Health Care Refom: State Exchanges

Health Insurance Exchange

An Exchange is a mechanism for organizing the health insurance marketplace to help consumers and small businesses shop for coverage in a way that permits comparison of available plan options based on price, benefits, and quality.  By pooling people together, reducing transaction costs, and increasing transparency, Exchanges hope to create more efficient and competitive markets for individuals and small employers.

Beginning with an open enrollment period in 2013, Exchanges plan to help individuals and small employers select and enroll in private health plans that fit their needs and budget. Exchanges will assist eligible individuals to receive premium tax credits or coverage through other Federal or State health care programs.

Federal Support

The Health Care Authority applied for and received a $1 million State Health Exchange Grant for planning an exchange in Washington State. The grant will be used to identify and document key business functions and policy decisions of a state-based exchange. The largest portion of the grant has been committed to a review of the information technology necessary to support a state-based exchange. 
On November 18, 2010, HHS (Health and Human Services) released their guidelines for states to qualify for further federal funding and technical support.   Necessary Exchange costs can be fully funded by HHS until 2015.  After January 1, 2015, Exchanges must be self funded.

Health Care Reform: New Grandfathering Rules and 1099 Reporting

On November 15, the Treasury Department, Department of Health and Human Services, and the Department of Labor issued an amendment revising the interim final "grandfather" rules released in June. The revised rules will allow group plans to change carriers without losing their grandfathered status.
Also on November 15, Senate Finance Chairman Max Baucus (D-MT) introduced legislation that would repeal recently-expanded reporting requirements. The Small Business Paperwork Relief Act (not yet numbered) would repeal a key revenue raiser used in the Patient Protection and Affordable Care Act (PPACA) and the Small Business Jobs Act which requires businesses and landlords to file Form 1099 reports to the Internal Revenue Service for any business expenses in excess of $600.
Grandfathered Rules -
In June, the three agencies issued the "grandfather" interim final rules that severely limited changes that can be made to plans that existed before enactment of the PPACA in order to be exempt from many of the law's new requirements.
Previously, one of the ways an employer group health plan could lose its grandfather status was if the employer changed insurance companies. The amendment now allows all group health plans to switch insurance companies and shop for the same coverage at a lower cost while maintaining their grandfathered status, provided the structure of the coverage doesn't violate one of the other rules for maintaining grandfathered plan status. See Benefit Partners blog on our website for the details on Grandfathered Plans.
The amendment affects only insured group health plans. A change of issuers in the individual market would still result in the loss of grandfathered status.
1099 Reporting –
The PPACA includes a provision that expands the 1099 reporting requirement to all businesses for business expenses in excess of $600. The Small Business Jobs Act bill signed into law on September 27 increases penalties for failure to file Form 1099 reports with the IRS and adds individuals receiving rental income from real estate to the expanded Form 1099 reporting requirements.
Efforts to repeal or modify the expanded 1099 reporting requirement began in late July by both parties in both chambers. These previous legislative initiatives failed primarily due to the lack of consensus on how to pay for the repeal. The Form 1099 requirement would have raised $17 billion for the health care bill and $2.5 billion over 10 years for the small business bill. New offsets will be sought to pay for the repeal. 

Health Care Reform: Group Of One

Group Of One
Two important changes are taking place with health insurance coverage:
"Group of one" coverage: Sole proprietors and other self-employed individuals, who until recently had to seek coverage in the individual insurance market, may now be able to qualify for small-group coverage. The 2010 Legislature passed Senate Bill 6538, which amended several sections of Washington State's insurance law, including amending and re-enacting RCW 48.43.035. The change took effect in late September.
Applicants must meet certain criteria in the legislation, including:
•        You must have been self-employed (or had the same small employer) for at least the last 12 months.
•        At least 75 percent of your income (51 percent if an agricultural business) must come from the same trade or business.
Small-group policies are available without a health screening. Most people who buy coverage in the individual market must pass a health screening.  Small-group policies also do not have the same limitations as the individual plans.
Open Enrollment Period for children's individual coverage from November 1 to December 15: As of September 23, 2010, when they renew, health plans cannot deny children coverage because of a pre-existing condition. However, states are allowed to create special enrollment periods for individual health plans.
Washington State's open-enrollment period for coverage beginning January 1, 2010 is November 1-December 15. During this time, parents can either buy a family plan or a child-only policy without submitting a health questionnaire for their children.

Health Care Reform: Election Results

The Elections are over.  Now what?
This week's blog is short and to the point.  Republicans gained control of the House in Washington DC.  Many candidates ran on a platform of change to the PPACA – Patient Protection and Affordable Care Act.  A day after the elections Republican leaders vowed to seek repeal of the nation's health care reform law. With the Senate still under Democrats' control and a Presidential veto waiting in the wings if needed, outright repeal is virtually impossible.  But we will see a new spirit in the debates.  Republicans could successfully chip away at some of the law's provisions.  Also important, Republican gains in numerous governorships and state offices are expected to bolster efforts in many states to weaken the federal law via enforcement and implementation at the state level.

Health Care Reform: CLASS Act

CLASS Act – Community Living Assistance Services and Support
The Affordable Care Act created the CLASS Program, which is national, voluntary insurance that will be available after October 2012 to help you pay for services and support in a long-term care situation.  Employees of companies that choose to participate will be automatically enrolled in the CLASS Act and will pay with payroll deductions unless they opt out.  Other workers and the self-employed will be able to enroll on their own. Retirees are not eligible.
After paying premiums for five years (and you must have worked for three of those five years), you're eligible for a cash benefit of about $50 per day if you're unable to perform activities of daily living, such as walking, bathing or dressing, or if you are cognitively impaired.
That benefit falls far short of covering the actual cost of long-term care -- which currently averages over $200 per day in a nursing home.  The premiums have not been set, but estimates have been given from $125 to $160 per month.  For those below the poverty line, the premium will be $5 per month.
If you can qualify for long-term care insurance in the private market, you will receive a far greater benefit for the estimated premium.  You also will not have to wait five years to receive benefits.  If you will be rejected because of your health, the CLASS Act could be your only option.

Health Care Reform: Tax Implications

Health Care Reform Tax Implications
Caution – This email has 13 points.  It's a summary but there is a lot to review!
The new health care reform law is full of new taxes or increases that will affect many individuals and businesses.  It will be years before most of these hikes will happen but it's not all bad.  The law also has tax breaks to help both individuals and small businesses pay for insurance.
1. A new 10% excise tax on indoor tanning services started on June 30, 2010.
2. The new law gives small firms tax credits for providing coverage in 2010.  Employers with 10 or fewer workers and average annual wages of less than $25,000 can receive a credit of up to 35% of their health premium costs each year through 2013. The credit is phased out for larger firms and disappears completely if a company has more than 25 employees or average annual wages of $50,000 or more.
Beginning in 2014, the system will change. The law requires each state to establish a health insurance exchange -- a marketplace where individuals, the self-employed and small businesses can buy health insurance coverage. The government-regulated exchanges would offer insurance policies with different levels of coverage and price tags. Small firms that sign up with one of the health exchanges can receive a credit of up to 50% of their costs -- with the same phaseouts for average income and size as the earlier program. The credit disappears after 2015.
3. Businesses will be required to include the value of the health care benefits they provide to employees on W-2s. Although this was originally required beginning with W-2s for 2011 (issued early in 2012), just last week a one-year delay was announced. This requirement will be mandatory in 2012 for W-2s in 2013.  The amount reported is not considered taxable income.
4. The deduction employers now take for providing Medicare Part D prescription drug coverage to their retirees to the extent that the federal government subsidizes the coverage will be eliminated. This will not take effect until 2013.
5. The penalty for nonqualified distributions from health savings accounts will be doubled to 20% beginning in 2011.
6. An annual limit of $2,500 that employees can contribute to health care flexible spending accounts will take effect in 2013.
7. Funds from flexible spending accounts, health reimbursement arrangements or health savings accounts can no longer be used for over-the-counter medications starting in 2011.
8. Starting in 2013, a 0.9% Medicare surtax will apply to wages in excess of $200,000 for single taxpayers and over $250,000 for married couples. Also, for the first time ever, a Medicare tax will apply to investment income of high earners. The 3.8% levy will hit the lesser of (1) their unearned income or (2) the amount by which their adjusted gross income exceeds the $200,000 or $250,000 threshold amounts. The new law defines unearned income as interest, dividends, capital gains, annuities, royalties, and rents. Tax-exempt interest won't be included, nor will income from retirement accounts.
9. Itemized deductions for medical expenses will be increased to 10% from the current 7.5% beginning in 2013. Taxpayers age 65 and over are exempt from the cutback through 2016.
10. Beginning in 2018, a new 40% excise tax will be put on high-cost health plans, levied on the portion that exceeds $10,200 for individuals and $27,500 for families. This could affect individual policies as well as employer plans. 
11. Individuals who have no health coverage by 2014 will have a new tax.  This will be phased in over three years, starting at the greater of $95, or 1% of income, in 2014, and rising to the greater of $695, or 2.5% of gross income, in 2016.
12. In 2014, a tax credit will help low-income people purchase coverage. To be eligible, a person's household income must be between 100% and 400% of the federal poverty level, approximately $11,000 to $44,000 for singles and $22,000 to $88,000 for families. The credit is a sliding scale, based on income. As the family's income rises, the credit is phased out.
13. A nondeductible fee will be charged to businesses with 50 or more employees if the firms fail to offer adequate coverage. The fee will equal $2,000 times the number of employees, though it won't count the first 30 workers in that calculation.

Health Care Reform: National Risk Pool

Do you know someone with a pre-existing medical condition who has been uninsured for six months or more? Now there is help.

The Patient Protection and Affordable Care Act (PPACA), signed by President Obama on March 23, 2010, creates a temporary national high-risk pool to provide health coverage to people with pre-existing medical conditions who have been uninsured for six months. This high-risk pool, officially known as the Pre-existing Condition Insurance Plan, is being implemented relatively quickly and will provide temporary coverage until the broader coverage provisions take effect in January 2014. The health reform law establishes basic requirements for the high-risk pool program.

States can operate their own high-risk pool or have the federal government carry out the program. Washington State has chosen to operate a plan for the US Dept of Health and Human Services through a subsidiary of the Washington State Health Insurance Pool (WSHIP). You can get information at www.wship.org/PCIP-WA or call us.