MARYLAND HB 443 AND SB 238 ALLOWS AGENTS AND CONSULTANTS TO BROKER HEALTH PLANS THROUGH PUBLIC EXCHANGES

According to the Legislative Wrap-Up (please see below) Maryland House Bill 443 and Senate Bill 238 allow agents and consultants to broker plans through the public exchanges.  This is wonderful news as it gives employers and individuals access to both private insurance programs as well as those offered through the public exchanges while maintaining their relationship with agents/consultants.  Hopefully, this will help spur competition and ultimately lower insurance costs making coverage more affordable for everyone.  Of course the Supreme Court may throw a wrinkle or two as to how the law will go into effect.  But  come January 1, 2014, I would assume that regardless of what the Supreme Court decides, Maryland will plow forward with their version of Health Reform.

The Legislative Wrap-Up Library and Information Services, Department of Legislative Services

Maryland Health Benefit Exchange Act of 2012
HB 443 (passed) makes various updates to Maryland’s Health Benefit Exchange laws. This Administration bill, as amended, expands the operating structure of the Maryland Health Benefit Exchange by, among other things, authorizing the exchange to contract with health insurance carriers in a certain manner, establishing the framework for the Small Business Health Options Program (SHOP) Exchange, and establishing navigator programs for the SHOP and Individual exchanges. The bill requires SHOP Exchange navigators to be licensed, Individual Exchange navigators to be certified, and insurance producers to be authorized to sell qualified plans in the SHOP and/or Individual exchanges. The bill also establishes a process for selecting the benchmark plan that will serve as the standard for the essential health benefits for health benefit plans offered in the small group and individual markets, both inside and outside the exchange.

The legislation has a general effective date of June 1, 2012, although some provisions do not take effect until January 1, 2014.

HAGGLING OVER HEALTHCARE-A SUPREME DECISION

Is making individuals pay for health insurance or pay a penalty constitutional?  That, over three days last week, was being argued in front of the US Supreme Court.  At this point it's any body's guess, however, a decision will be reached sometime in June. 

In additional to the individual mandate, what else will need to be taken out of the Health Reform Law in order to protect it from abuse?  At the very least, guaranteed issue coverage would need to be taken off the table.  And possibly open enrollment periods added in.  Without this there would be no way to protect from people jumping on and off plan when they needed care......which would be catastrophic. 

During the several days of testimony the more liberal Justices seemed to drive questions that would uphold the law while the conservative Justices were not as sure about congress' power regarding making people purchase health coverage.  The Justices include 5 Republicans and 4 Democrats. 

This is a very big deal to the Obama Administration.  He has even issued a "Challenge" to the Supreme Court to uphold the law.  If this law fails or at least a major portion (Individual Mandate), it could have devastating impacts on his re-election effort.

GAME TIME!....U.S .SUPREME COURT TO HEAR ARGUMENTS ON INDIVIDUAL MANDATE

Admit it, you thought I was talking about March Madness, right? The U.S. Supreme Court is set to hear arguments later this month regarding the constitutionality of the Individual Mandate.  If you recall, the individual mandate is that provision in PPACA (Health Reform) that states all people must have individual medical coverage or face a fine.  How the outcome could affect the way employers offer medical coverage could go several different ways.

If the Mandate is ruled constitutional, health reform will continue on its path, states will continue to set-up their exchanges and employers will need to make decisions whether to continue to offer coverage or send employees to the exchanges or a combination of both.  Employer groups of under 50 employees will see little or no monetary adverse consequence to sending employees to the exchange or not because there are no penalties to do so.  If the employer has over 50 employees, not offering some form of minimal essential coverage could cause fines and penalties levied on them.  There are decisions, especially for employers under 50 employees, if its financially prudent to shut down their medical plans and send all employees to the exchanges.  There are schools of thought that for some employers, in order to stay competitive, they will need to continue to offer employer sponsored coverage.

If the Mandate is ruled unconstitutional there is no requirement for employees or anyone else to elect medical coverage.  Since the individual mandate is a guard against "adverse selection" and allows risk to be spread among everyone, it could potentially be the death of the health reform law as it is written.  Since there are no pre-existing condition exclusions and individuals would be able to come onto plan when they wanted, mostly the people electing coverage would be those that needed it.  In other words there is no incentive, or dis-incentive not to carry coverage.  So the risk pool would be made of mostly sick people and eventually would make the cost of coverage unaffordable leaving us in a much worse place then we are now. 

If the individual mandate was removed, other provisions like no pre-existing condition limitations may need to be adjusted to keep people from hopping on-plan simply when they need coverage.  Some thoughts could be limited open enrollment periods, higher premiums for those outside of this period, etc. 

In all, health reforms are needed.  Forcing people to carry coverage may or may not be a good thing.  As far as employers are concerned there is much to keep our eye on in the upcoming months as we draw closer to full implementation of health reform.

HOW TO BEND THE COST CURVE FOR MEDICAL COVERAGE

The following is from an earlier post but as we get closer to the implementation of the exchanges the information is even more important.  Many of these types of partially-self funded plans have included wellness provisions and many other value added services.  In addition, for groups that are relatively healthy, can significantly drive down the cost of health care coverage with no risk to the employer.


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. 

PPACA....IT'S TIME.....REPORTING HEALTH COVERAGE COST ON W-2

The provision that required employers to report the cost of Medical, Dental and Vision coverage was supposed to go in effect for reporting year 2011.  However, that was delayed and the IRS has issued guidance for reporting these amounts (2012-9) for 2012 W-2's.

In a nutshell, the IRS stated that all employers who have issued more than 250 W-2's will be required to show the value of the employer sponsored medical, dental and vision coverage on their employees 2012 W-2's.  The cost of coverage does not include contributions made to a Health Savings Account (HSA), Medical Savings Account (MSA) or Health Reimbursement Arrangements.

In calculating the cost of coverage to be reported, the IRS indicated that this amount would be the same amount used to calculate the COBRA cost, not including the 2% administration fee, if any.

Those employers who file less that 250 W-2's are exempt from this provision at least through 2012.

The big question is why does the IRS want this information?  They state it's for informational purposes only.  Two thoughts:  This could be a way for the Fed to determine if their is coverage in place in regards to the "no coverage penalty" or a way for the Fed to tax those "Cadillac Plans" in 2018.

PPACA-HHS DEFINES "ESSENTIAL HEALTH BENEFITS"

In December the Department of Health and Human Services outlined proposed policies defining what exactly are "Essential Health Benefits" to be included in health plans.  All insurance policies must cover these services in order to be certified and offered in the exchanges.  Below are a list of those services:

Ambulatory Patient Services
Emergency Services
Hospitalization
Maternity and Newborn Care
Mental Health and Substance Abuse Disorders
Prescription Drugs
Rehabilitative and Habilitative Services
Lab Services
Preventive and Wellness Services, Including Chronic Disease Management
Pediatric Services, Including Oral and Vision Care

Each state would need to select a "Benchmark Plan" which could include at least all of the services above.  Could be from the largest plan in the state, largest state plan, largest federal plan, largest hmo plan offered in state.  This is the HHS's way of saying we are flexible.  If the state does not elect their own, the default benchmark plan will be the small group plan with the largest enrollment in the state. 

This "benchmark plan" is not to be confused with "Minimal Essential Coverage" which if you have more than 50 employees, could determine whether your health plan could set you up (or help you avoid) a big penalty from the fed. More to come later on that...........

So basically this means that all health plans would need to include an array of services in each of those ten areas identified in order to be offered through the state exchanges. 

MERRY CHRISTMAS!!!!!!!!!!!!!!!

I would like to take a moment this Holiday Season and wish you and your family a Very Merry Christmas and prosperous 2012.  Although most of us are happy to see 2011 come to an end, as it has been a trying year for many, I hope you will join me in counting the many blessing God has bestowed upon us.

My Holiday prayer is for success and health, happiness and prosperity for you and your loved ones.

All the best to you and your families.

                                                                          

Ben

Brooks Benefit Services, LLC