Near-Term Changes In Health Insurance

By John Ballard

In the shadow of more dramatic stories, health care is a dull subject, but some readers may want to see this summary from Health Affairs. 

Temporary access to Insurance for people with preexisting conditions: Ninety days after the enactment of the legislation--in other words, on June 21, 2010--there is to be a new program that provides access to insurance for individuals with preexisting conditions who have not had insurance coverage for at least six months. The program, which would create a national "high-risk pool" or assist states in setting up or expanding their existing pools, is temporary. It will be in existence until new health insurance exchanges are implemented on January 1, 2014. The law sets aside $5 billion for the federal government to create the new federal high-risk pool or to assist states in running theirs.

In April 2010, Health and Human Services Secretary Kathleen Sebelius wrote to states asking whether they wanted to expand or create their own pools or would prefer to refer their residents to a new national pool. So far, one state, Georgia, has indicated that it would not expand its existing pool and would rely on the federal pool. [Update: The number is up to fifteen. Wonk Room has a commentary and map showing which states.]  The federal government is now sorting out various other details, such as whether people who are already covered through existing state high-risk pools will be able to switch over to a new federal pool, or whether they would see their premiums for state-pool coverage fall as a result of the new federal financial assistance.

No preexisting condition restrictions for children: Effective six months after enactment (September 23, 2010), the law also prohibits plans from excluding coverage for preexisting conditions for children up to age 19. As of mid-April 2010, several health insurers announced that they would honor this provision effective immediately with all newly written health insurance policies.

Restrictions on certain insurance practices: Effective September 23, 2010, the law generally prohibits insurance companies from rescissions--the act of cancelling health insurance policies that have already gone into effect because the insurer believes the insured might have had a preexisting condition that was not disclosed in advance. (The insurer can still cancel a policy if it believes a patient has committed a fraud or made an intentional misrepresentation of material fact.) As of the publication date of this brief, America's Health Insurance Plans, the industry trade group, had said that insurers would commit to stopping rescissions except in the case of fraud. WellPoint and UnitedHealthcare were among the insurers that said they would halt rescissions immediately.

As of September 23, the law will also prevent insurers from imposing lifetime limits on benefits--for example, capping total payouts on behalf of a single insured individual at $1 million over the lifetime of the policy. The law also requires the HHS secretary to develop regulations that restrict the use of annual limits on benefits in group plans and on new plans on the individual market.

Reporting requirements: Beginning January 1, 2011, health plans must report information on their medical loss ratios, or the portion of premium dollars collected that are spent on medical care. Such reports will be made available on the Internet. The law requires that the minimum medical loss ratio must be 85% in the large-group market and 80% in the small-group and individual markets. The HHS secretary has the authority to make adjustments to the requirements in the individual market if there is a risk of market destabilization. Plans that pay out less than that threshold will have to return premium dollars to enrollees.

Small-business tax credit: For 2010 through 2013, small businesses that purchase health insurance for their employees will be eligible for a tax credit, depending on the firm size and their total payroll. Businesses with up to 25 employees and average annual wages of $50,000 will be eligible for a credit; businesses with 10 or fewer employees and average annual wages of less than $25,000 will be eligible for the full credit of 35 percent of the employer contribution.

Expanded dependent coverage: Adult children under age 26 may be covered as dependents on their parents' health insurance, effective September 23, 2010. This is because many adult children have had difficulty obtaining affordable coverage on their own after they have graduated from college and have lived at home for a while. Insurance carriers are required to adapt new proposals to cover these young adults under parents' policies. As of the publication date of this brief, several insurers--WellPoint, Humana, and UnitedHealthcare--have said that they will allow college students who are about to graduate to stay on their parents' policies until the new provision allowing them to be covered to age 26 takes effect in September.

Coverage and access provisions: Effective September 23, 2010, new plans must cover recommended preventive services and immunizations without requiring cost sharing. New group and individual plans must have internal and external appeals processes for coverage determinations and claim denials. New plans covering emergency services or obstetrical and gynecological services, or both, cannot require preauthorization for those services. Plans cannot limit access to primary care providers in the plan network who are willing to accept new patients.

Expanding access to information on health insurance: By July 1, 2010, HHS is required to establish a Web site to provide information about health insurance options in each state for individuals and small businesses. By March 23, 2011, HHS is required to develop standards for how information on coverage and cost sharing is presented in health insurance documents and how health insurance and medical terms are defined. Those uniform standards and definitions will be used by insurers in summary of benefits and coverage explanation documents effective March 23, 2012. For tax years after 2010, employers will be required to include the value of the health insurance coverage on the W-2 form provided to the employee.

Retirees' access to health insurance: The law creates a temporary "reinsurance" program that subsidizes employers for the cost of health insurance for their retirees ages 55-64, as well as their families. The program will reimburse employers for 80 percent of costs between $15,000 and $90,000 per enrollee and is effective June 21, 2010.

Access to long-term care insurance: The law requires the creation of a voluntary long-term care insurance program funded by enrollee premiums that would cover community living assistance services for adults who become disabled. This measures is known as the Community Living Assistance Services and Supports (CLASS) program. The program is to be effective January 1, 2011.

�  �  �

What's next?

Many steps to implement these provisions will be undertaken by HHS, which has now created a new Office of Consumer Information and Insurance Oversight to help carry out the changes. The Obama administration will have to establish a framework for the continued role of state government agencies in regulating health insurance and will also have to forge a working partnership with state health insurance departments. Differences of opinion are likely to emerge as these regulations are developed and implementation of the law is begun.

Additional resources at the link, including this from the New England Journal of Medicine.

...Opponents will continue, and probably intensify, their opposition. They have promised legal challenges and are likely to seek repeal of all or part of the legislation. Moreover, formidable implementation hurdles must be surmounted if health care reform is to achieve its goals.

On the political front, Republicans unanimously opposed the final bill in both the House and the Senate. They have expressed outrage at the Democratic leadership's decision to "ram through" reform using budget reconciliation to modify the Senate-passed bill sufficiently to make it acceptable to the House. The outrage is baseless, but the fury is real and will poison future debate.

The first political testing ground will be the November 2010 midterm elections. Republicans have pledged to make the substance of the reform and the procedures used to enact it central to these elections. The Democratic majorities in both chambers of Congress are likely to be reduced, probably by even more than is usual for an off-year election. With 2010 gains under their belts, opponents will almost certainly continue and intensify attacks on the reform legislation during the 2012 presidential and congressional campaigns; they may well regain control of the Senate � 21 Democrats and 2 independents who vote with them, but only 10 Republicans, will be up for reelection � and could win the White House.

The reform legislation's implementation schedule gives these political possibilities particular salience. Although many provisions of the bill will take effect immediately or soon after enactment, implementation of the big-ticket items is deferred. The individual and employer mandates, the subsidies to make insurance affordable, the Medicaid expansion, and major insurance-market reforms will all start in 2014. And the tax on high-cost insurance plans goes into effect in 2018. Given the intensity of Republicans' opposition to the substance and manner of passage of this reform, if the GOP regains the presidency and control of Congress in 2012, implementation could be substantially delayed or the law could be significantly modified or even repealed before its major elements have been implemented.

Making the legislation a success requires not only that it survive but also that it be effectively implemented. Although the bill runs to more than 2000 pages, much remains to be decided. The legislation tasks federal or state officials with writing regulations, making appointments, and giving precise meaning to many terms. Many of these actions will provoke controversy. Performing them will take staff, money, and time. Given the current federal deficit and beleaguered state treasuries, needed staff and funding will be hard to come by.

Et cetera, et cetera...

Note, please, that Health Affairs Journal and the New England Journal of Medicine are not primarily political or insurance organs. Both are medical publications, written by and for medical professionals. Criticisms of the new law might carry more weight if these publications were complaining, but that is not the case. What we find here is instead a clear determination not only to accept the changes, but to make them work as intended.