Tuesday, May 25, 2010

Health Care in America: A Layman Reads the Health Care Bill - Part 5

Subtitle D covers a vast stretch of legislative land, and took me quite some time to get a full enough understanding of to actually be able to post something here. Finally, I've traversed its expanse a number of times and I'm here to give you all a step-by-step, detailed tour through the wilderness. In other words, I'm going to try to summarize it like the rest of the posts. Here goes.

You should know that this is the longest post yet...so you might want to grab a glass of water...or vodka.

To start with, it's probably helpful to mention that this subtitle is split into 5 parts. They are, Part 1: Establishment of Qualified Health Plans; Part 2 - Consumer Choices and Insurance Competition Through Health Benefit Exchanges; Part 3 - State Flexibility Relating to Exchanges; Part 4 - State Flexibility to Establish Alternative Programs; and Part 5 - Reinsurance and Risk Adjustment.

Part 1, dealing with the establishment of qualified health plans is, obviously, a big deal. Here, we finally learn that there is in fact a definition of a qualified health plan (i.e. a health plan that is qualified to operate within an exchange...but that's not the definition). It is long and rambling, but the exciting parts are: such plans are certified through exchanges, provide the Essential Health Benefits (to be covered momentarily), are offered through an Issuer which is in good standing with the state, and offer a mix of plans - including at least one Gold level and one Silver level. It also stipulates that rates for the plans must be the same whether offered within an exchange or privately, outside of the exchange.

Next, we have the definition of the Essential Health Benefits. Notably, for those of you following along, these are in Section 1302 - I mention this because this section is frequently referred to throughout the legislation, but you already knew that. These are simply a list of benefits which must be covered by any health plans in exchanges. They are:

  • Ambulatory Patient Services
  • Emergency Services
  • Hospitalization
  • Maternity/Newborn Care
  • Mental Health/Substance Use Disorder Services (including behavioral health treatment)
  • Prescription Drugs
  • Rehabilitation and Habilitation [sic] Services and Devices
  • Laboratory Services
  • Prevention & Wellness Services and Chronic Disease Management
  • Pediatric Services, including oral and vision
It is noted here that coverage of these benefits must be equal to that provided under "typical" employer sponsored plans. In this case, there is included a set of instructions for determining what is "typical." It is also specified that coverage of these benefits must be balanced, not weighted entirely toward specific benefits and limited severely on other benefits.

Next up, we discover Levels of Coverage within Exchanges. There are four (4) levels of coverage. They are: Bronze, Silver, Gold and Platinum. The levels of coverage a differentiated based on Actuarial Value of the plans. AV is a fairly complex issue, which is actually handled quite nicely by the group responsible for Consumer Reports. You can find their article here. It has charts and graphs...so...yeah. I'll try to explain it below without charts or graphs. Feel free to scroll down.

Essentially, the AV of a health plan is the amount that, over the whole average population of people, the plan is expected to cover in health expenses. So, if your health plan's AV is .60, then the plan will, on average, cover 60% of the medical costs of those involved in the plan, and the average amount covered by enrollees will be 40% of the costs. This means that chances are, if you're fairly healthy and not racking up a lot of medical costs, you'll pay more than your 40%, because it's based on the average, and you might not reach your out of pocket expense limit. If you're still confused, go check out that link. The graphs are helpful.

That said, the 4 levels of coverage are differentiated by their actuarial values - .60, .70, .80, and .90 respectively. Because the Platinum plan will cover an average of 90% of the enrollees' medical costs, it will be considerably more expensive than the Bronze level plan. That is the long and short of the coverage levels. The caveat here is that they also provide for a Catastrophic Plan, which is available only to people under 30, who meet certain criteria for tax exemption. These plans will cover essential benefits, but, among other things, don't kick in until the enrollee has spent the total out-of-pocket cost-sharing limit for the year.

The next major issue covered here deals with the never-divisive subject of abortion. It comes down to this: abortion is not required to be covered by a plan in order for the plan to qualify for the exchange. However, at least one plan must be offered within each exchange that does cover legal methods of abortion. Laws regarding federal funding of abortion stay the same. Also unchanged are any state laws regarding abortion - including parental notification laws, where applicable. Providers retain the right to refuse to perform abortions.

The final tidbit of information in Part 1 deals with market definitions. I know, I was excited, too. Here's the quick version - Individual Market and Group Market definitions are self-explanatory. If you need more help with that, you're out of luck. The only thing that needs explaining really is the difference between large and small group markets. It's simple - large group markets are for employers who employ at least 101 employees at the start of the plan year.

Now it's time to move on to Part 2! Hooray! Part 2 deals with Consumer Choice and Insurance Competition within Exchanges. To start with, we get a little statement about the reason for exchanges. They exist to "facilitate the purchase of qualified health plans" and to help small businesses in the state enroll their employees in health plans. They must be established, in each state, by January 1, 2014. Also, they'll get federal funding to be used only for the establishment of the exchange - not it's operation once it's established.

The criteria for certification within an exchange is as follows:

  • Must meet marketing requirements, including not being marketed specifically to discourage people with "significant health needs"
  • Must ensure plenty of choice to consumers
  • Must include, in-network, providers serving predominantly low-income, under served neighborhoods
  • Must be accredited by consumer review programs - these will be established by the exchanges and will have review/satisfaction systems which will be incorporated into the web portal discussed earlier
  • Must use uniform enrollment form and the standard format established earlier
Plans must also have a rating system in the exchange based on quality and price, and must include standard annual enrollment periods as well as special enrollment periods (such as for marriage, divorce, etc.).

Here we learn that the exchanges are specifically run by the state governments or approved non-profit organizations, and that states can require the additional coverage of benefits not specified in the Essential Health Benefits. However, any cost associated with coverage of those additional benefits must be covered by the state, not passed on to the federal government.

The functions of state exchanges are as follows:

  • Certification, re-certification, de-certification of any plan applying to the exchange
  • Operation of a toll-free assistance hot-line
  • Maintenance of a website with standardized comparative information on all plans
  • Assignment of ratings to plans as discussed above
  • Informing public about state programs like CHIP programs, Medicaid, etc. - to include eligibility, requirements, plan information - and enrollment of all qualified individuals
  • Provide a calculator to show actual cost of plans after "premium tax credit under Section 36B" of the 1986 tax Code and "cost-sharing reduction under Section 1402"
Other miscellany: all exchanges are to be self-sustaining by January 1, 2015; regional and interstate exchanges are allowed, must be approved; there are no requirements on choosing specific plans; no one will be compelled to buy through an exchange, except members of congress and their staff; all exchanges will undergo annual audits to ensure transparent use of funds.

And that's all for Part 2. They go by so quickly, don't they? On to Part 3!

Part 3 covers state flexibility in exchanges. These include non-profit, member-run insurance issuers and a non-profit, community insurance option.

To begin with, let's examine the non-profit, member-run issuers. The Secretary of Health will have $6 billion to distribute to the states for the establishment of these plans in the form of grants and loans. Once again, these funds are to be used only for establishment, not further operations of these programs. They are calling them "Consumer-Operated & Oriented Plans" or CO-OPs. Pretty witty, eh? Well, in any case, they want CO-OPs to be established in every state, with priority for the funds to go to CO-OPs that will be state-wide, have significant private support and meet other specifications. If no one steps up to start one, the Secretary can use the appropriated funds (that state's portion of the $6 billion) to "encourage" creation of one in that state.

CO-OPs must sign an agreement to meet certain requirements to get the federal funds - including not using any of the money for marketing, propaganda, or lobbying purposes. Failure to meet the requirements, or fix problems once they've been pointed out, will result in a fine of 110% of the total loan and grant amount, plus interest. Yikes.

To qualify for funds, a CO-OP must use all profit money (once they've paid back the loans) to lower premiums, improve member benefits, and otherwise serve the members. They must still comply with all state insurance laws, including those regarding certification and licensing. Also, these organizations will fall into a new 501(c) tax category, the 501(c)29...in case you were wondering. I know you were.

Next we move on to what sounds very similar to what we just talked about - Community Health Insurance options. These are also to be started with federal funds - though I don't believe the amount was specified. I don't recall seeing anything about them being in every state, and the federal funds will, again, be used only for the establishment of the program, not its continued operation. They must meet state solvency requirements, though those aren't specified anywhere in this legislation as far as I can tell.

These options will cover only the essential benefits, and enrollees can pay out of pocket for any additional coverage - though again the state can add benefits, but must cover any additional cost - they can't pass it along to the federal government. The stated goal of these programs is to provide high value for premiums, reduce administrative costs, promote administrative simplification, provide high quality clinical care, provide high quality customer service, and provide a sufficient choice of providers. I may be wrong, but most of this sounds like the stated goal of the exchange itself...so by the end here we should have the most efficiently run, administratively simplified, high quality, customer oriented health plans in the world!

Enough with this repetition in Part 3 - let's move on to Part 4, regarding state flexibility to establish alternative programs. The stated alternative programs amount to basically 2 things - programs for low-income individuals who aren't eligible for Medicaid, and the allowance of multi-state and national plans.

Let's start with the second part first. The multi-state and national plans are just that - plans that cover multiple states or the entire nation. Basically this section is in here just to state that those are allowed. It seems somewhat unnecessary to me, but hey, this is federal legislation we're talking about. Why skip saying something when you could just go ahead and write 4 or 5 pages about it?

The first part is more interesting - programs for low-income folks who are ineligible for Medicaid. These programs are essentially subsidized health plans for people whose household income is between 133% and 200% of the poverty line and who are under 65 and, again, ineligible for Medicaid. They provide the essential health benefits at a discounted rate. As I read it, if your household income is less than 150% of the poverty line, you pay the cost of the second-lowest Silver level plan, but get the cost-sharing benefits of the platinum plan. If your household income is between 150% and 200% of the poverty line, you pay the same, but get cost-sharing equivalent to the Gold plan. Not a bad deal, if you ask me. And states are supposed to contract with providers to negotiate supplying these plans at a discount to the state.

Finally, we arrive at Part 5, which discusses reinsurance and risk-adjustment. To be honest, I'm not sure I follow the reinsurance thing here. I've looked it over a number of times, and I while I'm not sure who is being actually re-insured here, I guess this establishes a program that will provide some cash to help stabilize the premium rates for the first 3 years of the exchange programs, when, we're told, price spikes are a high risk. I suppose this is due to all the transition and chaos, but it's not really explained. In any case, it's supposed to help keep everything level as far as premiums go. I'm not really buying it, but I'm not sure what the downside is, here.

The risk-adjustment part I do understand. It's pretty simple. Low-risk plans, those with an actuarial risk for their enrollees which is less that the average actuarial risk of all enrolless in all plans in the state must pay a fee that will go to helping cover costs of high-risk plans. High-risk plans here are plans whose actuarial risk is higher than the average actuarial risk of all enrolless in all plans in the states. In simpler terms, if the enrollees in a plan are, on average, really healthy, and the actuarial risk for them is, on average, less than what it is for an average of everyone in the whole state, then your plan is a low-risk plan. The opposite is true for high-risk plans.

Congratulations! You've finished the longest, driest post yet in our epic journey through the health care legislation. I'm proud of you. Now take a breath...and re-read it, because let's be honest, you probably fell asleep about half way through. When you've finished that, you can move on to more exciting blogs, like ones about famous people tweeting obnoxious things or non-famous people tweeting obnoxious things on reality shows. Until next time!

Thursday, May 13, 2010

Health Care in America: A Layman Reads the Health Care Bill - Part 4

In this installment of the health care act reading, we'll be looking at Subtitle C: Quality Health Insurance Coverage for All Americans. This subtitle is broken up into 2 parts, so that's how I'll break up the post as well. The first part is yet another set of amendments to the Public Health Service Act. That is followed up with a foray into the rights concerning existing coverage. Let's get started!

Subtitle C is a pretty exciting subtitle, and I don't mind saying so, and the bulk of it is found here in Part 1. Here, Sections 2701 - 2708 are amended. Rather than breaking them down one by one bullet-point style, I'll just give you the gist of it all at once.

First, we eliminate exclusions and discrimination based on preexisting and other health conditions. Apparently, the Public Health Service Act specifically allowed for such discrimination, but it's off the table now. Also changed are the rate and reasons for which premium rates can vary. Now, the only variance allowed is based on: individual vs. family coverage; age (not more than 3 : 1); tobacco use (not more than 1.5 : 1); and rating areas, which will be established by each state. Also of note, here, is that age and tobacco variations have to be proportionate. So if 1 person in your family of 5 would be affected by those variances, your premium can only be affected by that same proportion.

Another major change in these amendments is that health plans cannot discriminate against people based on what they're calling "health status." First, eligibility rules are stated, listing several examples of health status factors such as "health status" (wow, thanks!), medical condition, claims experience, medical history, genetic information and disability. Second, to put those factors into practice, the amendment prohibits "wellness programs" and disease prevention programs with rewards (like premium discounts and rebates) if they require the fulfillment of a health status requirement to achieve. So, a program cannot require that, for example, an individual meet a certain weight requirement, or run a given distance or lift a required amount of weight in order to receive a premium reduction or rebate. Those goals may not be medically feasible (or advisable) for certain people, so they are not valid goals in these programs. There are, of course, exceptions to this rule. In order to be legal, such a program must meet the following requirements:

  1. The discount must be equal to less than 30% of the total cost of coverage
  2. The program must be "reasonably designed to promote health or prevent disease" and can't be "subterfuge for discriminating based on a health factor" and, my favorite, can't be "highly suspect" in the method of health promotion or disease prevention. You gotta love legislative language, eh?
  3. It must have open eligibility at least once a year
  4. It must be available to all "similarly situated" individuals, and offer alternative standards for cases in which achieving the standard is medically dangerous or inadvisable. And whenever one standard is listed in the program literature, they must both be listed.
These programs will have a 10-state, 3 year demonstration period (from 2014 - 2017), and if they work they can then be expanded. Part of that demonstration will include, of course, a report , which will note what programs and rewards were most effective at promoting health and preventing disease, which were cost-effective, and how much they might cost the federal government if they were implemented on a more broad (i.e. nation-wide) scale.

Other notable changes in the amendments:
  • Insurance issuers have to grant coverage to all who apply
  • Renewability of coverage is guaranteed
  • Insurance issuers cannot discriminate against health providers (i.e. hospitals/doctors) if they meet plan requirements and, of course, are practicing legally
  • All health insurance plans must meet certain "comprehensive" coverage requirements, which will be enumerated later in the legislation, and will be called "essential benefits"
  • Excessive waiting periods are prohibited - apparently we'll hear more about this in Section 2704(b)(4)
Part 2 of Subtitle C deals, as we said, with existing coverage. This part is pretty simple. Basically, if you have health insurance, either from the individual market or as part of a group plan (like through an employer), the amendments in this subtitle (C) and in subtitle A will not apply to your insurance. Even if you renew your insurance, the changes won't take effect, as long as there are no changes to your coverage. Also, if it was possible for your family to join your plan before, they can still do so without the changes. And if your employer has a plan (i.e. a group plan) they can continue to enroll new employees (and families, as applicable) without the changes. If your health plan is part of a collective bargaining agreement, none of these changes will take effect until the last part of the agreement expires.

Two other little tidbits from this subtitle - all standards have to be applied uniformly to all health insurance issuers; and all amendments in Subtitle C are effective for plan years on or after January 1, 2014.

So that's it! That's Subtitle C, in all its glory. Stay tuned for the next installment - Subtitle D, the longest subtitle yet! And let me tell you, it's a real page turner. All 30 or so pages of it!

Saturday, May 01, 2010

Health Care in America: A Layman Reads the Health Care Bill - Part 3

Before we begin the almost uncomfortably exciting Subtitle B of Title I of the health care act, I believe some administrative activity is in order. It has come to my attention that the version of the legislation I linked to in the first post is technically the Senate version of the bill. While I believe that there is no difference between that and what is officially listed as law, I think in the name of authenticity that my source should be updated. As such, I found, through the government printing office website, the full text of the bill as enacted. I'll also update the original link to reflect this change. An unexpected upside to this adjustment - the bill is now a measly 906 pages! Not that anything is missing, the text is just mashed closer together with smaller spacing and, I believe, a smaller font. Good times!

And now, on to the the actual reading.

Subtitle B - Immediate Actions to Preserve and Expand Coverage is, as mentioned above, riveting stuff. So let's get to it.

Section 1101 starts out the subtitle dealing with granting those with preexisting conditions immediate access to health care. By sometime around June or July, a temporary "High Risk Pool" will be established to provide insurance to said folks. This pool will expire on January 1, 2014. The pool cannot restrict because of preexisting conditions - surprise! - and must meet specific requirements, such as covering at least 65% of costs and meeting a specific out-of-pocket limit which can be found in section 223(c)(2) of the Internal Revenue Code of 1986 (hereafter referred to as the "1986 Code"). Apparently one is supposed to be able to read section 223(c)(2) and understand just what that out-of-pocket limit is. Also apparently, one should be smarter than me to do so. I think it's $5,000 max, but I'm not guaranteeing that. Feel free to check my work on that one.

Other restrictions stipulated apply to how drastically rates can vary, specifically that there cannot be a 4 to 1 variance based on age. I'm assuming this means that at most, an older person who is more of a liability to the insurer can't pay more than 4x the amount a younger person would pay.

Eligibility for the pool is pretty simple - one must be a U.S. citizen or national, have a preexisting condition, and cannot have been insured for the prior 6 months. This last part inspires the next part - a stipulation against other insurers "dumping" risk, which is to say encouraging (or paying) folks enrolled on their plans to leave so they can be eligible for this new pool. That kind of activity will be illegal, so don't even think about it.

There will be a provision of $5 billion to cover the costs of the pool that exceed the income from premiums. It is also required that, in the next 4 years, procedures be devised to transition enrollees to a qualified health plan in one of those mysterious exchanges we've mentioned earlier. Those qualified health plans will be required to leave out coverage caps on this. It is also noted that the Secretary (presumably the Secretary of Health) can stop taking applications to the pool in order to stay within the $5 billion budget, and that this pool provision supersedes any state laws for high risk pools. So far, this is the closest thing I've found to infringement of the Constitution, and I'm not even sure it is. I believe that the Constitution explicitly states that the federal government can enact laws that will supersede state laws. I'm just saying this is the closest thing I've found so far. I'd be interested to know if anyone reads this differently.

Section 1102 provides for reinsurance for early retirees. This is a temporary gig, and expires January 1, 2014. After being confused about this one for a while and seeking input from none other than my brother, I believe this implies an expansion of Medicare. I also believe this because I'm pretty sure I saw in the table of contents that later on we'll see an expansion of Medicare. I'm good like that.

In any case, it's essentially reinsurance for folks who are retired, over 55, and not yet eligible for Social Security benefits if they're enrolled in an early-retirement insurance plan sponsored by a previous employer or employers. The plan appropriates $5 billion to reimburse those plans for claims of expenses between $15,000 and $90,000 in a plan year. It will reimburse up to 80% of the total expenses, but those reimbursements have to be used by the plan to lower the cost to the individual enrollees by lowering premiums, deductibles, co-payments, or out-of-pocket costs. This will be enforced by annual audits of the insurers.

Section 1103 tackles information that is supposed to allow consumers to identify affordable insurance. This one's pretty cool, actually. It has two parts. First, in May of 2010, a standardized format will be created for the presentation of information on coverage options. Think of it as the "Nutrition Facts" of health insurance, except, despite what you may see on certain auto insurance commercials, no insurance comes in a cardboard box. Sorry. Anyway, the format has to at least include info on:

  • the percentage of premium revenue spent on non-clinical costs
  • eligibility
  • affordability
  • premium rates
  • cost-sharing provisions
Second, by July 1, a web portal will be created through which anyone, in any state, can find "affordable health insurance options in their state." The aforementioned standard format will be used for the website.

The final section in Subtitle B, section 1104, covers "Administrative Simplification." I know, I'm excited, too, that the same folks who brought us the DMV and eleventy-billion different variations of the 1040 tax form are now putting on clinics for administrative simplification. But this section is surprisingly valid.

First off, we have the creation of what they're calling Uniform Standard Rules of Operation for, basically, paperwork. This Standard requires simplification of terminology and forms within the health care/health insurance industry. It "seeks to reduce the number and complexity of forms...for patients and providers." It clearly states that the goal of these uniform operating rules is ease of use and simple "uniformity."

These Standards must be adopted by July 1, 2011 for implementation on or before January 1, 2013, and must include special rules for dealing with electronic payments. Similar rules for health claims, enrollment, premium payments, etc. are required to be effective at least by January 1, 2016. It is disturbing that there exists an industry for which it seems understandable that the government should step in and effectively say, "Ok, folks, this is ridiculous - how can anyone understand all these forms?! Let's clean it up, for Pete's sake!" But, here we are.

My favorite part of this section is the "penalties" part at the end. Noncompliance, basically not implementing the standardized rules, will be incur a penalty payment of $1. Yep, just $1...per covered life in the noncomplying plan...per day that the plan doesn't comply! That could seriously add up, and that makes me happy. Oh, and the penalty for "misrepresentation" (i.e. being a dirty stinking liar) is double the standard penalty. There is, though, a limit on the penalties. They can't amount to more than $20 per person per plan annually. Or $40, if you're a liar.

So there you have it! Subtitle B, done and done. Next time, uncontrollable excitement with Subtitle C - Quality Health Insurance Coverage for All Americans. I know - all of us? But then how will we know who is important and who is worthless around here? Don't worry, I'm sure we'll still find a way. We're innovators, after all.