Good Neighbor Insurance (www.gninsurance.com) is continuing to update our clients on the new health insurance laws. There are six major coverage options for those in the US and even though some of the rules and regulations are similar for all many differences are there and it all depends on how old you are and for whom you work. Many critical details of this new insurance law will be clarified in the months and years to come.
These six major coverage options are:
(1) Individual or family coverage (private health care plans)
(2) Employee/employer group option for small businesses (typically under 50 employees)
(3) Employee/employer group option for large businesses (typically larger than 50 employees)
(4) Exchange options through the state you are residing in (fully integrated 1-1-2014 and are quasi-government and private insurance coverage combined)
(5) Medicare (which include Parts A, B, C, and D) for those 65 years onwards
(6) Full government health plans like Medicaid, CHIP, TRICARE, VA and other coverage plans as may be designated by the Department of Health and Human Services based mostly on financial criteria and/or military service.
The president signed the Patient Protection and Affordable Care Act (PPACA) into law on March 23, 2010. Additionally, he signed the Health Care and Education Reconciliation Act of 2010 on March 30, 2010, which made amendments to the PPACA law. The president’s signature on the reform bills triggered a series of major changes to the health care system that will affect every American. There were several changes that became effective upon President Obama’s signature. The rest of the changes are scheduled to become effective at varying times over the next several years.
The law is wide-reaching and encompasses more than 2,700 pages and many more pages of expected new regulation. Many of the specific details are yet to be finalized by federal agencies and state officials. This guide outlines some of the major sections of the law, and we’ve indicated when guidelines are pending from the United States Department of Health and Human Services (HHS) and other federal or state agencies. These guidelines will help all health insurance companies comply more completely with the reforms.
9-30-2010 / COMPLIANCE ALERT: Large employers to make changes to their health care plans for 2011
A survey of 72 of the largest companies in the U.S. conducted by the National Business Group on Health in August 2010 found that most of the large employers surveyed will be changing their health care plans for 2011. These companies represent more than 3.7 million employees.
Health care costs in 2011 are expected to increase an estimated 8.9% as a result of the recently passed Patient Protection and Affordable Care Act. To manage this situation, many employers in the survey claim that they will implement changes in their health care plans that shift some of the financial burden onto employees:
- 63% of the respondents indicated they would increase the percentage employees contribute to premiums,
- 46% stated they would raise out-of-pocket maximums,
- 44% said they would raise in-network deductibles,
- 40% indicated they would raise out-of-network deductibles,
- 21% stated they would raise the co-pay for specialist care, and
- 6% said they would raise the co-pay for primary care.
Also, 62% of the large companies surveyed indicated they will switch to consumer-driven health plans (CDHPs) in 2011, either through health savings accounts (HSAs) or health reimbursement arrangements (HRAs) which most employers will combine with a high-deductible plan.
The survey also found that to manage retiree health care costs, 46% of the surveyed employers will impose caps on company contributions, 37% will increase employee contributions, and 5% will drop the coverage altogether.
In terms of prescription drugs, 25 % of the respondents indicated they will raise the co-pay for retail pharmacy prescription drug benefits, while 21% will do the same for mail-order pharmacy benefits.
Benefits administrators face the important task of keeping benefit plans cost-effective as health care costs continue to increase in 2011. Switching to consumer-oriented health plans and increasing employee contributions and copayments are among the preferred strategies for large companies in the U.S.
Employers should be cautious when redesigning employer-sponsored health care plans, particularly because the Patient Protection and Affordable Care Act stipulates that health care plans will lose their grandfathered status if significant measures are taken to reduce the benefits or increase the costs to consumers. Keep in mind that to maintain grandfathered status, plan sponsors may not take any of the following actions with respect to plan elements in effect on 23 March 2010.
- Significantly cut or reduce benefits. For example, if a plan decides to no longer cover care for people with diabetes, cystic fibrosis or HIV/AIDS.
- Raise co-insurance charges.
- Significantly raise co-payment charges. Compared with the copayments in effect on March 23, 2010, grandfathered plans will be able to increase those co-pays by no more than the greater of $5 (adjusted annually for medical inflation) or a percentage equal to medical inflation plus 15 percentage points.
- Significantly raise deductibles. Compared with the deductible required as of March 23, 2010, grandfathered plans can only increase these deductibles by a percentage equal to medical inflation plus 15 percentage points.
- Significantly lower employer Contributions to the Plan. Grandfathered plans cannot decrease the percent of premiums the employer pays by more than 5 percentage points.
- Add or tighten an annual limit on what the insurer pays. Plans cannot tighten any annual dollar limit in place as of March 23, 2010. Moreover, plans that do not have an annual dollar limit cannot add a new one unless they are replacing a lifetime dollar limit with an annual dollar limit that is at least as high as the lifetime limit (which is more protective of high-cost enrollees).
- Change insurance companies. If an employer changes insurers, the plan will not be considered a grandfathered plan. This does not apply when employers that self-insure switch plan administrators or when changes are required by collective bargaining agreements.
- 9-22-2010 / COMPLIANCE ALERT: Employers must report cost of health care plans on W-2 starting with tax year 2011
Enacted 30 March 2010, the Patient Protection and Affordable Care Act (PPACA) includes reporting provisions for form W-2 starting tax year 2011. Specifically, W-2s for tax year 2011, which should be distributed to employees on or before 31 January 2012, will have to report the aggregate cost of applicable employer-sponsored health care plan.
An applicable employer-sponsored health care plan is health coverage under a group health plan offered to employees by their employers, which premiums are excluded from the calculation of the employee gross income.
The calculation of the aggregate cost of the health care plan is straightforward for most group health plans, as said aggregate cost is equal to the premiums paid by both the employer and by each employee. For self-insured plans like HRAs, however, calculation of the aggregate cost is more complex and the IRS is expected to issue a set of regulations for on the matter in the near future.
Starting tax year 2011, at the end of each tax year employers must calculate the aggregate cost of the applicable health coverage for each employee. The employer must then report that individual aggregate cost on each employee’s W-2.
9-29-2010 / Survey finds medical and prescription drug trend rates are to remain relatively stable in 2011
The 2011 Segal Health Plan Cost Trend Survey revealed that relative to 2010, medical and prescription drug trend rates will remain stable in 2011, with the exception of indemnity plans and high-deductible health plans (HDHPs), medical preferred provider organizations (PPOs), and point of service plans (POS). Compared to 2010 forecasts, the trend rate for indemnity plans and HDHPs are expected to decrease, while trend forecasts for PPOs plans/POS are slightly higher (up 0.2% to 0.6%) than last year.
A trend is a forecast of the per capita claims cost which is usually highly correlated with the actual cost increase a plan carrier assesses, but they are not the same. In fact, changes in the cost of a plan may be very different from the projected claims cost trends, as the plan cost reflects variables such as group demographics and changes in plan design and/or participant contributions.
The 2011 Segal Health Plan Cost Trend Survey of managed care organizations, health insurers, pharmacy benefit managers and third party administrators, examines trend ranges, trends for active participants and retirees, trend components and the accuracy of trend projections.
Other noteworthy findings of the survey include:
- In 2011, medical plans are projected to experience cost trends more than 8x the consumer price index for urban consumers (CPI-U), which was 1.2% in July 2010.
- Also, in 2011, medical plans are projected to experience cost trends more than 5x the annual increase in average hourly wages, which was 1.8% in July 2010.
- In 2011, prescription drugs trends are projected at 9.2% for active participants and early retirees.
- Fixed-scheduled dental plans and dental-maintenance organizations (DMOs) trend rates are forecasted to decrease by 0.8% and 0.5% respectively in 2010.
- Combined projected trend rates for PPOs and POS plans are lowest in the Midwest (9.8%) and highest in the Northeast and the West (11.2%).
For 2011, Medicare Advantage (MA) health-maintenance organizations (HMOs) trend rates are projected to decrease from 7.7% to 7%, while MA PPOs trend rates are forecasted to be 6.4%.
The survey findings indicate that health plan cost trends continue to outpace increases in inflation and average earnings, imposing a significant challenge on plan sponsors as they try to maintain affordable health care coverage for employees and their families.
Adding to the challenge, there’s the 2010 Patient Protection and Affordable Care Act (PPACA) and its provisions, which are expected not only to add to cost trend rates but also to have a significant financial impact inasmuch as they remove lifetime dollar limits. This is why many plan sponsors have already begun to build-in the cost of the coverage for adult dependent children up to age 26 into future participant contributions within the new rules’ permissions. In addition, some plan sponsors are considering requiring that adult children have no access to other employer-sponsored health plans. Other plan sponsors covering pre-Medicare-eligible retirees are choosing to file for the retiree reinsurance subsidy program, by which, until 1 January 2014, employers will be reimbursed up to 80% of claims between USD 15,000 and USD 90,000 for pre-Medicare retirees ages 55 to 64 who are covered under employer-provided insurance plans in a given year.
Plan sponsors are faced with the challenge of balancing plan costs while implementing practical solutions to comply with the PPACA. Providing a financially sustainable yet high-quality health care requires plan sponsors to craft plan design strategies. In an effort to balance cost mitigation and quality of the health plan, plan sponsors have begun to focus on cost management strategies such as wellness and care management investments, value-based designs (use of high quality providers at a relative low cost), data mining and discounted provider networks.
Doug Gulleson loves to scuba dive overseas and makes sure he has his US health care and overseas health care information with him at all times when he travels (check out his diving travels at www.douggulleson.com). Keep our blog close by you, www.gntravelinsurance.com , for continual updates on the changes with the US health care system.