PPACA taxes and fees: Coming to a return near you

The Patient Protection and Affordable Care Act (PPACA) is supposed to provide health insurance subsidy tax credits for about 20 million low-income and moderate-income Americans in 2014, but it also could impose a significant increase in federal income tax payments for some high-income Americans.

Here’s a look at some of the major PPACA taxes and fees that are supposed to take effect in 2014.

  • Health care industries. Insurers, drug companies and medical device manufacturers face new fees and taxes.
  • The insurance industry faces an annual fee that starts at $8 billion in its first year, 2014.
  • Companies that make medical equipment sold chiefly through doctors and hospitals, such as pacemakers, artificial hips and coronary stents, will pay a 2.3 percent excise tax on their sales, expected to total $1.7 billion in its first year, 2013. They’re trying to get it repealed.
  • Pharmaceutical companies that make or import brand-name drugs are already paying fees; they totaled $2.5 billion in 2011, the first year.
  • Employer penalties. Starting in 2014, companies with 50 or more employees that do not offer coverage will face penalties if at least one of their employees receives government-subsidized coverage. The penalty is $2,000 per employee, but a company’s first 30 workers don’t count toward the total.
  • The intentionally uninsured. Nearly 6 million people who don’t get health insurance will face tax penalties starting in 2014. The fines are estimated to raise $6.9 billion in 2016. Average penalty in that year: about $1,200. The penalty provision is supposed to exempt people with conscientious reasons for refusing to buy health coverage and those who cannot find affordable coverage.
  • Upper-income households. Starting Jan. 1, individuals making more than $200,000 per year, and couples making more than $250,000, will face a 0.9 percent Medicare tax increase on wages above those threshold amounts. They’ll also face an additional 3.8 percent tax on investment income. Together these are the biggest tax increase in the health care law.
  • Indoor tanning devotees. The 10 percent sales tax on indoor tanning sessions took effect in 2010. It’s expected to raise $1.5 billion over 10 years. The 28 million people who visit tanning booths and beds each year — mostly women under 30, according to the Journal of the American Academy of Dermatology — are already paying. Tanning salons were singled out because of strong medical evidence that exposure to ultraviolet lights increases the risk of skin cancer.

*Modified from a LifeHealthPro.com article


Health Costs on His Mind Small Factory Owner Looks for Ways to Cope With New Law

Sales at Automation Systems LLC, a parts-assembly factory in the Chicago suburbs, dropped 60% following the 2008 financial collapse. Owner Carl Schanstra was able to get the firm back on its feet by breaking into new markets, such as the auto industry. Sales are up 12% this year, and are likely to rise again next year, too.

But for the 34-year-old, the expected growth in sales brings a new concern. He is worried that as Automation Systems continues to expand, it will be subject to a provision in the health-care overhaul that could damage its bottom line.

Mr. Schanstra is contemplating various strategies he can take next year in order to sidestep what he believes are significant burdens of complying with the law. In fact, he’s considering whether he should split his manufacturing firm in two.

That is because his plant, with sales of about $1.6 million for 2012, currently employs 40 full-time workers, mostly low-paid employees who monitor the factory equipment. If sales were to continue to rise, the plant could, conceivably, employ 50 full-time workers in 2014. Under the new health-care law, the Affordable Care Act, businesses with 50 or more full-time equivalent employees will be required, starting in that year, to offer workers health insurance or potentially pay a penalty.

The expense, he says, would drive up the cost of his labor. So he doesn’t want to let employment at the factory reach that number. “I’ll be hammered for having more people at work,” says Mr. Schanstra, who took over the firm when his father died in 2003.

Splitting the business into two would be a “headache,” he acknowledges. But with fewer than 50 full-time equivalent employees in each half of this business, he hopes to avoid paying the penalties that otherwise could amount to at least $40,000 a year. His firm hasn’t offered health-insurance benefits since 2003, when premiums jumped 50%, bringing his yearly outlay for coverage for his staff of 20 people to about $40,000 total.

The Checkup

Automation Systems LLC weighs whether to add workers as Affordable Care Act nears

  • Sales of $1.6 million for 2012, up 12% this year and expected to rise next year
  • 40 full-time employees, 10 shy of the 50 that would trigger health-care requirement
  • Penalty for not offering 50 or more full-time workers health insurance: At least $40,000

Source: The company

Legal and tax experts say breaking up a firm—as Mr. Schanstra is contemplating—generally won’t allow a business owner to stay outside the parameters of the law. According to the Internal Revenue Code, all workers who are employed by a common group of corporations or business partners must be treated as being employed by a single owner.

But an owner could potentially create a spinoff entity if his or her business has more than one revenue stream, and if there are different owners for each entity, says Peter Fleming, a partner with Carnegie, Pa.-based accounting firm Wilke & Associates LLP. He recommends exploring other options first. “The spinoff move is a big step,” he says, because it requires surrendering a portion of the company over to someone else.

Small-business experts say it isn’t surprising that some business owners are thinking of splitting their firms or taking other steps to eschew the health-care overhaul due to the associated costs and regulatory burdens. “It’s a very legitimate question to ask, should I try to find a way to get under the 50-employee threshold,” says Alden Bianchi, a partner with law firm Mintz, Levin, Cohn, Ferris, Glovsky and Popeo PC in Boston. Providing health insurance is “a compensation cost and it’s the job of the business owner to minimize costs,” he adds.

Exploring far-reaching strategies to dodge the employer mandate isn’t uncommon, adds Katie Mahoney, executive director of health-care policy at the U.S. Chamber of Commerce, because, for some business owners, “it’s a matter of dollars and cents and they don’t have it. They find a way around it or they close their business.”

Average premiums for family health-insurance plans have increased 97% since 2002, according to a September study conducted by nonprofits Kaiser Family Foundation and Health Research & Educational Trust.

Business owners have other less-radical options for maneuvering around the law’s provisions.

Some say they’re likely to reduce their workers’ hours or even lay off staff in order to remain below the thresholds established under the act. Under the law, firms with 50 or more full-time-equivalent employees will have to provide “minimum essential” and “affordable” coverage, or pay a penalty for each employee in excess of 30 full-time employees.

Sidney Brodsky, chief executive officer of James Gerard Foods, a gourmet food business in Phoenix with roughly 50 employees, says he is considering “weeding out” his weakest performers to reduce his firm’s head count to below 50 full-time equivalents. He would then bring on contract workers, should he need more help.

Mr. Brodsky has offered health-care benefits to his employees for the past 12 years, though he only contributes 50% toward their premiums. By hovering under the law’s employee threshold, he can continue to offer health benefits to his employees without having to worry about meeting the “minimum essential” mandate. In order to avoid penalties, employers must offer a plan that covers at least 60% of the of the actuarial value of the cost of the benefits. In addition, employers must not charge the employee more than 9.5% of his or her household income toward the cost of health-insurance premiums.

Others plan to shift to part-time workers, because there are no penalties if part-time employees aren’t offered coverage.

Mr. Schanstra says he is thinking of bringing in a partner to take over one half of the business, should he divide it. He is also considering opening a factory in South America—and focus his growth there—catering to industries in that region. “I want to see where the cards fall,” he says. “Splitting the company is not off the table.”

Mr. Schanstra is aware that dividing his business into two may not help him dodge the law’s requirements. His backup plan, if he can’t split his firm, is to keep his head count low or to invest in machinery that would replace workers. He also plans to raise prices as much as 20% starting in January to buffer any health-care related costs he may incur in 2014.

Getting part-time staff is “not a really good functional way for us to operate our business,” he says, because of how employees’ shifts, which rotate 24 hours a day, are scheduled for optimal productivity.

“The unknown makes everyone stop spending and start saving,” he says. “We will be more cautious and leaner and tighten up.”

Corrections & Amplifications
Under the Affordable Care Act, employers with 50 or more full-time equivalent employees more must offer a health plan that covers at least 60% of the of the actuarial value of the cost of the benefits. In addition, employers must not charge the employee more than 9.5% of his or her household income toward the cost of health-insurance premiums. A previous version of this article stated that employers are required to pay 60% of the total cost of the plan’s benefits.

*Modified from a Wall Street Journal Article by Emily Maltby and Sarah Needleman


Are 2013 health care tax hikes just the start?


DECEMBER 26, 2012

WASHINGTON (AP) — New taxes are coming Jan. 1 to help finance the Patient Protection and Affordable Care Act (PPACA). Most people may not notice. But they will pay attention if Congress decides to start taxing employer-sponsored health insurance, one option in play if lawmakers can ever agree on a budget deal to reduce federal deficits.

The tax hikes already on the books, taking effect in 2013, fall mainly on people who make lots of money and on the health care industry. But about half of Americans benefit from the tax-free status of employer health insurance. Workers pay no income or payroll taxes on what their employer contributes for health insurance, and in most cases on their own share of premiums as well.

It’s the single biggest tax break the government allows, outstripping the mortgage interest deduction, the deduction for charitable giving and other better-known benefits. If the value of job-based health insurance were taxed like regular income, it would raise nearly $150 billion in 2013, according to congressional estimates. By comparison, wiping away the mortgage interest deduction would bring in only about $90 billion.

“If you are looking to raise revenue to pay for tax reform, that is the biggest pot of money of all,” said Martin Sullivan, chief economist with Tax Analysts, a nonpartisan publisher of tax information.

It’s hard to see how lawmakers can avoid touching health insurance if they want to eliminate loopholes and curtail deductions so as to raise revenue and lower tax rates. Congress probably wouldn’t do away with the health care tax break, but limit it in some form. Such limits could be keyed to the cost of a particular health insurance plan, the income level of taxpayers or a combination.

Many economists think some kind of limit would be a good thing because it would force consumers to watch costs, and that could help keep health care spending in check. PPACA took a tentative step toward limits by imposing a tax on high-value health insurance plans. But that doesn’t start until 2018.

Next spring will be three years since Congress passed the health care overhaul but, because of a long phase-in, many of the taxes to finance the plan are only now coming into effect. Medicare spending cuts that help pay for covering the uninsured have started to take effect, but they also are staggered. The law’s main benefit, coverage for 30 million uninsured people, will take a little longer. It doesn’t start until Jan. 1, 2014.



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.”


Aetna CEO Sees Obama Health Law Doubling Some Premiums

Health insurance premiums may as much as double for some small businesses and individual buyers in the U.S. when the Affordable Care Act’s major provisions start in 2014, Aetna’s chief executive officer said.

While subsidies in the law will shield some people, other consumers who make too much for assistance are in for “premium rate shock,” Mark Bertolini, who runs the third-biggest U.S. health-insurance company, told analysts yesterday at a conference in New York. The prospect has spurred discussion of having Congress delay or phase in parts of the law, he said.

“We’ve shared it all with the people in Washington and I think it’s a big concern,” the CEO said. “We’re going to see some markets go up as much as as 100 percent.”

Bertolini’s prediction is at odds with Congressional Budget Office estimates that the law will have little effect on small and large-employer plans and the Obama administration’s projections that middle-class families will actually save money. The 2010 law is expected to extend health care to about 30 million people who otherwise couldn’t get insurance, paid for by new taxes and fees on companies and wealthier individuals.

Those taxes will make coverage more expensive for insurers, as will other provisions such as a ban on discriminating against people with pre-existing medical conditions, Bertolini said. Premiums are likely to increase 25 percent to 50 percent on average in the small-group and individual markets, he said, citing projections by his Hartford, Connecticut-based company.

High Estimate

The one-time jump in rates also includes increases in costs that would come even without the law, Bertolini said.

“That just seems silly,” said Gary Claxton, a vice president at Kaiser Family Foundation, aMenlo Park, California- based nonprofit that studies health issues. “I can’t imagine anything going on in the small-group market that would change the average premium that much. On the individual market, there’s arguments for things changing, but those magnitudes seem high.”

The Obama administration said last year that “middle-class families” buying insurance through the law’s new online exchanges may save as much as $2,300 a year starting in 2014. Nick Papas, a White House spokesman, declined to comment on Bertolini’s predictions.

The CBO estimated in 2009 that the law will increase premiums 10 percent to 13 percent for individuals and have little effect on small and large-employer plans. After the subsidies are factored in, individual bills will go down by about 60 percent, the agency predicted.

About 43 percent of people who buy on the exchanges, or individual markets outside of them, won’t be eligible for subsidies, according to the report. They would see premium increases “somewhat less” than 10 percent to 13 percent, CBO predicted.

*Modified from a Bloomberg article


Business That Drop Health Care Coverage Could Face Backlash

Many U.S. businesses — particularly those that are small or primarily depend on low-wage workers — are considering whether to stop providing health coverage to their employees and instead pay penalties under the Affordable Care Act, a move some experts say could result in a worker backlash, Bloomberg reports.


Under the ACA, businesses with at least 50 workers beginning in 2014 must pay a penalty of $2,000 per employee if they do not provide affordable coverage to their employees. Meanwhile, the average annual premium for family coverage is expected to cost $12,000 in 2014, of which employers typically cover 80%, or about $9,600, according to estimates from Towers Watson.

Reasons To Continue Providing Insurance

Mercer partner Tracy Watts said that although it might seem like an easy decision for such employers to forgo providing coverage, companies have several compelling reasons to continue providing insurance, including:


  • Using the coverage as a recruitment tool
  • Keeping workers healthy
  • The fear of backlash from higher-earning employees whose out-of-pocket insurance costs could go up


If their work-based coverage is dropped, low-wage workers might pay lower premiums for health insurance by purchasing coverage through the ACA’s insurance exchanges. However, those whose incomes are too high to qualify for federal subsidies would pay more, according to Randall Abbott, a senior consultant at Towers Watson.

In addition, while health coverage is tax deductible for employers, the $2,000 penalty is not. Further, workers who are forced to find their own health coverage might expect additional compensation, and wages also are not tax deductible, Abbott said.

According to a survey by Mercer, just 6% of businesses are planning to drop health coverage by 2014, and only 9% of retail and hospitality businesses are likely to take that step.

Meanwhile, the Congressional Budget Office in July estimated that the ACA would result in a loss of benefits for 2.5% of the U.S.’s 161 million employees, or about four million individuals (Nussbaum/Wayne, Bloomberg, 12/05)


IRS aims to clarify investment income tax under healthcare law

(Reuters) – The Internal Revenue Service has released new rules for investment income taxes on capital gains and dividends earned by high-income individuals that passed Congress as part of the 2010 healthcare reform law.

The 3.8 percent surtax on investment income, meant to help pay for healthcare, goes into effect in 2013. It is the first surtax to be applied to capital gains and dividend income.

The tax affects only individuals with more than $200,000 in modified adjusted gross income (MAGI), and married couples filing jointly with more than $250,000 of MAGI.

The tax applies to a broad range of investment securities ranging from stocks and bonds to commodity securities and specialized derivatives.

The 159 pages of rules spell out when the tax applies to trusts and annuities, as well as to individual securities traders.

Released late on Friday, the new regulations include a 0.9 percent healthcare tax on wages for high-income individuals.

Both sets of rules will be published on Wednesday in the Federal Register.

The proposed rules are effective starting January 1. Before making the rules final, the IRS will take public comments and hold hearings in April.

Together, the two taxes are estimated to raise $317.7 billion over 10 years, according to a Joint Committee on Taxation analysis released in June.

To illustrate when the tax applies, the IRS offered an example of a taxpayer filing as a single individual who makes $180,000 in wage income plus $90,000 from investment income. The individual’s modified adjusted gross income is $270,000.

The 3.8 percent tax applies to the $70,000, and the individual would pay $2,660 in surtaxes, the IRS said.

The IRS plans to release a new form for taxpayers to fill out for this tax when filing 2013 returns.

The new rules leave some questions unanswered, tax experts said. It was unclear how rental income will be treated under the new rules, said Michael Grace, managing director at Milbank, Tweed, Hadley & McCloy LLP law firm in Washington.

“The proposed regulations surely will increase tax compliance burdens for individuals,” said Grace, a former IRS official. “There’s clearly some drafting left to be done.”


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).


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).


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:

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).



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).