Health Care Reform Implementation

	Individual & Family Health Insurance
	Small Business Health Insurance

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What does Reform Mean to You NOW?

Under the Patient Protection and Affordable Care Act and the Health Care and Education Affordability Reconciliation Act of 2010, changes will be phased in from 2010 through 2017.  The primary reforms aren't to go into effect until 2014.  The National Association of Health Underwriters has prepared a comprehensive implementation timeline, which you can download at http://www.nahu.org/Reform%20Timeline%20revised.pdf.

Reform Highlights for 2010

The 2010 reforms won't significantly impact most Illinois and Indiana health insurance consumers.  The following changes will be implemented over the course of the year, based on policy anniversary dates:

• Lifetime Benefit Limits Prohibited
  For group and individual health insurance plans, the act prohibits lifetime limits on the dollar value of benefits for any participant.

  COMMENT:  This change has minimal practical impact as most comprehensive health insurance policies already have limits of at least $2 million per lifetime.  The actuarial value of this change is no more than a few dollars per year per person.

• Increased Dependent Coverage
  For group and individual insurance plans, the maximum age for dependent child coverage is increased to age 26.  This expansion of coverage also applies to married children.

  COMMENT:  For young adults with serious medical conditions, who would otherwise have difficulty obtaining private coverage, this expansion of benefits will have meaningful impact.  Adult children will be able to extend coverage under the parent's plan for extra year or two.  There will be a small corresponding increase in premiums to offset the additional costs to insurance companies.

• Policy Rescissions Prohibited
  Health insurance policy rescissions are prohibited except in cases of fraud or material misrepresentation.

  COMMENT:  This aspect of the reform legislation has received a lot of media attention, but we don't see it making any difference to Illinois and Indiana consumers, who are already protected from unfair policy rescission practices.

• Coverage of Preventive Care
  The act mandates coverage of specific preventive services with no cost sharing.

  COMMENT:  Consumers who've previously chosen not to buy health insurance plans with extensive preventive care coverage will have to pay extra for these insured services, which most people, without insurance assistance, are able to fund on their own.

• Pre-existing Condition Coverage for Children
  All group and individual plans will have to cover pre-existing conditions for children age 19 and under.

  COMMENT:  Certainly there's social benefit in this provision of the new law, but it will obviously generate higher health insurance premiums.  Some parents of seriously ill children will try to "game" the system, only buying insurance when large medical expenses loom.  Under this kind of circumstance, insurance is no longer insurance.  There has to be a better way.

• HSA Distribution Tax Increase
  The tax penalty on HSA distributions that aren't used for qualified medical expenses increases from 10% to 20%.

  COMMENT:  You shouldn't use your HSA funds for non-qualified expenses anyway.  We view this provision as rather insignificant.

• OTC Drug Exclusion from Account-Based Plans
  You will no longer be able to use your HSA, MSA or FSA to fund over-the-counter drug purchases, unless the over-the-counter medications are prescribed by a doctor.

  COMMENT:  To us, this provision doesn't seem like a big deal.  If you require large amounts of over-the-counter drugs, you should probably consult a doctor anyway.  However, it means some folks will have to pay for extra physician consultations.

• Tax on Brand-Name Prescription Drug Manufacturers
  The law imposes an annual nondeductible fee on pharmaceutical manufacturers and importers of branded prescription drugs.  The aggregate annual fees, based on market share, to be imposed on covered entities will be $4.8 billion.  The fee is payable in 2011, but is based on 2010 sales.

  COMMENT:  Some portion of the corresponding increase in drug company expenses will be passed on to consumers.  We fail to see how this addresses the problem of rising health care costs.

Conclusion

The 2010 reforms will benefit a small number of people, and they will generate an incremental health insurance cost increase for all people.  Such is the nature of insurance, which exists to disperse individual risk and spread costs over a larger population.

However, not a single one of these reform provisions does anything to actually lower the cost of health insurance.  Yet, the law is called the "Patient Protection and AFFORDABLE Care Act."  We're still reviewing the legislation to identify how the AFFORDABLE part comes into play.