Health Care Reform Update

The AMCNO Board of Directors has continued to evaluate the health care reform bills and legislation as it moved through Congress. The AMCNO believes that the current health care system is fragmented and unsustainable and does not meet the needs of our members and their patients. Our organization and the physicians we serve recognize the need for health care reform and have long advocated for change in the health care delivery system. The AMCNO has voiced its support regarding many of the aspects included in the legislation before Congress such as the funding of patient centered medical homes, enhanced access to care for all Americans, changes in health insurance company behavior, support for prevention and wellness programs, and support for changes in geographic variations to address both costs and care provided.

Specifically the AMCNO has advocated for Congress to pass legislation that would:

• Allow access to affordable health care for all Americans;
• Implement reform of Medicare physician payment methodologies;
• Not overburden or add costs to the Medicaid program;
• Enact meaningful medical liability reforms inclusive of alternative dispute resolution concepts and health courts;
• Provide for insurance market reforms that address the issue of physician profiling by health insurers, that enhance choice of affordable coverage and eliminate denials of care for certain conditions;
• Implement changes in geographic variations that affect costs and care provided;
• Require health care decision making by physicians and their patients, instead of by insurers or government entities;
• Provide for quality improvement as well as reductions in cost and waste;
• Provide for investments and incentives for public health and prevention and wellness initiatives;
• Standardize insurance claims processing requirements to eliminate unnecessary costs and administrative burdens;
• Provide for the implementation of health insurance exchange models versus a government-run public option;
• Remove restrictions on physician ownership of facilities;
• Provide appropriate avenues and funding for the growth of the physician workforce to meet demand.

The proposal that has been signed into law does address some of the points noted above however it also creates a new health care entitlement program and expands an already underfunded Medicaid program. In addition, the legislation does not include changes to the Medicare SGR payment formula but it does create a new independent commission that could create more reductions in the Medicare physician payment system dependent upon how it operates in the future. The proposal also does not include measures to address medical liability reform.

The AMCNO lobbyist Mr. Connor Patton and attorneys from the legal firm of McDonald Hopkins, LLC have prepared an overview of some of the items included in the Act. Here are some of the highlights:

Creation of Health Benefit Exchanges

The Act requires states to establish the American Health Benefit Exchanges and Small Business Health Options Program (“SHOP”) Exchanges (collectively, “Exchanges”) designed to assist individuals and qualified employers in purchasing coverage. Exchanges are required to:

1. Be a governmental agency or nonprofit entity established by a state;
2. Only offer qualified health plans;
3. Establish procedures for certification of health plans as qualified health plans; and
4. Require health plans seeking certification to submit a justification of any premium increase prior to implementation of such increase.

Additional information to know about the Exchanges:

• Exchanges will be required to keep an accurate accounting of all activities, receipts, and expenditures and annually submit a report concerning such accountings.
• The Exchanges will permit an employer to select a level of coverage for its employees. Employees can then choose to enroll in any qualified health plan that offers that level of coverage. Initially, only individuals and employers with 100 or less employees will be eligible to participate in the Exchanges. Employers with 100 or more employees may join an Exchange after January 1, 2017.
• The Office of Personnel Management (which administers the Federal Employees Health Benefit Program) will be required to offer at least two multi-state plans in each Exchange. At least one plan must be provided through a non-profit entity and one plan must not provide coverage for abortions except as permitted by federal law.
• Through the Exchanges, the Act will also provide funding for the Consumer Operated and Oriented Plan (CO-OP) program, a program to create non-profit, member-run health insurance companies that will offer qualified health plans.

Impact on Employers

The impact on your business depends on the size of your company:

• Beginning January 1, 2014, large employers (employers with 50 or more full-time employees) that do not offer qualified coverage to full-time employees will be subject to a penalty of $750 per full-time employee. Employers that offer coverage but have at least one employee receiving a premium tax credit through an Exchange will be assessed a fee equal to the lesser of $3,000 per employee receiving a tax credit or $750 for each full-time employee. Employers that impose a waiting period on employees before permitting them to enroll in coverage will be assessed a fee per employee based on the length of the waiting period. The Act also prohibits employers from discriminating against or discharging any employee because the employee’s actions subject the employer to penalties under the Act.
• Employers with more than 200 employees will be required to automatically enroll employees into the health insurance plans offered by the employer and provide notice to employees about Exchanges, the availability of a tax credit for premium assistance, and the loss of an employer's contribution to an employer-provided health benefit plan if the employee purchases a plan through an Exchange.
• Small employers (employers with no more than 25 employees and with average annual compensation levels not exceeding $50,000) will be permitted to elect a tax credit of 35% of their employee health care coverage expenses beginning in 2010 and increasing to 50% of their expenses in 2014. The tax credit is phased out based on employer size and employee compensation levels.
• The Act requires the establishment of a temporary reinsurance program to provide reimbursement to participating employment-based plans for a portion of the cost of providing health insurance coverage to early retirees prior to January 1, 2014.
• A new employee benefit cafeteria plan (Simple Cafeteria Plan) is established and defined as a plan that:

1. Is established and maintained by an employer with an average of 100 or fewer employees during a two-year period;
2. Requires employers to make contributions or match employee contributions to the plan;
3. Requires participating employees to have at least 1,000 hours of service for the preceding plan year; and
4. Allows such employees to elect any benefit available under the plan.

• Insurers of employer-sponsored health plans with an aggregate value that exceeds certain levels (generally $8,500 for an individual or $23,000 for a family) will be assessed a tax of 40% on the amount the plan exceeds those levels. The tax will be imposed on the issuer of the health insurance policy (in the case of self-insured plans, the plan administrator or the employer). The “aggregate value” of the plan includes healthcare FSAs, HRAs, employer contributions to HSAs, as well as coverage for dental, vision and other supplemental services (effective January 1, 2013.)

Impact on Hospitals and Nursing Facilities

There are a variety of key provisions related to hospitals and nursing facilities:

• The Act imposes a penalty tax on charitable hospitals who fail to comply with the following requirements:

1. Conduct a community health needs assessment every two years;
2. Adopt a written financial assistance policy for patients who require financial assistance for hospital care; and
3. Refrain from taking extraordinary collection actions against a patient until the hospital has determined whether the patient is eligible for financial assistance.

• Reduces state disproportionate share hospital (“DSH”) allotments for most states by 50% or 35% (based on the state’s most recent uninsurance rate).
• Supports a movement away from institutional long term care by authorizing states to offer home and community-based services and supports to Medicaid beneficiaries who would otherwise require care in an institution.
• Physician-owned hospitals that do not have a provider agreement in place by August 1, 2010, will be prohibited from participating in Medicare. Allows participation in Medicare under a rural provider and hospital exception if the hospital meets certain requirements addressing conflict of interest, bona fide investments, patient safety issues, and expansion limitations.
• Authorizes the establishment of pilot programs for specified hospitals and hospice programs, to test the implementation of a value-based purchasing program for payments to the provider.
• Authorizes appropriations to HHS for debt service on, or direct construction or renovation of, a health care facility that provides research, inpatient tertiary care, or outpatient clinical services, which meet certain requirements, including that the facility is critical for the provision of greater access to health care within the state.
• Establishes the availability of grants for:

1. Nurse-managed health clinics;
2. Enhancement of the nursing workforce through nurse retention programs;
3. The establishment of new accredited or expanded primary care residency programs; and
4. Activities that promote better care in long term care facilities.

Government Grants and Loan Opportunities

The Act provides numerous grant and loan opportunities in a variety of areas, most notably for prevention and wellness initiatives and to increase and improve the healthcare workforce.

• Establishes grant programs focused on community preventative health activities and public health initiatives such as establishing programs to provide surveillance and response to infectious diseases and other public health concerns to be administered by the Director of the CDC.
• Establishes a healthcare workforce development grant program as well as various other grant programs to:

1. Recruit students in social work and similar professions;
2. Support training in cultural competency, reducing health disparities, and working with individuals with disabilities; and
3. To support projects designed to provide low income individuals the opportunities to obtain education and training for healthcare occupations.

• Increases the maximum amount of loans made by nursing schools to students, expands student loan forgiveness to include allied health professionals employed in public health agencies and authorizes scholarships for mid-career professionals in the public health and allied health workforce for additional training.
• Authorizes appropriations for the National Health Service Corps Scholarship Program and the National Health Service Corps Loan Repayment Program.
• Establishes a Community Health Center Fund and appropriations to the fund to provide for expanded and sustained national investment in community health centers.

Prescription Drugs and Medical Equipment

A few of the new requirements on the pharmaceutical and medical equipment industry are:

• Amends the Social Security Act to require drug, device, biological and medical supply manufacturers to report transfers of value made to providers, as well as information on physician ownership or investment interest in the manufacturer and it provides penalties for noncompliance.
• Further amends the Social Security Act to require a pharmacy benefit manager (“PBM”) or a health benefits plan managing prescription drug coverage under a contract with a Medicare or Exchange health plan to report information regarding the generic dispensing rate, the rebates, discounts, or price concessions negotiated by the PBM, and the payment difference between health plans and PBMs and the PBMs and pharmacies.
• Imposes new taxes on manufacturers of pharmaceuticals ($2.3 billion annually), medical device manufacturers ($2 billion annually) and the health insurance sectors ($2 billion in 2011; increasing to $10 billion by 2016).

Medicare and Medicaid

The Act expands Medicaid and the Children’s Health Insurance Program (“CHIP”) and includes many significant changes to both the Medicaid and Medicare programs. The changes are intended to improve access, delivery and quality of healthcare provided through the programs. In an effort to reduce costs, the Act also focuses on decreasing fraud, waste and abuse in the programs through integrity programs and initiatives.

Effect of Medicaid Expansion on State Budgets

The Act expands Medicaid to all individuals under the age of 65 with incomes up to 133% of the federal poverty level. The expansion of Medicaid will be fully subsidized by the federal government from 2014 through 2016; however in 2017 financing for newly eligible individuals will be shared between the states and federal government. Even accounting for cost sharing, the Congressional Budget Office estimates that the Act will increase state spending on Medicaid/CHIP by $26 billion as a result of the expanded coverage. As states look for ways to fund the increased cost, one option is to take funds that would otherwise be allocated for discretionary care and use those funds to finance the cost of newly eligible individuals. Medicaid providers providing discretionary care services could experience a reduction in coverage as the cost to states is fully phased in.

Impact on Private Insurance Industry

The Act provides for many mandates to the insurance industry, such as prohibiting insurers from denying coverage based on preexisting conditions and discriminating against individuals based on health status or gender. The Act will prohibit plans from placing lifetime limits on coverage and beginning in 2014 annual limits on coverage will also be prohibited. Insurers will be required to provide dependent coverage for children up to 26 years of age. Insurers will be subject to certain reporting requirements, including information on how premium dollars are spent and justification for increases in premiums.

Individual Health Coverage Mandate

Beginning in 2014, the Act will require all individuals (with limited exceptions) to obtain qualifying health coverage or pay a penalty. Enforcement of the full penalty (the greater of $750 per person up to a maximum of $2,250, or 2% of household income) will be phased in over the course of two years beginning in 2014. Individuals without coverage through their employer will be able to purchase coverage through Exchanges. The Exchanges are established under the Act to provide access to coverage for individuals and small employers. Individuals who have coverage through their employer are permitted to keep their current coverage. Individuals purchasing coverage through the Exchanges with household incomes falling between 100%-400% of the federal poverty level will be eligible for tax credits related to their premiums and cost-sharing subsidies.

Individual Tax Matters

• The Medicare Part A income tax rate will increase from 1.45% to 2.35% for individuals earning more than $200,000 or couples earning more than $250,000 (effective January 1, 2013).
• The Act also modifies current laws relating to HRAs and FSAs, such as increasing the tax on distributions from HRAs and FSAs that are not used for qualified medical expenses and capping contributions to FSAs under cafeteria plans to $2,500 per year (effective January 1, 2011).

It should be noted that if the Reconciliation Bill passes in the Senate, it will impact provisions noted above. The AMCNO will continue to provide information and updates on the health care reform legislation in our emails and our publications.