Volume II, Issue 4 – April
1
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, and to share our perspectives on modernization of the health care
system.
UnitedHealth Group Comments on Enactment of Health Care Reform
Bills
Following the enactment of the “Patient Protection and Affordable
Care Act” and the “ Health Care and Education Affordability Reconciliation Act”
, UnitedHealth Group President and CEO Stephen Hemsley stated, “UnitedHealth
Group is committed to ensuring that expanded access to quality care for
millions of Americans is achieved and sustained over time. We remain concerned
that any advances under the new law will be eroded by the unchecked
rise of health care costs that were not adequately addressed in the
legislation. We will continue to work with all stakeholders to tackle this
complex but critical issue.” For years, UnitedHealth Group has
focused on practical, proven and effective solutions to ensure accessible,
affordable and quality coverage for all Americans. Throughout the federal
health care reform debate, we engaged with government officials, policymakers
and the health care community to improve health care from a whole-system
perspective, offered constructive reform proposals, and provided data, insights
and best practices from across our enterprise. We support many of the elements
included in the new law, from the coverage expansions to the anti-fraud and
abuse initiatives to the incentives for the promotion of prevention and
wellness efforts. However, many of the reforms will only be sustainable if
there’s an effective individual responsibility requirement and the accelerating
cost burden on families and businesses is relieved. We know that the
modernization of health care is just beginning. Controlling cost growth across
the system is fundamental to creating a modern health system.
National Spotlight
President Signs Health Reform Bills
On March 30th, the President signed the “Health Care
and Education Affordability Reconciliation Act” that passed both the House and
Senate on March 25th. T he “Health Care and Education
Affordability Reconciliation Act” makes changes to the “Patient Protection and
Affordable Care Act,” which was signed into law by the President on March 23rd.
The CBO estimates that these two laws combined will cost $940 billion over ten
years and cover 32 million of the 54 million uninsured. Details of the newly
enacted health reform bills include:
·
Financing
of Health Reform: A 40% excise tax is placed on “high value”
employer-based plans (insured and self funded) valued at over $10,200 for
individuals and $27,500 for families starting in 2018 , with higher levels and
adjustments for the age and gender of workers and for high risk occupations.
Beginning in 2013, there is an increase in the Medicare FICA tax of 0.9% on
income over $200,000 for singles and $250,000 for couples and a new 3.8%
assessment is placed on unearned income for these income earners. Annual fees
are placed on health insurers (a total of $60 billion from 2014 to 2020 with
exemptions for certain non-profit Medicaid and Medicare plans) and
pharmaceutical companies (a total of $28 billion from 2011 to 2020). Starting
in 2013, a 2.9% sales tax is applied to medical devices, excluding eyeglasses,
hearing aids, and other “general goods” purchased over-the-counter. The
legislation also makes changes to 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 for plan years starting on or after six
months post 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 cover dependents to the
age of 26, prohibition of waiting periods exceeding 90 days, a requirement that
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 legislation 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 legislation sets up an
80% medical loss ratio (MLR) for individual and small group plans and an 85%
MLR for large group plans. 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
insured 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 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). Annual limits and pre-existing condition
exclusions are prohibited for insured and self funded plans. States can pass
legislation to form “Health Care Choice Compacts” to allow the purchase of
individual insurance across state lines.
·
Multi-State
Plans and CO-OPs: “Multi-State Plans” are created
in 2014 to compete with private insurers in state Exchanges. The Office of
Personnel Management (OPM) will enter into contracts and negotiate premiums and
other conditions with at least two private health plans (health plans may
voluntarily participate and at least one must be non-profit) to create
Multi-State individual and small group plans to be offered in every state by
2017. Start-up funding is also provided to establish non-profit member-governed
health plans (CO-OPs) in 2014 not currently in existence to compete with
private insurers and Multi-State Plans in Exchanges. CO-OPs and Multi-State
Plans must comply with the same rules as other plans in Exchanges. States are
not required to establish CO-OPs.
·
State
Exchanges: State-based “Exchanges” are established in
2014 for individuals without access to affordable group coverage (and not
eligible for Medicare or Medicaid), small groups to size 100 (states may limit
small groups to 50 and may increase beyond 100 starting in 2017), and CHIP
eligibles (beginning in 2015) if benefit and cost-sharing under a plan is
certified as appropriate for the population. State Exchanges are designed to
facilitate comparison shopping, enrollment, and subsidy administration and
certify plans for participation that meet established standards and rules,
including reasonable rate increases. Participation is voluntary.
·
Benefit
Plans: Beginning in 2014, 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) 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 30 and for those whom
a Bronze premium would exceed 8% of income). Individuals between 133% and 200%
of the federal poverty level without access to employer 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 as long as additional subsidy costs are
state paid. 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: Starting
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 minimum
requirements (“Bronze” plan or “Young Invincible” plan for those under age 30),
or pay a penalty. The penalty is the greater of a flat dollar amount ($95 in
2014 phased-in to $695 by 2016) or a percent of income (1.0% in 2014 phased-in
to 2.5% by 2016). 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. Individuals up to 400% of the federal
poverty level ($88,000 for a family of four) are eligible for premium and
cost-sharing subsidies for plans purchased through an Exchange. Employers are
not required to offer coverage, but those with 50 or more full-time employees
not offering coverage are required to pay a $2,000 fee per employee obtaining a
subsidized plan through an Exchange starting in 2014. Employers offering
coverage must pay up to a $3,000 fee per employee obtaining subsidized coverage
through an Exchange. Employers may exempt 30 full-time employees from the
penalty calculation. Those employers offering coverage must also provide
tax-exempt “free choice vouchers” to qualifying employees (whose premium
contribution would be between 8% and 9.5% of their income) to purchase coverage
through an Exchange that is equal to the contribution the employer would have
made to its own plan. Starting in 2010, low wage employers (average salary less
than $50,000) 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.
·
State
Waivers: States can seek a waiver from HHS starting in 2017 to adopt their
own rules in lieu of the new federal standards related to benefit requirements,
Exchanges, and coverage mandates as long as the state standards would result in
similar outcomes and not increase the federal deficit.
·
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 (95%
in 2017 phased-down to 90% by 2020 and thereafter). For states that have
already implemented a Medicaid expansion
for childless adults and parents, state spending on this
population is reduced by 50% in 2014 and over time state spending is reduced further
to equal that of non-expansion states by 2020. Upon enactment, states are
required to maintain existing Medicaid and CHIP eligibility. CHIP is extended
to 2015. If a state exhausts its federal CHIP funding in any given year,
CHIP eligibles may be moved into an Exchange. Beginning in 2015, states can
enroll CHIP eligible children into private coverage through an Exchange if the
benefits and cost-sharing are certified by HHS as similar to those under
CHIP.
·
Medicare:
The payment structure for Medicare Advantage is changed by setting
the 2011 Medicare Advantage payments at 2010 levels and phasing-in new payment
levels ranging from 95% of fee-for-service Medicare payments in high-cost areas
and 115% of fee-for-service Medicare payments in low-cost areas starting in
2012. Beginning in 2012, Medicare Advantage plans with high quality or an
improvement in quality are eligible for payment bonuses. By 2014, Medicare
Advantage plans are required have an 85% medical loss ratio. The Part D “donut
hole” or coverage gap is closed by 2020 by reducing the gap by $250 in 2010 and
reducing coinsurance to 25% for brand and generic drugs. Starting 2011,
pharmaceutical manufacturers provide a 50% discount for brand name drugs and a
7% discount for generic drugs purchased in the “donut hole” or coverage gap
under Part D. The income subsidy exclusion for employers offering “qualified
prescription drug plans” is eliminated in 2013. The legislation 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 B and an independent
“Payment Advisory Board” is established to report on system-wide health care
costs, access, and quality and recommend policy changes to slow the rate of
national health care spending growth and limit the rate of growth in Medicare
spending.
Watch for more information from UnitedHealth Group over the next
few weeks and months on the provisions and implementation of the “Patient
Protection and Affordable Care Act” and “Health Care and Education
Affordability Reconciliation Act.”
For more information on health reform and modernization, state
updates and copies of newsletters and reports visit: www.unitedhealthgroup.com/reform .
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