Volume 13, Issue 14   |   November 9, 2009

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House passes Affordable Health Care for America Act

On Saturday evening (November 7) the U.S. House of Representatives passed a sweeping health care reform bill. The 1,990 page bill, if ultimately signed into law in its current form, would materially alter the healthcare and health insurance landscape in America. Outlined below are highlights of the Affordable Health Care for America Act passed by the House.

Individual and Small Market Reforms:
 
All individuals are required to have insurance or pay a tax (2.5% of income). Failure to procure insurance or pay tax can ultimately be punishable by up to 5 years in prison.
Creates centralized Health Insurance Exchange where individuals can shop for standardized insurance policies, including a Public Option.
Premium credits/subsidies to help individuals up to 400% of Federal Poverty Level (FPL) ($73k/year for family in 2009) buy insurance.
Expand Medicaid threshold to 150% of FPL.
Tax credits to help small employers provide coverage.
Creates Public Plan Option to offer insurance through the Exchange (limited to individuals and small employers). Public Option reimbursement rates paid to providers to be negotiated with providers directly (not based on Medicare).

Insurance Mandates

Prohibits applying pre-existing condition limits or underwriting insurance policies based on health.
Premium rates may vary based on age (most expensive cannot be more than 2x least expensive); geographical location; and family size only.



In the Senate

Debate over healthcare reform in the U.S. Senate will escalate in the weeks ahead and passage of a bill from the Senate will be more difficult to achieve. It now appears likely that action in the senate will extend into 2010 and passage of a bill from the Senate is not guaranteed. Key debate points include:

Inclusion of a Public Option (a likely filibuster flashpoint).
Individual versus employer mandate (House bill has both).
Taxing “Cadillac” plans versus taxing high income earners (Senate favors the former while House favors the latter).

 
Sets minimum standards for health insurance benefit levels (“essential benefits package”). Must cover minimum of 70% of health costs. Secretary of HHS has authority to set specific minimum benefit levels and Act suggests copays over deductibles and coinsurance.
Limits out-of-pocket expenses to $5,000 individual / $10,000 family.
Prohibits annual and lifetime maximums.
Mandates 85% minimum loss ratios for insurers (i.e., insurers non-claim costs cannot exceed 15%).
Increases dependent eligibility age to 27.
Prohibits insurers from retroactively canceling policies (rescission).
Removes insurer’s anti-trust exemption.
Prohibits reimbursement for over the counter drugs under tax advantaged accounts (FSA, HSA, HRA).
Limits FSA contributions to $2,500 annually (currently unlimited).

Large Employer Impacts

Defines Large Employer as an employer with over $750,000 in annual payroll.
Requires employers to offer qualified insurance to employees or pay a tax of 8% of payroll.
Employers must contribute 72.5% for employees / 65% for dependents of the cost of a qualified plan or be subject to the 8% payroll tax.
Auto-enrolls employees in lowest cost plan.
Extends COBRA eligibility until Exchange is active
Employer benefits must meet minimum benefit levels (“essential benefits”) defined by Secretary of HHS.

Medicare Changes

Payment cuts and ‘efficiency improvements’ relating to Medicare Advantage plans, prescription drugs, hospital readmissions, general hospital payments, and other items.
Secretary to negotiate Medicare drug prices with pharmaceutical companies.
Allows for standardized patent protection and generic equivalents for biologic drugs.
Increase payments to primary care providers.
Phases out Medicare Part D “donut hole” by 2019.

Prevention, Wellness and Public Health

General support for community research and community based programs.
Limited grants for small employers to implement qualified wellness programs.
Requires chain restaurants and vending machines to disclose nutritional content.
Provides $12 billion in funding for community health centers and other public health programs.

Long Term Care

Establishes national voluntary program paid through payroll deductions.
Provides benefit of $50/day for non-medical custodial services.

Other Changes

Insurance coverage receiving full or partial federal subsidy is prohibited from covering abortion (in most circumstances).
No Federal provisions for tort reform.

Financing

Congressional Budget Office projects bill is expected to cost $1.05T over 10 years.
Revenue to pay for the bill is projected as follows:
    -   $461B from new 5% income tax increase for individuals earning above $500,000
    -   $426B savings from Medicare and Medicaid cuts and changes
    -   $97B from taxes and fees for medical device makers, hospitals, and other health care providers
        and other changes
    -   $167B in projected taxes from non-compliant individuals and employers.
 
The bill does not include the ~$250B required to prevent a 20%+ cut in Medicare physician reimbursements currently scheduled for 2010.


 

Questions or Comments?
Please submit your questions or comments regarding this issue to info@arlengroup.com or call (415) 733-7000.

The Insight newsletter is not intended to provide legal advice but perspective on recent regulatory issues, trends and standards affecting employee benefits. Please consult your own legal counsel for further information on the topics discussed in this issue of Insight.

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