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Health Care Reform

Learn what the law means to you,
and what work still needs to be done...

Health care reform is acting as a catalyst-forcing providers to consider significant changes in traditional health care business models. Health care providers and hospital systems are facing a strategic dilemma in this changing environment

2010

New Programs

  • The temporary retiree reinsurance program takes effect, but specific criteria apply and funding is limited.
  • National risk pool launched, and small business tax credit.
  • Medicare members who reach the "donut hole" receive a $250 rebate.

Insurance Reforms

  • No lifetime dollar limits on essential benefits.
  • Allowed restricted yearly limits on the dollar value of certain benefits.
  • No coverage rescissions/cancellations except for fraud or intentional misrepresentation.
  • No cost-sharing obligations for preventive services in network.
  • Dependent coverage, if provided, required up to age 26.
  • Enhanced internal and external appeal processes and requirements.
  • No pre-existing condition exclusions for enrollees (under 19 years of age).

2011

Insurance Reforms

  • New uniform coverage documents and standard definitions developed (applicable in 2012).
  • Must meet minimum medical loss ratios.
  • Rate reviews begin.

Medical Reforms

  • Medicare Advantage cost-sharing limits take effect.
  • Medicare beneficiaries who reach the "donut hole" get a 50 percent discount on brand-name drugs.
  • Primary care doctors and general surgeons practicing in underserved areas, such as inner cities and rural communities, get a 10 percent Medicare bonus.
  • Medicare Advantage plans begin restructuring of payments and freeze 2011 payments at 2010 levels.

Other

  • The voluntary long-term care insurance program starts. The program provides a cash benefit to help those with disabilities stay in their homes or pay nursing home costs. Benefits start five years after paying the coverage fee.
  • Increased funding for community health centers to provide care for many low-income and uninsured people.
  • Costs for over-the-counter drugs not prescribed by a doctor excluded from being reimbursed through an HSA or FSA.
  • Employers may report the value of health care benefits on employee W2 tax statements
New employer reporting requirements

Beginning in 2011, employers will be required to disclose the value of health care benefits on an employee's annual W-2.

Employers will be required to notify employees:

About the availability of the exchange - for new employees, at the time of hiring; for current employees, by March 1, 2013;

They may be eligible for a subsidy under the exchange if the employer's contribution to the plan is less than 60 percent of total allowed costs of the benefits;

If the employee purchases coverage in the exchange, he or she will lose the employer's coverage contribution.

In 2014, large employers will be subject to expanded 5500 reporting requirements to include information on the health insurance coverage of their employees.

New employer reporting requirements

To learn more, see "How Healthcare Reform changes your Medicare plan in 2010-2011"

Part D donut hole. Beginning in 2011, there is a 50 percent brand discount on drugs in the gap. Members will pay less for generic drugs in the gap as well: 93 percent in 2011, which phases down to 25 percent by 2020. The donut hole is eliminated by 2020.

Retiree drug subsidy. Beginning in 2013, employers may no longer deduct the retiree drug subsidy when offering qualified coverage under Medicare Part D.

Medicaid. Beginning in 2014, states are required to provide premium assistance and wrap-around benefits to any Medicaid beneficiary who is offered employer-sponsored coverage, if it is cost-effective to do so.

Medigap. The National Association of Insurance Commissioners will create new model plans for benefit packages C and F that include nominal cost sharing. The new models will be available in 2015.

Small Business Tax Credits

Small businesses with fewer than 25 employees and average wages of less than $50,000 get a tax credit for their contributions to buying health insurance for employees. The tax credit starts at up to 35 percent and increases to 50 percent in 2014 when the exchange is operational. A full tax credit may be available to small businesses with fewer than 10 employees and average wages of less than $25,000.

Other

Administrative simplification. The law also requires HHS to adopt a single set of operating rules for electronic transactions to create uniformity (e.g., health claims or equivalent encounter information, eligibility and claims status, enrollment and disenrollment, premium payments, and referral certification and authorization). Group health plans will have to certify compliance with these standards.

CLASS Act. Creates a new government-run voluntary long-term care insurance program (CLASS Program). Employers must automatically enroll employees and facilitate payroll deductions. Employees may choose not to participate.

2012

Health System Changes

  • Hospitals, doctors, and payers encouraged to join forces in "accountable care organizations."
  • Hospitals with high rates of preventable readmissions facing reduced Medicare payments.
  • Administrative simplification rules required under ACA begin to phase in.

2013

Taxes/Deductions

  • Individuals making $200,000 a year or couples making $250,000 would have a higher Medicare payroll tax of 2.35 percent on earned income - up from the current 1.45 percent. A new 3.8 percent tax on unearned income, such as dividends and interest, also added.
  • Contributions to flexible spending accounts (FSAs) limited to $2,500 a year - indexed for inflation. And the threshold for deducting medical expenses on taxes goes from 7.5 percent to 10 percent of income.
  • Medical device manufacturers have a 2.9 percent sales tax on medical devices, with exemptions for some, like eyeglasses, contact lenses and hearing aids.
  • No more deduction for expenses allocable to Medicare Part D subsidy for employers who maintain prescription drug plans for their Medicare Part D-eligible retirees

2014

Coverage Mandates & Subsidies

  • New individual and employer coverage responsibilities.
  • New individual affordability tax credits and expanded small business tax credits.

Health Insurance Exchange & Insurance Reforms

  • State individual and small group health insurance exchanges operational
  • Guaranteed issue, guaranteed renewability, modified community rating and minimum benefit standards ("essential benefits" plan) effective.
  • No more lifetime or annual dollar limits for essential benefits.
  • No more excessive waiting periods.
  • No pre-existing condition exclusions.
  • New health plan disclosure and transparency requirements.
  • New uniform insurance rating reforms.
  • Provider non-discrimination requirements.

Medicaid & Medicare Reform

  • Medicaid expanded to cover low-income individuals under age 65 up to 133 percent of the federal poverty level - about $28,300 for a family of four.
  • Minimum medical loss ratio of 85 percent required for Medicare Advantage plans.
Individual Responsibility

New employer penalties and obligations: Starting in 2014, employers don't have to offer their employees health insurance coverage, but most of them with more than 50 employees will pay an assessment if they don't, or if they offer coverage that isn't affordable. Full-time and part-time employees are included when determining whether an employer has 50 employees (based on current full-time employee equivalency rules).

Employers with 50 or more employees that do not offer "minimum essential coverage" will pay $2,000 for each employee over the first 30 employees if one of their employees gets a tax subsidy to buy insurance under an exchange.

Employers with 50 or more employees that do offer minimum essential coverage but have at least one full-time employee receiving subsidized coverage under an exchange will pay whichever is less: $3,000 for each employee receiving a premium credit, or $2,000 for each full-time employee.

Employers must provide "free choice" vouchers to employees with incomes below 400 percent of the federal poverty level if the employee's contribution to coverage is between 8 percent and 9.8 percent of income and the employee chooses to purchase coverage in the exchange. No penalties will be imposed on employers with respect to employees who receive these vouchers. Employers with more than 200 employees that offer coverage must automatically enroll new full-time employees in coverage. Employees may opt out.

Employer Responsibility

To learn more, see "How Healthcare Reform changes your Medicare plan in 2010-2011"

Part D donut hole. Beginning in 2011, there is a 50 percent brand discount on drugs in the gap. Members will pay less for generic drugs in the gap as well: 93 percent in 2011, which phases down to 25 percent by 2020. The donut hole is eliminated by 2020.

Retiree drug subsidy. Beginning in 2013, employers may no longer deduct the retiree drug subsidy when offering qualified coverage under Medicare Part D.

Medicaid. Beginning in 2014, states are required to provide premium assistance and wrap-around benefits to any Medicaid beneficiary who is offered employer-sponsored coverage, if it is cost-effective to do so.

Medigap. The National Association of Insurance Commissioners will create new model plans for benefit packages C and F that include nominal cost sharing. The new models will be available in 2015.

2016

Health choice compacts

  • States can form health choice compacts to allow insurers to sell individual policies In any state participating In the compact.

2018

Taxes

  • New tax ("Cadillax tax") A new excise tax goes into effect for high-value, "Cadillac" health plans: 40 percent for amounts over $10,200 for individuals and $27,500 for family plans, paid by insurance companies and plan administrators.

2020

Revenue-raising Provisions

  • The healthcare reform law imposes a 10 percent tax on tanning services.
  • Beginning in 2011, the pharmaceutical industry will pay annual industry fees. The fee will be phased in and will hold steady at $2.8 billion a year after 2019.
  • Beginning in 2013, manufacturers of medical devices will pay a 2.3 percent excise tax on sales of medical devices.
  • Beginning in 2013, the Medicare payroll tax rate will increase by 0.9 percent for individuals who make more than $200,000 and couples that make more than $250,000.
  • A new 3.8 percent tax will be added on income from interest, dividends, annuities, royalties and rents for those at the same income threshold.
  • Beginning in 2014, a non-deductible premium tax will be imposed on insurers ($8 billion in 2014, $11.3 billion in 2015 and 2016, $13.9 billion in 2017 and $14.3 billion in 2018. After that, it will increase in an amount proportional to overall premium growth).

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