Federal Health Care Reform Implementation

The Silicon Valley Leadership Group is deeply committed to making health care more accessible and affordable to all. Employers, along with the government, are the largest payers of health care costs and a critical stakeholder in the process of negotiating health care reform. While we remain committed to providing health insurance to employees, employers in the Silicon Valley and across the country cannot sustain current levels of premium increases without cost shifting to employees or making their business significantly less competitive or unprofitable.

The Leadership Group is working diligently with state and federal policy makers to ensure that the needs and sensitivities ­ businesses face are considered as Federal Health Care Reform is implemented at the state level.

  • Development of prevention policies and programs to keep people well rather than treating them when they become ill: 
    • Focus more of our health care expenditures on prevention rather than medical care.
      • 75% of the nation’s $2 trillion spent in health care are medical costs associated with chronic disease (Centers for Disease Control and Prevention)
      • Only 3% is used for government public health activities (Centers for Medicare & Medicaid Services)
    • Implement prevention and health maintenance initiatives including environmental and behavioral changes around nutrition and fitness
      • Community and public health based programs
      • Policies such as stronger food labeling requirements for packaged food and nutritional information on restaurant menus and mandatory PE in schools
      • Public and private sector partnerships bringing all of these efforts together including efforts that incorporate schools and workplaces
    • Develop a dedicated and substantial source of funding for prevention
      • Tax incentives or subsidies for employers that offer wellness programs and incentives
      • Incentivize businesses to offer health and wellness programs in the workplace
  •  Funding and policy frameworks that encourages innovative medical R&D and new health care delivery systems
    • Funding should focus on new innovations in treatments, particularly for early intervention and screening and better treatment/maintenance of costly chronic diseases
    • Similar to venture capitalists, the federal government should fund grants to organizations that innovate new, efficient and effective delivery methods and systems
    • New delivery systems should integrate wellness programs and health promotion
  • The development of health IT infrastructure led by the Federal government and agencies
    • Focus on better uses of information technology (IT), not limited to electronic medical records, wherever practicable and appropriate to improve efficiencies, reduce errors, and improve quality
    • While almost $20 billion was dedicated to health IT in ARRA, there remains many substantial political and technical challenges to realizing the promise of health IT
    • Both strategy and implementation will be important in making the best use of the money while coordinating with many different stakeholders and achieving consensus
    • The federal government and agencies need to set stronger protocol and processes for IT development and standards that are both effective and efficient
  • Review and rewrite health care regulations
    • Health care costs are high in part due to the industry being one of the most regulated
    • Simplification of regulations, without decreasing safeguards, can be done by eliminating redundancies and conflicts

    Although the federal Patient Protection and Affordable Care Act was signed in 2010, the effects will take several years to occur throughout the nation. California plans to implement the PPACA at a state level through four major tasks:

Health Care Reform Timeline for Employers

Although the federal Patient Protection and Affordable Care Act was signed in 2010, the effects will take several years to occur throughout the nation. California plans to implement the PPACA at a state level through four major tasks:

  1. Improving access to private health insurance for persons with pre-existing medical conditions
  2. Improving the quality and security of private health insurance by enforcing new federal insurance rules
  3. Developing a health benefit exchange to make it easier to shop for and buy insurance
  4. Focus on prevention and wellness

The changes to health care are multi-level, and here the Leadership Group presents key changes affecting employers. This is not intended to serve as a complete guide to federal health care reform.

Click here to learn more about legal challenges and issues regarding the Patient Protection and Affordable Care Act.

2010

  Small Business Tax Credits

  • Provides tax credits to small employers with no more than 25 employees and average annual wages of less than $50,000 that provide health insurance for employees.
    • Phase I (2010-2013): tax credit up to 35% (25% for non-profits) of employer cost
    • Phase II (2014 on): tax credit up to 50% (35% for non-profits) of employer cost if purchased through an insurance Exchange for two years
    • 503,000 California small businesses may be eligible for tax credits. Tax credits were effective immediately upon passage of the health reform law.

  Qualifying Therapeutic Discovery Project Credit

  • Provides tax credits or grants to employers with 250 or fewer employees for up to 50% of the investment costs in projects that have the potential to produce new therapies, reduce long-term cost growth, or advance the goal of curing cancer within 30 years. The grant or tax is available for investments made in 2009 or 2010.
    • As of November 2010, nearly $1 billion in tax credits and grants were provided through the program.

  Reinsurance Program for Retiree Coverage

  • Creates a temporary reinsurance program for employers providing health insurance coverage to retirees over age 55 who are not eligible for Medicare.
    • HHS accepted applications until May 5, 2011. The program is slated to be closed by the end of 2013.

  Revised Appeals Process

  • Group health plans must have an effective internal appeals process that complies with ERISA, as well as an external review process that meets the Uniform External Review Model Reform Act from the National Association of Insurance Commissioners.

  Coverage of Preventive Benefits

  • Employer plans must pay the full cost of preventative care, such as immunizations and preventative screenings for infants, children, adolescents, and women. The U.S. Preventative Services Task Force, Centers for Disease Control and Prevention and the Health Resources and Services Administration will make recommendations for required preventative care.

  Adult Children Coverage to Age 26

  • Employer health coverage must be extended to adult dependents up to 26 years of age (through age 25).
  • The Governor approves legislation which would conform the state law to the federal law.
    Related legislation: SB 1088 (Price)

  No Lifetime or Annual Limits on Essential Benefits

  • Employers may no longer set lifetime limits on essential benefits.

  No Preexisting Condition Exclusion for Enrollees Under Age 19

  • Employers may not deny coverage due to pre-existing conditions. The provision applies immediately to dependents under 19 years of age and extends to all individuals beginning in January 1, 2014.
  • California ensures access to coverage for children with pre-existing conditions, no matter the insured status of parents/guardians.
    Related legislation: AB 2244 (Feuer)

  New Options for Adults with Pre-existing Health Conditions

  • California’s new Pre-existing Condition Insurance Plan (PCIP) will draw down up to 761 million in federal dollars available to California to cover adults with preexisting conditions through 2014. This high risk pool program, oversaw by California’s Managed Risk Medical Insurance Board (MRMIC), will serve up to 30,000 Californians that are otherwise “uninsurable.”
    Related legislation: AAB 1877 (Villines) and SB 227 (Alquist)

  Transparency Disclosures

  • Employers must disclose to the Secretary of Health and Human Services (HHS) and the public information about claim payment policies, enrollment, cost sharing and rating policies, out-of-network coverage and participant rights.

  Nondiscrimination for Fully-Insured Plans

  • Fully-insured health plans may not discriminate in favor of highly-compensated employees (nondiscrimination requirements applied to self-insured health plans prior to Reform).

  Health Insurance Exchange

  • States must create health benefit exchanges where qualified individuals and small businesses will be able to shop for qualified insurance plans with competitive pricing.
  • California takes the lead in the nation, passing bills to implement a health insurance exchange. Related legislation: AB 1602 (Perez) and SB 900 (Alquist/Steinberg)

  Rescission of Coverage

  • Coverage may only be rescinded in cases of fraud or intentional misrepresentation.
  • California Governor Schwarzenegger approves legislation to implement the new federal standards of rescission. California improves upon federal law with requirements that insurers continue coverage pending determination of rescission.
    Related legislation: AB 2470 (De La Torre)

 

2011

  Form W-2 Reporting of Value of Benefits

  • Employers will be required to report the cost of health insurance coverage on the employee’s annual W-2 forms. Employers should use COBRA rates to determine the value of benefits.

  Small Employer Credits for Wellness Programs

  • The ACA provides grants of up to five years to small employers that establish wellness programs. The ACA will provide technical assistance and other resources to evaluate employer-based wellness programs and will conduct a national worksite health policies and programs survey to assess employer-based health policies and programs.

  Choice of Physician

  • Employers must permit participants to choose a participating primary care physician and not require preauthorization for referrals for emergency or obstetric care.
  • This has been an existing California law for over a decade.

  Long-Term Care Benefit

  • Employers may voluntarily implement an employee-funded long-term benefit program. Employees would pay monthly premiums through payroll deduction. After five years of contributing, employees become eligible to receive assisted living funding under the necessary circumstance. Employee participation is also voluntary.

  Controlling Cost of Health Coverage

  • Ø At least 85% of all premium dollars collected by insurance companies for large employer plans must be spent on health care services and health care quality improvement.
  • Ø At least 80% of all premium dollars collected for small employer and individual health plans must be spent on benefits and quality improvement.

 

2012

  Uniform Notice Requirements

  • Employers must provide new enrollees with a summary of benefits and an explanation of coverage. The summary must be no longer than four pages in length, a minimum of 12 point font, and should be written in a manner that can be understood by the average participant. The summary should contain key information regarding cost sharing, limitations of coverage, illustrations of common benefits scenarios, and details on where participants can obtain further information.

  1099 Informational Reporting

  • Businesses paying $600 or more annually to property and service providers (including corporations) must file Form 1099s with each provider and the IRS. The regulation seeks to raise additional funds for health reform by tracking unreported income.

  Modification Notice

  • Employers must provide notice of any material modifications to benefits 60 days before implementation. Non-compliance will result in $1,000 fine per violation.

  Compliance With Qualify of Care Reporting

  • Self-funded plans and insurers must report annually to the Secretary of HHS and enrollees regarding plan features that improve health outcomes, reduce hospital readmissions, improve patient safety, reduce medical errors, and implement wellness activities.

 

2013

  Employee Notice Requirements

  • Employers must inform new and existing employees about the state health exchanges and provide information on employee eligibility, free choice vouchers, and premium credits.

  Employer Retiree Coverage Subsidy

  • Eliminates the tax-deduction for employers who receive Medicare Part D retiree drug subsidy payments.

  Medicare Part D Tax Deduction Eliminated

  • Tax deduction for employees who receive Medicare Part D retiree drug subsidy payments.

  New Limit on Contributions

  • Employees may contribute no more than $2,500 annually to a health FSA.

  Medicare Payroll Tax

  • The Medicare Part A (hospital insurance) payroll tax on wages and self-employement income in excess of $200,000 ($250,000 joint) will increase by 0.9% (from 1.45% to 2.35%). The employer will be required to withhold from individuals but is not required to calculate joint income for withholding purposes. Individuals will be held responsible for the additional tax if amount withheld from wages is insufficient.

  Health Insurance Exchanges

  • States’ deadline to seek federal HHS approval of progress to be fully operational in one year.

 

2014

  Employer Requirements (Pay or Play)

  • Assesses a fee of $2,000 per full-time employee, excluding the first 30 employees, on employers with more than 50 employees that do not offer coverage and have at least one full-time employee who receives a premium tax credit.
  • Employers with more than 50 employees that offer coverage but have at least one full-time employee receiving a premium tax credit, will pay the lesser of $3,000 for each employee receiving a premium credit or $2,000 for each full-time employee, excluding the first 30 employees.

  Minimum Essential Coverage

  • Employers must cover a 60% minimum of the cost of “minimum essential coverage” for employees, as defined by the HHS. Total employee cost for health care coverage should not exceed 9.5% of any employee’s household income.

Free Rider Penalty

  • If an employee’s cost of health coverage exceeds 9.5% of household income, and at least one employee elects to purchase coverage through the state exchange, the employer has failed to provide minimal essential coverage and will be subject to the employer mandate.

  Employee Wellness Participation Incentives

  • Employers may encourage employees to participate in wellness programs through premium discounts, waivers of cost sharing requirements, or extra benefits of up to 30% of the cost of coverage. Employers must also offer an alternative arrangement for individuals who have difficulty participating due to certain limitations.

  Free Choice Vouchers

  • If the employee’s cost of coverage exceeds 8% of household income (but less than 9.8%), and the employee’s household income is less than 400% of the Federal poverty level, then the employer must offer a “free choice” voucher that the employee may use to purchase coverage through a state health exchange. The voucher must equal the amount the employer would have paid to provide coverage under the employer’s plan and will be used to offset the costs of purchasing alternative coverage.

  No Preexisting Condition Exclusion for Enrollees

  • Employers may not deny coverage due to pre-existing conditions. The provision extends to all individuals.

  Out of Pocket Limits

  • Employers may not impose greater cost sharing than the current out of pocket limits for high deductible health plans (in 2010, $5,950 for individuals and $11,900 for families).

  Certification of Health Care Coverage

  • Employers must certify that all full-time employees were offered health coverage. The certification must specify the length of waiting period under the plan, the time period that coverage is available, the premium charged and the employer’s shared cost.

  Health Insurance Exchanges

  • State health benefit exchanges set to be fully operational as a market for individuals and small businesses to buy qualified health plans.

  Multi-State Health Plans

  • Multi-state health insurance plans will be made available through health benefit exchanges.

 

2018

  Excise Tax on Expensive Plans

  • Plans that cost over $10,200 for individual coverage and $27,500 for family coverage annually will be subject to an excise tax. Employers that sponsor such plans must pay a 40% tax on the excess value of the coverage. The tax applies to all amounts paid for medical expenses, including dental and vision. The threshold is higher for employers that have a disproportionately older employee population and employees in high-risk professions.

 

Sources

The following proved invaluable in the assembly of this business timeline for federal health reform:

Anthem Blue Cross

http://www.makinghealthcarereformwork.com/healthcarereform/

Blue Shield of California

https://blueshieldca.com/bsc/aboutbsc/health-reform/timeline/index/ifp.jhtml

California Health Care Reform

http://www.healthcare.ca.gov/

Kaiser Family Foundation

http://healthreform.kff.org/Timeline.aspx

Health Care.gov

http://www.healthcare.gov/