Health Care Reform Update

As the country heads into the second year of health care reform - a quick review of the tumultuous initial phase of the definition and implementation of some reform provisions is in order. However, it is necessary to keep in mind that more speculation focusing on the impact of reform and the results of the recent mid-term elections have raised serious questions abut what form the reform policy ultimately may take. Some believe that a vote to repeal the reform legislation - although viewed only as symbolic at this time - may occur when Congress convenes in January 2011. The law's constitutionality is also being challenged by several states and as a result of the November elections, additional states may join the challenge. Some provisions have been implemented in 2010 as scheduled but there is some doubt that the planned future implementation schedule will stick without modifications applied to some of the provisions and to the schedule. The biggest changes are slated to occur in 2014 with implementation of the insurance exchanges but it appears that there will be serious debate ahead on the final structure of these exchanges.

During 2010 preventive care benefits were expanded and many plans are or will be required to cover immunizations, preventive exams, and additional screenings for women without cost sharing and co-payments. The first phase of small business tax credits were implemented for employers with less than 25 employees and average wages of less than $50,000. Also, a temporary reinsurance program for retirees age 55 and over who are not yet eligible for Medicare was established. Adult children 26 years old or younger can now be added to health plans regardless of student status; this provision was effective on plan anniversary dates beginning after September 23, 2010. Also effective for plans with anniversaries on or after September 23 is the elimination of lifetime dollar limits, and denying coverage for children with preexisting conditions. Taking effect on plan anniversary dates is a new appeals process that must include an option for an external review.

In 2011

Effective January 1, 2011 health plans and insurers will be required to report their "medical loss ratio" or MLR. Why is this important to employers? The loss ratio is composed of the costs of clinical services, quality and other services directly related to patient care. Insurers will be required to rebate premiums to employers if the loss ratio is less than 85% for large groups, and 80% for small groups and individuals. If a rebate to the employer does occur, the employer must refund a proportionate amount to each employee that is relative to the portion of the premium that employees contribute for their coverage ...a sizeable administrative burden for employers. The MLRs and rebates are to be calculated on a state by state basis which could prove to be onerous for multi-state employers.

Flexible spending account arrangements and health reimbursement accounts (HRAs) will no longer reimburse participants for over the counter drugs not prescribed by a doctor. Taxes will also increase to 20% next year for the non-medical use of medical savings accounts and Archer medical savings accounts.

Small employers can start receiving grants in 2011 and for the next five years to help establish a wellness program at their companies. Informational labeling regarding the nutritional value of food served at chain restaurants and vending machines will be required in 2011.

Many of the 21 provisions of the health reform law scheduled to go into effect in 2011, are intended to reduce the cost of Medicare and Medicaid and the creation of commissions, panels and advisory boards to study quality, costs, and current processes. Undoubtedly, the effect of the 2010 elections as well and the action taken by several states to seek legal remedies in federal court will result in continued immediate uncertainty relative to an employer's ability to make long term plans for their sponsored health plans. The J Hovanec Group will continue to monitor the evolution of health care reform and provide additional guidance during 2011. Please don't hesitate to call us with any questions.