Health Care Reform Update

Volume 2 Issue 2
May 26, 2010

The Health Care Reform Update is a publication intended to provide objective information on the health care reform updates from Washington DC. Many businesses report health care as their second and fastest growing expense. With all the headlines and discussions, we know that it is difficult to separate fact from fiction. We will periodically send articles to help you maintain a knowledgeable position on the topic. We believe in building relationships with our clients; solving their problems, exchanging information, ideas and resources with them and providing them with value-added services. This is our way to share great information with you and it is our mission to continue to improve upon these philosophies. Enjoy this issue of the Health Care Reform Update and thank you for reading it. It was our pleasure putting it together for you.

You are cordially invited!  If you have not signed up for The Fedeli Group and Ernest & Young event on June 3, 2010 at 7:30am at Executive Caterers at Landerhaven you can still register by clicking here, or contact Mary Ellen Gillenwater at This e-mail address is being protected from spambots. You need JavaScript enabled to view it .

We are pleased to host Congressman Steven LaTourette ("Cleveland's go to Congressman") and Congressman/House Minority Leader John Boehner, who will present a Washington D.C. update. 

The Health Care Summit will focus on:

• The impact of costs, obligations and compliance requirements on business owners and employers.
• The tax implications of this new law on individuals and business.
• Understanding the effective time line for each phase of the law's provisions.
• The new mandates on medical service providers and the subsequent impact on individuals and employers.

Please do not hesitate to contact us if we can be of any assistance to you relative to your health care needs and how this impacts your company.  Being amongst the largest and most experienced health care insurance brokers and consultants in the state, we can be of significant help to you and your organization. 

Below are the key elements of the Patient Protection and Affordable Care Act

• Individual Mandate
  All individuals will be required to have health insurance, with some exceptions, beginning in 2014.  Those who do not have coverage will be required to pay a yearly financial penalty of $695 per person.
• Guaranteed Issue
  Through private market reforms, all carriers will be required to have guaranteed issue and guaranteed renewal in order to accommodate the individual mandate beginning in 2014.
• American Health Benefit Exchanges
  States will create the American Health Benefits Exchanges where individuals can purchase insurance and separate exchanges for small employers to purchase insurance.  These new marketplaces will provide consumers with information to enable them to choose among plans.  Premium and cost sharing subsidies will be available to make coverage more affordable.
• Although there will not be a public plan option in the Exchanges, the Office of Personnel Management, which administers the Federal Employees Health Benefit Program, will contract with private insurers to offer at least two multistate plans in each Exchange, including at least one offered by a non-profit entity.
• Plans in the Exchanges will be required to offer benefits that meet a minimum set of standards.
• Premium subsidies will be provided to families with incomes between 100-400% of the poverty level (or $22,050 to $82,200 for a family of four in 2009) to help them purchase insurance through Exchanges.
• Employer Requirements
  Employers with more than 50 employees will be assessed a fee of $2,000 per full time employee if they do not offer coverage and if they have at least one employee who received a premium credit through an Exchange.
• No employer may impose a waiting period that exceeds 90 days.
• Employers that offer coverage will be required to provide a free choice voucher to employees with incomes below 400% of the poverty level if their share of the premium cost is between 8 to 9.8% of the income and who choose to enroll in a plan in an Exchange.
• Large employers (more than 200 employees) that offer coverage will be required to automatically enroll employees into the employer’s lower cost premium plan if the employee does not sign up for employer coverage or does not opt out of coverage.
• Private Insurance Mandates
  New insurance market regulations will prevent health insurers from denying coverage to people for any reason, including their health status and gender.
• Health insurers will be prohibited from imposing lifetime limits on coverage.
• Young adults will be allowed to remain on their parent’s health insurance up to age 26.
• Expansion of Public Programs
  Medicaid will be expanded to all individuals under age 65 with incomes up to 133% of the federal poverty level ($14,404 for an individual and $29,327 for a family of four in 2009).
• The federal government will provide 100% federal funding for the costs of those who become newly eligible for Medicaid for three years (2014-2016).
• New Taxes and Fees
  “Cadillac Tax” – Imposes a 40% excise tax on insurers of employer sponsored health plans with aggregate values that exceed $10,200 for individual coverage and $27,500 for family coverage.
• Non-Wage Medicare Tax – starting in 2013, households with incomes above $200,000 ($250,000 for married couples) will have a new 3.8% tax applied to their income from interest, dividends, capital gains, and some profits from investments in partnerships and corporations.
• 0.9% Medicare Tax Increase – starting in 2013, households with incomes above $200,000 ($250,000 for married couples) will have a 0.9% increase to their Medicare taxes on their wages.
• The pharmaceutical manufacturing sector must pay a new annual fee ($2.5 billion in 2011).
• HSA and FSA Changes
  Only prescribed drugs would be permitted to be reimbursable through a health savings account.
• The tax on distributions from a health savings account that are not used for qualified medical expenses would be increased to 20%.
• The amount of contributions to FSA’s for medical expenses would be limited to $2,500 per year, adjusted for inflation.
• Small Business Tax Credit
  Provides a two year tax credit to small businesses (less than 25 employees) with average annual wages of less than $40,000 that purchase health insurance with tax credits.
• Prevention/Wellness Programs
  Establish the National Prevention, Health Promotion and Public Health Council to coordinate federal prevention, wellness and public health activities.
• Create a Prevention and Public Health Fund to expand and sustain funding for prevention and public health programs.
• Permit employers to offer employees rewards – in the form of premium discounts, waivers of cost sharing requirements, or benefits that would otherwise not be provided for participating in a wellness program and meeting certain health related standards.       

Source: IIABA Government Affairs Team

By Anna Wilde Mathews

The share of Americans who get health coverage through their jobs has been declining for years, dropping to 63.3% of working-age adults in 2008.  The question now is whether the new health law will accelerate that trend, and induce more employers and workers to turn to government coverage options. 

In the near term, at least for the total figures, that is unlikely.  For the next decade, the overall number of Americans with workplace health benefits isn’t likely to change much, government analysts suggest. 

But the relatively flat overall forecast masks a lot of expected churn.  Some small firms, particularly those with predominantly low-income employees, will likely drop health insurance  Other companies may see more workers joining their coverage rolls, largely because of the law’s new requirement for Americans to have health plans. 

The U.S.’s employer-based health-insurance system dates back to the 1940’s.  That is when companies began offering health benefits to get around wage caps imposed during World War II.  Despite the declines in such coverage, which have mostly been among small employers, about 163 million people, including children, were under workplace health plans in 2008, according to the Kaiser Family Foundation. 

The Congressional Budget Office estimates the new law will result in about three million fewer people having employer health benefits in a decade than would have otherwise been the case, while the Lewin Group, a consulting unit of UnitedHealth Group Inc., sees a slightly smaller dip.  The chief actuary of the agency that oversees Medicare projects even less of a drop-off, about one million people by 2019. 

But the Medicare actuary, Richard Foster, predicts that nationally, 14 million people will move out of employer coverage.  That is partly because companies will have the option of throwing at least part of the cost of covering lower-income employees onto the government. 

Starting in 2014, some of those workers will qualify for the newly expanded Medicaid program, while others will be able to purchase government-subsidized health plans.  In addition, insurers have to sell plans to people regardless of their health status, so employers won’t worry that sicker workers could get shut out. 

The biggest test is likely to come with small firms like 460 Machine Co., a machine shop in Prince George County, Va., with five workers.  A recent downturn in business, combined with rising premiums, has made it tougher to keep its health plan.  The options available on the new exchanges, along with the subsidies that two of the five employees would be able to get, would make it easier to consider dropping the coverage.

The new requirement for most Americans to have coverage, or pay a penalty, will push some workers in plans they may have previously spurned.

Also, some employers may add coverage at the behest of employees who don’t want to run afoul of the mandate.  The law also includes a tax credit for small employers covering low-income workers.

Jonathan Gruber, an economist at the Massachusetts Institute of Technology says the similar Massachusetts health overhaul shows the individual insurance requirement can encourage employers to offer plans.  Even though the federal law does “suddenly make life a lot easier for some companies to drop coverage,” he says, others, particularly those with high-wage workers, might add it.

Source: The Wall Street Journal 

Registrants for the upcoming Executive Health Care Update Summit were asked a series of questions as they registered online for the June 3 event. Our intention is to use their responses to prepare the Summit panel and speakers to directly address the issues and concerns of the audience. All four questions were 'multiple choice'. The collaborative results demonstrate a gap in understanding the timeline and compliance requirements by employers and the impending cost to the employer and their employees, going forward.

Employers Turn to Consultants for Health Care Reform Answers
 By Karen Pallarito

Hungry for advice on complying with national health care reform, employers are turning in droves to benefit consulting firms, experts say.

The surge in demand has resulted in new revenue-producing opportunities—as well as longer hours—for health care consultants.  Educating employers and keeping them in the loop on the law's various nuances is a must. To get the word out, consultants are using newsletters, e-mail, teleconferences, webcasts and Web page updates.

Consulting firms are supplying background information and general guidance as a value-added service to existing and prospective clients. In the near term, employers want to know what they have to do to expand coverage to young adults under age 26, remove lifetime limits and preserve their “grandfathered” status exempting them from certain new provisions of the law. Employers that provide retiree drug benefits are seeking guidance about whether to retain those benefits.

Health care reform also is resulting in new administrative rules and requirements. For example, employers must begin reporting the value of health care benefits on workers' Form W-2. Earlier this month, rules were issued detailing requirements that employers extend health coverage to workers' adult children up to age 26.

Long-term decisions are more complex. Most consultants expect health care reform will increase health plan costs, forcing companies to make trade-offs.  To invest more heavily in health benefits, for instance, some employers may decide to reduce their commitment to compensation programs or retirement benefits, he said. Conversely, some firms may choose to scale back health benefits to free dollars for other programs.

While exiting the health plan business remains a topic of discussion, consultants said they expect most large, self-insured companies to stay the course. Health benefits are, for many, a significant recruitment and retention tool. Others, however, may find that the math simply doesn't add up.  Industries with large numbers of lower-paid, part-time workers such as retail, manufacturing and hospitality, face tougher choices, consultants said.

In a recent survey, Mercer found that about half of all large employers—those with at least 500 employees—offer coverage to part-time employees who work 30 hours or more a week. The rest don't cover any part-time employees, require them to work more than 30 hours a week to qualify for coverage or impose other eligibility requirements.

Source: Business Insurance

As this legislation becomes more clear, we will provide detailed outlines of the changes.  We will create regular information updates to keep you informed.  If you have an immediate need, please contact us.  Also feel free to check the benefits section of our website for updates at www.thefedeligroup.com.