Health care reform does next to nothing to reduce the cost of health care — Analysis by SBAM health insurance expert Scott Lyon
March 23, 2010
Updated March 25, 2010
As you may know, the U.S. House of Representatives has passed the Senate health reform bill, and President Obama has signed it into law. The vote was close (219-212) with 38 Democrats voting “no” on the bill along with every Republican. All of Michigan’s delegation voted along party lines.
Within the legislation, the root cause of the nation’s issue with health care – cost – was almost completely ignored. As far as SBAM is concerned, the issue of cost containment is critical, and the reality is that this bill does next to nothing to reduce the cost
To best of our ability, SBAM will keep you informed of what is going on
or changing along with some analysis on how this will impact our small
businesses members and their employees.
Now that the health care bill has been signed into law, many of you may be asking what it all means. Below is a brief analysis of what we know as of now.
For Small Businesses and Individuals:
- Individual Mandate that requires most U.S. citizens and legal residents to purchase insurance. There are subsidies for low income people and penalties if you don’t purchase.
- Employer mandate for any employer with more than 49 employees with penalties if the employer does not offer coverage.
- Health Insurance Exchange – portal through which individuals and small employers can review and purchase insurance.
- Expansion of Medicaid and the Children’s Health Insurance Program (CHIP).
- Small business tax credits for companies with fewer than 25 employees and average annual wages of less that $50,000 if employer pays more than 50% of the premium – note that it phases out for companies above 10 employees and as the average wage increases.
New Fees that will impact premiums:
- New fees on pharmaceutical companies of $16 billion between 2011 and 2019, then $2.8 billion a year thereafter.
- New annual fees on health insurance companies of $47.5 billion between 2014 and 2018 and then indexed by the previous year’s fee increased by premium growth.
- New Fees on taxable medical devices of 2.9%.
- Exclusion of the cost of over the counter medication from your Health Savings Accounts (HSAs) or Flexible Spending Accounts (FSAs) effective 2011.
- Increases the threshold for itemized deductions of medical cost from 7.5% to 10% in 2013.
- Limits the amount of contribution to an FSA to $2,500 effective 2013.
- Increases the Medicare Part A tax from 1.45% to 2.35% for individuals making over $200,000 and families above $250,000 – so look out if your business is a pass through.
- “Cadillac Tax” taxes on the most generous healthcare plans starting in 2018.
Insurance Carrier Related Changes:
- Co-Op Plan in each state – non-profit member run health insurance plans.
- Mandating Purchase – 4 basic benefit tiers along with an Essential Benefits Package (what must be covered and how they must be covered).
- Guarantee Issue and Renewal.
- Dependent coverage to age 26.
- Eliminates lifetime limits on claims.
- Rating rules – essentially modified community rating.
- Exchanges – portals and purchase options beginning in 2014.
- New medical loss ratios for carriers – 80% in individual and small group market and 85% in large group market.
- New “sheriff” to review health insurance plan increases and justify the increase.
- Limits deductibles to $2,000/$4,000.
- Limits waiting period to 90 days.
Cost Containment is pretty weak:
- Enhanced oversight of new providers of Durable Medical Equipment into Medicare and Medicaid.
- Establish a Research Institute to study comparative effectiveness of treatments.
- Better coordination between the benefits of Medicare and Medicaid.
- A National Wellness Council.
- Grants to support delivery of evidence based medicine and wellness services.
Of course in a 2,000 page bill there is much more – especially as it relates to Medicare, SBAM will continue our analysis of this legislation and of course keep you as up to speed as possible as things change and as they become clearer over the next days/weeks/months. If you have any questions or concerns, please feel free to give us a call.
If you have any questions or concerns, please feel free to give us a call at (800) 362-5461 or email scott.lyon@sbam.org.