Within the past week, the Department of Health and Human Services Secretary Kathleen Sebelius issued the first of what will be reams of rules and regulations governing health insurance.
Even as no less than 23 states sue the federal government over the Constitutionality of the Affordable Care Act, many more rules and regulations will be issued in the weeks and months ahead.
The latest issue simply re-states the application of provisions in the law.
-Health insurance policies can not be rescinded by insurance companies after September 23, 2010, for any reason but for the more egregious acts of fraud.
-Health insurance policies can not have lifetime maximum benefits after September 23, 2010.
-Children under age 19 can not be excluded from coverage due to a pre-existing health condition.
-Dependents are allowed to remain on parents’ coverage until age 26 regardless of marital and student status.
These rules apply to individually purchased plans of insurance as well as group plans. Grandfathered plans are not exempt from these items
As the weeks turn into months and months into years, prevailing thought seems to suggest that the small group health plans (group plans under 50 primary insured lives) and individual plans will become virtually indistinguishable. That is, each plan type will look identical and the only difference will be how the plan premium is billed.
Because small group plans have already operated under stricter regulation such as guaranteed issue, we can develop an idea of the future premiums of individual insurance from the small group market when it began to operate under strict controls.
Contrary to expectations, the premiums did not rise as much as expected. However, the ACA does insert other issues that will undoubtedly impact future premiums. As mentioned previously, the Medical Loss Ratio is likely to have the most significant impact. As you may recall, the MLR is the requirement that insurance companies in the “under 50 market” must hold claims to no less than 80% of premiums paid. This can result in premium rebates or potentially large increases.
A second factor that will place upward pressure on premiums is the guarantee issue. Small group plans are guaranteed issue and pre-existing conditions are covered from day one as long as the individual has maintained ongoing coverage for the past 12 months. Otherwise, pre-existing conditions are subject to a waiting period.
ACA does not contain any language related to waiting periods for pre-existing health conditions in the small group market or individual market. HHS is expected to address this concern before January 1, 2014. Insurance companies see this oversight as a big concern, especially since the law will require guarantee issue with no serious mandate for individuals to enroll in insurance other than a “modest” penalty.
Another factor likely to exert pressure on individual plans is the new age rating schedule as set forth by ACA. The premium for the older adults can not be more than four times the rate for the youngest adult. The age rating schedule varies from one insurance company to another, but on average, the current range is about six to one.
Because insurance companies are not likely to lower the premiums for older adults, young adults should expect significant increases in premiums as insurance companies try to close that gap by January 1, 2014.
At that time every individual will be required to buy health insurance or face a penalty. The penalty will be $695 per person per year, up to a maximum of three per family ($2085 total), or 2.5% of household income by 2016. From January 1, 2014, the penalty is $95 (X 3 per family) and in 2015, $325 (3 X per family).
Individuals who object to health insurance for religious reasons are exempt from the penalty as are prisoners, American Indians, undocumented aliens, or others who suffer financial hardship.
The fed will assist in premium payments if household income is between 133% and 400% of federal poverty level (FPL). The amount of the subsidy will vary based on the level of household income in the FPL range. The very bottom could get a 100% subsidy. Additionally the fed will also help pay the out of pocket expenses that arise such as assistance with copays and coinsurance.
Still other individuals will qualify for expanded eligibility under Medicaid.
Because of the laxity of penalties for non-enrollment, some experts believe HHS will have to issue revised regulations restricting enrollment in individual health insurance to prevent people from foregoing enrollment until they become sick. These regulations could look similar to the current Medicare enrollment periods. That is, open enrollment would be restricted to a specific time of year. Failure to enroll during this time would result in the penalty being applied.
Perhaps one of the most troubling aspects of health care reform is what could happen to Medicare beneficiaries.
Health care reform did not change the benefits or delivery method of Medicare Parts A, B, C, and D. It did never the less include some language that implies Medicare Part C beneficiaries may suffer the most.
Part C is also known as Medicare Advantage coverage. Medicare beneficiaries enrolled in Medicare Advantage with or without Part D (prescription drug coverage), have paid little to no premium other than their Part B premium. This almost certainly will change.
Insurance companies that offer Medicare Advantage receive subsidies from Medicare and in return are responsible for all claim payments. Medicare no longer is responsible for claim payments for beneficiaries enrolled in a Medicare Advantage plan.
Over the next 10 years, $50 billion will be extracted from Medicare Advantage subsidies to help finance the rest of the health care reforms, namely the subsidies passed to low income households and the expansion of Medicaid.
Most, if not all, of the $500 billion have to be replaced. The only available source is higher premiums. This could result in a doubling to tripling of current premium levels. Those who pay nothing for their Medicare Advantage could easily see premiums of $150 or much more.
Medicare Advantage plans will probably begin to align themselves with provider networks if they do not do so presently. Some carriers may even discontinue offering Medicare Advantage plans altogether.
If a carrier drops its Medicare Advantage offering, its beneficiaries will be eligible for a special open enrollment in another Medicare Advantage, a Part D (prescription) plan, or a Medicare supplement plan. Medicare A and B look to be completely free of health care reform.
It is becoming clear many more questions arise as we begin to get answers to other questions. Then again, if the states prevail in their lawsuit over the Constitutionality of the new social program, “Will health care reform then be completely abandoned?”
No one likes insurance companies reserving the right to arbitrarily deny coverage. Insurance companies have agreed to reasonable guaranteed issue requirements, provided a few safe guards are in place to protect the viability of reasonable premiums, such as restricted open enrollment periods and heftier penalties for non-enrollment.
Next time: A recap of articles 1-4.
No comments:
Post a Comment