State Health Plan Meeting Summary: April 22, 2010

The State Health Plan held their final meeting to review the National Health Reform Legislation and the impact of the legislation on the State Health Plan and Employers in NC. They also approved their final report and recommendation.

2010 Health Care Reform: Jack Walker who administers the State Health Plan presented on the key areas of the federal Health Care package.

Insurance Reform:

  • Extends Insurance Coverage to 95% of Americans over the next ten years
  • Establishes high-risk pool until 2014.
  • Establishes individual mandate and employer mandates with less than 50 employees with exceptions.
  • Creates regional/statewide insurance exchanges.
  • Offers reinsurance for employers covering pre-Medicare retirees ages 55-64.
  • Eliminates pre-existing conditions exclusions.
  • Eliminates annual and lifetime limits.
  • Provides free preventive care.
  • Extends dependent age to 26 with no student requirement.

Medicaid Expansion:

  • Expands eligibility to 133% FPL (Federal Poverty Level).
  • Demonstration projects to improve care delivery.

Medicare:

  • Medicare Advantage rate cuts.
  • Allows for providers in Accountable Care Organizations to “share” savings with CMS.
  • Medicare Part D changes.

Quality Improvements:

  • Establishes an Innovation Center to reduce expenditures and improve quality.
  • Various provisions to establish comparative effective and quality research.

Timeline for Health Care Reform and the Impact on the NC State Health Plan

  • June 23, 2010-Temporary re-insurance program for early retirees (funds will be depleted 1-2 years).
  • January 1, 2011– Employers are required to disclose the value of health benefits on W-2IRS forms for 2011 calendar year (LEA administrative costs). CLASS Act will require payroll deduction line for long term care insurance.
  • July 1, 2011-Bans pre-existing conditions exclusion for dependents under the age of 19 (negligible impact). Prohibits lifetime maximums (no impact). Mandates that dependents that are “not eligible for other group coverage” can stay on or join parent’s policies up to age of 26 (State $11-$27 annually).
  • March 23, 2012-New standards for description of covered benefits (State/LEA administrative costs).
  • July 1, 2012-Tax on all Plan enrollment for “Quality Research” (State-$600,000-2013, $1.3 million-2014)
  • January 1, 2013– Caps contribution to Flexible Spending Account at $2,500/year (no impact).
  • July 1, 2013-Employers of 200 or more employees must provide disclosure of all options to all employees and make enrollment for new employees automatic unless the employee refuses (administrative costs).
  • January 1, 2014 OR July 1, 2014-Free Choice Voucher. The law requires the employer who offers coverage to provide employees whose family income is more that 400% of FPL a “Free Choice” voucher if the employee contributions are between 8% and 9.5% of family income and plan coverage is greater than or equal to 60% of the actuarial value (unknown impact). Bans pre-existing conditions exclusion for all individuals (negligible). Bans waiting periods greater than 90 days (no impact). The age 26 rule will drop the requirement for “grandfathered” plans of eligibility for other group plans (negligible impact). Employers are permitted to offer employees penalties/rewards up to 30 percent of the cost of the healthcare program for participation in health programs (NC current law: 20 percent). Establishes state-based Insurance Exchanges. Requires individuals to obtain health care coverage. *Note: The employer may compare the difference between paying the monthly 1/12 of $3,000 penalty for all affected employees, or paying 1/12 of $750 for every full-time employee, whichever is less.
  • July 1, 2014-Requirements to Provide Coverage by employers of 50 or more otherwise pay a penalty. In addition, employers will either pay the penalty or provide a “Free Choice” voucher.
  • January 1, 2017-States are allowed to offer large group coverage through HIE (Health Insurance Exchange).
  • January 1, 2018 or July 1, 2018– Imposes a 40 percent excise tax on high cost health plans that exceed $10,200 for individual and $27,500 for family coverage.

*As of April 22, 2010, both State Health Plan offerings exceed 60 percent of the actuarial value.

Most of the major costs associated with health care reform in NC will occur as administrative costs for employers, including local school systems. The changes could cost the State Health Plan as many as half of their enrollment with members whose earnings are so low they would qualify for subsidy or the Health Insurance Exchange plan. This will drive up the costs per member/per month, which could result in fewer members staying in the system and create a vicious cycle. Each State has the authority to operate its own Health Insurance Exchange program as well as regional HIEs and federal HIEs. An example of the eligibility for a free choice voucher or HIE subsidy was described using a series of questions. A family of four with a household income below between $61,938 and $73,551 can receive a “Free Choice” voucher, and if the family household income falls below $61,938 they are eligible for the HIE subsidy. Most of the issues in the Health Care reform package are not effective until 2014, however there are a number of reforms beginning on/or in six months after the enactment of the laws while the Sate Health Plan requirements become effective no later than July 1, 2011. The NC State Health plan is grandfathered from many of the legislative requirements. Citizens and legal immigrants will be required to pay a penalty if they do not have health insurance. If one doesn’t enroll they pay a penalty of $95 per person or 1% of taxable income in 2014, $325 or 2% in 2015 or $695 or 2.5% 2016. There are some exemptions for individuals who do not file taxes and those for whom the lowest cost plan exceeds 8% of an individual’s income.

There are still many issues to be addressed and rules that have yet to be finalized for the law. If you would like a copy of the handout please contact me.

Blue Ribbon Task Force on the State Health Plan Report to the 2010 Session of the 2009 General Assembly:

The report provided an overview the six meetings held this year and the final recommendation that reads: The Blue Ribbon Task Force on the State Health Plan for Teachers and State Employees recommends that the General Assembly continue addressing State Health Plan issues during the 2010 Session and that the Task Force resume its work after adjournment of the 2010 Session and develop a report to the 2011 General Assembly.

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