What the Future Holds?

1. New Healthcare LawNEAHU/NE Blue Cross/ShieldAshland, NE-Quarry OaksApril 27, 2010Jesse A Patton LUTCF, HIA, MHP, FAHM, HIPAAA, EHBANAHU National Legislative Chairman

3. “America will be in a constant health-care war if ObamaCare is enacted. Passage wouldn't end the health-care debate. Rather, it would perpetuate ObamaCare as the dominant issue for decades to come, reshape politics, create an annual funding crisis in Congress, and generate a spate of angry lawsuits. “ - WSJ 3/19/2010 What the Future Holds?

5. It’s Not Government’s Job More Americans now say it’s not the federal government’s responsibility to make sure all Americans have health care coverage than say it is – a first in Gallup’s polling of this question that started nearly a decade ago. Do you think it is the responsibility of the federal government to make sure all Americans have health care coverage, or is that not the responsibility of the federal government? Source: Newport, Frank. "More in U.S. Say Health Coverage Is Not Gov’t. Responsibility." Gallup. 13 Nov 2009. Gallup, Web. 27 Jan 2010. <http://www.gallup.com/poll/124253/Say-Health-Coverage-Not-Gov-Responsibility.aspx>.

6. Americans are Ideologically Consistent How U.S. adults responded to the question: Do you consider yourself to be liberal, moderate or conservative? Source: Wall Street Journal/NBC News polls; margin of error for January 2010: +/-3.1 percentage points.

7. Source: Perry, Mark J. (2010, January 6). Government funding increases healthcare costs. The American, Retrieved from http://blog.american.com/?p=9051

8. Key House Players

9. Key Senate Players

10. Current Status • On March 21, the House passed HR 3590, the bill passed by the Senate on December 24, 2009, with a 219-213 vote. Signed into law on March 23. • The House and Senate have also passed a reconciliation bill, HR 4872, with a packages of “fixes” to the Senate bill • President Obama signed the reconciliation bill. “We have to pass the bill so that you can find out what is in it” …. Speaker Nancy Pelosi

11. CBO Estimates • $940 Billion over Ten Years • Cover 32 million of the Uninsured • Reduce Deficit by over $124 Billion during this time period

13. NAHU supports reform, but opposed the Senate bill –we believe it to be misguided It does not address the cost of providing medical care, the true driver of private health insurance premiums. Many of the deficit reduction provisions in it are false savings. Full Disclosure With that said, this bill is the law of the land, like it or not. Our goal is to help you understand what it entails and what, as employers, you need to do to be compliant. We are in the implementation stage and that is bring us challenges for years to come.

14. Scope, Size, and Uncertainties 2500+ page bill is hard to summarize. We are not in dealing with sound bites now – as professionals and group administrators we now need to know the fine points for implementation.

15. Confused – Implementation overload!! DON’T PANIC YET!! Don’t memorize this! We are at the End of the beginning—7 to 10 years of rule making and changes.

16. Implementation Be forewarned, NAIC, CMS, DOL , Dept Treasury and DHHS will need to issue guidance after enactment on many issues which will impact our understanding of these measures. There are some questions you have today that cannot be answered.

17. New Offices Open 4/19/10 • HHS secretary’s office now has an Office of Consumer Information and Insurance Oversight that will oversee implementation of the PPACA private insurance provisions • Office of the Director. • Office of Oversight. • Office of Insurance Programs. • Office of Consumer Support. • Office of Health Insurance Exchanges

18. First Problem-Day One Legislation • One of the first drafting errors-the coverage of preexisting conditions in children.  • President Obama campaigned on this issue, repeatedly touted eliminating the ability to deny coverage to children with preexisting conditions, and requiring the coverage of such conditions with no look-back or exclusionary periods, as one of the first benefits of the new reform laws.  • The President and Democrats have repeatedly cited these provisions as benefits that will help American children within the next six months. A small problem, though—the new laws don’t actually say that.

19. What Did Pass? • The new measures do require health plans serving all markets—individual, small- and large-group and self-funded—to cover the preexisting conditions in children age 19 and under with no limitations if the coverage is already offered or in force for all plan years beginning on or after six months of the March 23, 2010, enactment date. •  However, the new laws do not require insurers in all markets to guarantee-issue coverage to anyone at any age until plan years beginning on or after January 1, 2014

20. Kathleen Sebelius- Sec. HHS • “The America people debated and discussed health insurance reform for more than a year. Congress and the President have acted. Now is not the time to search for non-existent loop holes that preserve a broken system.”

21. AHIP-Karen Ignagni • "With respect to the provisions related to coverage for children, we await and will fully comply with regulations consistent with the principles described in your letter."

22. Problem over health coverage for Capitol Hill • "drafting error" in the legislation left unclear the date by which lawmakers and certain staff members will be required to drop their existing insurance and sign up for state-run exchanges

23. Congress Coverage • Because the exchanges don't have to be operational until 2014, that raised the possibility that lawmakers and staff members would be booted from their existing insurance, under the Federal Employees Health Benefits Program (FEHBP), without another alternative, the report said • But the Office of Personnel Management has concluded that the section of the law forcing them into the exchanges doesn't take effect until the exchanges become operational and that no one will lose his or her insurance

24. Applies within 90 days-2010 • Creates high-risk pool coverage within 90 days or enactment for people who cannot obtain current individual coverage due to preexisting conditions. Eligibility limited to individuals who have been uninsured for at least six months prior to applying for the pool. • This national program can work with existing state high-risk pools and will end on January 1, 2014, once the Exchanges become operational and the other preexisting condition and guarantee issue provisions take effect. • It will be financed by a $5 billion appropriation.

25. What the PPACA Bill Does Immediately • Individuals and employer group plans on date of enactment is grandfathered indefinitely. Enrollment of family members/new employees in grandfathered health plans are included. Act does not expressly require that terms or benefits of a grandfather health plan are required to remain the same (PPACA 1251(d);1401) • The reconciliation bill eliminates the ability of plans to grandfather in a number of areas. • If you lose your grandfathered status, that DOES NOT MEAN you will be forced into an Exchange in 2014.

26. Patient Protection and Affordable Care Act 2010 Eligible small businesses are eligible for phase one of the small business premium tax credit. Small employers will receive a maximum credit, based on number of employees, of up to 50% of premiums for up to 2 years if the employer contributes at least 50% of the total premium cost. Businesses do not have to have a tax liability to be eligible Non-profits are eligible Average salary must be $50,000 or less

28. IRS Rules • The credit is calculated as follows: • (1) Initial amount of credit determined before any reduction: (35% x $96,000) = $33,600    (2)  Credit reduction for FTEs in excess of 10: ($33,600 x 2/15) = $4,480(3) Credit reduction for average annual wages in excess of $25,000: ($33,600 x $5,000/$25,000) = $6,720(4) Total credit reduction: ($4,480 + $6,720) = $11,200(5) Total 2010 tax credit: ($33,600 – $11,200) = $22,400.

29. Small Business Tax Credit • The credit is claimed on the employer’s annual income tax return • The credit can be reflected in determining estimated tax payments for the year to which the credit applies in accordance with regular estimated tax rule • In determining the employer’s deduction for health insurance premiums, the amount of premiums that can be deducted is reduced by the amount of the credit

30. PPACA in 2010 Temporary reinsurance program for employers that provide retiree health coverage for employees over age 55 begins within 90 days of enactment. Reimburse participating employment‐based plans for 80% of the cost of benefits provided to early retirees (and to the eligible spouses, surviving spouses, and dependents of such retirees) in excess of $15,000 and below $90,000 (adjusted annually for inflation)

31. Temporary Reinsurance Program • Plans are required to use the funds to lower costs borne directly by participants and beneficiaries, such as premiums, co‐payments, and other out‐of‐pocket costs, but could be not used to reduce the costs of an employer maintaining the plan • $5 Billion in Federal Reinsurance Grants until 2014, includes state and local government plans • Funds are available until expended HHS Secretary would have the authority to stop taking applications

32. PPACA in 2010 • All group plans will be required to comply with the Internal Revenue Section 105(h) rules that prohibit discrimination in favor of highly compensated individuals within six months of enactment • Deductibility for Part D subsidies is eliminated in 2013, but this results in an immediate accounting impact.

33. First Substantial Economic Issue • Medicare Modernization Act of 2003, the federal government has been providing tax-free payments to companies that provide comprehensive prescription drug coverage to their retirees, since these retirees then do not participate in the federal Medicare Part D program

34. 1,400 for-profit companies Affected • Company     $ in Millions  • AT&T    1,000  • John Deere  150  • Boeing  150  • Caterpillar  100  • Prudential Financial  100 •  Lockheed Martin  96  • 3M  90  

35. PPACA in 2010 • Health reform law gradually reduces the amount enrollees will have to pay for their prescriptions in the gap, starting with a $250 rebate • Beginning in 2011, Part D enrollees who reach the coverage gap will receive a 50 percent discount on the total cost of their brand-name drugs in the gap

36. Part D-Medicare • Over time, Medicare will gradually phase in additional subsidies in the coverage gap for brand-name drugs (beginning in 2013) and generic drugs (beginning in 2011), reducing the beneficiary coinsurance rate in the gap from 100 percent to 25 percent by 2020 • By 2020, for brand-name drugs, Part D enrollees will receive the 50 percent discount from pharmaceutical manufacturers, plus a 25 percent federal subsidy (phased in beginning in 2013). Part D enrollees will be responsible for only 25 percent of the total cost of their drugs out of pocket • By 2020, 75 percent of the cost of generic drugs in the gap will be subsidized by Medicare (phased in beginning in 2011), while beneficiaries will pay the remaining 25 percent out of pocket

37. Standard Medicare Prescription Drug Benefit, 2010 Plan pays 15%; Medicare pays 80% Enrolleepays 5% $6,440 in Total Drug Costs($4,550 out of pocket) Enrollee pays 100% $3,610 Coverage Gap (“Doughnut Hole”) $2,830 in Total Drug Costs ($940 out of pocket) Enrollee pays 25% Plan pays 75% $310 Deductible SOURCE: Kaiser Family Foundation illustration of standard Medicare drug benefit for 2010 (standard benefit parameter update from Centers for Medicare & Medicaid Services April 2009).

38. Medicare Part D Enrollees Who Reached the Coverage Gap in 2007 Excludes Part D Enrollees Who Receive Low-Income Subsidies and Non-Users Did not reach the coverage gap Reached the coverage gap NOTES: Estimates based on analysis of retail pharmacy claims for 1.9 million Part D enrollees in 2007.SOURCE: Georgetown University/NORC/Kaiser Family Foundation analysis of IMS Health LRx database, 2007.

39. PPACA in 2010 • Requires the states and the Secretary of HHS to develop information portal options for state residents to obtain uniform information on sources of affordable coverage, including an Internet site. • The roll out date for this is July 1, 2010 • Information must be provided on private health coverage options, Medicaid, CHIP, the new high-risk pool coverage and existing state high-risk pool options.

40. PPACA in 2010 Lifetime limits on the dollar value of benefits for any participant or beneficiary for all fully insured and self-insured groups and individual plans including grandfathered plans are prohibited within six months of enactment. Annual limits will be allowed prohibited completely by January 1, 2014 and regulations will be out soon describing very limited use until then.

41. PPACA in 2010 • All group and individual plans, including self-insured plans, within six months of enactment, will have to cover dependents up to age 26. Tax exclusion until the end of year child turns 26 • The reconciliation package: • Extended this requirement to grandfathered plans. • Established that dependents could be married and would be eligible for the group health insurance income tax exclusion. • Established through 2014, grandfathered group plans would only have to cover dependents that do not have another source of employer-sponsored coverage.

42. PPACA in 2010 • Health coverage rescissions, within six months of enactment, will be prohibited for all health insurance markets except for cases of fraud or intentional misrepresentation. • All group and individual health plans, including self-insured plans, will have to cover preexisting conditions for children 19 and under for plan years beginning on or after six months after date of enactment. • Grandfathered status applies for group health plans

43. PPACA in 2010 For all group and individual plans, including self-insured plans, emergency services covered in-network regardless of provider. Enrollees may designate any in-network doctor as their primary care physician. New coverage appeal process. Federal grant program for small employers providing wellness programs to their employees will take effect on October 1, 2010

44. PPACA in 2010 • For all group and individual health plans, including grandfathered plans, mandates coverage of specific preventive services with no cost sharing. • Minimum covered services are specified based on existing federal guidelines on specific topics • This may ultimate be a significant cost increase for many plans. • Unclear if dental and vision for children will be included in the preventive care requirements. • Impact may be immediate in 2010 or in 2014 with essential benefits package.

45. PPACA in 2010 Establishes federal review of health insurance premium rates. Secretary of HHS, in conjunction with the states, will have new authority to monitor health insurance carrier premium increases beginning in 2010 to prevent unreasonable increases and publicly disclose such information. Carriers that have a pattern of unreasonable increases may be barred from participating in the exchange. In addition, $250,000,000 is appropriated for state grants to increase their review and approval process of health insurance carrier premium rate increases.

46. PPACA in 2010 Minimum loss ratio requirements will be established for insurers in all markets. The MLR is 85% for large group plans and 80% for individual and small group plans (100 and below). The calculation is independent of federal or state taxes and any payments as a result of the risk adjustment or reinsurance provisions. Carriers will have to issue a premium rebate to individuals for plans that fail to meet the minimum MLR requirements.   

47. PPACA in 2010 Allows the Secretary of DHHS to make adjustments to the MLR percentage if it proves to be destabilizing to the individual or small group markets. The National Association of Insurance Commissioners (NAIC) is required to establish uniform definitions regarding the MLR and how the rebate is calculated by December 31, 2010.

48. The PPACA in 2011 The tax on distributions from a health savings account that are not used for qualified medical expenses increases from 10 to 20%. OTC drugs no longer be reimbursable under HSAs, FSAs, HRAs and Archer MSAs unless prescribed by a doctor. Creates a new public long-term care program and requires all employers to enroll employees, unless the employee elects to opt out.

49. PPACA $500,000 Limit • Companies that are in the same “controlled group” as a health insurer may be subject to the $500,000 • Years Prior 2013 any premiums for providing health insurance coverage, Post 2012 a company must have 25% of premiums from providing minimum essential coverage • Drafting Error? Pre-2013 Dental, Vision, LTC, specific disease or illness, hospital indemnity counts

50. The PPACA in 2011 • Beginning in 2011 and in effect until 2016, the law established a 10% Medicare bonus payment to care providers who bill at least 60% of their charges for primary care services • General surgeons also get a 10% Medicare bonus payment beginning in 2011 until 2016 if they practice in underserved areas