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Wednesday, March 24, 2010

What Healthcare Reform Means for Our Benefits

Unless you've been camping in a distant cave you know that this week the House of Representatives approved comprehensive healthcare reform legislation. Over the next nine years this new law has the potential to substantially change the healthcare system and industry in this country. While most everyone knows something happened, what it means seems open to interpretation.

Walking through the corporate office this week as part of our Open Enrollment process I heard many opinions and had several requests to blog on this topic. I've also sought out news items off the web, TV and radio. In addition, about a half dozen unsolicited email articles have come to my inbox by companies wanting to sell us consulting services for our health plans. The following is a summary of what I've learned to date.

One more thing before we start. I am neither Republican nor Democrat, conservative nor liberal. Please don't try to paint me with a particular political brush if you don't agree with my analysis. Liberal/progressives tout this law as the savior of humanity, and conservative talk radio refers to it as unconstitutional Armageddon. It is neither; it's a change in direction from a private insurer system to a quasi-private system with greater government involvement.

The goals of this legislation are to cover more uninsured Americans and control the escalating cost of medical coverage. To do this the government is proposing to use a number of levers at it's disposal, from changes in tax law, expanding medicare coverage rules, penalties and subsidies for different personal and corporate behaviors, and an expanded regulatory power requiring all Americans to be covered by health insurance of some form or another.

Specifically, here is what happens and roughly in what order:

Within 90 days

  • Family policies (I assume both group and personal) must allow dependents to stay on the plan until they reach age 26. In Tennessee right now that age is 24; in most states it's 22.

  • Plans may not apply a pre-existing condition exclusion to children under 19.

  • Uninsured citizens can obtain coverage through a federally subsidized insurance program.

  • Increased medicare prescription drug coverage.

  • Small businesses with fewer than 25 employees get a tax credit for providing benefits.
  • Restrictions on lifetime and annual spending caps in insured medical plans.

  • Medicare must cover preventative care at 100% (no co-pays, deductibles, or co-insurance)

  • Establish a reinsurance program for employers providing retiree medical coverage for retirees >55 yrs old but not yet Medicare eligible. Phases out by 2014.

  • Insurers must report not only what they spend on claims but how much they spend on administrative overhead.

In 2014

  • Establishes health insurance exchanges for individuals to buy insurance in a more competitive market.

  • Establishes Small Business Option Programs (SHOPs) where employers with less than 100 employees can group together and buy insurance with better buying power.

  • Requires all employers with more than 50 employees to provide health insurance or pay a tax fine of up to $2,000 per employee.

  • Requires all citizens to have health insurance or pay a tax fine phased in over four years of up to $750.

  • Provides tax credits for businesses that buy their health insurance through SHOPs

  • Provides subsidies for individuals who purchase health insurance through an Exchange

  • Employers who provide health insurance but which cost the employee more than 8% of their annual income (provided employee makes no more than 4x federal poverty level) must provide that employee with a voucher for what the company would have spent on the employee's insurance so that the employee can use that to buy insurance from an Exchange.

  • Employers whose employees use vouchers to purchase insurance from an Exchange must pay a fine of up to $750 per employee.

In 2018

  • IRS will impose a 40% tax on "high-end" health plans valued at $10,200/yr or greater for single coverage and $27,500/yr for family coverage. FSA and HSA contributions must be added to the cost of premiums for this calculation.

  • FSA Annual limits (what you can save in a tax year) will be reduced from $3,500 to $2,500.


The immediate changes for our plan are the lifting of lifetime and annual maximums, and adding dependents up to age 26 back on our plan if we're asked to do so. Our new plan has pre-existing condition exclusions for new-hires after April 1st, but we won't be able to apply it to children under 19. Depending upon how the insurer underwrites our plan, these changes could add risk and therefore increase our premiums for next year's renewal.

Past this year, candidly its too early to tell what impact this will have on our plan. There is a Senate reconcilliation bill to be passed, a Presidential Executive Order that's supposed to put more limits on taxpayer funding of elective abortions, and court challenges in as many as 34 states. Another potential change would be amendments to the bill. Congress' approval rating is around 17%, close to an historic low, and we may have a substantially different Congress next year which might want to make changes.

Just remember, most of the changes from this law impact individual and small company plans, and we're covered under a corporate plan. Most of these changes impact how the uninsured buy coverage, and just about everyone here has coverage. We'll keep you informed as we know more, but overall there's no real cause for celebration or jumping out of windows yet. As the Zen Master said, "We'll see."


David P. Leach said...

Brilliant analysis, as usual.

Anonymous said...

Enjoy your blog it reminds me of Joe Friday. Just the facts...