Health Care Reform Overview and Implementation

Jim SmithAmerican Continental Group

900 19th Street, N.W.Washington, DC 20006

202-327-8100

Health Care Reform Overview and

Implementation

The new health care reform law contains two parts: Patient Protection and Affordable Care Act (PPACA) signed

into law March 23, 2010 (P.L.111-148) Health Care and Education Affordability Act Reconciliation

Act signed into law March 30, 2010 (P.L.111-152) They include numerous provisions intended to:

expand access to health insurance improve the quality and comprehensiveness of coverage make coverage more affordable for all Americans

Hundreds of mistakes, ambiguities and blank holes to be addressed by administrative rulemaking, technical corrections and Secretarial discretion.

Health Care Reform Legislation

Big PictureIndividual Mandate

Employer shared responsibility

Insurance market rules on enrollment, premiums, medical loss and consumer protection

State or federal insurance “exchanges”

Standard benefits package

Income-related premium and cost subsidies

Medicare doughnut hole phased out by 2020

Near-Universal coverage (32m new enrollees)

Federal budget impact ($143B reduction over 10 years projected)

Health spending decline (6% GDP projected)

Requires U.S. citizens and legal residents to have qualifying health coverage.

Those without coverage pay a tax penalty of the greater of $695 per year up to a maximum of three times that amount ($2,085) per family or 2.5% of household income.

The penalty will be phased in according to the following schedule: $95 in 2014 for the flat fee Or: 1.0% of taxable income in 2014 $325 in 2015 for the flat fee 2.0% of taxable income in 2015 $695 in 2016 for the flat fee 2.5% of taxable income in 2016

Beginning after 2016, the penalty will be increased annually by the cost-of-living adjustment.

Exemptions will be granted for various groups (i.e. financial hardship, religious objections, American Indians, and others).

Individual Mandate

Creates state-based exchanges for individuals and small businesses with up to 100 employees to purchase qualified coverage. Funding available to states to establish Exchanges within one year of enactment and until January 1, 2015.

Permits states to allow businesses with more than 100 employees to purchase coverage in the SHOP Exchange beginning in 2017.

Requires the Office of Personnel Management to contract with insurers to offer at least two multi-state plans in each Exchange.

Health Insurance Exchange

Authorizes a Consumer Operated and Oriented Plan (CO-OP) program of $6 billion to promote the creation of state non-profit, member-run health insurance companies.

Permits states to create a Basic Health Plan for individuals between 133-200% FPL.

Requires all plans operating in the Exchanges to pay FQHCs a rate that is no less than their Medicaid PPS rates.

Health Insurance Exchange (cont.)

Provides tax credits for premiums and cost sharing for individuals with incomes up to 400% of the federal poverty level

Limits Exchanges to U.S. citizens and legal immigrants

Employee plans must have an actuarial value of at least 60% if the employee-share of the premium exceeds 9.8% of income.

Provides refundable and advance-able premium credits to eligible individuals and families with incomes between 133-400% FPL to purchase insurance through the Exchanges on a sliding scale

Subsidies to Individuals

$2,000 fee per full-time employee on employers with more than 50 employees not offering coverage with at least one full-time employee who receives a premium tax credit (first 30 employees excluded) Employers with 50 or fewer employees will be exempt from any penalties.

Starting January 1, 2014, employers with more than 50 employees offering coverage with at least one full-time employee receiving a premium tax credit will pay the lesser of $3,000 for each employee receiving a premium credit or $2,000 for each full-time employee.

Free Choice Vouchers starting January 1, 2014.

Employer Requirements

A tax credit for employer contributions to pay for health insurance for employees, applies to taxable years beginning on or after January 1, 2010.

To qualify: No more than 25 full-time equivalent employees Average annual full-time equivalent wages not exceeding

$50,000.

To qualify for maximum credit: No more than 10 full-time equivalent employees Average annual full-tine equivalent wages not exceeding

$25,000.

Small Business Tax Credit

Grandfathered plans (any group or individual health plan in existence on March 23, 2010) are exempt from some of the new health insurance plan requirements

In addition, the penalty under the Employer Mandate applies only to non-grandfathered plans

Modifications to the existing plan may result in loss of grandfathered status. Rules are expected from HHS.

Maintaining grandfathered plan status may be an important objective for some employers

Plans - - What is a Grandfather?

No dollar value maximum limits on benefits, except on specific covered benefits that are not essential health benefits

Applies to Grandfathered Plans (GF Plans) and Nongrandfathered Plans (NGF Plans)

Effective plan years beginning on or after September 23, 1010

HHS may provide for exceptions

No Lifetime and Annual Limits

Elimination of preexisting conditions exclusions

Applies to GF Plans and NGF Plans

Elimination of PCE's for children under age 19 effective for plan years beginning on or after September 23, 2010

Generally effective for all participants plan years beginning on or after January 1, 2014

No Preexisting Conditions

Plans covering dependent children must allow continued coverage up until age 26



Full time student and unmarried conditions cannot apply

Dependent Coverage to Age 26

Health plans cannot rescind coverage, except for fraud or intentional misrepresentations



No Rescissions

Certain preventive care received without cost sharing

Applies to NGF Plans only

Effective for plan years beginning on or after September 23, 2010

Preventive Care

Elimination of plan requirements to obtain prior authorization or pay increased cost sharing for in-network or out-or-network emergency services, or obtain prior authorizations or referrals for obstetrical and gynecological care.

Applies to NGF Plans

Effective plan years on or after September 23, 2010

Pre-Authorizations

Auto enrollment for new hires of large employers (more than 200 full-time employees).

Applies to GF Plans and NGF Plans.

Effective Dates of March 23, 2010 or when specified in regulations issued by DOL.

Auto Enrollment

New annual limit of $2,500 per employee

Effective for taxable years beginning on or after January 1, 2013

Health Care Flexible Spending Accounts

Annual out of pocket limits (indexed for inflation) cannot exceed the limits that apply to HSA's ($5,950 single/$11,900 family)

Deductibles cannot exceed $2,000 for single coverage and $4,000 for family coverage (both indexed for inflation)

Applies to NGF Plans only

Effective plan years beginning on or after January 1, 2014

Cost Sharing Limits

Waiting periods cannot exceed 90 days



Waiting Periods

Maximum permissible employer wellness programs incentivebased on satisfying a standard related to a health

status factoris increased to 30% from 20% of employer and

employee plancost for applicable coverage


Wellness Plans

Numerous Pilots and Demos in Reform Law

Operated out of the newly created Center for Medicare and Medicaid Innovation

Focus on “wellness,” quality of care, keeping people in their homes longer

Pilot and Demonstration Projects

Bundled Payment DemoMedicaid global payment system DemoPediatric Accountable Care Organization Demo Independence at home DemoExtension of gainsharing DemoMedicare hospice concurrent care DemoPatient navigator programDemonstration project concerning

individualized wellness plan

Demo Projects (examples)

CMS Has Broader Authority on Pilots and Demos Budget Neutrality Relaxed. CMS has wider latitude to see if

cost savings will materialize over periods longer than 5 yrs.

CMS has more latitude in evaluation and implementation. CMS historically needed at least 5 years to move from the creation of a pilot to making a national policy change from it. Now, CMS has been given legal authority to roll out some or all of the attributes of a pilot without doing a post evaluation or going to Congress (as long as CMS sees that the pilot or a part of the pilot saves money). This can happen at anytime during the pilot.

Too soon to evaluate how these changes will affect the use of

pilots/demonstration projects, but the changes could prove significant.

Pilots & Demo Projects Implementation

A group of providers who agree to manage quality, cost, and overall care of a defined population of Medicare fee-for-service beneficiariesMust participate in the program for at least three yearsHave a formal legal structure allowing it to receive and

distribute payments for shared savingsInclude enough primary care professionals to cover the

Medicare beneficiaries assigned to itHave in place leadership and management structures that

include clinical and administrative systemsDefine processes to promote evidence-based medicine and

patient engagementDemonstrate to the Secretary that it meets patient-

centeredness criteria

Accountable Care Organizations

Establishment of ACO qualification criteria Interaction with federal antitrust law Interaction with state insurance regulationPayment methodologiesBeneficiary safeguardsMulti-payer participationPerformance measurement and reportingSelection and expansion of pilots Interaction with Medicare Advantage

ACO Implementation Issues

Rising level of coverage for uninsured patients

Reductions in funding for Medicare disproportionate share

More coordinated care, financial risk and public accountability

Medicare cuts drive efforts to "bend the cost curve“ by promoting safety and efficiency

Episodic Payments create bundled payments and penalties for readmissions

Hospitals

Conduct a community health needs assessment once every three years

Adopt financial assistance policy Limit charges for those qualifying for financial assistanceRefrain from extraordinary collection actions before making

reasonable efforts to determine whether a patient qualifies for financial assistance

Tax-exempt hospitals must include and disclose additional information on Form 990 Schedule H (community needs assessment implementation and financial audits).

IRS must review every exempt hospital’s community benefit activities as reflected on its Form 990/Schedule H at least once every three years

Treasury Secretary must report annually to Congress on comparative levels of hospital charity care and complete a Congressional study on emerging trends after five years

New Rules for Non Profits:

The annual reports must also include information on costs incurred by tax-exempt hospitals for community benefit activities.

The Secretary must also prepare a study on the trends emerging in the annual reports and submit it to Congress within 5 years.

Community Benefit and Tax Exemption

Authorizes and appropriates $9.5 billion in the following annual amounts to a new Community Health Centers Trust Fund for the purpose of expanding Community Health Centers’ operational capacity to serve nearly 20 million new patients and enhance their medical, oral, and behavioral health services:

$1 billion for FY2011; $1.2 billion for FY2012; $1.5 billion for FY2013; $2.2 billion for FY2014; $3.6 billion for FY2015.

Within the Community Health Centers Trust Fund, also authorizes and appropriates $1.5 billion over five years to allow Community Health Centers’ to meet their capital needs by expanding and improving existing facilities and constructing new sites.

TOTAL = $11 billion over five years.

Community Health Centers

Authorizes and appropriates the following annual amounts to a new National Health Service Corps Trust Fund:

$290 million for FY 2011; $295 million for FY 2012; $300 million for FY 2013; $305 million for FY 2014; $310 million for FY 2015.

TOTAL = $1.5 billion over five years.

Allows for teaching to count as clinical practice for up to 50% of obligated service.

National Health Service Corps

Program Funding

Medicaid for all up to 133% FPL based on modified adjusted gross income beginning January 1, 2014, All states go to 90% FMAP by 2020

Guarantees “Essential Health Benefits” as defined in the law.

Eliminates cost-sharing for preventive services in Medicaid and Medicare.

States can expand Medicaid eligibility to childless adults beginning April 1, 2010.

Increases Medicaid payments in fee-for-service and managed care for primary care services provided by primary care doctors (family medicine, general internal medicine, or pediatric medicine) to 100%

Medicaid Expansion

Require states to maintain current income eligibility levels for children in Medicaid and CHIP until 2019 and extend funding for CHIP through 2015. CHIP benefit package and cost sharing rules will continue as under current law.

Beginning in 2015, states will receive a 23 percentage point increase in the CHIP match rate up to a cap of 100%.

CHIP-eligible children who are unable to enroll in the program due to enrollment caps will be eligible for tax credits in the state Exchanges.

Treatment of CHIP

FQHC preventive services are updated to include an expanded list of preventives services covered under Medicare, effective for services provided on or after January 1, 2011.

FQHCs’ Medicare reimbursement will be updated to a new PPS payment methodology effective on or after October 2014. At this time, both the Medicare cap and productivity screen are eliminated.

FQHC Medicare Payments

Appropriates $7B annually to establish a Prevention and Public Health Fund (prevention, wellness, and public health activities, including prevention research and health screenings, the Education and Outreach Campaign for preventive benefits, and immunization programs)

Provides grants for up to five years to small employers that establish wellness programs.

Establishes a demonstration program for health centers to receive funding for drafting individualized patient wellness plans.

Directs the President to establish the “National Prevention, Health Promotion and Public Health Council”

Establishes Community Preventive Services Task Force to review effectiveness of clinical and community-based preventive services and make recommendations.

Prevention and Wellness Programs

CHIP maintained at current eligibility and benefits levels with cost-sharing under current law until 2015; after 2014, CHIP-eligible children who are not able enroll in CHIP due to enrollment caps eligible for tax credits in exchanges.

States required to maintain eligibility levels for Medicaid until 2019. Beginning in 2014, individuals with incomes between 100-400% FPL eligible for subsidies to purchase insurance through the Exchanges although individuals with incomes less than 133% FPL coverage through Medicaid.

Medicaid and the Exchange

Authorizes Title VII grant program for development of Teaching Health Centers - - community-based ambulatory patient care centers operating a primary care residency program.

Sec 340H provides per-resident payments to teaching health centers for operation of residency programs.

Strictly prohibits hospitals from receiving payments for this reimbursed time.

Appropriates directly $230 million for 340H over 5 yrs.

Teaching Health Centers

Essential Health Benefits and Medicaid benchmark both include mental health (Sec. 1302 and 2001)

Preexisting conditions include both “physical and mental” (Sec. 2705 )

Extension of physician fee schedule mental health add-on (Sec. 310)

Mental and behavioral health education and training grants (Sec. 5306)

Co-locating primary and specialty care in community-based mental health settings (Sec. 5604)

Mental Health Provisions

Larger government role in health care delivery may accompany expanded federal share of payment

Significant provider cuts likely necessary to reduce $500B from Medicare

Substantial implementation issues arise for employers, individual, plans and providers.

Forecast for Future

Several phases over the next 5+ years

Over a thousand references to Secretarial discretion which will prompt Administrative interpretations and rulemakings throughout the coming years.

Administrative Rulemakings expected regularly through the next several years to address key definitions, schedules, program rules, etc.

Technical Corrections are also expected to clear up ambiguities resulting from the lack of a House-Senate conference before final passage

Transparency and Public Feedback will be critical to success

Implementation

Health Care Reform Overview and Implementation

Documents

Transcript of Health Care Reform Overview and Implementation