For those of you that do not keep up or try to keep up with health care reform and you want to get a general overview, this is for you. The following information comes from a call I was on last week from the National Association of Health Underwriters (NAHU). They are not your enemy, in fact, this organization which I am proud to be a part of, represents and fights for the rights of individuals and small businesses in regards to health care and health care reform. And for many of us, health care reform is most likely, the single most important piece of legislation that we have and will see in our lifetime. I will now do my best to give you a general understanding of some of the more critical issues, the differences between the House and Senate Bill on these issues and how the possible outcomes will affect us. I will also try to add some links that you can click on for more information and clarification.
So let me start off with a couple of things. As you already know, we have Bills that have past both the House and the Senate. In general, the Senate Bill is worded (legislative language) much better (will help) and this will be better understood as we dig deeper in today’s reiteration.
Now with a Bill this size, usually they (House and Senate) will put together a formal conference committee to work out their differences. For major Bills like this one, an open negotiation televised on C-SPAN is generally normal protocol. In fact, President Obama had stated it would be open to the public and broadcasted on C-Span, but that is another story. So now what we are seeing is a process called “Ping Pong”, where they go back and forth amending the two Bills until they have just the one Bill. This closed door process does make it a bit more difficult to influence or help to improve the language and ultimate outcomes however, there are still many things that we (NAHU – constituents) will be able to positively affect. In this Ping Pong process, although they will only need 50 votes on the final vote to pass, there are many hurtles up to that point which require 60 votes to move forward towards the final vote. Yesterday’s Republican victory in Massachusetts will make attaining that 60 required votes a bit more difficult, but certainly not impossible. If nothing else, it will make for some more intense (creative) dealings to get to that 60th vote needed to pass a final vote. So, in going back to my statement of 60 required to reach the final vote of 50, one example is the motion to proceed to the final vote, which still requires 60 votes in the Senate to get to the final vote. Their hope is to get this done by the State of the Union address on February 2md, but it seems nearly impossible, however, with Massachusetts lost, they may become even more desperate, so who knows.
Moving on to the House and the Senate Bill, it is interesting to note, that although the House and the Senate Bill have some things in common, they are very different in key areas. The House Bill tends to leave a lot more to the Secretary and would create various federal agencies and authorities (not good). The Senate Bill is much more respectful of the states, giving them more control to manage according to their state, not giving them new authority, but not duplicating what states have already done through more government bureaucracy (partly my interpretation). So the Senate Bill, although much still needs to be changed, is much better in terms of not creating a mass of new government agencies and basically, one Government Health ZAR. The Senate Bill is much better, but still does not get it right either. This is why it is so important to retain the states authority, because it allows a lot more work to be done to making the Bill more palatable and better legislation, and may even help consumers instead of increasing the cost of our premiums. By doing this, we can help to clarify the roles of the state. We can help to affect those programs that currently help in cost containment, those that are working to improve the overall good health of people. Things like disease management and claims and wellness related issues that are built in to plans. Unfortunately, many of the consumer online carrier portals consumers use now like wellness features, health coaches and the like, might not be able to be afforded and available anymore. More federal mandates and taxes drive up internal expenses and not lower them. Minimum Loss Ratio’s is another area of legislation that plays a crucial role in whether this can work, especially in the early years of transition.
Requiring insurance carriers to increase their minimum loss ratio immediately and at too lean a ratio could have many adverse affects and could quite possibly drive many of the smaller insurance carriers out of business all together. So again, it is especially critical in the early years as they are asked to immediately ad hear to stringent and unreasonable minimum loss ratios. This will require insurance carriers to reduce expenses and incur the cost of setting up new systems relative to the transition; so basically, it is old expenses, plus new expenses, plus the squeeze to make expenses less. Now you might be thinking, what does this have to do with me and why should I care about what the federal government is doing to regulate and run private insurance companies. Well, if reform (which this is a critical piece) is not done correctly, you will wind up with a SINGLE PAYOR; a wholly owned, US Government Insurance Company. You think it is bad now, let the government be your only choice for health care insurance, your one stop federally run insurance company. Scary! You may not understand minimum loss ratio, but it is important that insurance companies can transition in and not out, and at 85% which the House Bill has written, it will not work. We are asking that it be at a least 75% in the short term to make it work in the early years. It’s all in the details. In the same way, we will have insurance exchanges which again, it is critically important that these are placed in the hands of the state. The state which will utilize online portals, rather than one giant government exchange which will explode consumer costs. The language on the Senate side is much better and while there is room for improvement, it is definitely better. There also new plans created & non-profit plans (many of which have been tried and failed in the past) that will be introduced; hopefully they will be better. Just so you know what to possibly expect, these things are coming in one form or another if legislation is passed.
As consumers, some areas you will want to be aware of as it will affect us. Carriers will be asked to pay additional taxes in 2010. Big surprise! There is a good possibility that you will see increases on top of normal trend increases as they try to price for 2010 taxes that they will have to pay and those not collected from January. Insurance carriers pay taxes on the premiums you pay and a percent of that is included in our premium rates. Also, you need to be aware, that many of these new requirements (mandates) will be effective in 12 month’s, however some will be effective immediately and some in 6 months. So if passed, you need to be prepared. Another area that the NAHU has been involved with is the high risk pools that are currently in place in many states for those with pre-existing coverage because they help to stabilize the insurance markets
So high risk or guaranteed issue as it is sometimes called, does not start right away however, there is some additional funding and element in the bill that if your state does not have a high risk pool, that there will have to be something, some sort of structure, but how that will work is not clear. What we don’t want in those states without a high risk pool , is to create any new federal entities that will merely drive up the costs of premium but that they look to current structures already in place and working.
So as mentioned, there Is a lot of discussion about this individual mandate or personal responsibility which is simply just a requirement that everyone be covered in order to ensure that market reforms don’t cause people to wait until they get sick to get their coverage to make the cost skyrocket for everyone. This is one situation where the House language is actually better than the Senate language. But the main issue here which we need to be concerned is that both of them are very dependent on penalties that are associated with taxes. This is not a very effective way to get people in to the system if they don’t pay taxes, which believe it or not, there are a lot of them and there are too many ways to get out of it. There should be other kinds of provisions put in, like maybe Part B of Medicare and Part D (prescription drug coverage) for late enrollment penalties and some restrictions on when people can go in. So there are still some very weak areas in both versions of the Bill and there needs to be more work done in these areas. Small things like this are important in keeping costs low otherwise, people are going to go in only when they need coverage and that will explode costs. These are areas that make it more expensive and certainly not more affordable.
Age rating in the House is 2-1 and 3-1 in the Senate (originally it was 5-1 in the Senate which was a good number). This means that the cost of coverage for the oldest person being insured can only be 3 times the very youngest person being covered. Many states today are 7-1- to 9-1, and again, these extremes will cause unhealthy market conditions and set-up precedents that will not be sustainable. Another problem area between the House and Senate Bill is that of how insurance companies can pool their business. The Senate Bill keeps the whole individual market (whether its through an exchange or not) and the small group market regardless of place of purchase (exchange or not) separate and there is a provision in there that allows Insurance commissioner to combine the small group markets if its appropriate in their state (but its not a requirement that they do that). In contrast, on the House side, their idea is to put everybody together if they are fully insured, and particularly if they are in an Exchange and that will have a negative impact on costs. Lastly, just so you know, the Public Option is still in the House language but will most likely not stay in as they will not get the votes they need to get a Bill passed.
Things Employers Need To Know:
Employer Mandate and probationary waiting periods; there are differences in the House and Senate Bill as it relates to these requirements. As it stands now, the employer mandate are for those companies with more than 50 employees and what it says is that employers have to provide coverage or pay a $750 penalty per employee if just one of their employees is eligible for subsidies and goes and tries to get them to the Exchange. The subsidies will be significant for people that are eligible. It’s a pretty tough penalty and it is likely that most companies will find that they have at least one employee eligible for subsidies. NAHU was successful in getting these changed for part time and seasonal employees, but those that that work 30 hours or more will be considered full time averaged on a monthly basis; NAHU tried to get it to be averaged over a quarterly basis but were unsuccessful.
Additionally, businesses with high employee turnover and have 180 day waiting periods will not be allowed to do that anymore. If the employer has more than a 60 day waiting period to 90 day, the employer will have a $600 penalty per employee. So we will probably see most waiting periods drop down to 60 days even though 90 day will be allowed, but we don’t think that employer’s will want to pay the penalties. These things do not sound good, but they are much better than the House Bill.
For Self Funded Plans – They may not be affected to the extent of the fully insured plans, but there will be provisions such as auto enrollment procedures for companies over 200 employees. As it relates to the health insurance and new long term care insurance provisions, there will be new requirements and reporting required of employers, so don’t expect self funded plans to go untouched.
Changes That Would Go In To Effect Immediately:
Three things that are in the House Bill that could easily creep in to the Bill and will immediately affect all plans like reconstructive surgery needed for children with congenital deformities; this would have to be covered by all plans everywhere. Then on the group side, pre-existing could go to a one month look back and a three month exclusionary period in the first 12 months of transition. Also, pre-existing conditions due to domestic violence would be prohibited from exclusion, and that would be all plans and all market segments. These things would go in to play as soon as the Bill is passed.
Things That Would Go In To Effect Within Six Months:
These things would have to do with life time limits and annual limits. This will apply to the essential benefits package and will be a new benefits package that will be very broad and cover most preventative things from what we know thus far. Anything that would fall in to this essential benefits package would go in to effect in six months and would be only on new plans and existing plans would be grandfathered in. Also things that now have annual limits, like chiropractic limits. In the essential benefits package this would not be allowed after six months; the limits would go away. We are not sure what will be covered in the essential benefits package as of yet, but it will be wide spread (comprehensive) and costly.
Another six month feature is coverage of specific preventative benefit services with no cost sharing, similar to those that are now experienced in the HSA plan designs. This will be required of all plans with no cost sharing by the member and will be very prescriptive in the preventative benefits the carrier must cover. The HSA’s plans cover these things now, but adding this to all plans will obviously be very expensive. Elimination of pre-existing conditions for children under 18 years of age and would be required of all plans. Another feature is that coverage for dependent coverage would be required by insurance carriers and would extend the age to 26 years of age. Full Doc
There are many things that we all need to be concerned with this legislation and were not mentioned. These were just a few of the important ones and one’s that the National Association of Health Underwriter’s are working on. There are a lot more details on HSA restrictions which include over the counter medications, a $2500 dollar limit and the possibility of disqualification some of the higher deductible HSA plans as they would not be considered credible coverage under these new regulations. HSA DOC
Please, if you have any comments or questions, I will do my best to answer them, just send me an e-mail. My e-mail is [email protected].
