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!

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