Coverage Expansion and Health Insurance Market Reforms
On March 23, 2010, the Patient Protection
and Affordable Care Act (PPACA) was signed into law. On March 25, 2010,
the Health Care and Education Affordability Reconciliation Act (HCEARA)
of 2010, which revised certain provision of the PPACA, was passed by
Congress and the massive overhaul of our nation’s health care system was
put in motion. The Acts are intended to expand health insurance coverage
to 32 million Americans who are currently uninsured, resulting in total
health coverage of 95 percent of all Americans.
Coverage Expansion
The PPACA and HCEARA
increase insurance coverage for American citizens by:
- Requiring
insurance companies to cover individuals with pre-existing
conditions;
- Creating high
risk insurance pools;
- Establishing
state-based health insurance market places know as “exchanges” where
individuals not covered by employer-based or governmental health
insurance can buy coverage;
- Offering
subsidies to low to moderate income Americans who buy insurance
through the newly established exchanges;
- Expanding the
Medicaid program;
- Requiring all
employers of 50 or more people to provide health insurance coverage
to their employees;
- Allowing
individuals up to age 26 to be covered under their parents’
insurance plans; and
- Requiring all
American citizens not covered by an employer-based or governmental
plan to purchase health insurance.
Pre-existing
medical conditions: As of September 23, 2010, private insurance
companies will be prohibited from denying coverage to children under the
age of 19 due to pre-existing conditions. This requirement applies to
all employer plans and new plans in the individual market and it will
apply to all individuals in 2014.
High risk
insurance pool: By June 23, 2010, a $5 billion national high-risk
insurance pool will be created to allow individuals with a pre-existing
medical condition, who currently are unable to purchase private health
insurance, to have access to insurance. This provision ends when the
state-based exchanges become operational.
State-based health
insurance exchanges: By 2014, each state must establish state-based
health insurance exchanges open to the individual and small group
market. Small employers, with 50 or fewer employees, will be able to
shop for coverage in the Small Business Health Options Program (SHOP)
exchange. The exchanges will be overseen by state insurance
commissioners; the financial integrity of the exchanges will be overseen
by the Secretary of the U.S. Department of Health and Human Services.
- Plan
requirements: Several levels of standardized, comprehensive
benefit packages will be available at different levels of cost
sharing.
- OPM plans:
Each exchange will provide access to multi-state, private plans
under the supervision of the federal Office of Personnel Management
(OPM), the agency that administers and regulates the Federal Health
Employee Benefit Plan.
- Co-ops:
Federal funding for start-up loans and grants will be provided to
qualified organizations to assist in the development of nonprofit,
member-run health insurance Consumer Operated and Oriented Plans
(Co-ops) that will offer health insurance through the health
insurance exchanges.
- Provider
payments: Providers will negotiate rates with the private plans
offered through the exchanges, much the same as is currently done.
- Insurance
market reforms: All plans operating in the exchanges will be
subject to new insurance market reforms.
Subsidies for
health insurance: The PPACA establishes four levels of plans that
can qualify for offering through an exchange: bronze, silver, gold and
platinum. As listed, the plans increase in the coverage value of
benefits with the bronze level covering 60% of the actuarial value of
total benefits and platinum covering 90%.
Premium assistance in
the form of refundable and advanceable tax credits will be provided on a
sliding scale to individuals and families with incomes between 100% and
400% of the federal poverty level (FPL). The premium credits will be
tied to the second lowest-cost silver plan in the area and will be set
on a sliding scale such that the individual’s/family’s premium
contributions are limited to 2% of income for those between 100% and
133% of the FPL up to 9.5% of income for those between 300% and 400% of
the FPL. The expected contributions will increase annually based upon
premium growth rates. Small employers with no more than 25 employees and
average annual wages of less than $50,000 that purchase health insurance
for employees will be provided with a tax credit.
Medicaid
expansion: In 2014, Medicaid will be expanded to cover non-elderly
individuals, including parents; children; and childless adults, up to
133% of the FPL. For most states, a federal matching rate of 100% will
be provided for newly eligible individuals. The matching rate will
decrease to 95% in 2017; 94% in 2018; 93% in 2019 and 90% thereafter.
Employer mandate:
Effective March 1, 2013, employers will be required to provide
notice to employees of their health insurance options, including options
available via the exchanges. Employers with 200 or more employees will
be required to automatically enroll employees in health insurance plans,
allowing individuals to opt-out. Employer penalties will apply for
failure to provide affordable coverage as follows:
- Employers with
50 or more full-time workers, that do not offer health insurance
coverage will pay an assessment of $2,000 per full-time worker (not
including the first 30 workers) if any of their employees receive a
tax credit to purchase insurance through the exchange.
- Employers that
offer unaffordable health insurance or a plan that does not cover at
least 60% of allowable costs will pay $3,000 for any employee that
receives a tax credit in the exchange up to an aggregate cap amount
set at $2,000 multiplied by the number of full-time employees.
Dependent coverage
for young adults up to 26 years of age: As of September 23, 2010,
any group plan or plan purchased on the individual market that provides
dependent coverage for children, must continue to offer such coverage
until the child turns 26 even if the child is married; unless the
dependent child is eligible for employer-sponsored coverage on his/her
own.
Individual
mandate: Beginning on 2014, most individuals who are not covered by
employer-based or governmental plans will be required to obtain
acceptable health insurance coverage. Failure to purchase such coverage
will result in a financial penalty equal to: the greater of $95 or 1% of
income in 2014; $325 or 2% in 2015; $696 or 2.5% in 2016; and continued
indexed amounts after 2016, up to the cap of the national average
“bronze” plan premium. Families with children will pay half of the
penalty amount for children, up to a cap of $2,250 for the entire
family.
Health
Insurance Market Reforms
Before September
23, 2010:
- No lifetime
or annual limits: Health plans must eliminate lifetime, annual,
or unreasonable limits of coverage on the value of essential health
care benefits.
- Prohibition
on rescissions: The ban on the practice where insurers
retroactively cancel health coverage will be extended to
employer-based group policies, except in the case of fraud.
- Annual review
of premiums: The Secretary, in cooperation with the states,
will establish a process for the annual review of unreasonable
increases in premiums. The process will require health plans to
submit a justification for an unreasonable premium increase prior to
the implementation of the increase. In 2014, the Secretary and the
states will begin monitoring premium increases offered through and
outside of any exchange. When determining whether to offer a health
plan in the large group market through an exchange the state must
take into account excess premium growth outside of the exchange
compared to the rate of premium growth inside the exchange.
- Mandated
coverage for preventive health services: A health plan must
provide coverage without cost-sharing requirements for certain
preventive care services.
- Extension of
non-discrimination rules: Health plans may not discriminate in
favor of highly compensated employees in terms of eligibility to
participate and the level of benefits under a plan.
By 2012:
- Ensuring
quality of care: The Secretary will develop reporting
requirements for use by health plans aimed at improving health
outcomes. These reporting requirements may affect provider
reimbursement. The Secretary will also promulgate regulations that
will provide criteria for determining a reimbursement structure
aimed at improving health outcomes.
- Uniform
explanation of coverage: Before March 23, 2012, plans must
provide a summary explanation that accurately describes the benefits
and coverage to participants prior to enrollment.
Beginning in 2014:
- Waiting
period restrictions: Health plans may not establish rules for
eligibility to enroll based on the individual’s health status.
- Mandated
coverage for clinical trials: Plans cannot deny participation
of a qualified individual in a clinical trial, deny coverage of
routine costs in connection with the clinical trial or discriminate
on the basis of participation in a clinical trial.
- Fair health
insurance premiums: premium rates may only vary by:
- Whether the
plan covers an individual or family;
- Rating area
which is established by the state;
- Age – may
not vary more than 3:1 for adults; and/or
- Tobacco use
– may not vary more than 15:1.
- Mandated
cost-sharing limits: Health plans must limit cost-sharing
amounts to the limits applicable to high deductible health plans.
Group health plans cannot have deductibles that exceed $2,000 for
single coverage or $4,000 for any other coverage. The amounts are
subject to cost-of living adjustments after 2014.
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