demystifying health care reform topics in health …...2011/08/03 · 5 learning objectives...

Topics in Health Care Series:

Demystifying Health Care Reform

Part 2: Coverage ExpansionCoverage Expansion

5

Learning ObjectivesIntroduction to Demystifying Health Care Reform,

a Topics in Health Care Series –

Part 2: Part 2: Coverage ExpansionCoverage Expansion

After participating in this program, which is part of the Topics in Health

Care/Health Care Reform (HCR) Series, you will be able to:

Understand how HCR expands previously established sources of health coverage and creates new ones

Discuss the individual and employer mandates and tax penalties and incentives that encourage enrollment

Discuss the impact of coverage expansion on the health care delivery system

Key Events Timeline –Insurance Market Reforms That Improve Access

and Coverage

8

First Dollar Coverage of First Dollar Coverage of

Preventive ServicesPreventive Services11

Prohibition on Lifetime Limits & Prohibition on Lifetime Limits &

Restrictions on Annual LimitsRestrictions on Annual Limits22

Prohibition of Preexisting Prohibition of Preexisting

Condition Exclusions for Condition Exclusions for

Children under 19Children under 1922

Extension of Dependent Extension of Dependent

Coverage to Age 26Coverage to Age 2633

Rescission LimitationsRescission Limitations22

Premium Increase ReviewPremium Increase Review44

Grandfathering Requirements

Guaranteed Issue and Guaranteed Issue and

RenewabilityRenewability44

Prohibition on Preexisting Prohibition on Preexisting

Condition ExclusionsCondition Exclusions44

Prohibition on Annual LimitsProhibition on Annual Limits22

Premium Rate RestrictionsPremium Rate Restrictions44

1. Interim final rules for group health plans and health insurance issuers relating to coverage of preventive services under the patient protection and affordable care act. Fed

Regist. edocket.access.gpo.gov/2010/pdf/2010-17242.pdf. Accessed August 25, 2010. 2. Patient protection and affordable care act; requirements for group health plans and

health insurance issuers under the patient protection and affordable care act relating to preexisting condition exclusions, lifetime and annual limits, rescissions, and patient

protections; final rule and proposed rule. Fed Regist. edocket.access.gpo.gov/2010/pdf/2010-15278.pdf. Accessed August 25, 2010. 3. Group health plans and health insurance

issuers relating to dependent coverage of children to age 26 under the patient protection and affordable care act; interim final rule and proposed rule. Fed Regist.

edocket.access.gpo.gov/2010/pdf/2010-11391.pdf. Accessed August 25, 2010. 4. One Hundred Eleventh Congress of the United States of America. The Patient Protection and

Affordable Care Act, H.R. 3590. govtrack.us/data/us/bills.text/111/h/h3590enr.pdf. Accessed August 24, 2010. Amended by Health Care and Education Reconciliation Act of

2010, H.R.4872. govtrack.us/data/us/bills.text/111/h/h4872enr.pdf. Accessed August 24, 2010.8

20112011 20122012 20132013 2014201420102010

Key Events Timeline—

Other Government Program Coverage Expansions

State Medicaid

Programs May

Cover People to

133% FPL

CHIP Reauthorized

through 2015

Early Retiree

Reinsurance

Program

High-Risk Pools

Medicare Part D

Reduced Cost-

Sharing – Generic

Medicare Part D

Brand Drug

Discount Program

(Coverage Gap)

CLASS Act Medicare Part D

Reduced Cost-

Sharing – Brand

State Medicaid

Programs Must

Cover People to

133% FPL, May

Cover People Above

133% FPL

11

20112011 20122012 20132013 2014201420102010

FPL = Federal Poverty Level; CLASS = Community Living Assistance Services and Support.

Expected Sources of Coverage, in Millions of People

ACA = Affordable Care Act.

1. Congressional Budget Office. CBO’s March 2009 Baseline: MEDICARE. cbo.gov/budget/factsheets/2009b/medicare.pdf. Accessed August 25, 2010. 2. Congressional Budget

Office. Estimate of the Incremental Effects of the Reconciliation Proposal, Relative to H.R. 3590 as Passed by the Senate. cbo.gov/ftpdocs/113xx/doc11379/AmendReconProp.pdf.

Accessed August 25, 2010.

CBO Estimates ACA Will Reduce

Uninsured Population by 30 Million

17

20102016 without reform

2016 with reform

50

400

27

150

44

52

350

29

162

55

22

52

2124

159

55Medicare1

Nongroup2

Medicaid/CHIP2

Uninsured2

Exchanges2

Employer –sponsored coverage2

Early Retiree Reinsurance Program1

June 1, 2010

$5 billion allocated to establish a reinsurance program for plan sponsors providing coverage to early retirees (55 or older) who are not eligible for Medicare

Plan sponsors will be reimbursed annually for 80% of total medical claims costs between $15,000 and $90,000 incurred by each eligible enrollee

Program ends on January 1, 2014, or when funds are exhausted

HHS issued an official application form on June 29, 2010

1. Early Retiree Reinsurance Program; Interim Final Rule. Federal Register. edocket.access.gpo.gov/2010/pdf/2010-10658.pdf. Accessed September 23, 2010. 2. ERRP Early

Retiree Reinsurance Program Application. http://www.hhs.gov/news/press/2010pres/06/20100629a.html. Accessed September 2010.

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GeneralGeneralGeneral

HHS = Health and Human Services..

Early Retiree Reinsurance Program 1 (continued)June 1, 2010June 1, 2010

Plan sponsors must:

submit an application to HHS to determine eligibility for the program

be able to provide adequate claim documentation

have in place programs and procedures intended to decrease health care costs for enrollees with chronic or high-cost conditions

have a system to detect and reduce fraud, waste, and abuse

Plan sponsors must use program reimbursement to reduce premiums, cost-sharing requirements, or other health benefit costs for either the enrollee or the plan sponsor

1. Early Retiree Reinsurance Program; Interim Final Rule. Fed. Regist. edocket.access.gpo.gov/2010/pdf/2010-10658.pdf. Accessed September 23, 2010.

20

EligibilityEligibilityEligibility

HHS = Health and Human Services.

Pre-Existing Condition Insurance Plan (PCIP)1

July 1, 2010July 1, 2010

1. Pre-Existing Condition Insurance Plan Program; Interim Final Rule. Fed Regist. edocket.access.gpo.gov/2010/2010-18691.htm. Accessed September 23, 2010.

A total of $5 billion in Federal funds was allocated for the entire program

Funding terminates when Exchanges begin operation on January 1, 2014

Starting in 2014, discrimination based on a pre-existing condition by an insurer will be prohibited

PCIPs may limit enrollment prior to 2014 if funding shortfalls occur

A Pre-Existing Condition Insurance Plan (PCIP) has been established in each state for those who have been uninsured for at least 6 months and who have been unable to obtain coverage due to pre-existing medical issues

States can run the PCIP, or can elect to have HHS run it for them

21


FundingFundingFunding

Dependent Coverage1

Plan Years Beginning On or After September 23, 2010Plan Years Beginning On or After September 23, 2010

Requires group and individual health plans to allow child dependents to stay on their parents’ plan until age 26

Plans may not exclude eligible dependents from coverage based on student status, residency requirements, marital status, or financial dependency

Grandfathered group plans may exclude coverage for dependents who have access to their own employer-sponsored coverage(This exception is no longer applicable for plan years beginning on or after January 1, 2014.)

Plans must offer a 30-day enrollment period not later than the first day of the first plan year beginning on or after September 23, 2010

1. Group Health Plans and Individual Health Insurance Issuers Relating to Dependent Coverage of Children to Age 26 Under the Patient Protection and Affordable Care Act; Interim Final Rule and Proposed Rule. Fed Regist. edocket.access.gpo.gov/2010/pdf/2010-11391.pdf. Accessed September 23, 2010.

23


EligibilityEligibilityEligibility

EnrollmentEnrollmentEnrollment

Prohibition of Lifetime & Annual Benefit Limits1

Phased in beginning in 2010Phased in beginning in 2010

Prohibits plans from having lifetime limits on the dollar value of “essential health benefit” coverage starting with plan years beginning on or after September 23, 2010

Allows plans to continue to apply annual limits on the dollar value of essential health benefits through 2014, but only within new limits established by HHS

Starting in 2014, prohibits plans from applying any annual limits on the dollar value of coverage for essential health benefits

Annual limit rules are not applicable to grandfathered individual (non-group) plans1. Patient Protection and Affordable Care Act; Requirements for Group Health Plans and Health Insurance Issuers Under the Patient Protection and Affordable Care Act

Relating to Preexisting Condition Exclusions, Lifetime and Annual Limits, Rescissions, and Patient Protections; Final Rule and Proposed Rule. Fed Regist.

edocket.access.gpo.gov/2010/pdf/2010-15278.pdf. Accessed September 23, 2010.

24

Lifetime LimitsLifetime LimitsLifetime Limits

Annual LimitsAnnual LimitsAnnual Limits

Essential Health Benefits Defined1

2014

Ambulatory patient services

Emergency services

Hospitalization

Maternity and newborn care

Pediatric services, including oral and vision care

Mental health and substance abuse services

Prescription drugs

Rehab services

Laboratory services

Preventative and wellness services, including chronic disease management

34

“Essential Health Benefits” Include:““Essential Health BenefitsEssential Health Benefits”” IncludeInclude::

1. Affordable Care Act. govtrack.us/data/us/bills.text/111/h/h3590enr.pdf. Amended by Health Care and Education Reconciliation Act of 2010.

govtrack.us/data/us/bills.text/111/h/h4872enr.pdf. Accessed September 23, 2010.

Immediate Small Employer Tax Credits1

Phased in beginning in 2010Phased in beginning in 2010

Available to employers with fewer than 25 employees and average wages below

$50,000

Employers must contribute at least 50% of the total premium cost

Tax credits are provided on a sliding scale to small employers for the first 2 years that

the employer offers health coverage to employees

From 2010 to 2013, the credit is 35% of the employer’s premium contribution. In

2014, it rises to 50% of the employer’s premium contribution

1. Affordable Care Act govtrack.us/data/us/bills.text/111/h/h3590enr.pdf. Amended by Health Care and Education Reconciliation Act of 2010.


25

Tax Credits Help Small Employers Provide InsuranceTax Credits Help Small Employers Provide InsuranceTax Credits Help Small Employers Provide Insurance

Other Consumer ProtectionsPlan Years Beginning On or After September 23, 2010Plan Years Beginning On or After September 23, 2010

All plans (except grandfathered individual plans) are prohibited from denyingcoverage or excluding benefits for pre-existing conditions for children under 19 years old1

All plans are prohibited from rescinding existing coverage except in cases of fraud or material misrepresentation1

Non-grandfathered plans must cover certain preventive services with no cost-sharing (eg, no co-payments, coinsurance, or deductible)2

1. Requirements for group health plans and health insurance issuers under the Patient Protection and Affordable Care Act relating to preexisting condition exclusions, lifetime

and annual limits, rescissions, and patient protections; final rule and proposed rule. Fed Regist. edocket.access.gpo.gov/2010/pdf/2010-15278.pdf. Accessed September 23,

2010. 2. Interim final rules for group health plans and health insurance issuers relating to coverage of preventive services under the Patient Protection and Affordable Care Act.

Fed Regist. edocket.access.gpo.gov/2010/pdf/2010-17242.pdf. Accessed September 23, 2010.

26

Additional Consumer Protections Will Immediately Impact CoverageAdditional Consumer Protections Will Immediately Impact CoverageAdditional Consumer Protections Will Immediately Impact Coverage

Insurance Premium Review1

Starting 2010

Health insurance companies must report and justify premium increases to HHS and

the relevant state

Health insurance companies must post the premium increase justification on the

plan’s public Web site

Beginning in 2014, states can make recommendations to the Exchanges about

whether a health insurance company should be excluded from participation on the

Exchanges based on unreasonable premium increases

ACA provides $250 million in funding to assist states in developing a rate review

process


.govtrack.us/data/us/bills.text/111/h/h4872enr.pdf. Accessed September 23, 2010.

27

Insurance Premium Rate ReviewInsurance Premium Rate ReviewInsurance Premium Rate Review

HHS = Health and Human Services; ACA = Affordable Care Act.

Individual Coverage Mandate1

Effective January 1, 2014

29Version 2

Starting on January 1, 2014, all US citizens and legal immigrants must have some form of “minimum essential” health insurance coverage

The penalty for non-compliance increases each year and will be the greater of a percentage of household income or a flat dollar penalty per family member

–2014: 1.0% of household income or $95 per family member



–For all years, the flat dollar penalty is reduced by 50% for children under 18

The total penalty is capped at the national average premium for a bronze-level health

plan offered through the new health insurance Exchanges

1. Affordable Care Act. govtrack.us/data/us/bills.text/111/h/h3590enr.pdf. Amended by Health Care and Education Reconciliation Act of

2010. govtrack.us/data/us/bills.text/111/h/h4872enr.pdf. Accessed September 23, 2010.

Individual Mandate & Non-Compliance PenaltyIndividual Mandate & NonIndividual Mandate & Non--Compliance PenaltyCompliance Penalty

Individual Coverage Mandate1 (continued)Effective January 1, 2014

The following types of insurance are considered “minimum essential coverage” and will satisfy the mandated coverage requirement:

–Medicare Part A

–Medicaid

–Children’s Health Insurance Program (CHIP)

–State high-risk pools

–Tricare

–VA

–Employer-sponsored coverage

– Individual (non-group) health plans (purchased privately or through an exchange)

–Catastrophic plans (only if under age 30)

1. Affordable Care Act. govtrack.us/data/us/bills.text/111/h/h3590enr.pdf. Amended by Health Care and Education Reconciliation Act of

2010. govtrack.us/data/us/bills.text/111/h/h4872enr.pdf. Accessed September 23, 2010.

30

Forms of Minimum Essential Health Insurance CoverageForms of Minimum Essential Health Insurance CoverageForms of Minimum Essential Health Insurance Coverage

VA = Veterans Administration.

No penalty will be imposed on those who have gone without minimum essential

coverage for a period of less than 3 months

Some individuals are exempt from the coverage mandate, including:

– Prisoners

– Undocumented aliens

– Individuals living outside the United States

– Qualifying religious objectors

– Individuals with household incomes below the tax filing threshold

– Any individuals whom HHS determines to have suffered a hardship with respect to

the capability to obtain coverage


Mandate and Penalty Exceptions1




31

ExemptionsExemptionsExemptions

Longer-Term Insurance Market Reforms1

Health insurance companies must accept every individual and employer group that applies for coverage (“guaranteed issue”)

Health insurance policies must be renewed each year at the option of the policy holder (“guaranteed renewal”)

Premium rates may not vary based on health factors, except for tobacco use

Premium rate age bands are limited to a 3:1 ratio




32

Additional Consumer Protections Will Make Coverage More AccessibleAdditional Consumer Protections Will Make Coverage More AccessibAdditional Consumer Protections Will Make Coverage More Accessiblele

Longer-Term Insurance Market Reforms1

(continued)

Health insurance policies must offer standardized benefit packages that include coverage for “essential health benefits” as defined by HHS

Annual cost-sharing is limited to the thresholds applicable to health savings accounts (HSAs)

Plans may not exclude coverage for pre-existing conditions

Coverage for clinical trial participation is expanded

Plans are prohibited from imposing a waiting period of longer than 90 days before coverage is effectiveHHS = Health and Human Services.



govtrack.us/data/us/bills.text/111/h/h4872enr.pdf. Accessed September 23, 2010. 33

Benefit Packages Will be Subject to More StandardizationBenefit Packages Will be Subject to More StandardizationBenefit Packages Will be Subject to More Standardization

Starting in 2014, each state is required to operate an insurance marketplace,

called a health insurance Exchange, to facilitate the sale of affordable health

insurance to small employer groups and to individuals without access to employer-

sponsored plans

States may operate one Exchange to serve both the individual and small group

markets, or they may operate separate Exchanges

Individuals with access to employer-based coverage are generally not allowed to

purchase coverage through an Exchange unless the employee’s required premium

contribution is more than 9.5% of income or the employer’s plan covers less than

60% of medical costs

State Insurance Exchanges1



2014

35

Exchanges will Provide an Additional Marketplace for InsuranceExchanges will Provide an Additional Marketplace for InsuranceExchanges will Provide an Additional Marketplace for Insurance

A plan must be certified as a “Qualified Health Plan” (QHP) in order to be offered for

sale through an Exchange

QHPs must conform to 1 of 4 standardized coverage tiers (Bronze, Silver, Gold, and

Platinum) which vary based on the percentage of medical costs covered

QHPs must cover “essential health benefits” as that term is defined by Health and

Human Services (HHS)

QHPs must cap out-of-pocket costs at the health savings account (HSA) limit

Exchange-Related Requirements1



36

QHP Benefit Plan CertificationQHP Benefit Plan CertificationQHP Benefit Plan Certification

Exchanges will not establish or approve QHP premium rates

QHPs must submit the justification for any premium rate increase to the Exchange

prior to implementation and must post the justification on the QHP’s Web site

An Exchange can prohibit a plan from continuing to sell on the Exchange if the plan

has exhibited a pattern of excessive or unjustified premium increases

QHP = Qualified Health Plan.

Exchange-Related Requirements1 (continued)



37

QHP Premium RatesQHP Premium RatesQHP Premium Rates

Exchange Benefit Plan Tiers1

Plan Type

60

70

80

90



Percent of

Medical

Costs

Covered

38

QHP TiersQHP TiersQHP Tiers


The Federal government will offer financial assistance in the form of advance tax

credits to help low-income individuals pay for coverage through the Exchanges

Eligible individuals and families enrolled in an Exchange insurance plan will

have their monthly premium cost reduced by the amount of the credit

Premium credit amounts are calibrated to ensure that individuals and families do

not spend more than a fixed percentage of their household income on health

insurance policies purchased through the Exchanges

The Federal government will pay the premium subsidy amounts directly to the

Exchange QHP

Exchange Plan Premium Subsidies1



39

Advance Tax Credits Reduce Premium CostsAdvance Tax Credits Reduce Premium CostsAdvance Tax Credits Reduce Premium Costs

Exchange Plan Premium Subsidies1 (continued)



40

Percent of Federal Poverty LevelPercent of Federal Poverty Level Exchange Plan Premium Limit as a Exchange Plan Premium Limit as a

Percentage of Household IncomePercentage of Household Income

0 – 133% 2%

133% – 150% 3% – 4%

150% – 200% 4% – 6.3%

200% – 250% 6.3% – 8.05%

250% – 300% 8.05% – 9.5%

300% – 400% 9.5%

Above 400 % No Limit on Premiums Charged

Exchange Plan Premium Subsidy ScaleExchange Plan Premium Subsidy ScaleExchange Plan Premium Subsidy Scale

Exchange Plan Cost-Sharing Subsidies1

The Federal government will also offer financial assistance in the form of

subsidies to help individuals pay for Exchange plan cost-sharing requirements

(eg, deductibles, co-payments, coinsurance, etc)

Cost-sharing subsidy amounts are again based on a sliding income scale

The Federal government will pay any cost-sharing subsidy amounts directly to

the QHP




41

Out-of-Pocket Cost AssistanceOutOut--ofof--Pocket Cost AssistancePocket Cost Assistance

Exchange Plan Cost-Sharing Subsidies1

(continued)



42

Percent of Federal Poverty Level % of Out-of-Pocket Costs Paid for by

HHS Exchange Subsidy Program

0% – 133% N/A (Covered by Medicaid)

133% – 150% 94%

150% – 200% 85%

200% – 250% 73%

250% – 400% 70%

Above 400 % 0%

Exchange Plan Out-of-Pocket Cost Subsidy ScaleExchange Plan OutExchange Plan Out--ofof--Pocket Cost Subsidy ScalePocket Cost Subsidy Scale


Employers are not explicitly required to provide health benefits, but large employers

will incur a penalty if they do not offer coverage and/or any employee receives a

government subsidy for Exchange coverage

Employers who do not offer any employee health coverage will pay $2,000

multiplied by the number of full-time employees (excluding the first 30 employees)

Employers who provide some form of coverage, but the coverage is deemed to be

unaffordable to employees, will pay the lesser of:

- $2,000 times the number of full-time employees (excluding the first 30 employees); or

- $3,000 times the number of employees receiving coverage on the Exchange

Exchange Impact on Employers1

2014



43

Employer ObligationsEmployer ObligationsEmployer Obligations

Penalty AmountPenalty AmountPenalty Amount

Closure of Part D Coverage Gap1

In 2010, the Federal government will provide a one-time, tax-free payment of $250 for each

non-LIS beneficiary who reaches the coverage gap

Beginning in 2011, manufacturers will provide a 50% discount on brand-name drugs filled by

Part D plan enrollees in the coverage gap. Manufacturers must participate in the discount

program in order for their drugs to be eligible for Part D coverage

Between 2011 and 2020, plans must phase-down the beneficiary coinsurance requirement to

25% in the coverage gap, effectively eliminating the coverage gap by extending the initial

coverage limit

In 2011, beneficiaries will begin to pay reduced prices for drugs filled in the coverage gap

- Brand-name drugs: 50% coinsurance in 2011 phasing down to 25% in 2020

- Generic drugs: 93% coinsurance in 2011 phasing down to 25% in 2020

ACA = Affordable Care Act.



Phased-In Starting 2010

51

ACA Closes Part D Coverage Gap by 2010ACA Closes Part D Coverage Gap by 2010ACA Closes Part D Coverage Gap by 2010

Cost-Sharing for Brand-Name Drugs in the

Coverage Gap1

50% 50% 50% 50% 50% 50% 50% 50% 50% 50%

2.50% 2.50% 5.00% 5% 10% 15% 20% 25%

100%

50% 50% 47.5% 47.5% 45.0% 45% 40% 35% 30% 25%

0%

20%

40%

60%

80%

100%

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Manufacturer Plan Beneficiary

1. The Henry J. Kaiser Family Foundation. Explaining Health Care Reform: Key Changes to the Medicare Part D Drug Benefit Coverage Gap.

kff.org/healthreform/upload/8059.pdf. Accessed August 25, 2010.

52

7%14%

21%28%

35%42%

49%56%

63%75%

100%93%

86%79.00%

72.00%65.00%

58%51%

44%37%

25%

0%

20%

40%

60%

80%

100%

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Plan Beneficiary

Cost-Sharing for Generic Drugs in the

Coverage Gap1

1. The Henry J. Kaiser Family Foundation. Explaining Health Care Reform: Key Changes to the Medicare Part D Drug Benefit Coverage Gap. kff.org/healthreform/upload/8059.pdf.

Accessed August 25, 2010.

53

Long-Term Care—CLASS Act1

Establishes voluntary, opt-out, national long-term care benefit program

financed by enrollee premiums

Provides lifetime disability benefit for those enrolled at least 5 years

who have a functional limitation expected to last more than 90 days

1. Affordable Care Act. govtrack.us/data/us/bills.text/111/h/h3590enr.pdf. Amended by Health Care and Education Reconciliation Act of 2010.govtrack.us/data/us/bills.text/111/h/h4872enr.pdf. Accessed September 23, 2010.

2012

54

Community Living Assistance Services and Support ActCommunity Living Assistance Services and Support ActCommunity Living Assistance Services and Support Act

demystifying health care reform topics in health …...2011/08/03 · 5 learning objectives...

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