Volume I, Issue 14 – Nov. 30, 2009

UnitedHealth Group is pleased to bring you this issue of the Health Care Modernization News Flash to update you on health care issues under discussion in Washington, D.C. and in the states.

National Spotlight

Senate Releases Merged Health Reform Bill and Passes "Motion to Proceed"

On November 18th, leadership in the Senate released a bill entitled the "Patient Protection and Affordable Care Act" that merges legislation passed by the Health, Education, Labor, and Pensions (HELP) Committee in July and the Finance Committee in October. With a vote of 60 to 39, the Senate passed a "Motion to Proceed" on November 20th allowing debate to begin on the bill likely this week. Although the motion to start debate secured 60 votes, it is unclear whether Senate leadership will be able to garner support from 60 Senators to defeat a filibuster and allow a final vote on the bill. Disagreements persist on issues related to the public plan, abortion, immigration, financing, coverage expansion, and insurance market reforms that may prevent some Senators from supporting a final vote on the bill. The CBO estimates that this bill will cost $848 billion over ten years and cover 31 million of the 54 million uninsured. To pay for the cost of the bill, the Committee 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 (applies to self-funded and fully insured plans), sets a 5% tax on cosmetic surgery, increases the Medicare tax by 0.5% on income over $200,000 for singles and $250,000 for couples, reduces spending for the Medicare Advantage program, reduces provider payment rates under Medicare, secures rebates for Medicaid and discounts for Medicare Part D from pharmaceutical companies, and makes changes to HSA and FSA rules. Details of the Senate bill include:

• Insurance Market Rules Effective in 2010: Several insurance market rules take effect in 2010, including government review of health plan premiums, prohibition of lifetime benefit limits and "unreasonable" annual limits for all individual and group plans (insured and self funded), a requirement that plans (insured and self funded) that cover dependents cover children through the age of 25, prohibition of waiting periods exceeding 90 days (insured and self funded plans), a requirement that all individual and group plans (insured and self funded) cover preventive services without cost-sharing, and prohibition of coverage cancellation or rescission except in cases of fraud. Prior to the implementation of new market rules and state Exchanges in 2014, the Senate bill also establishes interim provisions that require 75% of individual and 80% of group market premiums be spent on medical care, create high risk pool provisions for individuals who can not obtain coverage due to health status, and establish a reinsurance program for employer coverage of early retirees.
• Insurance Market Rules Effective in 2014: Insurance market reforms that require guarantee issue and renewal, establish risk sharing mechanisms (funded in part by the 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, family composition, and geography 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 2017). States can pass legislation to form "Health Care Choice Compacts" to allow the purchase of individual insurance across state lines. "National Plans" are also established with uniform benefit packages not subject to state benefit mandates, unless states elect to opt-out. States can seek a waiver from HHS starting in 2017 to adopt their own rules in lieu of the new federal standards as long as the state standards would result in similar outcomes.
• Public Plan and CO-OPs: The Senate bill establishes a national public plan ("Community Health Insurance Option") in 2014 to compete with private insurers in state Exchanges. States may pass legislation to opt out of the public plan. Provider rates for the public plan are negotiated and providers are not required to participate. The Senate bill also provides start-up funding to establish non-profit member-governed cooperative health plans (CO-OPs) not currently in existence to compete with private insurers and the public plan in state Exchanges. CO-OPs and the public plan must comply with the same rules as other plans in state Exchanges. States are not required to establish CO-OPs.
• State Exchanges: The Senate bill establishes state-based "Exchanges" in 2014 for individuals without access to affordable group coverage (and not eligible for Medicare or Medicaid) and small groups to size 100 (states may limit small groups to 50 and may increase beyond 100 starting 2017). State Exchanges are designed to serve as facilitators of comparison shopping, enrollment, and subsidy administration and regulators of plan standards and rules. Participation is voluntary and state Exchanges "certify" or determine which health plans may participate.
• Benefit Plans: Individuals and small groups to size 100 (states may limit small groups to 50 and may increase beyond 100 with expanded Exchange eligibility starting 2017). have a choice of up to five plan types including "Bronze" (60% actuarial value), "Silver" (70% actuarial value), "Gold" (80% actuarial value), "Platinum" (90% actuarial value) and "Young Invincible" (catastrophic plan available for adults under age 30 and for those for whom a premium for a higher value plan exceeds 8% of their income). Individuals between 133% and 200% of the federal poverty level without access to employer-based coverage would be enrolled in a state-negotiated "Basic Plan" where available. HHS establishes and updates benefit plan definitions through a public process, but states may establish additional benefit rules. Out-of-pocket spending is limited to HSA limits for individual and group plans (insured and self funded). Wellness incentives up to 30-50% of the cost of coverage are allowed for group plans (insured and self funded).
• Coverage Mandates, Penalties, and Subsidies: In 2014, individuals are required to have coverage through a "grandfathered plan," a large group plan, a government program (Medicaid, Medicare, and the like), or through an individual or small group plan that meets or exceeds minimum requirements ("Bronze" plan or "Young Invincible" plan for those under age 30), or pay a penalty. Waivers of the penalty are allowed for Native Americans, those with religious objections, and individuals with a financial hardship defined as premiums exceeding 8% of income. A $95 penalty is effective in 2014 and phased-in to $750 by 2016 for adults (penalty is halved for children). Individuals up to 400% of the federal poverty level ($88,000 for a family of four) are eligible for premium and cost-sharing subsidies. Employers are not required to offer coverage, but those with 50 or more employees not offering coverage are required to pay a $750 fee for employees obtaining a subsidized plan through a state Exchange. Employers offering coverage are subject to a $3,000 fee for employees obtaining subsidized coverage through a state Exchange if the employer does not offer minimum "Bronze" benefits, does not pay at least 60% of the premium, and the premium is more than 9.8% of an employee's income. Employers are also assessed a $400-$600 fee per employee for imposing a waiting period. Low wage employers (average salary less than $40,000) with 25 or less employees are eligible for up to a 50% premium credit for two years if they pay for at least 50% of the premium.
• Medicaid and the Children's Health Insurance Program (CHIP): Medicaid eligibility is expanded to 133% of the federal poverty level for all individuals in 2014 with full federal funding of the expansion until 2017 (up to 95% federal funding thereafter that varies by state). States are required to maintain existing Medicaid eligibility levels. States also receive additional federal funding to cover kids under CHIP, but are allowed to transition enrollees to the Exchange if their federal allotment runs out.
• Medicare: The Senate bill changes the payment structure for Medicare Advantage by reducing payments, creating a competitive bidding process, and providing financial incentives for care coordination programs and quality achievement. Pharmaceutical manufacturers provide a 50% discount for brand name drugs purchased in the "donut hole" or coverage gap under Part D and the income subsidy exclusion for employers who maintain prescription drug plans for Part D eligible retirees is eliminated. The Senate bill also links provider payments to quality outcomes, creates pilot programs for coordinated care delivery models, establishes a new "Innovation Center" to test and implement new provider payment methods, and changes payment incentives to reduce hospital acquired infections and preventable readmissions. Annual provider payment updates are reduced for Medicare Part A and Part B and an independent "Medicare Advisory Board" is established to recommend policy changes to limit the rate of growth in Medicare spending and improve quality.

CMS Actuary Estimates Cost and Coverage Impact of House Health Reform Legislation

The Chief Actuary for the Centers for Medicare and Medicaid Services (CMS) recently released a report analyzing the cost and coverage impacts of the "Affordable Health Care for America Act" passed by the House of Representatives on Nov. 7. The report states that total national health expenditures will increase by 0.8% under the House language and that "the additional demand for health services could be difficult to meet initially with existing health provider resources and could lead to price increases, cost-shifting, and/or changes in providers' willingness to treat patients with low-reimbursement health coverage." The CMS Actuary also states that the House bill "would not have a significant impact on future health care cost growth rates." In addition to analyzing the impact of the House legislation on costs, the CMS actuary also estimates the impact on coverage. The reduction in Medicare Advantage rates to 100% of Medicare fee-for-service will result in less generous benefit packages for Medicare beneficiaries and enrollment in Medicare Advantage plans is estimated to decrease by 64%. The report also states that "smaller employers would be inclined to terminate their existing coverage, and companies with low average salaries might find it to their – and their employees' – advantage to end their plans."

See our Center for Health Care Modernization and Reform site for more information and for copies of newsletters.

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