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Patient Protection and Affordable Care Act - Questions and Answers
 

The Patient Protection and Affordable Care Act makes far-reaching changes in the financing and delivery of health coverage in the United States.  HR 3590 was signed by the President on Tuesday, March 23, 2010.  A reconciliation bill, HR 4872, was signed by the President on Tuesday, March 30, 2010.

Many of the provisions of the new law incorporate or are variations of requirements that have long existed in the New Jersey individual and small employer markets.  These include guaranteed availability of coverage to every small employer and individual, guaranteed renewability, modified community rating, a minimum medical loss ratio of 80% in the individual and small employer markets, and making continuation coverage available for certain dependents after they reach a plan’s limiting age.  A significant change is the imposition of rating requirements including a minimum medical loss ratio requirement of 85% in the large group market.  Under current NJ law, no large group rates are subject to a minimum loss ratio requirement.

Note that the law defines the small group market as the market in which a plan is offered by a small employer that employs 1-100 employees, and the large group market as the market in which a plan is offered by a large employer that employs more than 100 employees. Until 2016, however, a state may limit the small group market to 50 employees as New Jersey currently does.

Many of the provisions require Federal agencies to promulgate regulations.  Therefore, even those requirements that already exist under New Jersey law can be expected to be changed as a result of Federal regulations.  The law that was passed consists of 2,407 pages.  The reconciliation bill is another 153 pages.  The following is therefore necessarily a high level overview in question and answer format, addressing only the major provisions of the law as they impact on the commercial insured markets in New Jersey, and based on the reconciliation bill as it looks today.  Note that as a Federal law, many of the law’s provisions also apply to self-funded plans.

 

Please note that these Q&As represent a preliminary review of the law and reconciliation bill.  Review of the 2,407 page law and 153 page reconciliation bill continues, and responses may change as the analysis continues and additional materials are provided by the Federal government.

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1.
When is the law effective?
2.
What provisions are effective immediately?
3.
What provisions are effective 90 days after enactment?
4.
What provisions are effective July 1, 2010?
5.
What benefit changes does it require beginning six months after enactment?
6.
What changes in coverage availability are required beginning six months after enactment?
7.
What other changes are required effective six months after enactment?
8.
What changes affecting medical cost ratios apply beginning in 2011?
9.
What does the law require for benefit descriptions?
10.
What rules does it require regarding electronic transactions?
11.
What reporting requirements apply beginning two years after enactment?
12.
What benefit changes does it require beginning January 1, 2014?
13.
What rating requirements apply beginning January 1, 2014?
14.
What availability requirements apply beginning January 1, 2014?
15.
Do people have to change the plans they are in now? (Added 04/13/2010)
16.
What is the individual mandate?
17.
Would employers be subject to penalties?
18.
What is a health insurance “exchange”?
 

1. When is the law effective?

The law is effective in phases, with some provisions effective immediately.  It will be fully in effect in 2014.  The following questions address the phases of the law in chronological order.

2. What provisions are effective immediately?

The Secretary of Health and Human Services (HHS) is to provide $30 million in grants to states to establish and operate offices of health insurance consumer assistance or health insurance ombudsman programs.   The receiving states must collect and report data on consumer issues.

The law creates a sliding scale tax credit to small employers with fewer than 25 employees and average annual wages of less than $50,000 that purchase health insurance for their employees. The full credit will be available to employers with 10 or fewer employees and average annual wages of less than $25,000. To be eligible for a tax credit, the employer must contribute at least 50 percent of the total premium cost or 50 percent of a benchmark premium.

In 2010 through 2013, eligible employers can receive a small business tax credit for up to 35 percent of their contribution toward the employee’s health insurance premium. Tax-exempt small businesses meeting the above requirements are eligible for tax credits of up to 25 percent of their contribution. In 2014 and beyond, eligible employers who purchase coverage through the State Exchange (described in a later Q&A) can receive a tax credit for two years of up to 50 percent of their contribution. Tax-exempt small businesses meeting the above requirements are eligible for tax credits of up to 35 percent of their contribution. (For more information: IRS Frequently Asked Questions on the Small Business Health Care Tax Credit)

3. What provisions are effective 90 days after enactment?

The Secretary of HHS is to establish a temporary high risk health insurance pool program to provide coverage to individuals with pre-existing conditions who have been without coverage for at least 6 months.  The law provides $5 billion to fund pools through 2013 either directly or through contracts with the states and nonprofit entities. We believe New Jersey’s IHC program could qualify for this funding.  Based on population, NJ’s pro rata share of funding could be about $100 million. (For more information, see NJ High Risk Pool Letter of Intent)

The Secretary is also to establish a temporary reinsurance program to reimburse employment-based plans for certain costs incurred by early retirees not eligible for Medicare.  Payments under the program must be used to lower costs of the plan.  It also provides $5 billion to fund the program.

4. What provisions are effective July 1, 2010?

The Secretary of HHS, in consultation with the States, is to establish a mechanism including a web site through which individuals and small businesses may identify affordable health insurance coverage.  It is to include information on health insurance coverage, Medicaid, CHIP, Medicare, a high risk pool, small group coverage, reinsurance for early retirees, tax credits, and other information.

The Secretary is to develop a standard format within 60 days of enactment to be used in presenting information relating to coverage options, including the percentage of total premiums spent on nonclinical costs, availability, premium rates and cost-sharing.

5. What benefit changes does it require beginning six months after enactment?

Plans may not establish lifetime limits on the dollar value of essential benefits.

Plans may only establish restricted annual limits prior to January 1, 2014 on essential benefits as determined by the Secretary of HHS.  New Jersey currently prohibits lifetime and annual limits on in-network benefits for network-based plans.

Plans must provide coverage without cost-sharing for:

  • Services recommended by the US Preventive Services Task Force;
  • 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; and
  • Preventive care and screenings for women supported by the Health Resources and Services Administration.

Current recommendations from the US Preventive Services Task force for breast cancer screenings will not be considered.

The Secretary will determine an interval of not less than 1 year after which new recommendations will be incorporated.

New Jersey law currently mandates certain wellness benefits, but they are subject to annual limits and may be subject to member cost-sharing.

Plans may not exclude coverage for children under age 19 due to pre-existing conditions. 

A plan that provides for designation of a primary care provider must allow the choice of any participating primary care provider who is available to accept them, including pediatricians.

If a plan provides coverage for emergency services, the plan must do so without prior authorization, regardless of whether the provider is a participating provider.  Services provided by nonparticipating providers must be provided with cost-sharing that is no greater than that which would apply for a participating provider and without regard to any other restriction other than an exclusion or coordination of benefits, an affiliation or waiting period, and cost-sharing.  New Jersey currently prohibits requiring a prior authorization for emergency services, and no greater cost-sharing for the use of out-of-network providers in an emergency.

A plan may not require authorization or referral for a female patient to receive obstetric or gynecological care from a participating provider and must treat their authorizations as the authorization of a primary care provider.  New Jersey currently prohibits requiring a referral for certain routine gynecological services.

6. What changes in coverage availability are required beginning six months after enactment?

The law provides that coverage may be rescinded only for fraud or intentional misrepresentation of material fact as prohibited by the terms of the coverage.  Prior notification must be made to policyholders before cancellation.  Note that this is a bigger issue in states that permit medical underwriting than in guarantee issue states like New Jersey.

Plans that provide dependent coverage must extend coverage to adult children up to age 26.  Carriers are not required to cover children of adult dependents.  The Secretary will define which adult children will be eligible for continuation.  Note that New Jersey currently requires carriers to permit continuation to age 31, but limits availability to residents or out-of-state students.  It is unclear whether the continuation would be paid for in full separately by the continuee (as is currently the case in New Jersey) or treated like other dependents.  The definition of dependent to be defined by the Secretary may also be different than New Jersey’s dependent definition.

7. What other changes are required effective six months after enactment?

All plans must submit certain practices and data to the Secretary and State insurance commissioner, and make them available to the public, in plain language.  This includes claims payment policies and practices, periodic financial disclosures, data on enrollment and disenrollment, data on the number of claims that are denied, data on rating practices, information on cost-sharing and payments with respect to out-of-network coverage, and other information as determined appropriate by the Secretary.

The law extends to fully-insured group plans the prohibition on discrimination in favor of highly compensated employees that currently applies in self-insured group plans.

Finally, with respect to appeals, group plans must incorporate the Department of Labor's claims and appeals procedures and update them to reflect standards established by the Secretary of Labor.  Individual plans must incorporate applicable law requirements and update them to reflect standards established by the Secretary of HHS.  All plans must comply with applicable state external review processes that, at a minimum, include consumer protections in the NAIC Uniform External Review Model Act or minimum standards established by the Secretary of HHS.  New Jersey law already includes an external review process similar to the Model Act.

8. What changes affecting medical cost ratios apply beginning in 2011?

Carriers must provide the Secretary of HHS a report concerning the ratio of incurred losses plus loss adjustment expenses to earned premiums.  The report must include the percentage of total premium revenue (after accounting for risk adjustment, premium corridors, and payments of reinsurance) that is expended on reimbursement for clinical services, activities that improve health care quality, and all other non-claims expenses, but excluding Federal and State taxes and licensing or regulatory fees.  Insurers must provide a rebate to consumers if the percentage of premiums expended for clinical services and activities that improve health care quality is less than 85% in the large group market and 80% in the small group and individual markets.  New Jersey has extensive experience with applying medical cost ratio requirements and refunding excess amounts.

The Secretary, together with the states, is to develop a process for the annual review of unreasonable premium increases for health insurance coverage.  The process will require insurers to submit to the State and the Secretary a justification for an unreasonable premium increase and post it online. 

The Secretary is to award $250 million in grants to states over a 5-year period to assist rate review activities, including reviewing rates, providing information and recommendations to the Secretary, and establishing Medical Reimbursement Data Centers to develop database tools that fairly and accurately reflect market rates for medical services.

9. What does the law require for benefit descriptions?

The Secretary of HHS must develop standards within 12 months of enactment for a summary of benefits and coverage explanation to be provided to all potential policyholders and enrollees.  The summary must contain:

  • Uniform definitions of insurance and medical terms;
  • A description of coverage and cost sharing for each category of essential benefits and other benefits;
  • Exceptions, reductions and limitations in coverage;
  • Renewability and continuation of coverage provisions;
  • A “coverage facts label” that illustrates coverage under common benefits scenarios;
  • A statement of whether it provides minimum essential coverage with an actuarial value of at least 60% that meets the requirements of the individual mandate;
  • A statement that the outline is a summary and that the actual policy language should be consulted; and
  • A contact number for the consumer to call with additional questions and the web address of where the actual policy language can be found.

The Secretary must consult with the NAIC, as well as a working group of insurers, providers, patient advocates, and those representing individuals with limited English proficiency.

Uniform documents are to be implemented within 24 months.

10. What rules does it require regarding electronic transactions?

It requires the Secretary to develop operating rules for the electronic exchange of health information, transaction standards for electronic funds transfers, and requirements for financial and administrative transactions by July 2011.  The requirements are to become effective January 1, 2013.

11. What reporting requirements apply beginning two years after enactment?

Plans must submit annual reports to the Secretary of HHS on whether the benefits under the plan improve health outcomes through activities such as quality reporting, case management, care coordination, chronic disease management, whether they implement activities to prevent hospital readmission, and whether they implement activities to improve patient safety and reduce medical errors.

12. What benefit changes does it require beginning January 1, 2014?

No Plan may discriminate on the basis of a pre-existing condition or past illness.

The law prohibits discrimination against health care providers acting within their licensure and within state laws.

The law requires individual and small employer carriers to include coverage with essential benefits of a defined actuarial value, and for all plans to comply with cost-sharing limitations.

Plans must implement wellness and health promotion activities.

13. What rating requirements apply beginning January 1, 2014?
 
Premiums may vary only by family structure, geography, plan design, age (within a 3:1 band) and tobacco use (within a 1.5:1 band).

Reforms must be applied uniformly in each relevant market.

14. What availability requirements apply beginning January 1, 2014?
 
The law will require each health insurer to accept every employer and individual in the state that applies for coverage, allowing for annual and special open enrollment periods.  This is similar to the requirements that already apply in New Jersey’s Individual and Small Employer markets.

Insurers will be prohibited from setting eligibility rules based on health status, medical history, genetic information or evidence of insurability. New Jersey currently prohibits this.

Employers could vary premiums by as much as 30 percent for employee participation in certain health promotion and disease prevention programs.

Discrimination against health care providers acting within the scope of their certification or applicable state law will be prohibited.

Health issuers will be prohibited from applying any waiting period exceeding 90 days.

15. Do people have to change the plans they are in now? (Added 04/13/2010)

The law includes a "grandfathering" provision that will allow people to keep the plans they had on the date of enactment, subject to some changes, as discussed below.  This means that an individual does not have to terminate coverage they had as of the law’s enactment date. Additionally, existing group health plans may allow new employees and dependents to join the "grandfathered" plans, and new dependents can be added to "grandfathered" individual coverage.

Existing plans will have to be amended to:

  • Reduce a waiting period such that it is no longer than 90 days
  • Remove lifetime benefit limits
  • Comply with the limitation on annual limits
  • Comply with the loss ratio requirements
  • Allow the extension to age 26 but limited to an adult child who is not eligible for enrollment in an employer-sponsored plan until 2014. 
  • Provide the uniform coverage documents
  • Apply the standard definitions.
 
16. What is the individual mandate?

Beginning in 2014, most individuals will be required to maintain minimum essential health coverage or pay a penalty. For those under 18, the penalty will be one-half the amount for adults. Exceptions to this requirement would be made for religious objectors, those who cannot afford coverage, taxpayers with incomes less than 100 percent of the federal poverty line, Indian tribe members, those who receive a hardship waiver, individuals not lawfully present, incarcerated individuals and those not covered for less than three months during the previous year.
17. Would employers be subject to penalties?

The law will require employers with 200 or more employees to automatically enroll employees into health insurance plans offered by the employer. The employees would be able to opt out if they had other insurance coverage.

Employers with more than 50 employees that do not offer coverage would be required to pay a $750 fee for each employee who receives a tax credit for health insurance through a state exchange, described in the next Q&A. Employers of that size requiring a waiting period before an employee can enroll in health care coverage would pay $600 per employee for a 60-90 day waiting period. Employers of that size offering coverage but with at least one full-time employee receiving the premium assistance tax credit would pay the lesser of $3,000 per employee receiving a tax credit or $750 per full-time employee.

The law will prohibit an employer from discharging or discriminating against an employee on the basis of the employee receiving a premium tax credit.

18. What is a health insurance “exchange”?

The law requires states to establish government-run insurance marketplaces known as “exchanges” by 2014. All legal state residents who are not incarcerated could enroll in qualified health plans through the exchange.

The law requires the Secretary of HHS to award grants until 2015 to states for planning and establishing the exchanges. If the Secretary determines a state will not have an operational exchange by 2014, the Secretary would establish and operate the exchange.

Insurers could offer one of four types of health plans: bronze, silver, gold and platinum. The plans would provide increasing levels of services covered and limits on out-of-pocket spending.

State exchanges will be required to:

  • Operate a toll-free hotline and web site.
  • Rate qualified health plans.
  • Inform individuals of Medicaid and CHIP eligibility.
  • Provide an electronic calculator to calculate plan costs.
  • Grant certifications of exemption from the individual responsibility requirement.
  • Allow regional or interstate exchanges if agreed to by the states and approved by the HHS secretary.
  • Include a Small Business Health Operating Program to help small businesses enroll their employees in qualified health plans.
  • Submit annual accounting reports to the HHS secretary.

Members of Congress and their staff could be offered only qualified health plans through exchanges.

 
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