Industry News
Senate Health Reform Bill
On December 24th, with a vote of 60 to 39, the Senate passed the “Patient Protection and Affordable Care Act” after nearly one month of floor debate. A 383-page manager’s amendment was added to the original bill containing a variety of provisions to secure the support of 60 Senators, thus allowing a final vote on the bill.
Here are some details of the Senate Bill:
Cost Estimates
The CBO estimates that this bill will cost $871 billion over ten years and cover 31 million of the 54 million uninsured. To offset the cost of the legislation, the bill places a 40% excise tax on “high value” employer-based plans (insured and self funded) valued at over $8,500 for individuals and $23,000 for families, places annual fees on pharmaceutical companies, medical device manufacturers, and health insurers (excluding some non-profit plans), increases the Medicare FICA tax by 0.9% on income over $200,000 for singles and $250,000 for couples, changes HSA and FSA rules, increases the threshold for individual tax deductibility of medical expenses to 10%, sets a 10% tax on tanning bed services, reduces spending for the Medicare Advantage program, reduces provider payment rates under Medicare, and secures rebates for Medicaid and discounts for Medicare Part D from pharmaceutical companies.
Insurance Market Rules Effective Within Six Months of Enactment: Several insurance market rules take effect within six months of enactment, including review of health plan premiums by state departments of insurance and HHS, prohibition of lifetime benefit limits and “restricted” annual limits, a requirement that plans that cover dependents cover children through the age of 25, prohibition of waiting periods exceeding 90 days, a requirement that all individual and group plans cover preventive services without cost-sharing, prohibition of pre-existing condition exclusions for children under 19, and prohibition of coverage cancellation or rescission except in cases of fraud. Prior to the implementation of new market rules in 2014, the bill also establishes high risk pool provisions for individuals who can not obtain coverage due to health status and creates a reinsurance program for employer coverage of early retirees. Provisions related to lifetime and annual limits, dependent coverage, waiting periods, preventive services, and retiree reinsurance apply to insured and self funded plans.
Insurance Market Rules Effective in 2011:The bill sets up a 80% medical loss ratio (MLR) for individual and small group plans and a 85% MLR for large group plans. Certain non-profit plans must meet higher MLR standards to be exempt from the annual fee on health insurers. The definition of small group follows current state law until 2014, when small group is defined as 100 employees unless a state limits the definition to 50 employees before 2017. These requirements apply to health plans inside and outside of Exchanges, including “grandfathered plans.”
Insurance Market Rules Effective Starting in 2014: Reforms that require guarantee issue and renewal during an open enrollment period, establish risk sharing mechanisms (partly funded by insured and self funded health plans), prohibit annual limits (insured and self funded), prohibit pre-existing condition exclusions as well as premium variations based on health status, and limit premium variation to tobacco use, age (3:1 band), geography, and family composition apply to individuals and small groups to size 100 (states may limit small groups to 50 and may increase beyond 100 with expanded Exchange eligibility starting in 2017). States can pass legislation to form “Health Care Choice Compacts” to allow the purchase of individual insurance across state lines.
