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Federal Health Reform Law Update

Mila Kofman, SuperintendentKatie Dunton, Director Outreach & Communications

Bob Wake, General CounselWeb page: maine.gov/pfr/insurance

800-300-5000

Oct. 1, 2010

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Overview of the insurance reforms in the ACA

• BOI actions

• Immediately upon signing – tax credit for small businesses – UPDATE

• Sept. 23 UPDATE

• Beyond

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BOI

• Established “health reform” implementation team– Analyze federal law and regulations – Many weekly calls with HHS and NAIC

• Superintendent and team monthly calls with health plans, and calls with agents, consumers (individual and small business advocates) and providers

• Governor’s Steering Committee and NAIC

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Bulletin 375

• Encourages carriers to implement all of the ACA changes as soon as possible

• Temporary limited exemption from the prior approval process for health insurance form filings - applies to policy changes that expand coverage as required by the Act or voluntarily exceed the minimum requirements.

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Small Business Tax Credit

• WHEN? Begins with 2010 tax year.• WHO? Businesses with fewer than 25 FTEs and average

annual wages less than $50,000.– employer must have a group health plan and must pay at least

50% of the premium.

• Tax credit amount? – Up to 35% (25% for nonprofit) of the amount an

employer pays – smaller of actual premium and $5,215 for employee-only/$11,887 for family (average premium in the small group market).

– Phase-out by size of business and wages of workers– 2014 increases to 50% (35% for nonprofit) – 2 years

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Tax Credits for Small Businesses

• BOI website – FAQs updated as guidance is provided

• Outreach and education: insurance agents, consumer groups, and others– BOI invited to provide technical assistance on

insurance questions.

http://www.irs.gov/newsroom/article/0,,id=223666,00.html

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Sept. 23 changes

• Dependent coverage up to age 26• Preventive care without cost-sharing• No lifetime limits• Limited annual limits• Enhanced Appeals & Reviews• No pre-ex for children under 19• Enhanced access to primary care & no

preapproval• Other

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Dependent Coverage up to age 26Federal Requirement

• Dependent coverage on the parent’s health plan must be available for adult children up to their 26th birthday on the same basis as minor children.

• Preferred tax treatment extended under IRC. • Exception - until 2014, grandfathered group

plans do not have to cover dependents who can get coverage through their own jobs.

• Starts first plan year on or after 9/23/2010. 30-day special enrollment period. Many plans voluntarily complied sooner.

• If plan doesn’t cover dependents, no change required.

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Dependent Coverage -- Maine law for dependent coverage is narrower

• ACA allows parents to decide whether to keep their adult children on the plan. For group plans, Maine law gave employer the choice.

• Maine law stops a year earlier, at 25th birthday.• ACA applies to self-insured and fully-insured. Maine law

applies to insurers, not to self-insured employers. • Maine law does not apply if child lives out of state, unless

child is full-time student.• Maine law does not apply if child is married or has

dependents. Under federal law parent can still cover child, but plan does not have to cover child’s spouse or dependents

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Preventive CareFederal Requirement

• Plans must provide coverage without cost-sharing* for:– Services recommended by the US Preventive Services

Task Force that have received an A or B grade.– Immunizations recommended by the Advisory Committee

on Immunization Practices of the CDC.– Preventive care and screenings for infants, children and

adolescents supported by the Health Resources and Services Administration.

– Preventive care and screenings for women supported by the Health Resources and Services Administration.

This requirement applies only to non-grandfathered plans.*Cost-sharing = co-pays, co-insurance, deductibles.

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Preventive CareMaine comparison

Maine law requires coverage for some preventive services, including screening mammograms, pap tests, prostate cancer screening and colorectal cancer screening.

Maine law DOES NOT prohibit cost-sharing for preventive services

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Lifetime LimitsFederal Requirements

• No lifetime limits on the dollar value of essential benefits (to be further defined).

This does not apply to individual or group grandfathered plans.

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Essential Benefits list

• Ambulatory patient services• Emergency services• Hospitalization• Maternity and Newborn Care• Mental health and substance abuse• Prescription drugs• Rehabilitative and habilitative services and devices• Laboratory services• Preventive and wellness services and chronic disease

management• Pediatric services, including oral and vision care

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Lifetime LimitsMaine comparison

Maine law prohibits lifetime limits in most coverage issued or renewed after Jan. 1, 2011. – Maine law preserves existing annual and

lifetime limits of less than $1 Million in individual policies.

ACA applies to essential benefits. ACA has no exemptions and takes effect sooner.

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Annual LimitsFederal Requirements

Annual limits on essential benefits are being phased out from 2010-2014.

Maximum annual limit allowed by federal law

From Sept. 23, 2010 -- to Sept. 23, 2011

$750,000

From Sept 23, 2011 – Sept. 23, 2012

$1.25 Million

From Sept. 23, 2012 – Jan. 1, 2014

$2 Million

After Jan. 1, 2014 No Limits Allowed

This does not apply to individual grandfathered plans.

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Annual LimitsMaine comparison

Maine law prohibits annual limits for most coverage issued or renewed after Jan. 1, 2011.

As annual limits phase out under ACA, federal standards are stronger than state law.

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Appeals and ReviewsFederal Requirements

• Claims and appeal rights must meet federal requirements (states can set higher standards).

• Permits simultaneous external review for expedited appeals.

• Permits external review after one appeal for individual plans.

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Appeals and Reviews Maine comparison

Maine law provides for two levels of appeal and in most cases requires exhaustion of appeals prior to external review.

Maine Insurance Rule 850 appeal and grievance standards are generally stronger than federal.

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Pre-ex for Children under 19Federal Requirements

Plans may not refuse to provide benefits for children under 19 because of their health history. 

This applies to all plans except grandfathered

individual plans. 

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Pre-ex for Children under 19 Maine comparison

Maine law already has limits on using preexisting condition exclusion periods.  The exclusions cannot be more than 12 months, and may not be used unless the enrollee has been without coverage for 90 days. 

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Primary Care & Preapproval Federal Requirements

1. Plans that use primary care providers (PCP) must allow the choice of any participating PCP who is available, including pediatricians.

2. Referrals to participating OB/GYNs can no longer be required.

3. Emergency services at nonparticipating providers cannot have higher cost-sharing than services at participating providers.

This does not apply to grandfathered plans.

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Primary Care & Preapproval Maine comparison

1. Maine law requires HMOs and non-HMO group health plans to allow OB/GYNs to serve as PCPs.

2. Under Maine law, annual exams do not require referrals; however, other services by OB/GYNs require referrals.

3. Maine law requires coverage for emergency services at nonparticipating providers but does not prohibit different cost-sharing.

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Other

• HHS: web-portal 2010 – health coverage options in all states

• Preexisting Condition Insurance Plan 2010 – 28 state-run programs (including Maine & DC)– 23 states using federal program

• $$$ for retiree reinsurance to private and government employers in Maine (UNUM, UMaine System, Portland Water District have applied and been awarded funds to help with the cost of health insurance for retirees).

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Jan. 1, 2011 – Federal MLR

• FEDERAL: Guaranteed loss ratio of 85% for large group, 80% for small group and individual.– NAIC working on definitions and methodology

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Maine MLR and Rate Oversight

• Individual – 65% medical loss ratio– Prior approval (public hearings)

• Small Group – 78% or 75% loss ratio – no prior approval: MLR 78% guaranteed for

3 years, limited filing of adjustment factors, refunds required;

– prior approval: MLR 75%, full filing

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Maine cont.

• Maine standard: – Rates cannot be “excessive, inadequate or

unfairly discriminatory”– MLR standard: pure (claims v. admin)

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Before 2014: other requirements, reforms, etc.

• Starting in 2012: Insurers must provide standardized summaries of benefits and “coverage facts” illustrations– Superintendent co-chairing statutory working

group– New 4-page summary will provide easy to

understand comparisons of health insurance to enable consumers to compare apples to apples when shopping for coverage

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Other:

• HHS working with NAIC to develop process for annual review of “unreasonable” rate increases.

• Insured employer plans may not discriminate based on salary

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Other - by July 1, 2013

• HHS to establish “essential benefits package” between end of 2011 and beginning of 2013

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Other: 2014 requirements for BOI

• Law requires states to implement 2-year transitional programs for risk adjustment, federal reinsurance– Risk adjustment: provide subsidies for

companies with higher-than-average risk pools.

– Federal reinsurance: provide subsidies for companies based on number of high risk individuals (as determined by HHS).

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January 1, 2014

• States begin to operate individual and SHOP Exchanges

• Exchange can only sell qualified plans (must offer one Gold and one Silver plan; may also offer Platinum and Bronze)

• Catastrophic plans are available to individuals through age 30 or who can demonstrate hardship– Preventive benefits and coverage of 3 primary care

visits exempt from deductible.• Subsidies and tax credits for coverage

purchased through an Exchange

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January 1, 2014: Maximum out-of-pocket expenses for people with incomes up to

400% FPL (source: kff.org)

Income Limits (FPL)

Individual (max out of

pocket)

Family

(max out of pocket)

$10,830-21,660 (1)

$22,050-44,100 (family of 4)

(100-200%)

$1,983 $3,967

$21,660-32,490 (1)

$44,100-66,150 (4)

(200-300%)

$2,975 $5,950

$32,490-43,320 (1)

$66,150-88,200 (4)

(300-400%)

$3,987 $7,973

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Premium credits for individuals and families @ 133-400% FPL – set on a sliding scale.

Premium you pay

Up to $14,620.50 (1) / $29,326.50 (4)

(133% FPL)

2% of income

$14,620.50-16,245 (1) / $29,326.50-33,075 (4)

(133-150% FPL)

3-4% of income

$16,245-21,660 (1) / $33,075-44,100 (4)

(150-200% FPL)

4-6.3% of income

$21,660-27,075 (1) / $44,100-55,125 (4)

(200-250% FPL)

6.3-8.05% of income

$27,075-32,490 (1) / $55,125-66,150 (4)

(250-300% FPL)

8.05-9.5% of income

$32,490-43,320 (1) / $66,150-88,200 (4)

(300-400% FPL)

9.5% of income

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January 1, 2014 shared responsibility: individuals, employers, & government

• Individual responsibility – must purchase health insurance (penalty)– $695/Max of average premium.

• Employer responsibility (50+ employees) – must offer “affordable” coverage or pay fee.

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Jan. 1, 2014 – Small Business Tax Credits Increase

• Tax credit increases for small businesses – from 35% to 50% tax credit.

• available for up to 2 years.

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For plan years beginning Jan. 1, 2014

• New federal minimum standards for individual and small group markets; states can be more protective and have higher standards– Guaranteed issue and no pre-ex;– Rating maximum variation: age 3:1, tobacco

1.5:1; prohibit: gender, health, group size; allowed: geography and family composition.

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Other standards

• Small group market extended from 2-50 to 1-100 (state may opt out and leave group as “50” in 2014 & 2015).

• Deductibles for small group cannot exceed $2000 single/$4000 family.

• States may merge small group and individual risk pools, but may not include grandfathered plans.

• Carriers must combine all non-grandfathered plans into single risk pool, and do the same for small group.

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January 1, 2016

• States may enter into interstate sales “Choice Compacts” – Subject to HHS approval under regulations

promulgated in 2013

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GRANTS (few of many)

• Rate review enhancement – BOI • Consumer ombuds programs – AG • Planning and development of Exchanges• Grants for CO-OP programs

– “Qualified nonprofit insurers” must be nonprofit, non-governmental, member-run, and not in existence before July 1, 2009.

Visit www.maine.gov/healthreform for updates on grant status

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Policy Decisions for the 125th Legislature

• State Bureau of Insurance or federal enforcement in Maine

• Small group market expansion (opt-out of <100 for first two years), merger of individual and small group market – BOI study 2011

• Coverage mandate: a state mandate not in the federal essential benefits package will have to paid for by the state for any person who receives a subsidy.

• Exchanges • Change consumer protections (some are currently

higher than federal minimums)