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Q&A: New health coverage rules for employers.

By Noam N. Levey, Tribune Washington Bureau

The Obama administration announces regulations designed to discourage companies from scaling back workers’ benefits.

The Obama administration on Monday announced regulations to discourage companies from scaling back their health benefits, a goal Democrats described as a top priority of the new healthcare law.

The rules may have a profound effect on the health coverage that more than 160 million Americans get from their employers.

Here is a rundown of what the regulations could mean for those who get their benefits through work:

Q. How will the new rules work?

A. The rules affect plans that were in operation when the president signed the healthcare law on March 23. Companies have an incentive to retain this “grandfather status” because it exempts them from some of the healthcare law’s new mandates. To qualify for the exemptions, however, companies will be able to make only limited changes to their plans.

Q. Will my employer be able to charge more for health benefits?

A. Employers would be able to raise premiums and still retain grandfathered status. But the rules limit how much companies could raise co-pays, deductibles and other employee contributions. Employers also could not lower their contribution to their employees’ premiums by more than 5 percentage points.

Q. Could my benefits change?

A. Employers would be able to adjust benefits, but not cut them altogether. For example, if a plan currently covers prescription drugs, it would have to continue doing so, although the list of covered prescriptions could be adjusted.

Q. What if my employer doesn’t want to meet these requirements?

A. Any company can choose to forego grandfathered status and still offer health benefits. But the company’s health plan would then be considered a new plan and would be subject to an escalating series of new mandates. Starting next year, for example, new plans will be required to cover preventive services such as cancer screenings with no co-pays or other cost sharing.

The bigger requirements start in 2014. Businesses then will have to offer plans with a minimum standard of health coverage, which will be outlined by the federal government. Grandfathered plans would not have to meet this standard.

Both new and grandfathered plans are already subject to some mandates starting next year, including a prohibition on lifetime benefit limits and a requirement to cover dependent children under 27.

Q. Will employers just drop coverage altogether because of the new rules?

A. That’s difficult to say. Large employers have an incentive to continue offering health benefits because they could face penalties in 2014 if they do not. But some business leaders believe large employers may ultimately stop providing benefits and let their employees shop for coverage in regulated insurance exchanges.

Even more small businesses are expected to lose grandfather protections. Small businesses typically change their health plans more often than large employers. Some business groups say that will actually encourage companies to drop coverage.

Starting in 2014, small businesses will be able to shop for benefits for their employees in new insurance exchanges designed to improve coverage options.


PPACA: Agencies Release Core Regulations

The Obama administration has unveiled interim final regulations it will use to implement the rescission, preexisting condition exclusion, benefits maximum and patient protection provisions in the new federal health laws.

The Internal Revenue Service, an arm of the U.S. Treasury Department, and the Employee Benefits Security Administration, an arm of the U.S. Labor Department, worked to put out the 196-page batch of interim final rules and guidance together with the new Office of Consumer Information and Insurance Oversight, an arm of the U.S. Department of Health and Human Services.

The Affordable Care Act – the legislative package that includes the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act – created the OCIIO, and it also created the rescission provisions and other provisions that led to the development of the interim final rules.

The IRS also is proposing to adopt the same batch of rules as permanent regulations.

Final drafts of the interim final rules and the IRS notice of proposed rulemaking are now available on the Office of the Federal Register website.

The rules are due to appear in the Federal Register June 28. Agencies sometimes change documents between the time they appear on the Federal Register office website and the time they officially appear in the Federal Register.

Comments on the interim final rules will be due 60 days after the day of official publication in the Federal Register, and comments on the IRS proposed rules will be due 90 days after the publication date.

Many of the group plan and group insurance rules will apply for plan years beginning on or after Sept. 23, and others will apply for plan years beginning on or after Jan. 1, 2014.

Similarly, many of the rules that affect individual health insurance will apply for policy years beginning on or after Sept. 23, and some will apply for policy years beginning on or after Jan. 1, 2014.


The ACA provisions banning lifetime benefits caps will take effect Sept. 23, and provisions restricting use of annual caps will take effect that same date. A ban on annual benefits caps is set to take effect Jan. 1, 2014.

Grandfathered individual policies are exempted from this provision, officials note.

“The statute provides that, with respect to benefits that are not essential health benefits, a plan or issuer may impose annual or lifetime per-individual dollar limits on specific covered benefits,” officials say.

The regulations describing “essential health benefits” have not been issued, officials say.

“For plan years (in the individual market, policy years) beginning before the issuance of regulations defining ‘essential health benefits,’ for purposes of enforcement, the Departments will take into account good faith efforts to comply with a reasonable interpretation of the term ‘essential health benefits,’” officials say. “For this purpose, a plan or issuer must apply the definition of essential health benefits consistently. For example, a plan could not both apply a lifetime limit to a particular benefit – thus taking the position that it was not an essential health benefit – and at the same time treat that particular benefit as an essential health benefit for purposes of applying the restricted annual limit.”

Between Sept. 23 and Jan. 2004, group plans and individual health insurers can “establish a restricted annual limit on the dollar value of essential health benefits,” officials say.

To avoid the possibility of big premium increases, federal agencies will phase the annual limits in over 3 years.

Starting Sept. 23, the annual limits must be at least $750,000. The minimum annual limit will increase to $1.25 million Sept. 23, 2011, and to $2 million Sept. 23, 2012.

The new ACA annual maximum rules do not apply to health savings accounts or to health reimbursement arrangements, officials say.


The federal agencies are making special allowances for limited benefit “mini med plans.”

To keep members of those plans from suffering a severe impact, “these interim final regulations provide for the secretary of Health and Human Services to establish a program under which the requirements relating to restricted annual limits may be waived if compliance with these interim final regulations would result in a significant decrease in access to benefits or a significant increase in premiums,” officials say.

HHS officials will put out limited-benefit plan guidance “in the near future,” officials say.


The ACA preexisting conditions exclusions provisions will prohibit group plans and individual issuers from imposing preexisting condition exclusions after Jan. 1, 2014; those provisions take effect for enrollees under age 19 for plan years beginning on or after Sept. 23.

Until the ACA provisions take effect, the rules included in the Health Insurance Portability and Accountability Act (HIPAA) of 1996 continue to apply, officials say in a preamble to the proposed regulations.

“These interim final regulations do not change the HIPAA rule that an exclusion of benefits for a condition under a plan or policy is not a preexisting condition exclusion if the exclusion applies regardless of when the condition arose relative to the effective date of coverage,” officials say.


ACA bans on group health plan and individual health policy rescissions, except in cases involving fraud or intentional misrepresentation of a material fact, are set to take effect Sept. 23.

Under the current standard, carriers can rescind coverage in cases involving unintentional misrepresentations of material facts, officials say.

The new ACA rescission standard “applies to all rescissions, whether in the group or individual insurance market, and whether insured or self-insured coverage,” officials say. “These rules also apply regardless of any contestability period that may otherwise apply.”

Starting with policy years beginning on or after Jan. 1, 2014, ACA provisions will ban health carrier discrimination based on health status, and those changes “will reduce the likelihood of rescissions,” officials predict.

State anti-rescission laws apply if the state laws are tougher than the federal standard, officials say.


Some ACA provisions require health plans to give enrollees easier access to certain types of providers, such as gynecologists, and in-network-level emergency services, without imposing prior authorization requirements.

“The emergency services must be provided without regard to any other term or condition of the plan or health insurance coverage other than the exclusion or coordination of benefits, an affiliation or waiting period … or applicable cost-sharing requirements,” officials say.


President Obama said today in the White House that he has just spoken to the chief executive officers of some of the largest U.S. health carriers and some state insurance commissioners to talk about implementing the ACA provisions.

A year ago, everyone, including insurers recognized “that finally something needed to be done about America’s broken health care system,” Obama said, according to a written version of his remarks. “One thing was clear to everybody: We couldn’t keep traveling down the same road.”

The new ACA regulations and the rest of the health system change process is “not punitive,” Obama said. “It’s not meant to punish insurance companies. They provide a critical service. They employ large numbers of Americans.  And in fact, once this reform is fully implemented a few years from now, America’s private insurance companies have the opportunity to prosper from the opportunity to compete for tens of millions of new customers. We want them to take advantage of that competition.”

But consumers need protection from problems with the current system, such as discrimination against children with preexisting conditions and efforts to rescind policies issued to women with breast cancer, Obama said.

“I’m pleased to say that some insurance companies have already stopped these practices,” Obama said.

Some have “questioned whether insurance companies might find a loophole in the new law and continue to discriminate against children with preexisting conditions,” Obama said. “And to their credit, when we called the insurance companies to provide coverage to our most vulnerable Americans, the industry agreed.  Those were the right things to do for their consumers, their customers — the American people. And I applaud industry for that.  And we’re going to hold industry to that standard, a standard in which industry can still thrive but Americans are getting a fair shake.”

Similarly, some insurers have tried to increase rates a great deal before new restrictions take effect, but at least one carrier withdrew a large rate increase when asked about it, Obama said.

“There are genuine cost-drivers that are not caused by insurance companies,” Obama said.

But “we’ve got to make sure that this new law is not being used as an excuse to simply drive up costs,” Obama said. “So what we do is make sure that the Affordable Care Act gives us new tools to promote competition, transparency and better deals for consumers. The CEOs here today need to know that they’re going to be required to publicly justify unreasonable premium increases on your websites, as well as the law’s new website — As we set up the exchanges, we’ll be watching closely, and we’ll fully support states if they exercise their review authority to keep excessively expensive plans out of their insurance exchanges.”


New rules could make 66 percent of employer plans lose ‘grandfathered’ status

New rules from the Obama administration that regulate health care plans that existed before the reform bill was passed highlight the difficulty the administration faces in both reforming the system and allowing people to keep the plans they like.

Under new regulations issued Monday, anywhere from 39 percent to 66 percent of employer plans will lose their “grandfathered status” by 2013, according to estimates included with the rules.

For plans that do not fall under the grandfathered status, employers would have to find a plan that complies with the health care bill passed March 23. Whether or not costs for the new plans will be less than grandfathered plans has yet to be seen.

Small businesses would be harder hit than large employers, losing grandfathered status for as few as 49 percent and as many as 80 percent of plans. Employers may keep their plan if it does not raise its prices beyond “reasonable changes” and if it does not cut substantially cut benefits for a particular condition.

Health and Human Services Secretary Kathleen Sebelius reiterated a saying that President Obama said many times during the health care debate: “If you like the plan you have, you can keep it,” Sebelius said at a press conference Tuesday.

But experts say the new regulations reflect the limits to which that promise can be kept.

“Given the direction that President Obama wanted to go with health care, his promise that people could keep their existing plans was always a dicey one,” said Tevi Troy, former HHS deputy secretary under President Bush and visiting senior fellow at the Hudson Institute.

The administration said that it would “take into account reasonable changes” that insurers routinely make in response to changes in cost and availability but would not outline details about what “reasonable changes” might be.

The regulations stipulate that insurers may make changes to their plans, but only to increase benefits or adapt to consumer protections outlined in the health care bill.

“They give all Americans with health insurance some important protections this year and create a path to the consumer-friendly health insurance marketplace of the future,” Sebelius said.

The new rules mandate that new individuals may not be added to grandfathered health plans after a business merger or restructuring so that grandfather status is not traded as a commodity. Thus companies will likely have employees with two different types of health care coverage, if the companies stay with their current plan.

Troy anticipates that insurance companies will try to freeze their plans to retain their grandfathered status for as long as possible.

“Freezing is not sustainable,” Troy told the Daily Caller. “The majority of plans will lose their grandfathered status in relatively short order, which I suspect was the unstated intent of both the legislators and the regulators.”


White House moves to keep employers from dropping insurance

From the

The White House on Monday outlined broad new rules designed to prevent employers from dropping health insurance benefits for their workers or shifting huge new costs onto them.

The regulations empower the administration to revoke the so-called grandfather status of businesses that shift “significant” new burdens onto employees — a considerable penalty that would subject those plans to all the consumer protections in the Democrats’ new healthcare reform law.

Unveiling the rules Monday, Health and Human Services Secretary Kathleen Sebelius told reporters that the changes will make good on one of the administration’s central promises during the contentious debate over reform: “If you like your doctor and your plan, you keep it,” she said.

Democrats exempted existing health insurance plans from a number of provisions of the new law as a concession to the insurance industry and business community. For example, grandfathered plans — those up and running when the legislation became law in March — don’t have to offer an insurance product without a cost-sharing requirement. Businesses, particularly large companies, prefer that arrangement because they don’t have to make sweeping changes to their existing plans.

The new rules say that employers can make “routine and modest” adjustments to their premium, deductible and co-pay requirements, Sebelius said, but “significant” cost hikes or benefit cuts would cost them their exempted status. The goal is to ensure that grandfathered plans “don’t use this additional flexibility to take advantage of their customers,” she said.

“We don’t want a massive shift of cost to employees,” Sebelius said.

Officials expect the new rules to have the greatest impact on the roughly 133 million employees at large companies, whose insurance offerings tend to remain more stable than at smaller businesses. Labor Secretary Hilda Solis told reporters Monday that the new rules will help “minimize market disruptions.”

Republicans are not convinced. Senate Minority Leader Mitch McConnell (R-Ky.) said Monday that the rules would force more than half of the U.S. workforce out of their current health plan — which “flatly contradicts” the Democrats’ promises during the debate.

“Here’s one more promise the administration has broken on healthcare,” McConnell said.

Sen. Chuck Grassley (Iowa), senior Republican on the Finance Committee, echoed that message, calling the rules “more proof” that, under the new law, “you actually can’t keep what you like.”

“Change is coming for a lot of people,” Grassley said in a statement, “whether they want it or not.”

The new rules came on the same day analysts at PricewaterhouseCoopers issued a report projecting that employers’ healthcare costs will jump 9 percent in 2011. The authors predict that employers next year will shift more costs onto workers, hiking deductibles and replacing co-pays with co-insurance policies.

The White House was quick to push back against the report, pointing out that the employer surveys on which it was based were conducted before the Democrats’ reform bill was passed. Also, the analysts noted that the new reform law, much of which takes effect in 2014, had only a “minor” influence on next year’s cost trends.

Asked about the report Monday, Sebelius conceded that many people will wonder why all the benefits of the health reform law don’t begin immediately. Still, she added, the survey “argues the case that we could absolutely not afford to do nothing.”

“People are being absolutely priced out of the marketplace,” she said.


Pre-Reform Health Plans Might Lose Reform Law Exemption

Draft regulations by the Obama administration indicate that more than half of employer-sponsored health care plans might lose their “grandfathered status” in 2013 and be forced to change in order to comply with regulations in the new health reform law, the Wall Street Journal reports.

The regulations — currently being written by HHS, as well as the Labor and Treasury Departments — appear to contradict Obama’s promise throughout the reform debate that people who like their insurance plans will be able to keep them (Johnson, Wall Street Journal, 6/12).

Qualifying for Grandfathered Status

Plans that were implemented before the new reform law was signed in March can qualify for grandfathered status, which exempts them from many, but not all, of the law’s consumer protections (AP/Washington Post, 6/12).

For example, grandfathered plans are exempt from limits on cost-sharing (Wall Street Journal, 6/12). The plans also are not required to comply with mandates that plans offer preventive care without co-payments or requirements that they institute an appeals process for disputed claims following guidelines stipulated in the overhaul (AP/Washington Post, 6/12).

Losing Grandfathered Status

The draft regulations suggest that the plans could lose their statuses if they make significant changes in deductibles, co-payments or benefits (Pear, New York Times, 6/13). A plan could lose its grandfathered status if it were to increase an employee’s share of medical costs from 20% to 30% or if it increased a deductible beyond the set limit of medical inflation plus 15% (Wall Street Journal, 6/12).

Health plans often change due because of increasing costs, making it likely that many grandfathered plans will change enough to lose their status (Alonso-Zaldivar, AP/San Diego Union-Tribune, 6/11).

The most extreme scenario under the draft is that 80% of small-business plans will lose their grandfathered status by 2013, according to the Journal (Wall Street Journal, 6/12).

Employer Groups, GOP Respond to Regulations

Some employer groups said the stricter guidelines associated with losing grandfathered status could be a positive development for workers.

Alex Vachon, an independent health policy consultant, said, “On the face of it, having consumer protections apply to all insurance plans could be a good thing for employees,” adding, “Technically, it’s actually improved coverage.”

However, Republicans criticized the draft regulations, saying that Obama broke his promise that workers can choose to keep their current coverage (AP/San Diego Union-Tribune, 6/11). Senate Minority Leader Mitch McConnell (R-Ky.) called Obama’s pledge a “myth.” He said, “Since its passage, Republican arguments against the bill have been repeatedly vindicated, even as the administration’s many promises about the bill have been called into question again and again” (AP/Washington Post, 6/12).

Representatives from the U.S. Chamber of Commerce added that the regulations serve as evidence that the reform law will raise costs (AP/San Diego Union-Tribune, 6/11). James Gelfand, health policy director at the Chamber of Commerce, said, “These rules are extremely strict,” adding, “Almost no plan is going to be able to maintain grandfathered status.”

An Obama administration spokesperson said the final rules are still being written, adding that the administration’s goal is to ensure that the regulations do not affect most grandfathered plans (Wall Street Journal, 6/12).


Consumers Worry Over Health Reform’s Costs: Deloitte


A survey found that many consumers are worried about changes to their current health insurance plans and the cost of insurance under the new Patient Protection and Affordable Care Act.

Consumers with employer-sponsored coverage seem to be the most skeptical of health care reform, according to a survey by Deloitte Consulting L.L.P, New York. Deloitte found 61% of these consumers believe their employer will reduce benefits for dependents and retirees. And 32% think employers will stop providing any health coverage for employees.

The survey also found 82% of consumers with employer-sponsored health plans believe that the cost of the health reform act will be higher than expected, and 58% believe the health reform act will not reduce health care costs in the long term.

American consumers will continue to worry about current and future health insurance coverage as the new federal Affordable Care Act goes into effect, says Paul Keckley, executive director of the Deloitte Center for Health Solutions.

Many consumers who say they are familiar with provisions in the Affordable Care Act are worried about future access to quality health care. The survey found 72% of them believe that some hospitals and medical practices will close, and 51% believe that their employers may drop their coverage.

In addition, most consumers are worried about the cost of care under the new legislation, according to the poll. Survey respondents anticipate increases in taxes and in health insurance costs, including premiums and out-of pocket expenses, hospitals and physicians services, and the cost of medications.

Of adults aged 18-34 51% believe that the health reform bill will reduce health care costs in the long erm, compared to 23% of 45-54 year-olds, 36% of 55-64 year-olds, and 30% of 65 year-olds and above, according to the survey.

The research suggest that health insurance plans and employers may need to work together more than ever to help ease the worry of plan participants and employees as new health reform measures are implemented, Deloitte suggests.

Deloitte found 84% of all the consumers it surveyed had health insurance.


ObamaCare strikes out with workers


ObamaCare, formally known as the Patient Protection and Affordable Care Act, is bad news for U.S. workers.

Strike One: ObamaCare is fiscally dangerous, raising the risk of higher taxes all around — including taxes on labor at a time when the job market is struggling.

Strike Two: ObamaCare creates strong incentives for employers — even while holding workers financial harmless — to drop employer-sponsored health insurance for as many as 35 million Americans. This is sure to lead to widespread turmoil in labor compensation, employee insurance coverage and labor relations.

Strike Three: ObamaCare slaps big increases in effective marginal tax rates on low-income workers. Every worker forced onto the subsidized exchanges is sure to face higher barriers to upward mobility and the pursuit of the American Dream.

ObamaCare should be sent back to the dugout.

But, sadly, the political arithmetic argues against a simple repeal. So the focus should be on cutting the massive subsidies that lie at the heart of the problem. Let’s take the reasons in turn.

The Congressional Budget Office projects that ObamaCare will reduce federal deficits by $143 billion over its first 10 years. But Michael Ramlet and I expose the bill to closer scrutiny in our coming Health Affairs article.

Not surprisingly for an act that creates two new, rapidly-growing entitlement programs —insurance subsidies and long-term care insurance — we conclude that ObamaCare instead increases the deficit by more than $500 billion in the first 10 years.

Not the best step at a time when even the sober-minded are beginning to worry that events in Greece and Europe are the ghost of America’s fiscal future.

Deficits represent a commitment to either raise taxes or reduce future outlays. New taxes on labor is sure to impede smooth functioning of labor markets by interfering with decisions involving education, career choice, hiring, job switching, second-jobs and myriad aspects of the most crucial U.S. economic activity today.

For better or — more likely — worse, health insurance is heavily entangled with the labor market. Today, roughly 163 million workers and their families receive health insurance coverage from their employers; and about one-half of the ObamaCare spending is for insurance subsidies.

These subsidies are remarkably generous — even for those with relatively high incomes.

For example, a family earning about $59,000 a year in 2014 would receive a premium subsidy of about $7,200. A family making $71,000 would receive about $5,200. Even a family earning about $95,000 would receive a subsidy of almost $3,000.

These subsidies threaten to undermine existing labor market relationships.

Health insurance is generally only one piece of an overall compensation package that employees receive as a result of competitive pressures. Evidence suggests that if the health insurance portion of that package is reduced or eliminated, the wage aspect will ultimately be increased as a competitive necessity to retain and attract valuable labor.

So the key question is whether the employer can keep the employee “happy” — appropriately compensated and insured — and save money.

The answer is frequently “yes” — thanks to the generosity of federal subsidies. In a study available at the American Action Forum website, we find that for a worker with an income of $59,250 — 250 percent of the federal poverty level — the employer could drop $12,000 in insurance, pay the $2,000 penalty ObamaCare imposes on doing so, give the worker a raise of $8,391 and pocket a tidy $1,550.

More important, the worker could use her raise and the $7,530 subsidy to purchase insurance as good as what she gave up.

What’s not to like — as long as the other 138 million taxpayers are financing the deal?

The potential affect is large. There are now 123 million Americans at or below this income cutoff. Roughly 60 percent of Americans work; about 60 percent of those receive employer-sponsored insurance. This suggests that there are about 43 million workers for whom it may make financial sense to drop insurance.

In the interest of being conservative, let’s say it is 35-40 million.

CBO estimated that only 19 million would receive subsidies, at a cost of about $450 billion over the first 10 years. This analysis suggests that the number could easily be triple that — or 19 million plus an additional 38 million in 2014. Meaning the price tag would be $1.4 trillion.

On top of that, there would be a disruptive and vast reworking of compensation packages, insurance coverage and labor market relations.

Strike Three is that our study shows that every worker shifted to public subsidies will face striking increases in effective marginal tax rates (EMTRs). These rates — the fraction of each additional dollar workers get to save or spend — are at the heart of economic incentives and should be kept as low as possible.

Unfortunately, ObamaCare imposes stunning increases on EMTRs for low-income workers. For every worker who faces a loss in employer coverage, we have a worker who faces a greater difficulty in getting ahead when taking an extra shift; finding a way for a second parent to work, or investing in night school courses to qualify for a raise.


Health law could ban low-cost plans


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.

If the ban is strictly implemented, “this population would likely be left with no coverage until 2014,” employer groups wrote last week in a letter to Health and Human Services Secretary Kathleen Sebelius and Labor Secretary Hilda Solis. “While it surely was not the intent of Congress or the administration to increase the number of uninsured, this provision will likely produce exactly this result for some of the most vulnerable of our population, e.g., lower-wage, part-time, seasonal and temporary workers who can only obtain and afford limited-benefit medical insurance coverage.”

The letter was signed by nearly three dozen organizations, including many trade groups that did not support the Democrats’ legislation. Industry groups estimate that about 1.4 million people use these plans.

HHS spokeswoman Jessica Santillo said that the department was considering input from “all stakeholders” as it develops the rules surrounding the ban on annual caps and that everyone will see improvements in quality from provisions of the overhaul implemented this year.

“Under the Affordable Care Act, millions of small businesses and their employees will see a significant decrease in the cost of health insurance and will have access to higher-quality-coverage options. In the short term, employers will benefit from administrative simplification and greater insurer accountability on their overhead and rate increases,” Santillo said. “And starting this year, an estimated 4 million small businesses who offer health coverage for employees will see immediate relief through a small-business tax credit.”

Once the exchanges open and the tax credits become available in 2014, many of the low- and middle-income people who use limited-benefit plans are likely to qualify for the credits. But that’s after three years of limbo.

Employers admit the plans aren’t comprehensive but say they offer them because their employees can afford them.

“It’s not top-notch coverage by any stretch, but it is better than no coverage,” said Neil Trautwein, a health care lobbyist at the National Retail Federation. “There’s slight irony, given the president’s repeated assertion that if you enjoy your coverage you can keep it, that this would take the coverage away from part-time employees until 2014.”

Rules to implement the provision could be written to allow the limited-benefit plans until just 2014 or, with some flexibility, longer.

“If the limits are too restrictive, these products are not going to be able to be in the marketplace because that’s what makes them affordable,” said Jessica Waltman, senior vice president of government affairs at the National Association of Health Underwriters, which represents insurance agents and brokers.


First victim of health care overhaul?


A Virginia-based insurance company says “considerable uncertainties” created by the Democrats’ health care overhaul will force it to close its doors by the end of the year.

The firm, nHealth, appears to be the first to claim that the new law has driven it out of business. “We don’t know what the rules are going to be, and, as a start-up, our investors need certainty,” nHealth CEO and President Paul Kitchen told POLITICO. “The law created so much uncertainty that is beyond our control.”

Last week, in a letter to the company’s 50 or so employees, Executive Vice President James Slabaugh said nHealth has stopped accepting new group customers and will terminate all business by Dec. 31.

“The uncertainties in the regulatory climate coupled with new demands imposed by national health care reforms have made it challenging to sustain the level of sales required to remain viable over the long run,” Slabaugh wrote.

The company’s finger-pointing — first reported by the newspaper Richmond BizSense — must be read with caution: For years, employers and health insurance brokers have struggled to keep pace with steeply rising health care costs.

Asked about nHealth’s decision to shut down, a White House aide said, “It’s difficult to comment on this case without fully evaluating the company in question.”

The blame game — whether health reform can be held responsible for the continuing woes of an already struggling system — will very likely become a familiar plotline as the health overhaul takes effect and political parties vie for control of the narrative.

President Barack Obama dives back into the fray Tuesday, traveling to a senior center in Wheaton, Md., for a national tele-town hall on health care.

NHealth opened for business about 2½ years ago and was named in October 2008 one of the “Greater Richmond Companies to Watch” by a local business group. Kitchen estimates the company has about 100 small-business contracts providing policies to “thousands” of subscribers.

NHealth specializes in high-deductible insurance plans, meant to cover larger medical emergencies, that are paired with health savings accounts, the tax-deductible accounts used to pay for medical expenses.

HSAs have grown dramatically since they were authorized in the 2003 Medicare Prescription Drug Improvement and Modernization Act. There were about 1 million enrollees in 2005. Now there are about 10 million, according to a May 2010 report from the industry group America’s Health Insurance Plans.

HSAs are a favorite of conservative health economists, who see the plans as a way to control costs by leaving spending decisions to individual consumers. Others have criticized the plans as discouraging cost-saving behavior such as preventive care.

In an interview with POLITICO, Kitchen said the impact of health reform on his business is twofold.

First, it created an uncertain future. With regulations yet to be written and rules constantly forthcoming, he said, “everything felt beyond our control.”

Second, Kitchen is apprehensive about a more regulated insurance market. The health reform law requires insurance companies to spend a certain amount of premium dollars on medical costs and, in many cases, bans lifetime limits on medical coverage. Kitchen said he was uncertain whether nHealth would be able to comply.

“The rules changed in the middle of the game,” Kitchen said. “We’re not willing to wander into that environment.”

The White House aide agreed that the rules will change, but in ways that benefit consumers. Stricter regulations will ultimately guarantee better coverage for subscribers. The medical loss ratio regulation, for example, will ensure that insurers spend a certain percentage of subscriber dollars on medical costs rather than administrative expenses.

“The Affordable Care Act sets new standards for insurance coverage that protect consumers and ensure they get the most for their premium dollar,” the aide said. “Insurers should have no problem meeting those standards, which do not require action until 2012. And starting in 2014, the insurance industry will have millions of new customers.”

Even without the health reform law, small health insurance firms were operating in a financially challenging landscape. Employers have become increasingly likely to consider dropping coverage as premiums have risen, according to annual surveys by the National Small Business Association. As far back as 2008, a Citigroup survey showed “more insurers were raising premiums at a faster rate than those who reported slowing increases,” according to a Wall Street Journal article at the time


Hewitt: One-third of workers could drop employer health coverage

More than one-third (35 percent) would consider dropping their employer plan if they can purchase similar coverage for a lower cost somewhere else.

Nearly half of the 3,000 American workers surveyed by HR consulting firm Hewitt Associates said they’ll keep their employer-sponsored health insurance in the next three to five years. But more than one-third (35 percent) would consider dropping their employer plan if they can purchase similar coverage for a lower cost somewhere else.

Experts say new health care reform legislation is pushing employers to realign their health benefits. Currently, the majority of Americans (61 percent) currently use employer-sponsored health care coverage as medical needs arise and participate in healthy living/wellness programs, according to Hewitt.

“Workers clearly appreciate the value of the health care coverage their employers offer to them and their families,” said Helen Darling, president of the National Business Group on Health, a nonprofit association that represents more than 280 large U.S. companies, in a press release. “Health care reform legislation will lead some employers to rethink their health benefits strategy, but employees overwhelmingly prefer and expect to see their employers continue to provide coverage in the future.”

Hewitt and National Business Group on Health’s survey reveals five key insights into how employees and their dependents view health care:

Employees know how to get healthy, but many aren’t taking action. Employees and their dependents are more involved in managing their health and health care options than ever before and know what actions will lead to better health. Most (84 percent) believe making smart choices in daily life leads to good overall health, and almost three-quarters (72 percent) think good health is a result of getting regular preventive care. However, this understanding does not seem to be translating into individuals taking actions that will directly improve their health. Only half of employees think they do a great or good job of eating healthy, while less than half (46 percent) reported doing a great or good job of exercising on a regular basis.

Participation in health programs is low, but satisfaction is high. Employees and dependents say they know what actions they need to take to get and stay healthy, but participation in many employer-provided health improvement programs is not as high as employers would like.

The most popular programs include biometric screenings (61 percent), followed by online health information tools (53 percent) and health risk questionnaires (41 percent). Stress management programs and employee assistance programs (EAPs) were the least popular, with just 9 percent participation in each.

Despite low participation rates, the Hewitt/National Business Group on Health survey shows that workers who take advantage of available programs, tools and services are generally satisfied with them. The programs with the highest employee satisfaction rates include blood screenings (91 percent), on-site health centers (83 percent) and physical fitness programs (78 percent).

Assistance with stress reduction/management and help with claims resolutions were among the programs with the lowest levels of satisfaction (60 percent respectively and 59 percent respectively).

Internal motivators can be just as effective as financial ones. Many employers presume that offering cash incentives in exchange for participation will generate the best results and incent employees to participate in health care programs.

However, the Hewitt/National Business Group on Health survey shows that employees are equally motivated by both intrinsic factors and the use of incentives or penalties. Nearly half (48 percent) would complete a health risk questionnaire (HRQ) without any incentive because it is “the right thing to do.” Twenty-nine percent would participate in a HRQ for an incentive and almost the same number (28 percent) would complete it if there was a penalty. Further, 44 percent of employees would participate in a wellness or health improvement program offered by their employer because it’s the right thing to do compared to almost a third (32 percent) who would participate if they were incented and 30 percent who would participate under threat of a penalty.

“The reality is that we all need a nudge at times to make the right health choices, and we learned through this research that the nudge doesn’t always have to involve money,” said Joann Hall Swenson, a principal and health engagement leader at Hewitt Associates, a global human resources consulting and outsourcing services company. “Financial incentives can work well, but organizations should also harness the power of intrinsic motivators like people wanting to stay alive and well for their families. The trick for employers is finding the right blend of motivators that works for their population.”

Skepticism and confusion get in the way of healthy actions. Further complicating the disconnect between workers’ intentions to get healthy and their actions, a majority of workers and dependents are confused when it comes to which information to trust and what to do about their health.

The top employee obstacles to making informed health care choices? Not knowing which information to trust (58 percent), followed by confusion over what is covered by the plan (54 percent), not knowing how much things cost (47 percent) and ability to quickly see a doctor when needed (42 percent).

“Companies need to remove as many barriers as they can that get in the way of employees taking the right actions—whether those are administrative, financial, geographic, or environmental,” explained Cathy Tripp, a leader and principal in Hewitt’s Health Management practice.

Workers want targeted and personalized communication. To help cut through the clutter of health care messages, employees and their dependents are asking for more personalized communication that is relevant to them. Almost half (44 percent) want customized, targeted reminders that are appropriate for them based on factors such as their age and gender, 41 percent would like personalized health program recommendations, and 40 percent requested online personal health records.

“Workers know what they need to do to manage their health, but unfortunately that’s not enough,” said Darling. “To turn this knowledge into positive actions, individuals need very specific tools, tactics and motivation. As employers consider making changes to their health care benefits in response to health care reform, they have a great opportunity to revitalize their existing strategy and create programs that will promote workforce health and productivity and hold down overall health care costs.”