Posted by: reddiva | October 16, 2009

The NEW Baucus – He is SO Proud of Himself! (part one)


I thought it might be a good idea to look at the final form of the Baucus bill – the one Harry Reid will use most of when he presents the bill he wants, or rather the bill Obama wants, the American people to live and/or die with.

From over 500 different and separate amendments offered, Baucus narrowed it down to 41 which he accepted and incorporated into the bill that was approved by his finance committee and passed to the Senate for Reid to play with.

Earlier, I wrote two articles about my reading of the original bill; let’s compare the way it WAS with the way it IS and see if anything beneficial came out of the discussions (read that arguments) during the process.  The original will be shown in red and strike through used where appropriate; updates will be in bold blue.

FIRST DRAFT:

Chairman’s Mark

The Chairman‘s Mark would establish Federal rating, issue, renewability, and pre-existing condition rules for the individual market. Issuers in the individual market could vary premiums based only on the following characteristics: tobacco use, age, and family composition. Specifically, premiums could vary no more than the ratio specified for each characteristic:

  • Tobacco use – 1.5:1
  • Age – 5:1
  • Family composition:

o Single – 1:1

o Adult with child – 1.8:1

o Two adults – 2:1

o Family – 3:1

The first change to the final form comes on page two.  The Age category was changed to 4:1.  Not much of a break but a little one.  The example I used in “Baucus Schmaucus” was if the cheapest rate was $100, older Americans would pay $500.  That figure has now dropped to $400.

The second change I see is on page 3 of the final form:

Chairman’s Mark

The rules for the small group market would be the same as those for the individual market, except that they would be phased in over a period of up to five years beginning January 1, 2013 July 1, 2013, as determined by each state with approval from the Secretary

So they gave the small group market a six month break.  Wasn’t that nice of them?

Since the following section has been removed in its entirety, I won’t use the strike through which might make it more difficult for you to read:

Qualified Long Term Care Insurance

Current Law

A plan of an employer providing coverage under a qualified long-term care insurance contract generally is treated as an accident or health plan. Thus, employer contributions for qualified long-term care insurance for the employee, his or her spouse, and his or her dependents are excludible from gross income and from wages for employment tax purposes. Employees participating in a cafeteria plan, however, are not able to pay the portion of premiums for long-term care insurance not otherwise paid for by their employers on a pre-tax basis through salary reduction because, under current law, any product that is advertised, marketed, and offered as long-term care is a nonqualified benefit specifically not permitted to be offered under a cafeteria plan.

Similarly, employee expenses for long-term care services cannot be reimbursed under a flexible spending arrangement for health coverage on a tax-free basis. A flexible spending arrangement for health coverage generally is defined as a benefit program which provides employees with coverage under which specific incurred medical care expenses may be reimbursed (subject to reimbursement maximums and other conditions) and the maximum amount of reimbursement reasonably available is less than 500 percent of the value of such coverage.

A qualified long-term care insurance contract is defined as any insurance contract that provides only coverage of qualified long-term care services and that meets other requirements. The other requirements include: (1) the contract is guaranteed renewable; (2) the contract does not provide for a cash surrender value or other money that can be paid, assigned, pledged or borrowed; (3) refunds (other than refunds on the death of the insured or complete surrender or cancellation of the contract) and dividends under the contract may be used only to reduce future premiums or increase future benefits; (4) the contract generally does not pay or reimburse expenses reimbursable under Medicare (except where Medicare is a secondary payor, or the contract makes per diem or other periodic payments without regard to expenses); and (5) the contract satisfies certain consumer protection requirements.

A contract does not fail to be treated as a qualified long-term care insurance contract solely because it provides for payments on a per diem or other periodic basis without regard to expenses incurred during the period.

Chairman’s Mark

The Chairman‘s Mark would allow a cafeteria plan to offer as a qualified benefit contributions to a qualified long-term care insurance contract (as defined in section 7702B) to the extent the amount of such contributions does not exceed the eligible long-term care premiums (as defined in section 213(d)(10)) for such contract. Under the Mark, reimbursement for employee-paid premiums for a qualified long-term care insurance contract through a flexible spending arrangement (whether or not under a cafeteria plan) is similarly excludible from gross income.

Effective Date

The provision is effective for taxable years beginning after December 31, 2010.

We didn’t lose much here because I have read that the Harry Reid bill will do away with all FSA accounts anyway.

On pages 8 and 9 of the final Baucus is a discussion about non-profits.  This is what I refer to as “co-ops.”  They found a way to keep some federal funding to a limit by adding one little phrase.

In order to meet the requirement above, insurers shall contribute to a reinsurance entity that is a non-profit entity (referred to as the ―Non Profit). The purpose of the Non Profit must be to help stabilize premiums for individual coverage during the first few years of operation of the state exchanges when the risk of adverse selection related to new rating rules and market changes is greatest. A duty of the Non Profit must be to coordinate the funding and operation of a risk spreading mechanism that takes the form of reinsurance. The Non Profit will be tax exempt for Federal tax purposes.

Insurance providers will be forced to pay a total of $20 billion to these “non-profits.”  How long will we have private insurance providers at this rate?  So to make matters worse, and keep the federal government’s nose in our business, they deleted a phrase from the next paragraph.

Contributions collected by the Non Profit must total $20 billion in 2013 to 2015 in order for insurers to meet the requirement. Contributions could be collected in advance or on a periodic basis throughout each applicable year as long as $10 billion in reinsurance payments could be made by the Non Profit for individual policies sold in the state exchanges for 2013, $6 billion for 2014, and $4 billion for 2015.

It is difficult for me to tell for certain where the money discussed in the following portion is to come from.  It seems to refer to the insurance providers, but it begins with information regarding the States Insurance Commissioners.  Are they saying that our employers are going to be responsible for this additional $5 billion?

State insurance commissioners would be able to review the actuarial soundness of the risk spreading activities conducted by and the contributions made by the Non Profit.

Additional contributions will be made in the amount of $5 billion in 2013 to 2015 to apply to employer-sponsored retiree coverage. The program would reimburse any eligible employers or insurers 80 percent of claims between $15,000 and ends at $90,000. The thresholds would rise each year based on the Medical Care Component of the CPI-U, rounded to the nearest multiple of $1,000. It would reinsure only the claims for individual between the ages 55 to 64 year old who are not active workers or dependents of active workers and who are not Medicare-eligible. Eligible employers are those offering coverage that is appropriate for a mature population between 55 and 64, offers preventative benefits, has demonstrated programs to generate cost-savings for those with chronic and high-cost conditions, and can show actual cost of medical claims.

Either way, why does a non-profit need approximately $25 billion over this three-year period if they are not attempting to replace private insurance providers?

This part comes from the top of page 12 of the new bill:

States must establish an exchange that complies with the requirements set forth in the Federal law. If a state does not establish an exchange within 24 months of enactment, the Secretary of HHS shall contract with a non-governmental entity to establish a state exchange that complies with the Federal legislation.

Added in the Modification or by Amendment at Markup

The Mark would prohibit state law from imposing more stringent regulatory requirements on certain health insurance issuers that are not applied to all issuers in the individual and small group markets. All entities offering health insurance would be subject to state regulatory requirements that exceed federal requirements established under this legislation.

Baucus Schmaucus!” had this information about grandfathered plans:

Grandfathered Plans

Current Law

No provision.

Chairman’s Mark

Individuals and groups who wish to renew coverage in an existing policy would be permitted to do so. Plans could continue to offer coverage in a grandfathered policy, but only to those who were currently enrolled, dependents, or in the case of an employer, to new employees and their dependents. No tax credits would be offered for grandfathered plans.

Beginning January 1, 2013, Federal rating rules would be phased in for grandfathered policies in the small group market, over a period of up to five years, as determined by the state with approval from the Secretary. These plans could continue to exist after the transition period, but would be subject to the new rating rules.

[In other words, our employers couldn’t provide our existing policies after this five-year period of “phasing to the new rating rules”.   Why didn’t he just say that they would be phased out?  The same is true of this bill as is true of H.R. 3200 – private insurance will be phased out.  Here they are again with Socialized medicine being the only viable option for the public. These people are making me really angry!  Why do they keep saying that they aren’t trying to do these things when that is the goal of every plan I have seen out there so far?]

There are two additions in the new bill:

Chairman’s Mark

Individuals and groups who wish to renew coverage in an existing policy would be permitted to do so. Plans could continue to offer coverage in a grandfathered policy, but only to those who were currently enrolled, dependents, or in the case of an employer, to new employees and their dependents. Any individual who has an existing policy equal in value to the ―young invincible plan (described below) can renew that policy. The policy will be considered minimum creditable coverage for purposes of meeting the personal responsibility requirement. No tax credits would be offered for grandfathered plans.

Beginning July 1, 2013 January 1, 2013, Federal rating rules would be phased in for grandfathered policies in the small group market, over a period of up to five years, as determined by the state with approval from the Secretary. These plans could continue to exist after the transition period, but would be subject to the new rating rules.

On page 13 of the new bill is the section for:

Interstate Sale of Insurance

Current Law

No provision.

Chairman’s Mark

No later than 2013, the National Association of Insurance Commissioners (NAIC) shall develop model rules for the creation of ― “health care choice compacts.” Starting in 2015, states, following action taken by the state legislature to approve participation, may form ― “health care choice compacts” to allow for the purchase of individual health insurance across state lines. ― “Health care choice compacts” may exist between two or more states. Once compacts have been agreed to, insurers would be allowed to sell policies in any state participating in the compact. Insurers selling policies through a ― “health care choice compact” would only be subject to the laws and regulations of the state where the policy is written or issued.

Compacts shall provide that the state where the consumer lives retains authority to address market conduct, unfair trade practices, network adequacy and consumer protection standards, including addressing disputes as to the performance of the contract. Insurers either must be licensed in both states or submit to the jurisdiction of each state with regard to these issues (including allowing access to records as if the insurer were licensed in the state.) Before selling a individual policy through a ― “health care choice compact,” insurers must clearly notify consumers that the policy may not be subject to all the laws and regulations of the state is which the purchaser resides.

Effective Date

The effective date for this subtitle is January 1 July 1, 2013 unless otherwise indicated.

If my counting is correct, here are the first nine changes.  So far, I am NOT impressed.  How about you?

Advertisements

Categories

%d bloggers like this: