Obama Heath Care Reform Update on H.R.3590

While the dust has not settled on the Obama health care reform bill  which was signed into law, I am attaching several good summaries of the bill as it impacts insurers and coverages. There will likely be a series of amendments coming as the House and Senate finalize their deliberations on the bill.

There are several provisions that will go into effect shortly after the bill is finalized.

  • Prohibition on lifetime limits
  • Yet to be determined restrictions  on imposing annual limits on “essential health benefits”
  • Rescission restricted to fraud or intentional misrepresentation (effective 6 months after enactment) For us this is a non event since these are the only conditions today that we would rescind coverage for.
  • Requires plans to cover preventive health services with no cost sharing (6 months after enactment)
  • Extends dependent coverage to 26 (again 6 months after enactment)
  • Several new requirements on consumer information plans must provide
  • Emergency room coverage can’t impose out of network cost sharing  (6 months after enactment)
  • Requires plans to establish an appeals process for coverage or claims disputes (we already have that)
  • No pre-ex for children under the age of 19 (6 months after enactment)
  • A temporary national high-risk pool will go into effect within 90 days of enactment
  • Imposes medical loss ratio requirements on individual and small group plans commencing in 2011 (Definitions and supporting rules will be developed by the HHS Secretary and the NAIC) As a note, currently state insurance departments who  govern rates and rate increases in the individual and small group market require actuarial documentation justifying the rates being charged. The measurement generally focuses on “lifetime loss ratios” meaning the average loss ratio expected over the life of the policy. There has been a considerable amount of discussion between the house and the senate and the NAIC regards this measurement issue. At present this is supposed to be worked out and be finalized by the end of November, 2010.

Most of the other provisions that will affect our business are slated for a 2014 effective date. That’s a long way off. But one thing is for certain, premiums will increase in the individual market. Between the imposition of no medical underwriting/guaranteed issue, a 3 to 1 age band (which incidentally will drive up rates for  25 year olds by 60%, for 30 year olds by 48%, and for 35 year olds by 28% given our current age banded rates), unisex (which again will increase rates for males under age 55 by anywhere from 10% to 20%) females will get a corresponding reduction so it won’t materially impact families, coverage parity for mental nervous ( this could be a huge inflator given guaranteed issue), an ineffective mandate which may depending on the penalties for “late enrollees” allow for people to wait until they come down with a serious medical condition to buy coverage, to name a few drivers of premium increases.

The bill does allow policyholders who have coverage in force prior to 2014 to retain their coverage presumably for as long as they want.

The CCH Tax briefing does a good job of explaining how the premium tax credits for people between 100-400% of federal poverty would work. So the presumption is that  while rates will go up in the  individual market the poor folks get a break. Notice however that there is no adjustment for age. At present the tax credits are only available if coverage is obtained through a state insurance exchange (which coincidentally many states are already fighting)

I also am including a letter from NAHU talking about the role a Certified Health Care Access Advisor should play for exchange customers. Please note that one of my roles at AHIP has been to work with NAHU on developing a certification program for health insurance agents. That work is nearing completion.

While Obama Health Care Reform it is a long way off, I believe the best service an agent can offer their customers is to ensure they have a plan in force before 2014 and advise them it is not in your best interest to wait unless you are likely to be eligible for a huge tax credit,  are old enough that the 3 to 1 age rule won’t have a big impact,  or  are either an older male or a younger female.

I will continue to provide updates as appropriate.

Ben Cutler

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