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Table of Contents
The Numbers Game 4
Patient Protection and Affordable Care Act Timeline of the Act Small Business Health Options Program (SHOP) Timeline for Changes Impacting Employers State Health Exchanges Functions of a State Exchange Structure of an Exchange Operating an Exchange Benefits of the Exchange Eligibility Timelines Summary
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Introduction
Health insurance has been, and continues to be, a highly debated issue in the United States. Every aspect of the healthcare industry is under question, from the cost of healthcare to its availability. This paper focuses on the changes mandated by the federally enacted Patient Protection and Affordable Care Act which calls for dramatic changes in the way health insurance is sold in this country.
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In 2000, the United Nations World Health Organization (WHO), ranked Americas healthcare system as the highest in cost, first in responsiveness, 37th in overall performance, and 72nd in overall level of health (among the 191 member countries of the UN). In addition, the Institute of Medicine of the United States National Academies points out that around 18,000 unnecessary deaths are caused in the U.S. every year and that the lack of medical care has resulted in the death of about 100,000 Americans annually . Employers still serve as the primary source for health insurance among most Americans, but due to rising health care costs, many employers have limited or, in some cases, eliminated coverage for their employees. This and the large number of unemployed have contributed to the rising number of uninsured Americans.
Source: U.S. Census Bureau, Income Poverty and Health Insurance Coverage in the United States, 2007
These statistics represent some of the reasons for the passage of the Patient Protection and Affordable Care Act.
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Timeline of the Act
EFFECTIVE BY 2010:
No discrimination permitted against children with pre-existing medical conditions Insurance companies cannot drop people from coverage unless there is a serious case of fraud There would be no lifetime limit on insurance coverage Annual limits on insurance coverage would be regulated Insurance companies must set up a consumer appeals board Information on health insurance must be provided online Qualified small businesses will get tax credits if they provide coverage at work Seniors hitting the prescription drug coverage donut hole (the coverage gap in drug spending in which seniors pay 100% of the costs) are given a one-time rebate check of $250 Preventive healthcare such as mammograms and flu vaccines will be available free of cost $15 Billion will be allocated to the Prevention and Public Health Fund to encourage Americans to live healthy lifestyles Adults with pre-existing medical conditions can access affordable healthcare through a high risk pool program Children can stay on their parents coverage until the age of 26 A $5 billion federal fund will ensure that early retirees have access to affordable coverage New incentives encourage more primary healthcare providers to work in underserved areas Insurance companies must justify unreasonable rate hikes Medicaid will be expanded to accommodate more people from low-income brackets Rural healthcare providers are paid to ensure that they continue serving these communities
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EFFECTIVE BY 2011:
Seniors who fall in the coverage gap receive a discount of 50% on Medicare Part D prescription drugs Free preventive services provided to seniors The Department of Health and Human Services (HHS) must submit a national strategy to improve the quality of healthcare in government sponsored programs like Medicaid, Medicare and CHIP The Community Care Transition Program must ensure that high risk Medicare beneficiaries do not undergo unnecessary readmissions Community Health Centers are constructed and expanded. Insurance companies must spend 80% (80% for small group and individual markets and 85% for large groups) of their premium dollars on healthcare services
EFFECTIVE BY 2012:
A Hospital Value-Based Purchasing Program is established that offers financial incentives to hospitals to improve the quality of care Physicians are incentivized to join Accountable Care Organization Electronic health records are created to reduce paperwork and administrative costs CLASS, a voluntary long-term care insurance program will provide cash benefits to disabled adults
EFFECTIVE BY 2013:
More funding to state Medicaid programs to provide preventive services Primary care physicians will be paid 100% of Medicare payment rates Additional funding to ensure children not eligible for Medicaid are covered
EFFECTIVE BY 2014:
Health insurers cant discriminate on the basis of pre-existing health conditions or gender of the beneficiary No annual dollar limits on the amount of coverage an individual might receive Individuals participating in clinical trials will be ensured coverage
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Tax credits are provided to lower income individuals applying for medical insurance Each state must create Exchanges for individuals to shop easily for health insurance Small businesses providing coverage to workers will receive increased tax credits
Individuals and families that can afford insurance will be encouraged to buy their own insurance Workers can use the employers insurance fund to receive affordable coverage for themselves
EFFECTIVE BY 2015:
The payment of physicians will depend on quality and not volume. This will encourage physicians to focus on providing quality healthcare
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Bonus tax credits will be provided to those employers who exceed the 60% threshold and contribute more towards their employee health insurance: $200 for each employee who receives self-only health insurance coverage$2000 for $400 for each employee who receives family health insurance coverage through the employer $300 for each employee who receives health insurance coverage for 2 adults or 1 adult and 1 or more children through the employer However all tax credits depend on the number of workers employed by the firm: 10 or fewer full-time employees More than 10 but not more than 20 full-time employees More than 20 but not more than 30 full-time employees More than 30 but not more than 40 full-time employees More than 40 but not more than 50 full-time employees More than 50 full-time employees 100% 80% 60% 40% 20% 0%
SHOP program tax credits are also subject to the percentage of year factor, determined by the number of months during the taxable year in which the employer paid or incurred qualified employee health insurance expenses.2
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Americans without any form of medical insurance must pay an annual fine of $95. This amount will increase in subsequent years 2016: : States will have to open SHOP to facilitate bulk buying of health insurance by small business employers. Both Exchanges and SHOP will be administered by individual states. The federal government will only administer an Exchange or a SHOP if a state refuses to create one.
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Functions of a State Exchange
In addition to being a market place for insurance products, Exchanges will have five crucial functions:
1. Foster competition among insurers to ensure that the consumers get the best rates and services. All the costs and services would be listed in a manner that will make comparison across plans easy. 2. Exchanges also are required to provide transparent and authentic information about plans, premiums, coverage, benefits, and the like. 3. For those who do not have access to any sort of assistance, Exchanges will facilitate enrollment in plans and the payment of premiums. They will serve as portals where applicants can check their eligibility for plans and subsidies. 4. By purchasing health plans from Exchanges, individuals can retain their coverage even when between jobs.
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The Exchanges will have five categories of health plans depending on the expenses. Other than providing the essential health benefits, the following different benefit categories will also include a: 1. Bronze Plan: 60% of the costs with HSA out-of-pocket limits 2. Silver Plan: 70% of the costs with HSA out-of-pocket limit 3. Gold Plan: 80% of the costs with the HSA out-of pocket limit 4. Platinum Plan: 90% of the costs with the HSA limit 5. Catastrophic Plan: For those below the age of 30 and are exempted from the mandatory purchase of health policy. Though the Act leaves it to the states to decide upon the form and medium of the Exchanges, most states, barring a few, will eventually govern their own health insurance Exchanges.
Structure of an Exchange
The Act directs every state to have a state-based health insurance Exchange as health insurance rules vary from state-to-state. A state Exchange will also give a greater sense of ownership to its citizens. The Exchanges will be funded by federal dollars. The Act also has provisions calling for the federal government to create and administer an Exchange if any state refuses to do so. There is a possibility that, at some later date, all state health insurance Exchanges will be integrated into a single national Exchange. This would reduce the administrative costs associated with the Exchanges. A national Exchange also would ensure that consumers are not deprived of coverage even when they change their state of residence.
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Operating an Exchange
Administrating a state based Exchanges that operate on federal dollars and adhere to both federal and state regulations will require collaboration by federal and state governments. Since Exchanges will be funded largely by the federal government, each states Exchange will be audited by federal agencies to ensure compliance with federal health insurance regulations. Since states will administer the Exchanges, it is important that state governments and their respective insurance departments form an Exchange Board to oversee operations. The effective management of the Exchanges will ensure that consumers reap the maximum benefits when purchasing health insurance.
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Eligibility
Not everyone can sell or purchase a plan through an Exchange. Both buyers and sellers must meet certain eligibility criteria before they can operate on an Exchange platform. For Buyers: Initially, Exchanges will be limited to unemployed individuals, those self-employed or employers with fewer than 100 employees. Health insurance carriers: Only those health insurance companies with acceptable rates, who spend no less than 80% of their premium dollars on health care expenses for their members and who comply with the federal guidelines will qualify to showcase their products on an Exchange platform.
Exchanges will provide consumers with a broad selection of health insurance options. However, with increased options comes, in some cases, confusion. It will be important that states also provide support including call centers -- for consumers participating in the Exchanges.
Timelines
Though Exchanges dont become fully operational until January 1, 2014, implementation has already begun. The following outlines the mandated implementation plan
2010
States develop informal databases capturing the issues that will affect the formation of Exchanges and the drafting of grant applications. The Department of Health & Human Services (HHS) establishes interoperable standards and protocols for enrollment in the HHS program
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2011
States begin to apply for federal grants for: A) HIT enrollment standards & protocols and; B) development of health benefit Exchanges Develop strategic plans to integrate the Affordable Act within the realms of the Exchanges Grants from the HHS become available for planning and developing standards for compiling and providing enrollees with summary of benefits
2012
Establish Health Benefit Exchanges Develop, issue, and review RFPs for IT and infrastructure States seek and receive final approval from HHS for Health Benefit Exchanges Develop and implement plans of operations Select audit firms to assess system of internal controls, key processes and systems Select vendors for outreach, marketing, advertising and develop strategy and materials Develop and issue RFPs for a) Navigators b) Call Centers c) Financial systems/ Subsidy Reconciliation State implements federal eligibility and subsidy determination guidelines
2013
IT/ Website developed and implemented HHS approves that a state is willing and able to implement the Exchange by January 1, 2014 Begin development of QHP (Qualified Health Plan) RFP specifications HHS to provide loans to assist Co-Ops Select QHP and begin implementation
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Marketing and outreach campaign Full Enrollment Systems Testing Begin selling health plans
2014
Health Benefit Exchange becomes fully operational
Summary
The state based health insurance Exchanges are one of the most important aspects of the healthcare reforms of 2010. The Act sets certain guidelines that every Exchange has to adhere to and yet leaves enough flexibility for states to accommodate their individual preferences and regulations. More importantly, the Act provides a platform for consumers to cost effectively and more easily purchase health insurance.
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