everything you need to know about health care reform (but are afraid to ask)

Copyright 2010

Everything You Need to Know About Health Care Reform

(But Are Afraid to Ask)

Barry F. Rosen, Esq.Catherine A. Bledsoe, Esq.

Cynthia A. Shay, Esq.

233 E. Redwood StreetBaltimore, Maryland 21202

410-576-4224 • [email protected]

Health Care Reform

• Patient Protection and Affordable Care Act of 2010 (PPACA)– Passed by Senate on Dec. 24, 2009– Passed by House on March 21, 2010– Signed March 23, 2010

• Health Care and Education Reconciliation Act of 2010 (Reconciliation Act)– House passed with PPACA to eliminate or modify

certain provisions of PPACA– Signed March 30, 2010

A Little Bit of Everything

Introduction

Impact on Employers & Medicaid Expansion

Impact on Insurance & Tax Changes

Quality & Cost Containment

Health Care Reform

What are the requirements on employers?

How has Medicaid been expanded?

Employers – Overview

• New programs and incentives

• New employment-related requirements

• New requirements for group health plans

• 2014 reforms

• Reporting and disclosure

requirements

Employers – New Programs

Temporary Reinsurance Programfor Early Retirees (Sec. 1102)

• $5 billion reinsurance fund for employer-based plans that provide coverage for eligible early retirees (pre-Medicare retirees ages 55 through 64)

• Fund reimburses participating plans 80% of the cost of benefits provided per enrollee in excess of $15,000 and below $90,000

• Employers must apply to HHS to participate


Small Business Tax Credit for Providing Employee Health Insurance (Sec. 1421)

• Qualified small employers (no more than 25 FTEs; average salary ≤ $50,000)

• Tax credit of up to 50% (35% for tax-exempt) of employer’s contribution toward cost of health insurance for employees


Closing the Donut Hole in Medicare Part D Prescription Coverage

• Donut hole between $2,830 and $6,440

• Effective 2010 – $250 rebate (Sec. 3315)

• Effective 2011 – 50% discount on brand name drugs and additional discounts and generic drug coverage (Sec. 3301)

• Effective 2013, repeal of Medicare Part D subsidy deduction (Sec. 9012)

Employers – New Requirements

Reasonable Unpaid Breaks for Nursing Mothers (Sec. 4207)

• Employer must give nursing mothers reasonable break times to express milk

for one year after child’s birth and must provide a private place, other than a bathroom, for this purpose

• Employers with fewer than 50 employees may be exempt if requirement would impose an undue hardship


Whistleblower Protection (Sec. 1558) Employer cannot discharge or discriminate against employee because employee

• receives federal tax credit or subsidy

• provided, or is about to provide, information relating to a violation or what employee

reasonably believes to be a violation of Title 1 of PPACA

• objects to or refuses to participate in any activity employee reasonably believes to be a violation


Simple Cafeteria Plans for Small Employers (Sec. 9022)

• Effective 1/1/2011

• Eligible small employers (100 or fewer employees in either of last two years)

• Simple cafeteria plan to provide employees with tax-free benefits

• Exempt from nondiscrimination requirements applicable to cafeteria plans of larger employers

Employers – 2014 Reforms

“Play or pay” mandate (Sec. 1513)• Large employers (at least 50 FTEs)• Offer “minimum essential coverage” or pay

penalty of $2,000 per FTE (minus first 30 FTEs)


Penalty for offering coverage that does not

satisfy minimums:

$3,000 per FTE who receives federal subsidy; maximum penalty of $2,000 times total number of FTEs (minus first 30 FTEs)


“Free choice vouchers” (Sec. 10108)

• Offered to qualified employees

• Cost is 8% – 9.8% of household income

• Household income ≤ 400% FPL

• Doesn’t participate in employer’s plan

• Employee uses voucher to purchase alternative coverage through exchange


Automatic enrollment (Sec. 1511)

Required for employers

with over 200 FTEs offering

health coverage; subject

to opt-out


Expanded Wellness Incentives

• Employers may offer employees incentives of up to 30% of premium cost for participating in a workplace wellness program and meeting healthcare-related standards (HHS could permit incentives up to 50%)

• $200 million program to award grants to small employers (< 100 employees) to initiate workplace wellness programs (Sec. 10408)

Employer – Reporting Requirements

Reports to the Federal Government

• 2011 – Report cost of employer-sponsored health, dental, and vision coverage and employer HSA and HRA contributions on employee’s W-2 form (Sec. 9002)

• 2014 – Report health insurance coverage information for each participant and beneficiary (Sec. 1514)

• 2018 – Report excess amounts subject to “Cadillac Plan” excise tax (Sec. 9001)

Employer – Reporting Requirements

Disclosures to Participants

• March 2011 – HHS to draft standards for summary of benefits and explanation of coverage (Sec. 1001)

• March 2012 – Employers provide summary of benefits and explanation of coverage consistent with new standards (Sec. 1001)

Employer – Disclosure Requirements

Notices to Participants – Effective 2014

• Explanation of exchange coverage options and premium subsidy rights (Sec. 1512)

• Notice of health insurance coverage information employer provided to IRS (Sec. 1514)

Medicaid Expansion

How is Medicaid expanded?

• Provides a national floor for coverage

• Eliminates exclusion of childless adults from coverage

• Provides states with significant new federal resources to fund the expansion

• Provides coverage to an additional16 million by 2019

Medicaid Expansion

Who is eligible?

• National floor of 133% FPL in 2014

• No categorical restrictions for those under 65

• Those eligible as of 3/23/2010 continue to be eligible until 2014 (adults) and 2019 (children)

• Those with incomes between 133% and 400% FPL are eligible for subsidies through state-based Health Benefit Exchanges

Medicaid Expansion

How is the expansion financed?

• 100% federal financing for the newly eligible from 2014 through 2016 (phased down to 90% by 2020)

• States receive current match rates for those currently eligible

• States that have already expanded eligibility to adults receive phased-in increase

Medicaid Expansion

What benefits will Medicaid cover?

• Newly eligible adults get benchmark package that meets minimum essential health benefits

• States can provide more comprehensive packages

• The elderly and disabled continue to receive broader package

Medicaid Expansion

How is access to care improved?• States must make it easier to enroll

• Medicaid payments for primary care physicians and services are increased to 100% of Medicare rates for 2013 and 2014 (with full federal financing for increase)

• Significant investments in community health centers

• $100 million in grant funding for states to establish programs to help recipients cease tobacco use, control weight, lower cholesterol and blood pressure and/or avoid or improve management of diabetes

Medicaid Expansion

What happens to CHIP?

• Provides funding through 2015

• Provides authority through 2019

• Requires states to maintain eligibility standards for children in Medicaid and CHIP through 2019

Medicaid Expansion

What will the expansion cost?• $434 billion federal cost for coverage-related

changes 2010-2019

• $8.3 billion federal cost for increased payments to primary care physicians

• $6.09 billion federal cost for Community First Choice Option

• $20 billion increased state cost 2010-2019

Medicaid Expansion

What are the savings?

• Medicaid prescription drug coverage ($38.14 billion)

• Reduction in Medicaid disproportionate share hospital ($14 billion)

Health Care Reform

• Individual responsibilities/subsidies

• Changes to private insurance

• Health insurance exchanges

• Financing

Data Sharing

• Creation of “new program”

• Data sharing/coordination between– IRS– HHS– State Insurance Commissioners– State Exchanges– Employers– Private Plans– Employees

Individual Responsibilities

• Starting in 2014 everyone must have “essential minimum coverage”– Government programs, employer coverage,

grandfathered plans, exchange plans

• Persons exempt– prisoners, undocumented aliens, religious

objectors

• No coverage = tax penalty (“shared responsibility payment”)


“[the mandate] . . . will broaden the health

insurance risk pool to include healthy individuals . .

. [and] is essential to creating effective health

insurance markets in which improved health

insurance products that are guaranteed issue and

do not exclude coverage of pre-existing conditions

can be sold”


Penalties• Penalties phased in over 3 years, max $695 or

2.5% of income• Average cost of policy?• Not paying is not a crime• IRS may not use liens or levies to collect• Undocumented aliens not subject to mandate

– “The [mandate] achieves near-universal coverage. . .”

Individual Subsidies

• Premium credits to purchase insurance through a health insurance exchange

• Eligible - income between 100% - 400% of FPL

• Sliding scale, credit = excess of premium over percentage of monthly income, which varies from 2% to 9.5%

• Credits may be paid in advance

Individual Subsidies

Subsidies• Also may be eligible for cost-sharing subsidies

• One-Third to Two-Thirds based on FPL

Changes to Private Insurance


Temporary Risk Pool• Temporary national high risk pool for people with pre-

existing conditions– Uninsured for 6 months

– Subsidized premiums

– Ends 2014 when insurance exchanges come in

• Employers and insurers must reimburse pool for medical expenses incurred forthose people they “encouraged”to leave their plans

• Effective immediately


Grandfathered Plans

• Generally plans in effect on March 23, 2010, and plans maintained pursuant collective bargaining agreements

• PPACA exempted from most reforms• Reconciliation Act made them subject to certain

reforms (prohibitions on excessive waiting periods, lifetime limits, rescissions, and extensions of dependent coverage)


Immediate Changes (by 9/23/10)

All Individual and Group policies must:

• Offer dependent coverage for dependents under 26 (married or not)

• May not rescind coverage except for fraud• Applies to grandfathered and non-grandfathered

plans


More immediate changes…• Coverage for preventive health and

immunizations (without cost share)• No discrimination in favor of highly compensated

employees• Implement appeals process with external review• Patient protections (primary care, emergency

room visits, OB and GYN care)• Apply to non-grandfathered plans only


Lifetime and annual limits• No lifetime limits on benefits

– Effective 9/23/2010, grandfathered/non-grandfathered

• No annual limits– Effective 1/1/2014, non-grandfathered and

grandfathered group plans– Restricted annual limits prior to 2014

• Both only apply to essential health benefits


Preexisting Condition Exclusions

• 9/23/10, prohibited for children under age 19

• January 2014, prohibited generally

• Applies to non-grandfathered plans and grandfathered group plans


Clinical Services - Rebates

• Effective 9/23/2010– Plans required to report loss ratios and proportion of

premiums spent on clinical services, quality and other

• Effective 1/1/2011– Rebates to consumers if premium spent on costs

other than clinical services and quality is less than • 85% for large group plans• 80% for individual and small group plans


Quality of Care• Beginning 1/1/2012, plans must report on

whether their benefits and policies satisfy four criteria:

1. Improve health outcomes

2. Prevent hospital readmissions

3. Improve patient safety and reduce medical errors

4. Improve wellness and health promotion

• No gun control


Changes effective January 1, 2014

Changes in Private Insurance

Fair Health Insurance Premiums

• Individual and small group markets (not grandfathered)

• Premium rates may vary only by family structure, rating area, age (ratio of 3 to 1), and tobacco use (ratio of 1.5 to 1)

• If state allows large group in Exchange, also applies to large group


Guaranteed availability of coverage

• Each health insurer that offers coverage in the individual or group market in a State must accept every individual and employer in that State that applies for coverage

• Must also continue in force such coverage at option of plan sponsor or individual

• May restrict for open or special enrollment

• Non-grandfathered only


No discrimination on health status

• May not set eligibility based on health status, claims experience, medical history, or genetic information

• Employers may vary insurance premium subsidies up to 30% for employee participation in wellness programs

• Non grandfathered only


Comprehensive Coverage

• Individual and small group plans must include coverage for essential health benefits determined by Secretary

• Limits cost-sharing

• Grandfathered plans excluded


Other changes effective 2014

• No preexisting conditions (for everyone)

• Non-discrimination in health care

• No waiting periods over 90 days (group plans only)

• Coverage for participation in clinical trials

Health Benefit Exchanges


American Health Benefit Exchanges

• Each state must have an exchange for individuals and small businesses (may combine into one) by January 1, 2014

• Beginning in 2016, states can create Health Care Choice Compacts to facilitate purchase of individual insurance over state lines


• Exchanges to be administered by government agency or non-profit

• Exchanges only open to qualified health plans (QHPs)

• Funding available to states to establish exchanges – Begin by 3/23/11– End by 1/1/15


Qualified Health Plans (“QHPs”)• Requirements:

– Certified by a state exchange (secretary to set standards)

– Must offer package of Essential Health Benefits– Insurer must be licensed in exchange state– One silver and one gold plan in each exchange– Insurer must agree to charge same premium for QHP

whether offered directly or on exchange


Exchange certification of QHPs

• Secretary to set standards, such as marketing, network adequacy, inclusion of essential community providers, quality improvement, uniform forms, and standardized benefit presentation format for consumer comparisons

• Exchanges to encourage incentives for improved health outcomes such as quality reporting, care coordination and chronic disease management (“medical home” model), and evidence-based medicine


Essential Benefit Package• Set by Secretary

– Ambulance, emergency, prescription drug, mental health, rehabilitative and habilitative, maternity, laboratory, wellness and preventative

– What would be in “typical” employer plan• Benefits may not discriminate based on age,

disability or expected length of life• States are discouraged from requiring more

benefits – if require them, state must pay for them


Exchange for Small Business (Small Business Health Options Program (SHOP)

• For employers with from 1 to 100 employees– States can elect to change 100 to 50 until 2016– Once in exchange employer can stay even if grows

• To participate, must make all full-time employees eligible for coverage

• Beginning in 2017, states may open up to larger businesses


Individual Market Exchange• To qualify for an Exchange QHP, individual

must:– Live in exchange state– Not be incarcerated – Be a citizen or alien lawfully in country for entire

enrollment period


Risk Pools• For each insurer, all individual market

enrollees in State are considered one risk pool• All small group enrollees (except

grandfathered plans) are considered one risk pool

• Exchange and direct offered pooled together


State Flexibility• States may contract to offer standard health plans to low

income individuals in lieu of offering coverage through exchange

• HMOs, health insurers or network of health care providers eligible to offer standard plan

• State must demonstrate that premiums do not exceed Exchange premiums for silver plans

• HHS to provide funding at 95% of premium tax credits and cost share subsidies under Exchange

Financing

Estimated Costs

• Cost of coverage components$940B over 10 years

• Discretionary spending $115B

• All in cost of $1.2 trillion over 10 years

• Reduce the deficit by $143B over 10 years

Financing

Financing

Costs to be financed by:

• Savings in Medicare and Medicaid• Increases to Medicare Tax• Excise tax on “cadillac plans”• Other excise taxes• Fees on insurance and drug companies

Financing

New FICA Taxes

• Effective 2013• Additional .9% of employee portion of Medicare

tax on income over $200k/$250k– Also applies to self employed

• New 3.8% Medicare tax on investment income for high income individuals, estates, and trusts– Tax imposed on lesser of investment income or

excess income over threshold

Financing

Excise Tax on Cadillac Plans

• Effective for tax years after 12/31/2017• 40% excise tax on employer-sponsored high

cost plans– Value over $10,200 individual or $27,500 family– Additional value threshold for retired or high risk jobs– Tax on excess value over threshold

• Tax imposed on the issuer/plan administrator

Financing

Taxes on Individuals• Imposed on those without insurance• Phased in over 3 years

– 2014 $95 or 1% of income– 2015 $325 or 2% of income– 2016 $695 or 2.5% of income

• No penalty if premiums from lowest cost plan > 8% of income, or income below federal tax filing levels

Financing

Reinsurance Fees• States to establish reinsurance program• Premiums collected from insurers and group

health plans to be paid out to plans that cover high risk individuals in the individual market

• Aggregate payments - $10B for 2014, $6B for 2015, and $4B for 2016 and after

• Additional $2B in 2014, $2B in 2015 and $1B in 2016 for general fund

Financing

Pharmaceutical Industry Fees• Beginning 2011, annual fee on drug

manufacturers and importers based on sales– $2.5B in 2011, $2.8B in 2012 and 2013, $3B in 2014-

2016, $4B in 2017, $4.1B in 2018 and $2.8B after 2018

• Non deductible• Does not apply if sales < $5M

Financing

Health Insurance Industry Fees• Beginning in 2014, annual fee on health insurers

– Excludes self funded plans, government plans

• Allocated based on premiums written, only to insurers with net premiums > $25M– $8B in 2014, $11.3B in 2015 and 2016, $13.9B in

2017, and $14.3B in 2018 and beyond (adjusted for rate of premium growth)

• Non deductible

Financing (Taxes)

Other New Excise Taxes and Fees• 2.3% tax on sale of taxable medical devices

(effective 1/1/2013)

• 10% tax on indoor tanning services (effective 7/1/10)

• 5% tax on elective cosmetic surgery (effective 7/1/10)

• $2 participant fee for insured and self-insured plans (for plan years ending after 9/30/12)

Financing

Other Tax Changes• Increase in income threshold for claiming

medical expense deductions – from 7.5% of AGI to 10% of AGI, for tax years after 12/31/2012

• Limitation on excess remuneration paid by health insurance providers– Deductibility of executive compensation generally

limited to $500,000 per year

Financing

Other tax changes…• Tax on distributions from HSAs not used for

medical expenses increased from 10% to 20%

• Tax on distributions from Archer MSA’s not used for medical exp. increased from 15% to 20%

• Limitations on health FSAs limited to $2500 per year

• Effective after 12/31/2012

Other New Initiatives

• Investment in training programs for primary care doctors, nurses, other health professionals

• Investments in community health centers

• Expansion of loan programs for health students

• Establishment of non-profit institute for research on clinical effectiveness of treatments

Quality & Cost Containment

1. New Programs

2. New Reimbursements

3. Fraud & Abuse

New Programs

3022 – Accountable Care Organizations

ACO becomes accountable for the quality, cost and overall care of 5,000+ Medicare fee-for-service beneficiaries for 3 years

New Programs

3022- Accountable Care Organizations

ACO providers get Part A & Part B

Plus “shared savings” (waiver)

Program to be established by 1/1/12

(Independence at home providers ineligible)

New Programs

3022 – Accountable Care Organizations

BIG Questions:

How does ACO whack up the shared savings?

How does Secretary assign people to an ACO?

Interruption of referral patterns?

New Programs

3023 – Payment Bundling

1 to 8 selected conditions

3 days before admit to 30 days after discharge

One bundled payment (no more than would otherwise be paid) paid to multi-specialty entity

5 year pilot program established by 1/1/13

Expansion, if working by 2016

New Programs

3023 – Payment Bundling

BIG Questions:

How does entity whack up the money? (waiver)

How does Secretary assign the people to an entity?

The entity must give beneficiary sufficient choice of providers

Interruption of referral patterns?

Downstream risk?

New Programs

3024 – Independence at Home

1/1/12

Doctors and/or nurse practitioners who have:

EMR Remote monitoring Mobile diagnostic

and willing to provide services at home 24/7

New Programs


Beneficiary must

1. Have 2 or more chronic illnesses

2. Have been admitted to a hospital within the last 12 months (non-elective)

3. Have received acute or sub-acute rehab services

4. Have 2 or more functional dependencies (bathing, dressing, walking, feeding, toileting)

New Programs


Target expenditures for Part A & Part B

Doctors/nurses share savings below target (waiver, referral patterns)

If no savings for 2 consecutive years, doctor/nurse is out of the Program

New Programs


200+ fee for service Medicare beneficiaries in each Program

But capped at 10,000 nationwide

So only 50 Programs with 200 people in each

(§3502 also lets Secretary contract with or give grants to state-designated health teams to support patient-centered medical homes)

New Reimbursements

3007 – Value-Based Payment Modifier

Higher reimbursement based on quality of care compared to cost

Rules by 1/1/12

Information 2013 – 2014

Implementation by 2015

Revenue neutral

New Reimbursements

5501 - 10% Monthly or Quarterly Bonus on Primary Care Services

99201 – 9921599304 – 9934099341 – 99350

IF 60% of allowed charges are primary

1/1/11 through 1/1/16

(Same for surgeons in shortage areas)

5502 – FQHC – Prospective payment system

New Reimbursements

4103, 4104, 4105 - Annual Wellness Visits

Including personalized prevention plan (health risk assessment) & screening schedule

Include telephonic and web-based

No co-pays for annual wellness visit and other prevention services in certain circumstances

2011

New Reimbursements

3134 - “Misvalued” codes

3135 - In 2011, 75% utilization to be assumed for Advanced Imaging

New Reimbursements

3403 – Independent Medicare Advisory Board

Purpose: Reduce the per capita growth in Medicare spending

1. Chief Actuary says projection above target2. Then Board recommends savings strategies

from .5% to 1.5% (starting 1/15/2014)3. Then Secretary implements4. Unless Congress stops it

New Reimbursements

3403 – Independent Medicare Advisory Board

Proposals may not

1. Ration health care2. Increase co-pays3. Restrict benefits4. Modify eligibility, or5. Reduce payments to providers

before 2019

Fraud & Abuse

6002 – Gifts from Manufacturers

Beginning in 2013

Drug & Device Manufacturers must

Disclose the names of doctors to whom they give anything of value ($10) (other than samples and education materials, for example)

and what they gave and its value

Physician ownership also disclosed

All information to be publicly available

Fraud & Abuse

6003 – MRI, CAT, PET

1/1/10

Doctors must disclose alternative provider at time of in-office ancillary referrals for MRI, CAT & PET

Fraud & Abuse

6407 – Home Health - DME

1/1/10

Face-to-face patient encounter before referral for home health services or DME

Fraud & Abuse

6402 - Overpayments

Medicare overpayments must be returned in 60 days

Fraud & Abuse

6404 – Claims Deadline

Medicare claims must be submitted within 1 (not 3) years of service

Fraud & Abuse

6411 - RAC

Expansion of RAC to Medicaid

Questions

everything you need to know about health care reform (but are afraid to ask)

Documents

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