Health Care Reform

1. Health Care Reform Did Congress cure our system’s ailments? James P. Gelfand, Director of Health Policy

2. What the Chamber supported… • Bending the cost curve • A focus on wellness and prevention • Insurance market reforms coupled with individual responsibility • Payment reforms (addressing cost-shifting & P4P) • Medical liability reform • Health IT • Improved affordability subsidies • Comparative effectiveness research

3. Agenda • What happened? • What’s the new law? • What can we do about it?

4. What happened? A long time ago…. (2008) In a galaxy far, far away… (DC) The health reform formula was within grasp: ( 1600 + 60 + 218 )

5. The Timeline • Inevitability brings cooperation • Kennedy’s Workhorse Group • Baucus’ Gang of Six • Strange Bedfellows • House “Tri-Committee”

6. House Bill SOON TO PASS???

7. August

8. Undeterred Christmas Eve November 7th

9. The Conference Plan • Fiscal Blue Dogs v. Big Spenders • Single-Payer Advocates • Immigration Champions • Progressive Caucus + Public Option • Pro-Life v. Pro-Choice Champions

10. January Surprise Foiled???

11. January Surprise 39%

12. Health Reform Reinvigorated • Major hurdle, Senate passage, already done • Just needed to pass SAME bill in House • Some changes were demanded (Cornhusker kickback, increased requirements) • “The nuclear option” • Could sign bills on the same day, treat as one

13. The Health Care Bills • Patient Protection and Affordable Care Act • Health Care and Education Reconciliation Act • Collectively known as “PPACA” • “Puh-Pah-Cuh” • Not “ACA”

14. The Patient Protection and Affordable Care of 2010(H.R. 3590)… Signed into law (P.L. 111-148) on Mar. 22, 2010 • Extends health insurance coverage to about 32 million currently uninsured. • Subsidies – provides subsidies for up to 400% of FPL • Medicaid Expansion – Up to 133%FPL (14,000 ind./29,000 family) • Individual Mandate – Starting 2014, with penalty of $695 ind./$2,915 family • Employer Mandate – (Free rider) Penalty for lack of “affordable” coverage if 50 or more employees • Creates State Insurance Exchanges – Available in 2014, state marketplace for purchasing insurance

15. The Patient Protection and Affordable Care of 2010(H.R. 3590) – continued… • Insurance Reforms • No rescissions (unless fraud – 2010) • Dependents covered until age 26 (2010) • No pre-existing condition exclusions (2010 for children; 2014 for everyone) • No lifetime limits (2010) or annual limits (2014 for group plans) • Requires preventative coverage (2010) • Guarantee Issue and rating limitations (2014) • Small Employer Credits – Up to 50% of employer’s contributions (up to 5 yrs.) • Minimum Benefits Package – All health plans offered through exchanges to provide the essential benefits

16. Cost $$$.... According to the Congressional Budget Office (CBO)… • Cost = $938 billion/10 years • Deficit reduction = $124 billion/1st-10years, $1.2 trillion/2nd-10 years • Doc Fix will cost over $275 billion • $569 billion in new taxes and tax increases • $528 billion total cuts to Medicare • Creates 16,500 new jobs for the IRS • Billions more in spending authorized, but not appropriated.

17. Pay Fors = $569 billion/10 years… • 10% excise tax on tanning services $2.7 billion/10 (2010) • Modification of tax treatment in certain health organizations $400 million/10 (2010) • Codify economic substance doctrine $4.5 billion/10 (2010) • Repeal of “black liquor” credit $23.6 billion/10 (2011) • Conforming definitions for medical expenses $5.0 billion/10 (2011) • Additional tax on distributions from HSA’s and MSA’s other expenses $1.4 billion/10 (2011) • Excise tax on manufacturers and importers of drugs $27.0 billion/10 (2011) • Corporate reporting requirements (1099 issue) $17.1 billion/10 (2012) • Limit flexible spending in cafeteria plans to $2,500 $13 billion/10 (2013) • Excise tax on medical device manufacturers $20 billion/10 (2013) • Medicare tax on HI earners $210.2 billion/10 (2013) • Eliminate Part D subsidy deduction $4.5 billion/10 (2013) • Limitations on executive compensation $600 million/10 (2013) • 10% medical expense deduction $15.2 billion/10 (2013) • Excise tax on insurance providers $60.1 billion/10 (2014) • Free Rider penalties $52 billion/10 (2014) • Individual Mandate penalties $17 billion/10 (2014) • 40% excise tax on Cadillac plans $32 billion/10 (2018) • Effects on coverage provisions in revenue $46 billion/10 (Misc.) • Other changes in revenue $14.3 billion/10 (Misc.)

18. 1099 reporting requirement… • Burdensome reporting requirement that increases the cost of doing business • Section 9006 requirement: Submit a separate 1099 form for every single business-to-business transaction in aggregate of $600 each year – GOODS and SERVICES • Could affect over 40 million businesses • House bill – H.R. 5141 – repeal Section 9006 (Rep. Lungren) / Senate bill – S. 3578 (Sen. Johanns)

19. Implementation: What happens and when? • Implementation will be a 10 year process • Immediate changes: 2010-2011 • Longer term changes: 2012-2013 • Most significant changes: 2014-2018 and beyond • Individual Mandate • Employer Mandate • Subsidies, Exchanges, Medicaid expansion

20. Immediate changes… • Insurance Reforms – 6 months after enactment • Prohibits lifetime limits, rescissions, and excessive waiting periods • Dependents covered until 26 • No preexisting conditions for under 19 yrs. old • First dollar coverage for preventative care • Grandfathered plans

21. Small business tax credit… Available to small companies and tax exempt organizations (2010-2015). 2 Phases. • PHASE 1 (2010-2013): • Employers with less than 25 full-time employees w/ avg. wage of $50,000 or less, and company pays min. of 50% of premiums are eligible for tax credit up to 35% of premiums. • Maximum credit if you have 10 or less full-time employees w/ avg. wage of $25,000. • Credit claimed on business tax return, not employment tax return. • PHASE 2 (2014-2015): • Same criteria above; but only available to employers purchasing insurance through the exchange. • Credit increases up to 50% of premiums; but only good for 2 years.

22. Important choices for businesses… • What is the Employer “Free Rider” Mandate? • Offering vs. Non Offering firms • Plan cost considerations for those who are offering • Other issues impacting employers

23. Employer “Free Rider” Mandate… • Employers with <50 Full-Time Equivalents (FTE) are exempt from offering. • Employers with 50 or more FTE, who do not offer, no fines levied if all employees’ incomes are over 400% of FPL (88 K/family of 4). • For employers with 50 or more FTE who don’t offer, if any employee receives tax credit through exchange, fine is equal to $2,000 times the # of employees minus 30. These penalties are also incurred if the employer is not offering a “Qualified” health plan. • If an employer with 50 or more FTE does offer health insurance, but it is not “affordable” (employee’s share is more than 9.5% of income), and the employee goes into exchange (and gets tax credit), the penalty is $3,000.

24. Employer Mandate and Penalties…

25. Plan considerations for offering… Whether you are a self-insured or fully insured, may trigger different requirements. Here are some items to think about: • Self-Insuring– New requirements for self-insured plans – Reporting value on W-2, will not need to cover “essential benefits” but will need to meet actuarial value (60%), will be exempt from new tax on insurers, but may be subject to “Cadillac Tax” in 2018 • Sending Employees to the Exchange– Starting 2017, large employers (over 100) may be able to participate in the exchange • Grandfathering of plans – What changes to your plan will trigger loss of “grandfather” status?

26. Grandfathering rule – How it works… “Plans will lose their grandfather status if they choose to make significant changes that reduce benefits or increase costs to employees.” • Changing carriers • Any changes in coinsurance that increases employee share of medical payments (i.e. Going from 80/20 to 70/30) • Any increase in a fixed payment amount (except co-payments) of more than medical inflation plus 15%; applies to deductible, max out of pocket, etc. (since 3/23/10) • Any increase in co-payment that exceeds the greater of medical inflation plus 15% or $5 plus medical inflation (since 3/23/10) • Decrease employer contribution to premiums by more than 5% below the level (since 3/23/10) • Eliminating any benefit for diagnosis or treatment or any part of treatment for a particular condition (since 3/23/10)

27. Issues impacting employer plans… • Long-Term Care – Starting 2011, employers permitted to automatically enroll employees into CLASS program • Retiree Prescription Drug Plans – In 2013, employers who receive 28% for RDP’s will no longer be able to deduct subsidy • Compensation: Salary vs. Benefits– Employers may prefer compensation through income rather than health benefits. • Consumer-Directed Account Options – Penalties for non-qualified purchases; limits on contributions

28. What can we do about it?

29. What’s next? • Political – 2 election cycles before 2014 • Legislative – Ongoing fixes in future Congresses, opportunities to improve the law. • Regulatory – Guidance & Rulemaking – DOL, HHS, & IRS • Good Faith Compliance/Medical Loss Ratio • Legal – Legal challenge; 21 states have filed suit on constitutionality

30. Chamber resources… • Vote For Business • www.voteforbusiness.com • Health Care Toolkit • www.uschamber.com/chambers/healthcare • Primer: Critical Employer Issues in the Patient Protection and Affordable Care Act • http://www.uschamber.com/publications/reports/100426_critical_employer_issues_ppaca.htm • Health Reform Impacts • www.healthreformimpacts.com

31. Questions?