Boom!

The House health care bill

Note:  this was a memo circulated by the “Government and Industry Relations Department” at a large company where my friend works (not an insurance company). It’s good for “anyone that is looking for info but not interested in sensational e-mails from either side of the political spectrum designed for fundraising and/or scaremongering.”

House Narrowly Passes Sweeping Health Care Reform Bill

On Saturday, November 7, the House of Representatives passed the Affordable Health Care for Americans Act (H.R. 3962) by a vote of 220-215. The bill was opposed by 39 Democrats and supported by one lone Republican.

Some key provisions in the bill include:

Public Plan Option: A government-sponsored public plan option based on health provider reimbursement rates to be negotiated by a new government agency, the Health Choices Commission (HCC). The government plan option would be one of multiple choices available to those who buy their insurance through an exchange. Insurance reform rules would apply to the government insurance plan. 

Insurance Exchange: Individuals without coverage and small employers would be eligible to purchase coverage through a newly established health insurance exchange. In Year One (2013), small employers with 25 or fewer employees would be eligible. The threshold for small employer eligibility would be increased to 50 employees in Year Two (2014) and 100 employees in Year Three (2015). 

Insurance Reforms: The bill mandates insurance reforms, beginning in 2010, including:

· No rescissions except for fraud;
· Guaranteed issue and renewability;
· Two-to-one limit on age-based premium variation;
· Community rating;
· No use of health history or preexisting conditions; 
· No annual or lifetime benefit limits;
· Dependent coverage for children extended through age 26; 
· Insurance companies could have no more than an 85 percent loss ratio. If loss ratios fall below the 85 percent level, the excess would have to be rebated to policyholders;
· As of the date of enactment, employers would not be allowed to reduce retiree health benefits unless they are also reducing benefits for active employees; and
· Health insurers would have to provide at least 90 days notice prior to a premium increase.

Disability/Long-Term Care Benefits: A new federal long-term care/disability program that would require employers to automatically enroll their workers (subject to an opt-out) in a program that would provide about $50/day in benefits in the event that the worker became unable (at least five years after beginning participation) to perform at least two activities of daily living. The employee-paid premium for the program — known as the CLASS Act — would be required to be actuarially sound. It is unclear at this time what the premium charge would be but it could exceed $100/month.

Individual Mandates: A mandate that will require all individuals to carry health insurance. Failure to comply with this rule would result in an additional 2.5 percent tax on modified adjusted gross income. The bill allows for hardship exemptions. 

Employer Mandate: Requires employers to offer and pay for health insurance for their workers. The rules are:

· Employers with payrolls of $500,000 or more would be subject to the mandate;
· Employers subject to the mandate would have to pay at least 72.5 percent of the cost of individual coverage, and 65 percent of the cost of dependent coverage. “Proportional” employer contributions to the premium would be required for “non fulltime” workers;
· Failure to comply with the mandate would result in a tax of eight percent of payroll in excess of $750,000. A two percent tax would apply to payroll starting at $500,000, and the tax would graduate, in two percent increments, up to a payroll size of $750,000; and
· There would be a two-year tax credit for small employers electing to offer health insurance to their workers. The credit would be equal to 50 percent of the cost of the insurance for employers with 9 or fewer workers. The credit would phase down for employers with 10 to 25 workers. It would not be available to employers with 26 or more workers.

Essential Benefits Package: In the insurance exchange, for health insurance to count as satisfying the health insurance mandates, it must include at least the “essential benefits package.” The rules include:

· The package would have to be offered on a nondiscriminatory basis;
· A new government entity, the Benefits Advisory Committee (BAC), would recommend the contents of the essential benefits package. The Department of Health and Human Services (HHS) would approve the BAC’s recommendations;
· Cost sharing would be limited, and could not exceed $5,000 in out-of- pocket spending for individual coverage; $10,000 for dependent coverage; 
· The essential benefits package would have to have an actuarial value of at least 70 percent;

National Risk Pool: Between date of enactment and the date the exchange is operational (2013) there would be a national high risk pool program. The bill authorizes $5 million to insure people who have been denied coverage due to preexisting conditions and/or who have been without coverage for “several months.” The program would end if the $5 million is used up.

Antitrust Exemption: The antitrust exemption available to health insurers and medical malpractice insurers would no longer be available for purposes of fixing prices, monopolizing markets, or dividing market territories. The provision also gives the Federal Trade Commission expanded enforcement authority.

Taxes (Offsets): The bill is principally offset by savings in Medicare (including Medicare Advantage) and new taxes. The new taxes include:

· An indexed annual cap of $2,500 on contributions to flexible spending accounts (FSAs);
· An increase from 10 percent to 20 percent in the penalty tax for early, non-medical expense withdrawals from health savings accounts (HSAs);
· Tax-free withdrawals from HSAs, FSAs and/or health reimbursement accounts (HRAs) could not be used for over-the-counter medicines, unless those medicines are obtained via prescription;
· A 5.4 percent surcharge on modified adjusted gross income in excess of $500,000 for individuals and $1 million for married couples filing jointly;
· Elimination of the tax deduction for employers receiving government subsidies for providing retiree prescription drug coverage;
· Tax parity for employer-provided health coverage for domestic partners; 
· Information reporting for payments made to corporations; and
· A 2.5 percent excise tax on the sale of medical devices (excluding resales and retail sales) for use in the United States.

Medical Malpractice: Limited incentive to states to set up alternatives to litigation in cases of medical malpractice (e.g., “early offer” or “certificate of merit” programs).

Interstate Sales of Insurance: Allows states to enter into compacts for purposes of sale of health insurance across state lines.

COBRA Extension: An extension of COBRA continuation coverage eligibility for the period between the health reform bill’s enactment and availability of insurance through the exchange (2013). This extension is separate from another proposal to extend the COBRA premium subsidy, which is under consideration.

Medicare: Cuts Medicare Advantage programs, and makes the Medicare Part D prescription drug program available to those in the “donut hole” — those with incomes between specified minimums and maximums — starting in 2010.

Wellness/Information Technology: Incentives for employers that offer wellness programs, so long as the programs are offered on a nondiscriminatory basis; and authorization for information technology programs.

In the Senate, Democratic leadership is waiting for a cost-revenue analysis from the Congressional Budget office on the latest version of its bill (the melded Finance and HELP committees version) before scheduling next steps. It’s unclear at this time when a Senate debate and vote will occur, however some are predicting before the end of November. Also unclear is if a final vote on a House-Senate conference bill would occur before year’s end. There are predictions that the process could extend into the beginning of the new year.