PPACA (Health Reform) and How To Cut Medical Insurance Costs

Under Health Reform (PPACA) and currently in the Maryland Small Group Market (Under 50 Employees), medical plans are guaranteed issue.  This means that when a small group employer puts a medical plan in place there are no questions asked.  Plans are chosen, employees enrolled and thats it.  There are two main criteria used  to establish a rate:  Average age of the employees electing coverage and Location of the Company.  All things being equal, one employer located in the same county as another employer with the same average age will pay the exact same rate for the same medical plan through the same carrier.  The rates that the insurance carrier uses are filed with the State of Maryland and based on pooling.  What this means is that regardless of how much or how little you or your employees use the medical coverage you will pay the exact same rates as other companys with the same demographics because all claims are pooled together.  Now, if your company is sick, then this is a good thing because you are going to benefit from all the healthy people in the pool.  However, if your group is healthy, you are helping to pay for all those sick, unhealthy people.  This is where self-funding or partial self-funding comes in.  For small group plans, partial self-funding is a combination of traditional medical coverage, a claims fund, and stop-loss coverage.  Under a traditional plan you pay your premium whether you use the plan or not.  Under self-funded plans, if you don't use the plan, some of those premium dollars may come back to you.  For example, lets say a 40 employee group pays $200,000 in medical premium per year.  Under a partially self-funded plan $100,000 may go to a claim fund.  To protect your fund there are limits on claims.  One is a specific Stop-Loss Insurance, maybe $10,000 (for specific one-time claims) and Aggregate Stop-Loss Insurance (this amount is the total amount of claims that will be paid out before this coverage kicks in).  If all those dollars aren't used in the plan year, they are paid back to the employer.  If claims exceed this amount, under partially self-funded plans, employers costs are only limited to their premiums paid in.  These plans will become ever more attractive to healthy employer groups as Exchanges are set-up and younger healthy employees may be opting-out to go find cheaper coverage leaving the employer group with older, more costly, employees that will only drive up the costs of their coverage. 

Funding for Free Choice Vouchers Gets Cut in 2011 Budget

Under Health Reform if an employer has over 50 employees and offers "Minimal Essential Coverage", and the the cost for coverage is between 8% and 9.8% of an employees annual income, they, in 2014, could take those employer dollars to the Health Care Exchanges and purchase coverage under the "Free Choice Voucher Program".  Except, that under the latest budget negotiations, funding for the "Free Choice Voucher" has been eliminated.   This means that employees will no longer be able to take those employer health care dollars to the exchanges. 

Also, in agreements made, there will be several studies performed on the impact of several health care reform law provisions including: Impact on Premiums, Comparative Effectiveness (coming in 2012-Non-Government Entity used to gather and disseminate findings to health care decision makers) and Limited Benefit Plans. 

Gotta Light?

Fast forward to 2014.  We are now purchasing health insurance through exchanges.  Individual and small business will be able to go to a virtual site, with the help of a navigator (possibly a broker or producer) and purchase medical coverage.  Depending upon your household income, you may also be eligible for a subsidy to help pay for that coverage.  The coverage you will be applying for is guaranteed issue, no-questions-asked coverage.  As it stands now, there are only a couple things that could impact the amount that you pay for your plan:

1) Family Composition (Individual, Parent/Child, Husband/Wife, Family)
2) Where you live or Rating Area
3) Age
4) And the only question that has to do with health.......do you use tobacco?

If you use tobacco you can be charged up to a 50% higher premium than non-tobacco users.  I understand that tobacco users are at a much higher risk of having health issues and probably should pay more, but what about all the other behaviors that cause illness?  Why is there no rate increase for them?   How about people who are diabetic because of their poor diets?  How about people who use crack or heroin?   While the diabetic gets insulin and diet counseling and the drug addict gets substance abuse treatment and medications to curb the desire, the tobacco user gets a 50% rate increase instead of acupuncture, hypnosis and/or a prescription for Chantix.  In all fairness though, smoking cessation counseling is now included under preventive in all health policies.

You may be thinking to yourself that this is no different than the life insurance industry where typically a tobacco user pays at least 50% more on their coverage.  The main difference is that life insurance isn't guaranteed issue.  If you are a diabetic or drug user, you will probably be turned down entirely.  Since your health plan through the exchange will be guaranteed issue, you can't be turned down.

This is definitely a head-scratcher for me.

"To Be Or Not To Be?" 1099 Requirement under Health Reform (PPACA)

Killing the requirement that all business and property owners provide to anyone they paid more than $600 in goods and services a 1099, has made it quickly through the House 314 -112.   HR 4, was supported by every Republican and 76 Democrats.  The loss of income to the Fed is approximately 25 billion dollars.  Republicans wanted to pay for this by modifying repayments of health care tax credit overpayments to those beneficiaries of subsidized coverage who no longer qulaify for the benefit.  The bill has moved to the Senate where it is likely to be passed but has stalled a bit becuase they do not like the way the house Republicans wanted to pay for it.  Senate Majority leader Reid, D-Nev, announced he has postponed plans to bring the bill to the Senate floor because Democrats were unable to reach an agreement on the bill over concerns about the offsets used to pay for the bill. 

Both the House and Senate want this part of the law killed.  It is a huge burden on business.  Another piece of PPACA to be removed.  Wonder whats next?

Boring But Important-States Can Opt-Out of Health Care Plan (Mandates) 3 Years Earlier

"If your state can create a plan that covers as many people as affordably and comprehensively as the Affordable Care Act (PPACA) does, without increasing the deficit, you can implement that plan, and we'll work with you to do it."  This is was President Obama said while speaking at the National Governors Association 2011 Meeting in Washington, D.C.  on February 28th.  What this means is that states would be able to withdraw from some of the law's regulatory mandates in 2014 instead of 2017 through a "state innovation waiver".

In bipartisan support of "Empowering States to Innovate Act" it allows states to establish independent insurance regulatory models instead of Health Exchanges.  In addition it also allows those states to have no individual mandate and no penalties for those companies with more than 50 employees that do not meet PPACA requirements.  This could be of great interest to those states who filed a lawsuit against the PPACA's individual mandate, in Florida.

Even though there would be more flexibility for the states, they still would be required to offer policies that are as comprehensive and affordable as those offered through the exchange, cover as many residents as would have through PPACA and not increase the deficit.  In addition, certain mandates would need to stay, including: No lifetime limits, Dependents can stay on parents plan until age 26, Patients can choose any network physician and Carriers must spend at least 80% on Health Care and no more that 20% on administrative costs.

The questions I have would be how would the fed be able to police these plans?  In other words how would they ever be able to prove how many residents would have been covered under PPACA versus the states own version?  Also, states will have the opportunity to do more.  In other words they could go the other way and set-up a government run single-payer plan. 

Health Saving Accounts and Over the Counter Medications for 2011

Effective January 1, 2011 you are not allowed to use HSA (Health Savings Account) FSA (Flexible Spending Account), MSA (Medical Savings Account) or HRA (Health Re-imbursement Arrangement) 
dollars for over the counter medications, unless they are prescribed.  In addition, for HSA and MSA's, the penalty tax if you do, goes from 10% to 20% and 15% to 20% respectively.  I have no idea, with the exception of raising more revenue, why the federal government would either disallow the OTC medications from being coverable or increasing the penalty.  In addition, how are they going to police this?  It would seem the increase of government employees needed to oversee this would negate any funds risen.  Anyway, if you have your physician prescribe your over-the-counter medication you are able to use your HSA and other named accounts to pay for it.  You do not need to have it filled by a pharmacist, just have the prescription on file.  Also, see if you can have the doc write it for a yearly supply.

Florida Stopping Implementation of PPACA (Health Reform)

This is a follow-up to the previous post, District Court Judge Roger Vinson Just Said No, Too!  As a result of the recent federal court ruling, by U.S District Judge Roger Vinson, which declared PPACA or at least the Individual Mandate to be unconstitutional, Florida has stopped the implementation of the law.  Florida Governor Rick Scott said, "We're not going to spend a lot of time and money with regard to trying to get ready to implement that until we know exactly what is going to happen and I hope and believe that either it will be declared unconstitutional or it will be repealed.  Florida Insurance Commissioner Kevin McCarty stated, "PPACA, a major component of the federal Affordable Care Act package, is not now in effect in Florida."  In addition McCarty said that he told the director of HHS (Health and Human Services) Office of the Consumer Information and Oversight, that Florida would not be spending any of the funds it had been allocated to implement the insurance exchange program. 

Since there were 25 other states that also were part of the lawsuit, I wonder how many of them will make decisions, at the state level, to stop implementation until a final determination has been made?  Final determinations could take as long as two years.