By Brian Schilling
It may not be immediately obvious in the aftermath of the health reform battle, but the fight is now over. Health care reform is here to stay. Notable changes begin in earnest this year and continue through 2018. These changes affect nearly every aspect of the insurance and delivery systems, including how employers buy care, what they get, how much it costs, and how it's taxed.
But which parts of the complicated bill are relevant for employers? A brief synopsis of the major changes that lie ahead, by year:
2010
- Coverage from Mom and Dad. Beginning in September, dependent adults up to 26 years old, even if they are married, may stay on their parents' health plans, giving them added measures of security and mobility. This will have special implications for interns, temporary workers, and any employer that hires younger workers in significant number.
- No more canceled policies. Also in September, insurance companies will be barred from canceling coverage for any reason other than fraud or non-payment of premiums, thus eliminating small employers' concerns that they might lose coverage should a worker get catastrophically sick.
- Tax credits for small businesses. Retroactive to the beginning of the year, billions of dollars in tax credits for the nation's smallest employers are now available to help offset the cost of coverage. These credits are on a sliding scale, with the full 35 percent credit available to firms with fewer than 10 employees and average wages under $25,000. Lesser credits are available for firms with up to 25 employees and average wages under $50,000. Some good news: the credits increase to 50 percent by 2014.
- The end of preexisting condition exclusions. Perhaps the biggest change for 2010 initially applies only to children. Insurance companies will no longer be allowed to deny coverage to children based on preexisting conditions. The same protections will be extended to adults beginning in 2014.
- Lifetime benefit caps banned. Lifetime coverage limits will be banned as of September. Annual coverage limits will also be banned, but not completely until 2014.
- Unreasonable increases will require an explanation. Effective immediately, insurers are now required to explain to the Secretary of Health and Human Services (HHS) any "unreasonable" rate increases prior to implementation. The Secretary does not have the authority to bar such increases, but can require insurers to post those explanations on their Web sites. Information on rate increases will factor into whether insurers are allowed to participate in health exchanges (see 2014).
- Reinsurance for retirees' benefits. Reinsurance will be available to employers providing retiree health benefits as early as late June.
- More information on what works. A new institute will conduct comparative effectiveness studies to help inform all players in the health care system about the effectiveness of various treatment options.
2011
- Did somebody say refund? Beginning in 2011, health plans serving large employers must spend at least 85 percent of their premiums on medical care or they will be required to offer rebates to enrollees. For plans serving the small-group and individual markets, the requirement is 80 percent. While not expected to generate significant refunds, this provision does offer a measure of assurance that the majority of health care dollars will actually be spent on medical care.
- A change to your W-2. Employers will be required to note on W-2 forms the value of each employee's health benefits. That dollar figure becomes especially relevant for certain individuals in 2018, when "Cadillac taxes" go into effect.
- A boost for value-based purchasing. The Center for Medicare and Medicaid Innovation will begin testing new provider payment models and fast-track implementation of successful efforts in Medicare, Medicaid, and the Children's Health Insurance Programs. The emphasis will be on improving quality and reducing costs.
- And another boost. Physicians participating in the Medicare program will be invited to participate in a program to evaluate the care they provide and generate comparative reports that will highlight high-use (i.e., inefficient) providers. Providers who do not participate by 2014 will be penalized.
- Web site for comparing Medicare doctors. HHS will establish a Web site that will allow Medicare beneficiaries to compare participating doctors on various measures of quality and patient satisfaction.
2012
- Value-based purchasing at the hospital level. HHS will establish a value-based purchasing program for acute care hospitals that will reward them for good outcomes. The department is also directed to come up with a plan to introduce value-based purchasing to the home health and nursing home sectors.
- Diabetes report card. HHS and the Centers for Disease Control and Prevention will issue a national diabetes report card, including assessments of preventive care practices, quality of care, risk factors, and outcomes.
2013
- Elimination of the deduction for employers' Medicare Part D drug subsidies. The government currently offers employers a subsidy that helps cover about 28 percent of the cost of retirees' prescription drug coverage. That subsidy will be taxed beginning in 2013. Companies affected by the new tax are required to note its impact on financial statements beginning this year.
- Limits on flexible spending arrangements. Health flexible spending arrangements in cafeteria plans will be limited to $2,500 in 2013, and indexed to the consumer price index after 2013.
2014
- No one gets turned away. New rules will require insurers to accept every individual or employer who applies and prohibit setting premiums based on health status. Older individuals (and possibly employers with an older workforce) will still pay more, as will smokers, but the bottom line is that any individual or firm that wants coverage and can pay for it will be able to get it.
- "Big employer clout" for everyone. The new law calls for the establishment of state-run health exchanges, which will essentially act like purchasing cooperatives for individuals and small businesses with up to 50 employees. Some states may opt to open their exchanges to employers with up to 100 employees, although it's not mandatory. These exchanges will help drive open competition, eliminate rate discrepancies between large and small employers, and give participants leverage on par with big employers. Exchanges will also let workers change jobs without fear of losing their health coverage.
- A national coverage requirement. An individual mandate goes into effect in 2014, but anyone caught without health insurance faces only a $95 penalty. The penalty gets bigger every year, until it tops out at the greater of $695 or 2.5 percent of a person's taxable income in 2019.
- Fines for large employers that opt out. Employers with 50 or more workers that opt not to provide coverage face a $2,000 fine per employee if any employee receives subsidized coverage.
- Small-business tax credit. As noted earlier, the 35 percent tax credit for small employers jumps to 50 percent in 2014.
- Quality reporting. Ambulatory surgical centers, long-term care hospitals, inpatient rehabilitation facilities, inpatient psychiatric facilities, cancer hospitals, and hospice providers will be required to adopt quality measurement and reporting programs and to test value-based purchasing in subsequent years.
- Independent Payment Advisory Board. This new 15-member board will advise Congress on reducing cost growth and improving quality of care for Medicare beneficiaries. The board is also expected to issue non-binding recommendations for private payers.
2018
- "Cadillac plan" taxes. A 40 percent excise tax will be placed on premiums for individual plans that cost more than $10,200, and family plans that cost more than $27,500. Although the tax will be imposed on insurers, the effects will surely be felt by consumers and employers, either in the form of passed-along costs or modified benefits.
Date Unspecified
- Deductions for wellness programs. Though no date has been set, employers may soon be able to deduct 30 percent of the amount spent on wellness programs. Employers can currently deduct only 20 percent.
- Grants for wellness programs. In addition, small and mid-sized employers will be able to apply for five-year grants to implement and strengthen qualified wellness programs.
For more information on health reform, see The Commonwealth Fund's implementation timelines: