Archive | State Health Exchanges

Will some families be priced out of health overhaul?

Some families could get priced out of health insurance due to what’s being called a glitch in President Barack Obama’s overhaul law. IRS regulations issued Wednesday failed to fix the problem as liberal backers of the president’s plan had hoped.

As a result, some families that can’t afford the employer coverage that they are offered on the job will not be able to get financial assistance from the government to buy private health insurance on their own. How many people will be affected is unclear.

The problem seems to be the way the law defined affordable.

  • Congress said affordable coverage can’t cost more than 9.5 percent of family income. People with coverage the law considers affordable cannot get subsidies to go into the new insurance markets. The purpose of that restriction was to prevent a stampede away from employer coverage.
  • Congress went on to say that what counts as affordable is keyed to the cost of self-only coverage offered to an individual worker, not his or her family. A typical workplace plan costs about $5,600 for an individual worker. But the cost of family coverage is nearly three times higher, about $15,700, according to the Kaiser Family Foundation.
  • So if the employer isn’t willing to chip in for family premiums _ as most big companies already do _ some families will be out of luck. They may not be able to afford the full premium on their own, and they’d be locked out of the subsidies in the health care overhaul law.

Employers are relieved that the Obama administration didn’t try to put the cost of providing family coverage on them.

“They are bound by the law and cannot extend further than what the law provides,” said Neil Trautwein, a vice president of the National Retail Federation.

The Obama administration says its hands were tied by the way Congress wrote the law. Officials said the administration tried to mitigate the impact. Families that can’t get coverage because of the glitch will not face a tax penalty for remaining uninsured, the IRS rules said.

“This is a very significant problem, and we have urged that it be fixed,” said Ron Pollack, executive director of Families USA, an advocacy group that supported the overhaul from its early days. “It is clear that the only way this can be fixed is through legislation and not the regulatory process.”

But there’s not much hope for an immediate fix from Congress, since the House is controlled by Republicans who would still like to see the whole law repealed.

The affordability glitch is one of a series of problems coming into sharper focus as the law moves to full implementation.

Starting Oct. 1, many middle-class uninsured will be able to sign up for government-subsidized private coverage through new health care marketplaces known as exchanges. Coverage will be effective Jan. 1. Low-income people will be steered to expanded safety-net programs. At the same time, virtually all Americans will be required to carry health insurance, either through an employer, a government program, or by buying their own plan.

Bruce Lesley, president of First Focus, an advocacy group for children, cited estimates that close to 500,000 children could remain uninsured because of the glitch. “The children’s community is disappointed by the administration’s decision to deny access to coverage for children based on a bogus definition of affordability,” Lesley said in a statement.
*Modified from an AP article

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CBO: PPACA tax credit could be big

By 2021, federal health insurance purchase tax subsidies could amount to about 13 percent of the insurer’s total 2011 premium revenue.

Analysts at the Congressional Budget Office (CBO) have analyzed the premium assistance tax credit, a component of the Patient Protection and Affordable Care Act of 2010 (PPACA), in a general report on refundable tax credits.

An ordinary tax credit is an amount that a taxpayer can subtract directly from the amount a taxpayer owes the government Traditionally, if using a tax credit would make the taxpayer’s tax bill a negative number, the taxpayer simply got out of paying taxes, or possibly could apply the amount to the next year’s tax bill. When using a refundable tax credit produces a tax obligation amount that happens to be a negative number, the government pays that amount to the taxpayer, CBO analysts wrote in their report.

The topic is of special interest this year, because the drafters of PPACA used refundable tax credits as the vehicle for helping low-income and moderate-income pay for health insurance.

When Congress created the first refundable tax credit — the Earned Income Tax Credit (EITC) program — in 1975, the goal of that program and later, similar programs was mainly to help low-income people increase their income, the analysts said.

In the past, Congress usually used spending programs such as the Food Stamp program, Medicaid and Pell Grants to help people pay for specific goods and services, such as food, health care or education, the analysts said.

Today, because tax credit programs tend to be more palatable to members of Congress and to the credit users than “government handouts,” Congress has structured more aid programs as refundable tax credit programs.

The EITC program and the child tax credit program will be by far the biggest refundable tax credit programs this year, and they are on track to generate about $125 billion of the $149 billion in refundable tax credits that taxpayers will report, the analyst said.

The new PPACA premium assistance tax credit could lead to about $35 billion in credit costs in 2014, and $110 billion of the $213 billion in total refundable credit costs in 2021, the analysts said.

U.S. health insurers took in about $864 billion in premium revenue in 2011, according to government estimates.

Tax credit recipients are supposed to use the premium assistance tax credit to pay health insurance premiums, and most will then have to use some of their own cash to cover the rest of the cost of the premiums.

Private health insurers are expected to generate much higher premium revenue in 2021 than in 2011, but, if consumers had spent an additional $110 billion in health insurance in 2011, that would have increased their revenue by about 13 percent.

Distributing benefits through refundable tax credits rather than through direct spending programs may effect the fairness of the tax system, the complexity of the tax system, and the efficiency of how resources are allocated in the economy, the analysts said.

In some cases, the analysts said, researchers have suggested that well-designed refundable tax credits might increase fairness and resource allocation efficiency.

Studies have suggested that the EITC has helped lead to a big increase the employment and earnings of single mothers that took place in the 1990s, the analysts said.

In the past few years, as the result of the weak economy, older tax credits, and new, stimulus-related tax credits, the average individual income tax rate for households in the bottom 40 percent of the income distribution has been negative, the analysts said.

The analysts also talk about questions about the complexity of administering the premium assistance tax credit.

PPACA lets individuals ask to get an advance on the premium assistance tax credit that they expect to collect, so that they can use the amount to pay for health coverage in 2014.

The government is supposed to pay the advance payments directly to the health insurers, and PPACA will limit how much individuals have to pay back if the government pays an advance premium assistance tax credit amount that happens to be bigger than what an individual actually qualifies for.

The amount the individual ends up qualifying for will depend on how much the individual earns, who else is in the individual’s family, and how much others in the individual’s family earn, and the initial, preliminary credit determination will depend on what those factors look like two years before the individual officially gets the credit, the analysts said.

“The amount of the credit will later be recomputed on the basis of the taxpayer’s characteristics in the year that the subsidy is paid,” the analysts said. “As a result, some recipients may have to repay part or all of any overpayment if changes in their family’s composition and income affect their eligibility for the credit or its amount.”

*Modified from LifeHealthPro.com article

 

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New regulations shed light on looming health-care reform costs for businesses

January 16, 2013

The ramifications of health care reform for business owners are coming into focus as regulators float new rules to govern employer-sponsored coverage.

  • Lost in the political fervor over the fiscal cliff, the Internal Revenue Service recently proposed new regulations to govern what has been dubbed the “employer mandate” section of the Affordable Care Act. The provision, which takes effect next year, requires companies with 50 or more employees to either provide adequate and affordable coverage to their workers or pay tax penalties.

But just how are those 50 to be counted?

Business owners have been waiting to find out how part-time and seasonal employees will count toward staff totals, how owners of more than one business are supposed to tally their workers, and of course, exactly how steep the penalties will be for failing to provide coverage.

The IRS addresses several of those issues with its newly proposed regulations. Here’s a look at what we now know about the employer health care requirements, as well as three key questions that remain unanswered.

Included in the proposed rules

A formula for calculating full-time equivalents: The health care law set the threshold for large-employer penalties at 50 full-time employees and full-time equivalents, but left the definition of those terms up to the IRS.

  • The agency has proposed counting all employees who work an average of 30 hours per week as full-time workers and calculating full-time equivalents by adding up the total number of hours worked by part-time employees each month and dividing by 120. Thus, a company with 45 full-time employees and eight part-timers who each work 85 hours per month (about 20 hours each per week) would be subject the large-employer coverage mandate (5.66 full-time equivalents + 45 full-time employees = 50.66 employees).

A slim margin-of-error for no-coverage penalty: The law states that a no-coverage penalty shall apply to any eligible large company that “fails to offer [coverage] to its full-time employees,” and the penalty has been pegged at $166.67 per month multiplied by the number of full-time employees, excluding the first 30. By that formula, a firm with 51 full-timers that doesn’t provide coverage would generally pay $3,500 per month (21 X $166.67).

But while that language granted regulators permission to penalize large firms that do not immediately provide benefits to each and every full-time employee, the IRS has granted some leniency. The new regulations would only enforce the non-coverage penalty for employers who fail to offer coverage to more than 5 percent of their employees (or five workers, whichever is larger).

  • The inclusion of paid-leave hours: But what about paid vacation, holidays or extended leaves—do those hours count toward monthly totals for each employee?

This was a pressing question for many business owners, and most of them won’t like the answer. Regulators have suggested that hours used to determine full-time status will include hours worked and hours for which employees are entitled to compensation even if no work is performed. That means time spent away for paid vacation, illness, maternity leave and even jury duty can push workers over the threshold for full-time benefits.

  • A transition rule for determining employer-size status: Business owners must make their own large- or small-employer determination on an annual basis by counting the number of full-time employees and equivalents they had during each month of the past calendar year.

But for the first year, to ease the transition, regulators have included a provision that allows them to count their employees for any six-month period in 2013 to determine their size status for 2014. The rules also delay the penalty for failing to provide coverage to employees’ dependents until 2015 so long as large employers that don’t yet offer those benefits take steps toward implementing them by 2015.

  • A delayed start for non-calendar year plans: The law states that the employer mandate provisions will take effect on January 1, 2014, which left business owners with fiscal-year (rather than calendar-year) health care plans wondering whether they would be held to that start date (which may fall right in the middle of their current plan) or permitted to wait until the start of their 2014 fiscal year. The proposed regulations grant them that break, noting that large businesses will not be subject to penalties until the start of their plan year for 2014.

Still up in the air

What constitutes a controlling interest in a business? The language in these latest proposals remains vague for owners of multiple businesses and part-owners of a single business. For example, if a pair of business partners share ownership of two companies, each taking a two-thirds majority stake in one firm and one-third ownership of the other, the regulations do not specify whether they will each be forced to count only one entity’s employees toward their respective totals or whether they will both count all workers.

What constitutes a seasonal employee?

The regulations leave the term “seasonal employee” open to interpretation when calculating their contribution to a company’s size status and their eligibility for health benefits. In one case, the regulations refer to definitions of “seasonal employee” set by the Labor Department, but later, regulators state that through at least the end of 2014, employers will be responsible for using a “reasonable good faith interpretation” of the term to determine which of their workers should be considered seasonal.

What constitutes adequate and affordable care? While the IRS has started to clarify the tax penalty side of the health reform equation, plenty of large employers are still waiting for the Department of Health and Human Services to define the law’s essential health benefits package — in other words, they haven’t yet been told what type of medical and health-related expenses their plans must cover for full-time employees. Until then, projecting future health costs for many businesses remains difficult.

*Modified from a Washington Post article

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Five Things To Watch in Health Care in 2013

California Healthline Contributing Editor by Dan Diamond –

December 12, 2012:

“Prediction is indispensable to our lives,” forecaster extraordinaire Nate Silver writes in his new book, “The Signal and the Noise.” Every day, whether wearing a raincoat to work or setting aside funds for future spending, “we are making a forecast about how the future will proceed — and how our plans will affect the odds for a favorable outcome.”

In health care, the mix of ever-shifting technologies, laws and competitive landscape means that many patients’ lives (and industry dollars) rest on whether providers and regulators can make the right bets. And some years, the industry’s direction is relatively easy to predict.

For example, when “Road to Reform” did a similar forecasting exercise last year, the 2012 signposts were clear. March’s Supreme Court case. The November election.

What will be significant in 2013 is a bit murkier, though several major developments await in the months ahead. A slew of ACA-related provisions are slated to take effect, with new taxes and programs like the Bundled Payments for Care Improvement Initiative slated to come online. Both parties continue to discuss entitlement reforms, which could include raising the Medicare eligibility age. The Independent Payment Advisory Board may submit its first draft spending control proposal.

Here are five broader trends that industry observers are watching.

Premium Growth

The Affordable Care Act was supposed to help tamp down health care costs, and some supporters have suggested (possibly prematurely) that the law has been responsible for a slowdown in health spending growth.

But average Americans haven’t seen much of a difference yet. A new analysis released on Wednesday found that workers’ spending on premiums swelled by 74% between 2003 and 2011.

And while the ACA contains measures to control premiums — like new rules on insurer oversight and administrative spending — observers don’t expect any immediate relief.

“Hold onto your hat,” consultant Robert Laszewski warns. Having spoken with a number of insurers in the individual and small group markets, Laszewski says to “expect a 30% to 40% increase in the baseline cost of individual health insurance to account for the new premium taxes, reinsurance costs, benefit mandate increases, and underwriting reforms.”

Those premium hikes may disproportionately hit people in their 20s and 30s, given new regulations that will narrow the difference in health insurance rates between younger and older consumers.

They also allow opponents of the ACA to score political points. The ongoing rise in premium costs “breaks a promise made by the president to lower premiums for families by $2,500,” according to Rep. Phil Roe (R-Tenn.).

Employer Decisions

One of the most significant industry questions post-ACA: Will employers continue to provide traditional health benefits for their workers, drop coverage or adopt new models in hopes of controlling spending?

It’s been hard to get a clear answer, partly because firms have been slow to announce their changes, fearing public backlash. “Road to Reform” recently reviewed a slew of employer efforts to control benefit costs, such as possibly shifting more full-time workers into part-time arrangements, and the accompanying critical news reports.

One of those companies was Darden Restaurants, which has since clarified that it would not be modifying workers’ hours.

“The program was only a test,” Darden spokesperson Matt Kobussen tells California Healthline, and “none of [the company’s] current full-time employees, hourly or salaried, will have their full-time status changed as a result of health care reform.”

But less-public changes to benefit design and provision are well in the works, at Darden and elsewhere. For example, the restaurant company is among several major firms exploring whether using defined contribution — where employers pay a fixed amount into employees’ health plans and allow workers to choose their coverage from an online marketplace — would be a more cost-effective way to provide health coverage.

Exchange Implementation

While HHS moved the deadline for states to decide whether they’re operating their own health insurance exchange, it’s kept the Oct. 1, 2013 deadline for all exchanges to begin enrolling consumers. And most observers agree: It will be a sprint to hit that deadline, especially with more states opting to let the government set up the model.

“Will the [federal government] be ready to provide an insurance exchange in all of the states that don’t have one on Oct. 1, 2013?” Laszewski asks.

“I have no idea. And neither does anyone else I talk to … We only hear vague reports that parts of the new federal exchange information systems are in testing.”

Merger and Integration Activity

The case doesn’t carry the weight of Florida v. Sebelius, but FTC v. Phoebe Putney Health System — and FTC v. ProMedica, for that matter — reflects the broad tension between regulators and providers.

In both lawsuits, FTC is attempting to prevent provider consolidation that the agency says would lead to anti-competitive behavior and higher prices for patients. And victories in those cases would further embolden FTC to intervene in merger activity, lawyers tell “Road to Reform.”

But hospitals, physicians and other providers say that they must move into new arrangements in hopes of navigating the changes wrought by the ACA, which is intended to reward more integration and care networks.

Comparative Effectiveness Research

While many experts polled by “Road to Reform” highlighted some of the ongoing policy issues that will spill into next year — from states’ decisions on expanding Medicaid to “fiscal cliff” negotiations — one pointed to potential changes in care quality as a top 2013 priority.

“I’m thinking a lot about” the Patient-Centered Outcomes Research Institute, economist Austin Frakt tells California Healthline.

“Comparative effectiveness research is far more important than most of the tinkering that gets proposed (like raising the Medicare age),” Frakt adds.

But is PCORI properly designed to help transform health care, or is it just another pool of research funding? As Michael Millenson writes, the institute is slated to spend $300 million on patient-centered outcomes research next year, which could make it a major player in funding new quality initiatives. But PCORI’s designers intentionally tamped down, worried that too much focus on “comparative effectiveness” would be seen as prioritizing “cost-effectiveness,” and even rationing.

“PCORI is the offspring of a shotgun marriage” between regulators who favor government-led reforms and those who are skeptical of them, Millenson concludes. “[And] no one is quite sure yet what this child will be once it grows up.”

Looking Forward

As forecasts go, all observers that “Road to Reform” talked to agreed: It will be another fast-paced year for the industry.

Of course, there’s always this maxim from expert prognosticator Silver: “It is amusing to poke fun at the experts when their predictions fail.”

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Insurers’ Proposed Rate Hikes in California Draw Criticisms

Consumer advocates are criticizing insurers’ planned premium rate hikes in California as an attempt to boost profits while the U.S. prepares to implement the Affordable Care Act, the San Francisco Chronicle reports (Colliver, San Francisco Chronicle, 11/29).

Details of Anthem’s Planned Rate Hikes

Recently, Anthem Blue Cross proposed premium rates hikes for next year that average 18% for more than 630,000 individual policyholders. Some of Anthem’s policyholders could experience premium increases of as much as 25% in February 2013.

Anthem also is seeking a separate rate hike averaging 15% for an additional 100,000 policyholders whose plans are regulated by the state Department of Managed Health Care (California Healthline, 11/28).

Details of Additional Planned Rate Hikes

According to filings with state officials, other insurers that have proposed premium increases include:

Aetna, which has proposed a nearly 19% rate hike for about 69,000 individual policyholders in April 2013;

Kaiser Permanente, which has proposed an 8% rate hike for more than 220,000 policyholders in January 2013; and

UnitedHealth Group, which has proposed a 10% rate hike for about 11,000 policyholders in January 2013.

Criticisms of Planned Rate Hikes

Consumer advocates say that insurers are trying to raise premiums in advance of Jan. 1, 2014, when the ACA will be fully implemented and insurers will not be able to deny coverage to individuals with pre-existing conditions. Jamie Court — president of Consumer Watchdog — said insurers want to boost their premiums going into 2014 to account for uncertainties in the law and to make sure they can make as much money as possible. He said, “This is a pre-emptive strike against the implementation” of the ACA.

Insurers’ Response

Darrel Ng — an Anthem spokesperson — said that the insurers’ rate increases “represent an economic reality faced throughout the entire industry, indicating health care costs continue to escalate faster than the growth of premiums.” Anthem also argued that the lagging economy has caused people to drop their health insurance to save money. As a result, many of those who keep their policies tend to be sicker and use their insurance more, according to Anthem (San Francisco Chronicle, 11/29).

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Insurers Question Physicians’ Acceptance of Medi-Cal Kids

Some California health plans are expressing concerns that there will not be enough physicians who are willing to accept children moved from the Healthy Families program to Medi-Cal, California Watch reports.

Healthy Families is California’s Children’s Health Insurance Program and Medi-Cal is California’s Medicaid program (Jewett, California Watch, 11/29).

Background

In October, California Health and Human Services Secretary Diana Dooley announced that the state is moving forward with plans to shift about 863,000 children from Healthy Families to Medi-Cal next year. Dooley said that the transition will help streamline and simplify government health care programs for California children.
Eliminating Healthy Families is estimated to reduce state spending by $13 million this fiscal year and $73 million annually after the transition is finished, according the state. The Department of Health Care Services said it plans to move all children enrolled in Healthy Families into Medi-Cal by Sept. 1, 2013. The beneficiaries are expected to be moved in four phases, depending on whether their physicians and health plans already accept Medi-Cal (California Healthline, 10/17).

Details of Concerns

Health Net has notified the state that it is unsure of how many of its physicians will continue to care for children after they are moved to Medi-Cal, which pays physicians less for health care services than Healthy Families.

Health Net covers about 86,000 children in four counties:

Fresno;
Los Angeles;
Sacramento; and
San Diego.

Health Net said it could not determine physicians’ willingness to take on children enrolled in Medi-Cal without seeing reimbursement estimates. CalViva — a plan that contracts with Health Net and has nearly 15,000 members in Fresno, Kings and Madera counties — reported similar concerns to state officials.

State Actions

In response to the concerns, state officials moved the transition date for Healthy Families beneficiaries covered by Health Net and CalViva from Jan. 1, 2013, to March 1, 2013. Norman Williams — a DHCS spokesperson — said that the agency provided physician payment information to Health Net on Nov. 5 and is continuing to collect data about whether physicians will accept Medi-Cal beneficiaries (California Watch, 11/29).

 

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Obama Administration Releases Three Proposed ACA Rules

On Tuesday, the Obama administration proposed three rules outlining how provisions under the Affordable Care Act would work, the Washington Post reports.

The three rules — one that prohibits insurers from discriminating against individuals with pre-existing conditions, another that establishes essential health benefits, and a third that expands employer-based wellness programs — are not yet final and will be open for comment until Dec. 26 (Aizenman, Washington Post, 11/20).

Proposed Rule To Prohibit Insurers From Discriminating Against Certain Patients

HHS proposed a rule implementing an ACA provision that prevents insurers from discriminating against individuals with pre-existing or chronic conditions.

The rule would prevent insurers from denying coverage to patients with pre-existing or chronic conditions. It also would prevent insurers from charging higher premiums to certain beneficiaries because of current or past insurance programs, gender, occupation and industry or employer size.

However, the rule would allow insurance companies to vary premiums — within limits — based on age, tobacco use, family size and geography (HHS release, 11/20). For example, insurers would be able to charge elderly individuals up to three times more than younger customers (Baker, “Healthwatch,” The Hill, 11/20).

According to HHS, the rule targets 50 million to 129 million U.S. residents who have conditions that insurance companies have cited in coverage denials or insurance cost increases (Wayne, Bloomberg, 11/20).

The rule also requires states to establish a single statewide risk pool for individual and small employer markets, unless a state opts to combine the two pools. Premiums and yearly rates would be based on the entire pool. In addition, the rule calls for a catastrophic plan in the individual market for young adults and individuals who cannot find affordable coverage (Zigmond, Modern Healthcare, 11/20).

Proposed Rule To Establish Essential Health Benefits

A second proposed rule delineates an ACA provision that creates essential health benefits for plans in the individual and small group markets, National Journal reports (Sanger-Katz, National Journal, 11/20).
Specifically, the rule ties essential benefits to a state’s benchmark plan, including the state’s largest small group plan, and must include items and services in at least the following 10 categories:

  1. Ambulatory patient services;
  2. Emergency services;
  3. Hospitalization;
  4. Laboratory services;
  5. Maternity and newborn care;
  6. Mental health and substance use disorder services;
  7. Pediatric services;
  8. Prescription drugs;
  9. Preventive and wellness services and chronic disease managements; and
  10. Rehabilitative services and devices (Fox, NBC News, 11/20).

Most states are using the benefits provided by the largest health plan in the state’s small-group insurance market as a benchmark. However, the rule requires insurers to provide additional benefits, including dental care and vision services for children, mental health and drug misuse treatment, and “habilitative services” for individuals with conditions such as autism or cerebral palsy.

HHS’ proposed rule goes beyond the informal guidelines issued last year by expanding comprehensive prescription drug coverage to include at least two drugs in each therapeutic class (Pear, New York Times, 11/20).

The proposed rule also addresses the actuarial value component of the essential health benefits, which is the percentage of the total average costs for benefits that a plan covers.

In 2014, a “bronze” plan must cover 60% of all covered benefits, a “silver” plan must cover 70%, a “gold” plan must cover 80% and a “platinum” plan must cover 90%.

The rule would allow plans to be within two percentage points of the standard. For example, a silver plan could cover 68% of the benefits (Modern Healthcare, 11/20).

Proposed Rule To Establish, Expand Wellness Programs

HHS, the Department of Labor and the Treasury Department proposed a rule that would establish and expand workplace wellness programs that promote health and control health spending, Modern Healthcare reports (Modern Healthcare, 11/20).

The rule allows employers to award employees as much as 30% of their health coverage costs for participating in wellness programs, an increase from the current 20%. Meanwhile, workers that enroll in smoking cessation programs could earn back as much as 50% of their coverage costs, HHS said.

The rule also requires employer-based wellness programs to provide alternative ways to qualify for rewards for individuals with special medical conditions (Viebeck, “Healthwatch,” The Hill, 11/20).

Insurers, Executives React To Rules

Meanwhile, Karen Ignagni, president and CEO of America’s Health Insurance Plans, in a statement on Tuesday said the “additional flexibility” on deductible limits is a “positive step.” However, she added, “[W]e remain concerned that many families and small businesses will be required to purchase coverage that is more costly than they have today” (Washington Post, 11/20).

Although insurance executives likely will not be satisfied with every decision HHS makes, Caroline Pearson, director at Avalere Health, said that “clear guidance and certainty is better than anything else” (Sanger-Katz, National Journal, 11/20).

In regard to the proposed increased access to prescription drugs, Stephen Finan, a health economist at the American Cancer Society, said the rule is an “improvement” from last year but “still does not guarantee that cancer patients will have access to all the major cancer drugs they need” (New York Times, 11/20).

Details About Federal Health Insurance Exchange Still Unknown

Meanwhile, states still are waiting for details about how federally run insurance exchanges will operate, CQ HealthBeat reports. During a press call about the rules on Tuesday, Gary Cohen, a senior official at CMS, said the agency “will be putting out additional guidance on the federally facilitated exchange in the near future.”

Cohen noted that in a federally run exchange, decisions about cost and coverage options will be determined by the government, not the state. He added that consumers “will have the same access to quality affordable care whether the state is running the exchange or whether the federal government is running the exchange” (Reichard, CQ HealthBeat, 11/20).

 

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Sears Switches to Defined Contribution & Private Exchange Model

Sears Holdings Corp. has joined the ranks of thousands of businesses small and large, by announcing it will move to a Defined Contribution model for employee health benefits in 2013. Through the plan, Sears will allocate a fixed dollar amount for employees and their dependents to purchase health insurance through a private health exchange.

The goal of the shift is to combat the rising cost of providing health benefits to Sears’ 90,000 eligible employees.

The cost per participant under traditional group health plans is on the rise. Employers are also feeling the pinch from minimum requirements such as the minimum percentage of the premium that must be paid by the employer, and the requirement that a minimum percentage of employees join the group plan. If either of those minimums is not met, the entire plan is canceled.

Sears’ Defined Contribution Model

Under the new plan, Sears will be able to cap their monthly health benefits cost per employee by giving a fixed dollar amount (the “defined contribution”) to each employee. Each employee will choose a health insurance plan on the private exchange that works for them, their spouses, and their dependents.

For decades, U.S. employers have been offering a one-size-fits-all plan with benefits that some employees may not need. Defined Contribution gives employees more choice and mitigates an employer’s financial risk from unexpected claims.

About the Private Health Exchange

The states and feds may still be hashing out the details of the state health exchanges, but businesses like Sears are pushing private exchanges forward. Sears employees will now have 15 choices for health insurance instead of the existing 4. Coverage options are available from five different medical insurers.

The objective of providing more choice through an exchange is to create competition and drive prices down for the policyholders.

“The more insurance providers compete, the better,” said Chris Brathwaite, spokesman for Hoffman Estates-based Sears. “I will have an opportunity to shop for a health care provider who meets my medical and my pocketbook needs.”*

Sears has not revealed how much it will allot for employees, but the amount will generally cover the insurance premium of one of the plans under the exchange. Depending on the amount and class of employee, employees could be responsible for paying a portion of the remainder of expenses they incur. All of the available plans provide catastrophic protection and cannot reject people for medical history or pre-existing conditions.

Health Reform and Companies’ Defined Contribution Shift

It is anticipated that more companies will adopt the Defined Contribution healthcare model as they are faced with rising expenses as 2014 nears.

“The best decision for most employers and their employees will be to eliminate their company-sponsored health insurance in favor of a defined contribution HRA solution,” says renowned economist and Zane Benefits founder, Professor Paul Zane Pilzer.

“That’s because employees no longer need employers to purchase quality health insurance, and, starting in 2014, employees earning less than 400% of the FPL (~$92,000 for a family of four) per year who purchase a personal policy will receive a large federal subsidy on their premium if their company doesn’t offer a group plan.”

As a result, all of the following Defined Contribution plans are expected to become mainstream:

  • Health Reimbursement Arrangement (HRA)
  • Medical Expense Reimbursement Plan (MERP)
  • Fixed Contribution Plan
  • Section 105 Plan

Modified from a Zane Benefits Blog 11/20/2012

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Could Romney Repeal The Health Law? It Wouldn’t Be Easy

Npr.org, by Julie Rovner – October 30, 2012:You can barely listen to former Massachusetts Gov. Mitt Romney make a speech or give an interview with hearing some variation of this vow:

“On day one of my administration, I’ll direct the Secretary of Health and Human Services to grant a waiver from Obamacare to all 50 states. And then I’ll go about getting it repealed.” That’s what he told Newsmax TV in September, 2011.

But there are two big questions in there. First of all, could a President Romney actually stop the health law in its tracks? And if he did try, what would happen?

First, it turns out that stopping the law may be harder than the law’s opponents realize. For one thing, if he’s elected, Romney can’t just grant waivers letting states ignore the law on his first day as president.

“There are waivers under the law, but not an across-the-board waiver,” said Tom Miller, a lawyer with the conservative American Enterprise Institute. For the record, Miller is an avid opponent of the health law. But he’s also a veteran of Capitol Hill and knows what can and can’t happen.

“You can try anything under the law,” says Miller. But in many cases, “a federal court will usually step in and say ‘you’ve gone a little bit too far.'”

In this case, the part of the law that allows the president to grant states waivers doesn’t actually kick in until 2017. And even the waivers that are allowed require states to cover as many uninsured people as would be covered by the Affordable Care Act.

Health industry consultant Robert Laszewski – also no big fan of the law – says federal courts would likely block a lot of things Romney might try to do unilaterally, like simply cut off funding or tell his staff to stop enforcing it.

“Sure, he can re-write the regulations for example… but fundamentally, he can’t change the law,” he says.

And even rewriting regulations would take months, at best.

Which brings us to the repeal part of Romney’s promise.

If Republicans gain control of Congress, they plan to use a fast-track procedure called budget reconciliation to repeal major chunks of the measure. That’s because budget reconciliation can’t be filibustered and needs only 51 Senate votes rather than the usual 60.

But there are a couple of problems with that, says Laszewski. One is that’s more time-consuming than many people realize.

“Budget reconciliation rules require them to have a budget resolution, and require them to be able to vote out the changes, and that timetable will take him to at least mid-year,” he said.

Indeed, since 1980 Congress has passed 19 budget reconciliation bills; the one that moved fastest got signed into law May 28, 2003. (A few took more than a year to become law.)

Meanwhile, the health law will still be in effect and the clock will still be counting down. So even as Congress may be working to undo the law, he says, states will still face deadlines to put important features in place.

“Every state legislature’s got a decision to make about whether they build an insurance exchange or not,” says Laszewski. “Everyone has sort of treaded water until the election – then we’re go or no go. If Romney’s elected, it’s like – we don’t know what’s going to go or not. And it’s just going to be one hell of a mess.”

And there’s still another complication. It turns out that not all of the law can be undone using the budget process. Things like requiring insurers to accept people with preexisting health conditions would almost certainly need the same 60 votes to undo as they needed to pass in the first place. Laszewski says that could cause problems of its own.

“So now we could be sitting here with reconciliation having stripped out all the money, on January 1 every sick person in America is showing up, getting their guaranteed-issue health insurance, and it’s just going to ravage the insurance pools, drive the cost of insurance way high,” says Laszewski.

That, he says, is a recipe for total chaos.

“We’re playing with gasoline here,” he said. “This is one-sixth of the economy … sitting on the ledge here wanting to know which way we’re going to go.”

Tom Miller of the AEI agrees that key parts of the health care sector have been doing a lot of waiting around for the election — and that given the short timelines, chaos is likely next year no matter who wins.

“If you implement it in its entirety you’ll also cause chaos in the market — would be my rejoinder.

We’re going to have chaos in either case.”

But the law has already put a lot of changes in place. So taking it apart, particularly given the potential legal and legislative difficulties, will be no easy task.

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The Election’s Choice on Health Care Reform

On the issue of health care reform, your choice on Election Day comes down to Obamacare or “repeal and replace.”

President Barack Obama’s position can be “summed up” in 2,400 pages. That’s the length of his Affordable Care Act, the landmark 2010 health care overhaul informally known as Obamacare, which makes sweeping consumer-centric changes to common health insurance practices.

The law is closely modeled after the Massachusetts health insurance reform that Republican challenger Mitt Romney championed when he was governor of that state in 2006. But now, the former Massachusetts governor vows that if he’s elected president, he’ll repeal the Obama law and replace it with a more conservative alternative.

But what that might look like is one of the campaign’s big questions.

  • Obama touts health care law in his campaign

Obama is promoting the Affordable Care Act as he makes his case for a second term. Go to the health care section of his campaign website to find out where he stands, and what you’ll find are links where you can “learn how Obamacare benefits you.”

Under the law, insurers by 2014 may no longer: deny coverage to individuals with pre-existing conditions; impose lifetime or annual dollar limits on coverage; cancel coverage arbitrarily; limit doctor choice and out-of-network emergency services; or charge higher premiums based on gender or health status.

The act also allows young adults to remain on their parents’ policy until age 26, and it provides a laundry list of preventive care screenings and services to all ages at no additional cost.

To help pay for this expansion of benefits, the law’s “individual mandate” requires most Americans to obtain health insurance or pay a penalty. To help consumers find affordable coverage, new state marketplaces called exchanges will open in 2014, government tax credits will be available for low-income individuals and families, and states are encouraged to expand their Medicaid programs to millions of uninsured, lower-income Americans.

The Medicaid expansion had been a requirement under the law, but the U.S. Supreme Court made it optional for states.

  • Romney plan short on details

Romney’s campaign website says Obama’s approach to health care reform takes the country in the wrong direction, by relying on “a dense web of regulations, fees, subsidies, excise taxes, exchanges, and rule-setting boards to give the federal government extraordinary control over every corner of the health care system.”

But while the Republican has been very specific about wanting to repeal the Obama health care law, he has been vague on how a Romney administration would replace it, says Jonathan Oberlander, professor of social medicine and health policy at The University of North Carolina at Chapel Hill.

“On one hand, there is reason to think they might seek ambitious health reform. On the other hand, the base of the Republican Party is more interested in ‘repeal.’ That makes it very hard for him to talk specifics about ‘replace,'” Oberlander says.

Romney “would be part of a Republican government, and the Republican Party has shown some pretty strong preferences about health care,” according to Joe White, professor of public policy and political science at Case Western Reserve University in Cleveland.

According to the Romney website, his reforms would promote individual responsibility for health care and ease government regulation on health insurers so that free-market competition can drive down costs.

The states rather than the federal government would run the show and “have both the incentive and the flexibility to experiment, learn from one another, and craft the approaches best suited to their own citizens,” the website says. Federal standards and requirements would be limited on both private insurance and Medicaid.

“The Republican position all along has been that the problem with health care is that people are not individually responsible for their health care, so when they need it, they consume too much,” White says. “Basically, their solution is to encourage less generous or less adequate insurance.”

Romney has said he would retain some popular features of the Affordable Care Act, including allowing young adults to remain on their parents’ plan and enabling people with pre-existing conditions to obtain coverage. But while he has said, “I like everybody being insured,” it is unclear whether he would require that.

  • What do voters want?

The Obama law is already starting to transform U.S. health care into the president’s vision, to mixed reviews. In a recent tracking poll from the Kaiser Family Foundation, 43% of Americans viewed the law unfavorably, while 38% felt favorably.

What effect would a Romney overhaul of the overhaul have on U.S. health care, and would the public approve?

Judy Feder, health policy expert with the Urban Institute, a nonpartisan think tank in Washington, D.C., says stripping the market of regulation would leave consumers less empowered to find affordable health coverage.

“It would essentially undo the employer-based insurance market,” she says. “Individual shoppers are much less effective than larger purchasers, particularly in a highly concentrated health care market.”

In the Kaiser Family Foundation tracking poll, a 49% plurality said the Affordable Care Act should be kept as is or even expanded. Oberlander says whether voters would accept a Republican health insurance alternative may not be as important to a President Romney as whether he could convince his own party to act at all.

“If he wins, he’s got more freedom, but they would also face a very conservative House, and they’re certainly not going to have a 60-vote (filibuster-proof) majority in the Senate,” Oberlander says, of the challenges for a Republican White House on health care reform. “Even if they wanted to do something ambitious, how do you pass it? And from a purely political viewpoint, why in the world would anybody want to start another health reform fight?”

*Modified from a Fox Business News Article

 

 

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