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Healthcare Reform Article -
2010-04-30 10:44am
On Sunday, March 21, 2010, the House of Representatives passed the fiercely contested healthcare reform bill, HR 3590. On Thursday, March 25 the Senate passed the Reconciliation Bill, the so-called âfix itâ bill. On Tuesday, March 30, President Obama signed the final piece of the legislation into law.
This legislation will have a major impact on every person living in the United States for the foreseeable future. While there are many implications of this bill, some components of the bill as well as the impact on employers are as follows: (Please note there are various time phases and qualifications of the various aspects of the bill. We are simply trying to give you a bottom line view point in this article.)
Everyone must buy insurance and get it either on their own or through their employer.
Employers with 50 or more employees who do not offer coverage will be fined $2,000 per employee, but exempts the first 30 from the fine. (for example, if you have 51 employees you pay the fine on 21 employees)
Employer plans must meet the essential benefits requirements in order to be considered compliant with the mandate.
All individuals must have qualified health insurance in place by January 1, 2014. Failure to have insurance will result in a tax up to 2.5% of household income with a minimum of $695.
Large, self-funded employers with 200 or more employees must auto enroll all new employees into any available employer sponsored health insurance plan, but employees may opt out if they have another source of coverage. In addition, ERISA plans are subject to report coverage status data on all plan participants to the IRS as part of the individual mandate.
Pre-existing exclusions will not be allowed. Lifetime and annual dollar limits on essential healthcare will not be allowed. Some current plans that have lifetime and annual dollar limits may be grandfathered until 2014. For the plans that are not grandfathered these changes will take effect within six months of enactment.
Insurance carriers will be required to report and prove that they spent between 80-85% of their revenue on medical claims. This is referred to as the minimum loss ratio.
The definition of qualified medical expenses has changed so that over the counter medications are no longer eligible expenses for HSAâs, FSAâs, and HRAâs. FSAâs will have an annual maximum limit of $2,500. The penalty tax for use of HSA money for non-qualified medical expenses doubles from 10% to 20%.
Small businesses with fewer than 25 employees and average annual wages of less than $50,000 that purchase health insurance for employees may be eligible for tax credits for up to two years.
Increases the Medicare payroll tax from 2.9% on unearned income to 3.8% for individuals with incomes over $200,000 and couples with incomes over $250,000. It also increases the 1.45% Medicare payroll tax on workersâ wages to 2.35% on earnings that exceed $200,000 for an individual and $250,000 per couple. The portion of the Medicare payroll tax paid by the employer would remain at 1.45%.
Immediate Impact
While the future impact is not clear, our expectation is that your current health insurance premiums will rise significantly between now and 2014 when most of the bill requirements will be effective. This will affect the fully insured employers more dramatically than self-funded employers. The insurance companies will be getting squeezed with the minimum loss ratio requirements of the bill as well as being required to cover pre-existing conditions. Therefore, it is our opinion that the insurance companies will be forced to increase their rates now in order to prepare for the unknown impact of the bill on their future.
Common Sense
To our dismay, the bill did not address the underlying cause of the cost of health insurance. The cost of health insurance is merely a symptomatic problem of the cost of actual healthcare. The insurance companiesâ profit margins are not as bloated as the politicians would have you believe. The bill does nothing to reign in the sky rocketing costs of receiving medical attention at a doctorâs office, hospital, or any other type of medical provider or facility.
If we could go back and re-write the law we would prefer to use more common sense and effective means to lower the cost of healthcare for all. We suggested to our representatives the following items for real healthcare reform:
1.Give major tax incentives for people to get insured under consumer driven healthcare policies, like Health Savings Account qualified plans, where the insured has to pay 100% of the upfront costs of medical care until their deductible is met (usually $2,000- $3,000) then the insurance plan pays 100% of all the remaining claims for the rest of the year.
2.Mandate that doctors, hospitals, medical providers and facilities post all of their services and their prices for each PPO network that they contract with. The reason being is that doctors in the same network have different negotiated pricing contracts with the insurance company and PPO network. Some charge more than others, even in-network. For example, if you have two Pediatricians in the same zip code and they are both contracted, or are in the same PPO network, they may have negotiated contracted prices with that PPO network that are 50-100% different in price. If you have more people spending their own money and paying 100% of the cost upfront, they will more than likely shop the price of their healthcare which would cause competition which would, in our opinion and as history clearly shows, cause prices to fall and services to actually improve. Healthcare is the only industry in our country where we walk in the door and have no idea what it will cost us.
3.Tort reform. There was no attempt for Tort reform in this legislative process.
If you have any questions on how this healthcare reform bill will affect you or if you need help with your insurance needs, we would be glad to be a resource for you.
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