison Magazine Details Small Business Decisions Under the PPACA
Insuring Resources Commentary:
The article below provides a great analysis on small business decision-making as health care is implemented. Dr. Samitt does a great job of laying out the small business issues and also suggests that more could have been done on the quality and cost containment side but he notes that better coordination among providers is essential. He notes that Wisconsin is well-positioned in that regard.
I've highlighted a couple of noteworthy items within the article below. These pertain to small business decision-making on whether to offer coverage or pay the penalty and on quality and cost issues and Wisconsin's current insurance marketplace.
A couple of items the article does not touch on:
1. State creation of Health Insurance Exchanges (statewide or regional) and other important decisions
***(stay tuned for a post from me on implementing HIE's in a few days)***
2. Enhancement of Wisconsin's High risk pool- Expansion of HIRSP pre -2014 to provide coverage for those with pre-existing conditions
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Health Care Calculation for Businesses: Coverage Versus Paying the Penalty
June 1, 2010
In Business Madison Magazine- http://www.ibmadison.com/healthcare?id=514
Large and mid-sized businesses have some calculating to do regarding the recently enacted Patient Protection and Affordable Care Act, the federal health care law, but that calculation will not be entirely monetary, according to Dr. Craig Samitt.
Samitt, president and CEO of Dean Health System in Madison, said the comparison small and mid-sized businesses must begin to make is the respective cost of providing insurance versus the cost in penalties for not providing it. That final decision does not have to be made until January of 2014, but provisions clearly prescribe that employers will have this choice themselves. (Qualified small businesses would be able to purchase insurance for their employees through state-based Small Business Health Options Programs or SHOPs.)
Since the law goes into effect in stages, Samitt believes affected businesses should map out a strategy to take advantage of the various changes that occur each year leading up to full implementation. There is the immediate benefit of small business tax credits that are retroactive to Jan. 1, 2010, and then there is the aforementioned coverage question.
Large and mid-sized employers that fail to offer what the law calls "minimum essential coverage" would be liable for an additional tax. That penalty would equal the product of the applicable payment amount (with respect to any month, 1/12 of $2,000) and the number of full-time employees employed by the employer during such month.
The penalty would apply to employers with 50 or more workers, but would subtract the first 30 workers from the payment calculation. In a hypothetical example, a company with 51 full-time employees that does not offer the still-to-be-determined "minimum essential coverage" would pay an amount equal to 51 minus 30 (or 21) times the applicable per employee payment amount up to $2,000 per full-time employee. (Businesses with fewer than 50 employees would be exempt from any employer responsibility.)
If employer-provided insurance exceeds 9.5 percent of the employee's household income, or the employer plan has an actuarial value of less than 60 percent, the coverage will not qualify as minimum essential coverage.
So the question becomes, "Do you provide coverage to employees, or do you pay penalties and have [individual] employees enter into an exchange," Samitt noted. "Obviously, this will be a challenging call for employers because it's not just about cost."
More immediately, the Act provides a temporary, sliding-scale tax credit to help small employers offset the cost of employer-provided coverage. For the purpose of the credit, a small employer generally is defined as one with fewer than 25 employees and average annual wages of less than $50,000. From 2011 through 2013, eligible employers may qualify for a tax credit for up to 35 percent of their contribution toward the employee's health insurance premium.
In 2014 and beyond, eligible employers who purchase coverage through a state exchange may qualify for a credit for two years of up to 50 percent of their contribution. (Employers with 10 or fewer employees and average annual wages of less than $20,000 would be eligible for the full credit.)
If a business belongs to an industry where the provision of health benefits is a competitive advantage, enabling them to attract and retain quality employees, Samitt believes it may be in the businesses' best interest to provide health insurance even if it costs more than paying the penalty. "Those are the things that small employers are going to have to start thinking about in terms of options regarding reform," he stated.
In general, Samitt regards the Act as good law for small businesses and for people who want to start a business but can't due to their concerns about health insurance affordability. "Businesses have had this challenge of affordability as it pertains to health care," he noted. "With these tax credits in short term, and with exchanges in longer term, smaller businesses have an opportunity to insure their employees like large businesses do."
Reform Measures
The Act tried to accomplish three things which are important to reform: broadening access to coverage, where it scores more highly in Samitt's view; and improving quality and affordability, where the jury is still out. According to Samitt, the bill's strengths are really more on the coverage side, but there is much less detail and only references pertaining to quality and cost. "At this point, it's hard to predict the impact on insurance premiums in the short- or long-term," he opined. "It's in an area where there is a lot more detail that needs to be worked out in terms of what will actually be covered, and in terms of changes in the payment system."
There is a ripe area for cost control, however. Historically, Samitt said the health care reimbursement model has been more based upon the quantity of care rather than the quality of care; because quantity of care has been rewarded, costs have continued to rise. "There are references in this bill to rewarding the quality of care, not just the quantity of care," he noted, "and if reimbursement changes to reward value, this should bend the cost curve and the premium curve."
Citing information from the Organization for Economic Cooperation and Development (OECD) Samitt said the cost curve must inevitably be bent downward. The OECD notes that U.S. health care expenditures as a percentage of gross domestic product rose from about 5% in 1960 to a projected 18% in 2010. By 2018, health care expenditures are projected to grow to 20% of GDP.
"The cost of health care is rising at an exponential rate, and rising faster than inflation, so when we look at how much we, as a society, are spending for health care, that trend is unsustainable," Samitt opined. "We will have no choice but to find a way to bend the cost curve while improving quality at the same time."
Health Care a la Carte
Ideally, Samitt said health insurance should be structured with preventive care, regular check ups, pharmacy, and catastrophic coverage. Asked if individual consumers, in order to hold down costs, should be able to pick and choose the rest, paying a la carte for things like mental health coverage, Samitt said that would be problematic and weaken universal coverage principles.
"The cost of broader insurance coverage can only be managed if the risk is adequately spread among the population," he explained. "Allowing people to shop a la carte can work for items that are truly non-necessities, like cosmetic surgery and items like that. But mental health care is not a luxury. It's a real health care concern that must be part of the 'must-haves' like preventive care, regular check ups, and catastrophic care."
"You can't have people just pay a la carte when they get sick because it's not how current coverage works," he continued. "That would be equivalent of deciding to buy auto insurance only after accidents happen."
Dr. Samitt commented on a number of topics, including the following:
On whether the bill is structured, as critics contend, to drive private insurers out of business and health care consumers into the government's arms? "The bill is not intended to drive private insurers out of business. I don't think it's designed to nationalize health care. There is no public plan in the bill. What the bill does do, though, is bring more accountability to the insurance world. The ultimate goal of the bill is to provide more citizens with better care at a lower cost.
"On the health care delivery and insurance side, this will mean the need for more integration and coordination where physicians, hospitals, and insurance plans are all working together with patients at the center, and with a focus on managing quality and cost. So that accountability is critical and the pressure to integrate is essential. What's great about Wisconsin is there are so many integrated systems like Dean-St. Mary's that are already practicing these integrated models. But that level of integration is absent in many of the greatest population areas of the nation. In most other markets, what you see more often are independent, non-aligned entities, which may drive up health care costs while not necessarily delivering higher quality care."
On whether he has any issues with the Act's requirement for insurers to use at least 80% of premiums for care services rather than administrative costs or profit taking? "In my view, the more dollars that can be directed to heath services, the better off we'll be. What we see in many integrated systems like those in Wisconsin, is those administrative costs are already on the lower side. So if there are health plans that can deliver a high quality product and spend less on administrative services and reduce waste, then why can't all health plans achieve that same level of reduction in administrative costs? So yes, that is a good provision. We should be spending more on clinical services than less."
On whether the federal government will be back to address health care reform: "Whenever you can provide more coverage, that's good. The insurance provisions in the bill are the right things to do. They make sense. However, the concern everyone has is how are we going to pay for this? That's why a big part of reforming health care will require us to think more about prevention, wellness, the appropriateness of hospitalization, and the appropriateness of getting care in the doctors' office rather than the emergency room. Those are the parts of reform that actually have to happen that are not well-specified in the bill."
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The article below provides a great analysis on small business decision-making as health care is implemented. Dr. Samitt does a great job of laying out the small business issues and also suggests that more could have been done on the quality and cost containment side but he notes that better coordination among providers is essential. He notes that Wisconsin is well-positioned in that regard.
I've highlighted a couple of noteworthy items within the article below. These pertain to small business decision-making on whether to offer coverage or pay the penalty and on quality and cost issues and Wisconsin's current insurance marketplace.
A couple of items the article does not touch on:
1. State creation of Health Insurance Exchanges (statewide or regional) and other important decisions
***(stay tuned for a post from me on implementing HIE's in a few days)***
2. Enhancement of Wisconsin's High risk pool- Expansion of HIRSP pre -2014 to provide coverage for those with pre-existing conditions
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Health Care Calculation for Businesses: Coverage Versus Paying the Penalty
June 1, 2010
In Business Madison Magazine- http://www.ibmadison.com/healthcare?id=514
Large and mid-sized businesses have some calculating to do regarding the recently enacted Patient Protection and Affordable Care Act, the federal health care law, but that calculation will not be entirely monetary, according to Dr. Craig Samitt.
Samitt, president and CEO of Dean Health System in Madison, said the comparison small and mid-sized businesses must begin to make is the respective cost of providing insurance versus the cost in penalties for not providing it. That final decision does not have to be made until January of 2014, but provisions clearly prescribe that employers will have this choice themselves. (Qualified small businesses would be able to purchase insurance for their employees through state-based Small Business Health Options Programs or SHOPs.)
Since the law goes into effect in stages, Samitt believes affected businesses should map out a strategy to take advantage of the various changes that occur each year leading up to full implementation. There is the immediate benefit of small business tax credits that are retroactive to Jan. 1, 2010, and then there is the aforementioned coverage question.
Large and mid-sized employers that fail to offer what the law calls "minimum essential coverage" would be liable for an additional tax. That penalty would equal the product of the applicable payment amount (with respect to any month, 1/12 of $2,000) and the number of full-time employees employed by the employer during such month.
The penalty would apply to employers with 50 or more workers, but would subtract the first 30 workers from the payment calculation. In a hypothetical example, a company with 51 full-time employees that does not offer the still-to-be-determined "minimum essential coverage" would pay an amount equal to 51 minus 30 (or 21) times the applicable per employee payment amount up to $2,000 per full-time employee. (Businesses with fewer than 50 employees would be exempt from any employer responsibility.)
If employer-provided insurance exceeds 9.5 percent of the employee's household income, or the employer plan has an actuarial value of less than 60 percent, the coverage will not qualify as minimum essential coverage.
So the question becomes, "Do you provide coverage to employees, or do you pay penalties and have [individual] employees enter into an exchange," Samitt noted. "Obviously, this will be a challenging call for employers because it's not just about cost."
More immediately, the Act provides a temporary, sliding-scale tax credit to help small employers offset the cost of employer-provided coverage. For the purpose of the credit, a small employer generally is defined as one with fewer than 25 employees and average annual wages of less than $50,000. From 2011 through 2013, eligible employers may qualify for a tax credit for up to 35 percent of their contribution toward the employee's health insurance premium.
In 2014 and beyond, eligible employers who purchase coverage through a state exchange may qualify for a credit for two years of up to 50 percent of their contribution. (Employers with 10 or fewer employees and average annual wages of less than $20,000 would be eligible for the full credit.)
If a business belongs to an industry where the provision of health benefits is a competitive advantage, enabling them to attract and retain quality employees, Samitt believes it may be in the businesses' best interest to provide health insurance even if it costs more than paying the penalty. "Those are the things that small employers are going to have to start thinking about in terms of options regarding reform," he stated.
In general, Samitt regards the Act as good law for small businesses and for people who want to start a business but can't due to their concerns about health insurance affordability. "Businesses have had this challenge of affordability as it pertains to health care," he noted. "With these tax credits in short term, and with exchanges in longer term, smaller businesses have an opportunity to insure their employees like large businesses do."
Reform Measures
The Act tried to accomplish three things which are important to reform: broadening access to coverage, where it scores more highly in Samitt's view; and improving quality and affordability, where the jury is still out. According to Samitt, the bill's strengths are really more on the coverage side, but there is much less detail and only references pertaining to quality and cost. "At this point, it's hard to predict the impact on insurance premiums in the short- or long-term," he opined. "It's in an area where there is a lot more detail that needs to be worked out in terms of what will actually be covered, and in terms of changes in the payment system."
There is a ripe area for cost control, however. Historically, Samitt said the health care reimbursement model has been more based upon the quantity of care rather than the quality of care; because quantity of care has been rewarded, costs have continued to rise. "There are references in this bill to rewarding the quality of care, not just the quantity of care," he noted, "and if reimbursement changes to reward value, this should bend the cost curve and the premium curve."
Citing information from the Organization for Economic Cooperation and Development (OECD) Samitt said the cost curve must inevitably be bent downward. The OECD notes that U.S. health care expenditures as a percentage of gross domestic product rose from about 5% in 1960 to a projected 18% in 2010. By 2018, health care expenditures are projected to grow to 20% of GDP.
"The cost of health care is rising at an exponential rate, and rising faster than inflation, so when we look at how much we, as a society, are spending for health care, that trend is unsustainable," Samitt opined. "We will have no choice but to find a way to bend the cost curve while improving quality at the same time."
Health Care a la Carte
Ideally, Samitt said health insurance should be structured with preventive care, regular check ups, pharmacy, and catastrophic coverage. Asked if individual consumers, in order to hold down costs, should be able to pick and choose the rest, paying a la carte for things like mental health coverage, Samitt said that would be problematic and weaken universal coverage principles.
"The cost of broader insurance coverage can only be managed if the risk is adequately spread among the population," he explained. "Allowing people to shop a la carte can work for items that are truly non-necessities, like cosmetic surgery and items like that. But mental health care is not a luxury. It's a real health care concern that must be part of the 'must-haves' like preventive care, regular check ups, and catastrophic care."
"You can't have people just pay a la carte when they get sick because it's not how current coverage works," he continued. "That would be equivalent of deciding to buy auto insurance only after accidents happen."
Dr. Samitt commented on a number of topics, including the following:
On whether the bill is structured, as critics contend, to drive private insurers out of business and health care consumers into the government's arms? "The bill is not intended to drive private insurers out of business. I don't think it's designed to nationalize health care. There is no public plan in the bill. What the bill does do, though, is bring more accountability to the insurance world. The ultimate goal of the bill is to provide more citizens with better care at a lower cost.
"On the health care delivery and insurance side, this will mean the need for more integration and coordination where physicians, hospitals, and insurance plans are all working together with patients at the center, and with a focus on managing quality and cost. So that accountability is critical and the pressure to integrate is essential. What's great about Wisconsin is there are so many integrated systems like Dean-St. Mary's that are already practicing these integrated models. But that level of integration is absent in many of the greatest population areas of the nation. In most other markets, what you see more often are independent, non-aligned entities, which may drive up health care costs while not necessarily delivering higher quality care."
On whether he has any issues with the Act's requirement for insurers to use at least 80% of premiums for care services rather than administrative costs or profit taking? "In my view, the more dollars that can be directed to heath services, the better off we'll be. What we see in many integrated systems like those in Wisconsin, is those administrative costs are already on the lower side. So if there are health plans that can deliver a high quality product and spend less on administrative services and reduce waste, then why can't all health plans achieve that same level of reduction in administrative costs? So yes, that is a good provision. We should be spending more on clinical services than less."
On whether the federal government will be back to address health care reform: "Whenever you can provide more coverage, that's good. The insurance provisions in the bill are the right things to do. They make sense. However, the concern everyone has is how are we going to pay for this? That's why a big part of reforming health care will require us to think more about prevention, wellness, the appropriateness of hospitalization, and the appropriateness of getting care in the doctors' office rather than the emergency room. Those are the parts of reform that actually have to happen that are not well-specified in the bill."
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