GOOD TO KNOW: Some basics of health care reform

After decades of failed attempts by various Democratic presidents and heated political battles, President Barack Obama signed legislation March 23 to overhaul the nation’s health care system and guarantee access to medical insurance for millions of Americans.

Two days before, the House approved, 219 to 212, the health care bill that the Senate had passed in December. At that time, the House passed some changes to the bill needed to make it acceptable to House Democrats. Those changes were then sent to the Senate which, as of Thursday afternoon (March 25), approved the changes to the health care bill. Because Republicans identified some flaws that struck minor provisions to the bill, it now goes back to the House for one more vote, though Democrats said they were confident the measure would soon be on President Obama’s desk for his signature.

The historic bill signed by Obama will provide coverage to an estimated 30 million people who currently lack it. The bill will require most Americans to have health insurance coverage. It will add an estimated 16 million people to Medicaid, and will subsidize private coverage for low- and middle-income people. It will regulate private insurers more closely, and ban practices such as denying care for pre-existing conditions. The law will cost the government an estimated $938 billion over 10 years, according to the Congressional Budget Office, which has also estimated that it will reduce the federal deficit by $138 billion over a decade.

Here is a summary of some of the main ways health care reform may affect people in various situations:

The Uninsured

Most Americans who do not obtain health insurance by 2014 will face a federal penalty as follows: In 2014, consumers who do not have insurance will owe $95 or 1 percent of income, whichever is greater. The penalty will subsequently rise, reaching up to $695 or 2 percent of income. Families who fall below the income tax filing thresholds will not owe anything, nor will people who cannot find a policy that costs less than 8 percent of their income.

a. Expanded Medicaid

More low-income individuals under age 65 will be covered by Medicaid. Under the new rules, households with income up to133 percent of the federal poverty level (about $29,327 for a family of four) will be eligible.

b. Exchanges and subsidies

Most other uninsured people will be required to buy insurance through a new state-run insurance exchange. People with incomes of more than 133 percent of the poverty level but less than 400 percent (from $29,327 to $88,200 for a family of four) will be eligible for premium subsidies through the exchanges. Premiums will also be capped at a percentage of income, from 3 percent of income to 9.5 percent.

c. Employment flexibility

The exchanges will also help people who lose their jobs, quit, or decide to start their own businesses. If a person loses employer-related insurance, he will be able to use the health insurance exchange. Additionally, people of any age who can’t find a plan that costs less than 8 percent of their income will be allowed to buy a catastrophic policy that is otherwise intended for people under 30.

The Insured

a. Employer coverage

People who receive coverage through large employers will not be likely to see drastic changes and their premiums should not be affected. Almost everyone, however, will benefit from new regulations like the ban on pre-existing conditions that will apply to all policies by 2014. Also, if the employee would like to pay more than 9.5 percent of their income for premiums or are offered employer plans that do not cover more than 60 percent of the cost of their benefits, the employee could buy insurance through the exchange.

b. Changes starting immediately

If you keep your current plan, within six months the plans will have to stop some practices, like setting lifetime limits on coverage and canceling policyholders who get sick. They will have to allow children to stay on their parents’ policies until they turn 26 and cover children with pre-existing conditions (but can still deny adults with medical problems until 2014).

c. High-cost insurance

Starting in 2018, employers that offer workers insurance plans with total premiums of $10,200 per individual or $27,500 per couple (“Cadillac plans”) would have to pay a 40 percent tax on the excess premium.

d. Changes in Medicare i. Prescription drug coverage

One of the biggest changes to Medicare involves the prescription drug program.

The “donut hole” will be eliminated by 2020, and starting immediately, consumers who hit the coverage gap will receive a $250 rebate. In 2011, they will receive a 50 percent discount on brand name drugs. The share consumers pay for both brand and generic drugs will decrease each year until the gap is eliminated in 2020.

From 2020 on, consumers will pay an average 25 percent for their drugs after they have paid their deductible and until they reach catastrophic coverage. They will no longer have to pay full price for their drugs at any point during the year.

Premiums for Part D coverage will increase for the wealthiest 5 percent of people with Medicare (individuals earning over $85,000/year and couples earning more than $170,000/year).

ii. Preventative care

The health care bill eliminates co-pays and deductibles for preventative care, and provides for an annual checkup and personalized prevention plan at no cost.

iii. Changes in reimbursement

The bill provides for a 10 percent bonus for primary care. There will be no pay cuts to doctors. The bill proposes reducing annual increases in Medicare payments to hospitals, Skilled Nursing facilities, and Home Health agencies.

However, a “productivity factor bonus” will come into play to encourage medical providers to become more efficient. If this productivity target ends up being too unrealistic and causes access problems for consumers, Congress can revisit these payment changes.

iv. Medicare Advantage (MA) Plan changes

Currently, Medicare pays private MA health plans 14 percent more per enrollee than it does for the same person under Original Medicare. The final bill would bring the payments to the companies providing these plans more in line with costs under Original Medicare.

MA plans would still be required to provide coverage that is at least as good as Original Medicare. Plans that deliver high-quality care and are efficient would still get payments from Medicare to fund extra benefits, such as dental cleanings or lower co-pays for hospital stays that some plans provide.

The bill limits the ability of the MA plans to charge more than Original Medicare for certain services. It also requires plans to spend at least 85 percent of the money they receive from taxpayers on medical services for plan members instead of profits and marketing costs.

Any person with Medicare who has a premium increase or benefit reduction in the MA plan can change to another plan or return to Original Medicare for coverage. The bill creates a single Annual Enrollment Period for drug and health plan changes from Oct. 15-Dec. 7. It also allows MA enrollees to enroll in Original Medicare during the first 45 days of the new year.

Of course, this is just a summary of some of the highlights of the new bill. Over the next few months, you will undoubtedly receive a lot of new information with respect to the health care overhaul.

If you have any additional questions, you may call Pat Hafermann, elderly benefits specialist with the Aging and Disability Resource Center, at (920) 467-4100 or (800) 596-1919.

Resource: “The Specialist” March 2010