Health Care reform…”What does it do for me?” “Is it going to be free?” “Will there be waiting lines at doctor offices?” “What about rationing?” These are all legitimate questions and will be addressed over the next few weeks.

Efforts to change the delivery system of health care in the U. S. goes back over 100 years. However, the most well known attempt at reform was as recent as 1994 during the Clinton administration. The overriding goal of reform debate has been to get all Americans insured and relieve the system of treating patients who had no insurance.

Providers then would shift the cost (I.e. cost shifting) to those who could afford to pay out of pocket or who had insurance. Consequently, the well to do and insured Americans saw their costs of health care rise disproportionately over time along with the premiums for health insurance.

Since the failure of the 1994 attempt at reform, the health care system introduced “Managed Care” plans. These plans offered discounts in premiums to steer insureds into certain blocks of providers. These plans had a number of different looks, but the most common in the West Texas area was PPO plans.

Managed Care plans helped alleviate the cost shifting stress for a while, but failed to bring more uninsured folks into the system. Eventually, as the number of uninsureds rose, premiums were forced higher and higher until today where it is not unusual for a family premium to be more than a house payment.

Most estimates say 47 million Americans are without health insurance today. The original goal of reform debate when it was seriously renewed in 2008, was to force that 47 million people into the cost sharing arena.

By March 23, 2010, the result of reform provided only modest incentives for those 47 million to participate in cost sharing system. Rather, the result ended up as insurance reform.

On March 23, 2010, President Obama signed into law the Patient Protection and Affordable Care Act (PPACA). On March 30, 2010, the President signed into the law the Health Care and Education Reconciliation Act of 2010 (HCERA), adding certain amendments to PPACA. Combined the two laws comprise health care reform.

The end result of reform will not reduce costs. The primary focus intended to get those 47 million Americans in the system as participating financial contributors by forcing them to purchase health insurance or open the health insurance markets up to insure those with pre-existing health conditions.

The incentives to get more people into the system include:

-tax credits for businesses who offer and help pay for insurance

-penalties to individuals and families who do not buy insurance

-elimination of pre-existing health condition exclusions by health insurance carriers

-premium subsidy payments to individuals and families who could not afford insurance

-expansion of Medicaid

These mandates along with a host of other mandates will be phased in over the next seven years, with the majority required by January 1, 2014. It is on this date that subsidies, penalties, and adult pre-existing condition limitations begin. Other prominent provisions begin on that date as well:

-State run “Health Insurance Exchanges” must be operating

-Policies may no longer include limitations on annual benefits

-Wellness programs begin

-Group plans will not be able to extend waiting periods for insurance eligibility beyond 90 days

-Employers must begin to “certify” coverage.

Other mandates require insurance companies to install important provisions by September 23, 2010:

-Dependent children, whether married or unmarried, student or non-student may remain as dependents until age 26

-Group health plans may not set lifetime maximum benefit amounts on “Essential Health Benefits”. The Dept of Health and Human Services will be determining what “Essential Health Benefits” are by September 23

-Children under age 19 who have a pre-existing condition must be “guaranteed issue”

-Insurance companies may not rescind health insurance policies except in limited cases of fraud or misrepresentation by an applicant

-A $250 payment will be made to Medicare Part D (prescription drug plan) beneficiaries as the first installment toward closing the “donut hole” by 2020.

Health plans in effect on March 23, 2010, or collectively bargained plans will be exempt from certain requirements and will retain the “grandfathered” status until, as yet undefined, policy changes are made. The grandfathered plans must still abide by dependent children to age 26 and benefit limitation rules. However they will be exempt from other more significant requirements that will be addressed in later columns.

Grandfathered health plan premiums will likely be less adversely affected than post-grandfathered plans which will have to conform to many mandates. Most experts believe health insurance on January 1, 2014, could be well over 75% higher than a similar policy today.

Very small group plans may give way to individual plans of insurance because the structure of health care reform blurs the line of distinctions between the two.

In the meantime prior to September 23, 2010, insurance companies will distribute updates to small group plan sponsors the following items:

-Children can remain on parent’s coverage until age 26

-elimination of lifetime benefit caps

-35% tax credit for offering and paying all or a portion of group health plan

The next blog will focus on group insurance reforms with more detail about the effects on small businesses.