2010 ICA Annual Education Conference

1. HEALTH CARE REFORM
WHAT DOES IT MEAN?
Bryan D. Bolton Robert R. Pohls Gary Schuman
Funk & Bolton, P.A. Pohls & Associates Sr. Counsel - Litigation
Twelfth Floor 10940 Wilshire Boulevard, Ste. 1600 Combined Insurance Company,
36 South Charles Street Los Angeles, California 90024 an ACE, Ltd. company
Baltimore, Maryland 21201-3111 Phone: 310.694.3092 1000 N. Milwaukee Avenue
Phone: 410.659.7754 Fax: 310.694.3093 Glenview, Illinois 60025
Fax: 410.659.7773 email: rpohls@califehealth.com Phone: 847.953.1506
email: bbolton@fblaw.com Fax: 773.506.5080
email: Gary.Schuman@combined.com
International Claim Association– 101st Annual Education Conference – October 4, 2010 – Renaissance Austin Hotel – Austin, Texas

2. HEALTH CARE REFORM
Program Overview
 History of Health Care Reform
 Patient Protection and Affordable Care Act
 Summary of Key Provisions
 Implementation Timeline
 Analysis of Impact
 Questions
International Claim Association– 101st Annual Education Conference – October 4, 2010 – Renaissance Austin Hotel – Austin, Texas

3. HEALTH CARE REFORM
History of Health Care Reform
1912 Teddy Roosevelt endorses social insurance,
and the “Bull Moose” Party adopts the
proposal as part of its platform.
1915 American Association for Labor Legislation
publishes draft bill for compulsory health
insurance; American Federation of Labor
opposes it.
1927 Committee on the Costs of Medical Care
forms to study the economic organization
of medical care.
1929 Great Depression begins.
International Claim Association– 101st Annual Education Conference – October 4, 2010 – Renaissance Austin Hotel – Austin, Texas

4. HEALTH CARE REFORM
History of Health Care Reform
1934 FDR creates Committee on Economic
Security to address old-age and
unemployment issues, as well as medical
care and insurance.
1935 Congress passes the Social Security Act,
without a provision calling for compulsory
health insurance.
1938 Technical Committee on Medical Care
publishes its report: “A National Health
Program.”
1939 Sen. Wagner introduces a National Health
Bill which includes a national health
program to be funded by federal grants and
administered by state and local governments.
International Claim Association– 101st Annual Education Conference – October 4, 2010 – Renaissance Austin Hotel – Austin, Texas

5. HEALTH CARE REFORM
History of Health Care Reform
1943 Wagner-Murray-Dingell Bill proposes
compulsory national health insurance to be
funded by payroll taxes.
1944 FDR outlines an “economic bill of rights”
including the right to adequate medical care
and the chance to achieve and enjoy good
health.
1944 Social Security Board calls for compulsory
national health insurance as part of the
Social Security system.
1946 Bill calling for universal comprehensive health
insurance is re-introduced, opposed by American
Hospital Association and American Bar
Association, and rejected as too “socialistic.”
International Claim Association– 101st Annual Education Conference – October 4, 2010 – Renaissance Austin Hotel – Austin, Texas

6. HEALTH CARE REFORM
History of Health Care Reform
1947 Truman calls for a National Health Program,
drawing opposition from American Medical
Association.
1948 Final report by National Health Assembly
endorses voluntary health insurance, but
reiterates need for universal coverage.
1948 American Medical Association launches a
campaign against national health insurance
proposals.
1952 Federal Security Agency proposes enacting
health insurance for Social Security
beneficiaries. (Bill introduced again in 1956
and 1959).
International Claim Association– 101st Annual Education Conference – October 4, 2010 – Renaissance Austin Hotel – Austin, Texas

7. HEALTH CARE REFORM
History of Health Care Reform
1954 Eisenhower proposes federal reinsurance to
enable private insurers to cover broader
groups of people.
1954 Revenue Act of 1954 excludes employers’
contributions to employee plans from taxable
income.
1956 Military “medicare” program is enacted to
provide government health insurance for
dependents of people in the Armed Forces.
1957 AFL-CIO supports government health insurance.
1958 Congress proposes covering hospital costs for aged
persons on Social Security; American Medical
Association responds by proposing an “eldercare” plan.
International Claim Association– 101st Annual Education Conference – October 4, 2010 – Renaissance Austin Hotel – Austin, Texas

8. HEALTH CARE REFORM
History of Health Care Reform
1960 Federal Employees Health Benefit Plan (FEHBP)
provides health insurance coverage to federal
workers.
1960 Kerr-Mills Act (precursor to Medicaid) uses
federal funds to support state programs
providing medical care to the poor and elderly.
1961 House introduces bill to create government health
insurance plan for the aged. Draws support from
organized labor and intense opposition from the
American Medical Association and commercial
health insurers. (Reintroduced in 1963).
1965 Medicare and Medicaid programs signed into law.
International Claim Association– 101st Annual Education Conference – October 4, 2010 – Renaissance Austin Hotel – Austin, Texas

9. HEALTH CARE REFORM
History of Health Care Reform
1971 Executive Order imposes wage and price freezes on
entire economy, including health care sector.
1972 Supplemental Security Income (SSI) program begins
providing cash assistance to elderly and disabled;
Social Security amended to allow people under age
65 with long term disabilities or end-stage renal
disease to qualify for Medicare coverage.
1973 Congress passes HMO Act of 1973.
1974 Nixon proposes the Comprehensive Health
Insurance Plan (CHIP), calling for universal
coverage, voluntary employer contribution and a
program for the working poor and unemployed.
International Claim Association– 101st Annual Education Conference – October 4, 2010 – Renaissance Austin Hotel – Austin, Texas

10. HEALTH CARE REFORM
History of Health Care Reform
1977 Annual increases in hospital expenses exceed overall
inflation rate by 8.7 percent; Carter proposes
limiting hospital expense increases to 3 percent over
inflation.
1978 Health care provider organizations launch voluntary
effort to control health care costs; Initial goal (2%
over inflation) met in 1978; All subsequent goals
exceeded.
1979 Senate passes bill with voluntary restraints on
hospital cost growth and triggers for mandatory
controls; Bill defeated in House of
Representatives.
1980 The Boren Amendment required that Medicaid pay
nursing home rates that were “reasonable;” states
oppose the measure as impossible to operationalize.
International Claim Association– 101st Annual Education Conference – October 4, 2010 – Renaissance Austin Hotel – Austin, Texas

11. HEALTH CARE REFORM
History of Health Care Reform
1981 States required to make additional Medicaid payments
to hospitals that serve disproportionate share of
Medicaid and low-income people.
1981 States allowed to mandate managed care enrollment of
certain Medicaid groups and to cover home and
community based long-term care.
1982 States allowed to expand Medicaid to children with
disabilities who require institutional care but can
be cared for at home (the “Katie Beckett Option”).
1983 Social Security Amendments of 1983 change Medicare’s
payments to hospitals to fixed prices based on
diagnosis-related groups.
1986 Hospitals participating in Medicare are required to
screen and stabilize all emergency room patients
regardless of their ability to pay.
International Claim Association– 101st Annual Education Conference – October 4, 2010 – Renaissance Austin Hotel – Austin, Texas

12. HEALTH CARE REFORM
History of Health Care Reform
1987 Census Bureau reports that 31 million people are
uninsured (13% of the population).
1988 Medicare coverage expanded to include prescription
drugs and cap beneficiaries’ out-of-pocket expenses.
Repealed in 1989, but requirements that states pay
Medicare premiums and share in costs of covering poor
beneficiaries in Medicaid are kept.
1988 States required to extend 12 months of transitional
Medicaid coverage to families leaving welfare.
1989 Budget reconciliation mandates coverage for pregnant
women and children under age 6 at 133% of poverty level.
1990 Budget reconciliation mandates Medicaid coverage of children age 6-18.
International Claim Association– 101st Annual Education Conference – October 4, 2010 – Renaissance Austin Hotel – Austin, Texas

13. HEALTH CARE REFORM
History of Health Care Reform
1993 Clinton convenes White House Task Force on Health
Reform; appoints First Lady as chair.
1993 Health Security Act introduced in Congress. Would
give every American a “health security card,” but gets
little support.
1993 Medicaid waivers approved to allow for test programs.
Many states use managed care models and use savings to
expand coverage.
1993 National health reform proposals (including single-payer
health insurance, managed competition without universal
coverage and a bipartisan bill to expand coverage) are
introduced but fail to pass.
International Claim Association– 101st Annual Education Conference – October 4, 2010 – Renaissance Austin Hotel – Austin, Texas

14. HEALTH CARE REFORM
History of Health Care Reform
1996 States allowed to cover parents and children at
AFDC levels.
1996 Health Insurance Portability and Accountability Act
(HIPAA) restricts use of pre-existing conditions in
health insurance underwriting.
1996 Mental Health Parity Act prohibits group health plans
from having lower dollar limits for mental health benefits.
1997 State Children’s Health Insurance Program (SCHIP)
provides coverage for uninsured children, funded by
cigarette taxes.
1997 Balanced Budget Act of 1997 changes provider payments
to slow Medicare spending, permits mandatory Medicaid
enrollment in managed care.
1997 Census Bureau estimates 42.4 million uninsured (15.7% of population).
International Claim Association– 101st Annual Education Conference – October 4, 2010 – Renaissance Austin Hotel – Austin, Texas

15. HEALTH CARE REFORM
History of Health Care Reform
2003 Medicare Drug, Improvement and Modernization Act
creates voluntary, subsidized prescription drug benefit
under Medicare, administered through private plans.
2003 Health Savings Accounts created to let individuals set-
aside pre-tax dollars for medical expenses.
2003 Maine passes Dirigo Health Reform Act, providing
subsidized coverage to individuals and small employers.
2005 Senate fails to pass the Small Business Health Fairness
Act, a measure which would let small businesses pool
together as “association health plans” and negotiate for
group health insurance.
2006 Massachusetts passes legislation to provide health care coverage to
nearly all state residents.
2006 Vermont passes comprehensive health care reform aimed for near-
universal coverage.
International Claim Association– 101st Annual Education Conference – October 4, 2010 – Renaissance Austin Hotel – Austin, Texas

16. HEALTH CARE REFORM
History of Health Care Reform
2006 City of San Francisco provides universal health services
for city residents under program that requires employers
to spend a minimum amount for employees’ health care.
2007 California fails to pass a health reform plan with
individual mandate and shared responsibility for costs.
2007 Census Bureau estimates 45.6 million uninsured
(15.3% of the population).
2007 Congress considers the Healthy Americans Act, requiring
individuals to obtain private health insurance through state health
insurance purchasing pools.
2007 Congress passes two versions of a bill to reauthorize the State Children’s
Health Insurance Program (SCHIP). Bush vetoes both.
2007 Insurers required to treat mental health and physical conditions on equal basis.
International Claim Association– 101st Annual Education Conference – October 4, 2010 – Renaissance Austin Hotel – Austin, Texas

17. HEALTH CARE REFORM
History of Health Care Reform
2008 Sen. Baucus releases White Paper outlining a national
health reform plan based on Massachusetts model.
2009 Obama establishes Office of Health Reform to coordinate
efforts at national health reform.
2009 Children’s Health Insurance Program (CHIP)
reauthorized to provide funding to cover 4.1 million
children who would have been uninsured by 2013.
2009 Obama releases budget outlining eight principles for health
reform and creating $634 billion health reform reserve fund.
2010 Obama presides over Bipartisan Health Care Summit at “Blair House.”
2010 Obama signs the Patient Protection and Affordable Care Act (March 23, 2010)
and the Health Care and Education Reconciliation Act of 2010 (March 30, 2010).
International Claim Association– 101st Annual Education Conference – October 4, 2010 – Renaissance Austin Hotel – Austin, Texas

18. Timeline of Insurance Reforms - 2010
 High-risk pool established to provide coverage to people
with pre-existing conditions.
 Provide dependent coverage for adult children to age 26.
 Require minimum coverage without cost-sharing for
preventive services, including recommended
immunizations, rated A or B by the U.S. Preventive
Services Task Force.
 HHS and states begin annual review of unreasonable
increases in health insurance coverage premiums. A
health insurer cannot implement any unreasonable
premium increase without prior justification to HHS and
the relevant state.

19. Timeline of Insurance Reforms – 2014
 Require guarantee issue and renewal, and allow rating
variation based only on age, premium rating area, family
composition and tobacco use. Limits out-of-pocket
deductibles based on IRC.
 Limits waiting period for coverage to 90 days.
 Prohibits Annual or Lifetime limits on essential benefits.
 No pre-existing condition exclusion permitted.
 Create state-based Health Insurance Exchanges.
 Requires OPM to contract with insurers to offer at least
two multi-state plans in each exchange.
 Create Essential Benefits Package providing
comprehensive services and must cover at least 60% of
actuarial value of covered benefits and limit cost-sharing.

20. Essential Benefits Plan
 Minimum essential benefits consists of the following:
ambulatory patient services, emergency services,
hospitalization, maternity and newborn care, mental health
and substance abuse services, prescription drugs,
rehabilitative and habilitative services and devices, laboratory
services, preventive and wellness services, and pediatric,
including oral and vision care.
 HHS is required to establish the complete list of essential
benefits.
 Essential benefit plans can differ by levels of coverage.

21. Essential Benefit Plan Coverage Levels
 Bronze (Basic) Level Coverage – equals 60% of full
actuarial value of the benefits provided by plan.
 Silver (Enhanced) Level Coverage – equals 70% of
full actuarial value of the benefits provided by plan.
 Gold (Premium) Level Coverage – equals 80% of full
actuarial value of benefits provided by plan.
 Platinum (Premium Plus) Level Coverage – equals
90% of full actuarial value of the benefits provided by
plan. Not required to offer Platinum coverage.
 All plans must offer mental health parity.

22. Qualified Health Plan
 A “qualified health plan” means a health plan that
(A) has a certification that such plan meets the
requirements of each Exchange through which the
plan is issued; (B) provides the essential health
benefits plan package; (c) is offered by a a licensed
health insurer that (i) is licensed and in good
standing to offer health insurance in each State
where coverage is offered; (ii) agrees to offer at least
one qualified health plan in silver and gold levels in
each such Exchange; (iii) agrees to same premium
rates inside and outside of Exchange; and (iv)
complies with regulations.

23. Health Insurance Exchange
 By 2014, States must establish exchanges to facilitate
purchase of qualified health plans and are charged with
enforcing standards.
 States must establish Small Business Health Options
Program (SHOP) Exchange to assist small employers in
the process of enrolling employees in qualified health
plans offered in the small group market.
 Regulations will establish criteria for certification of
health plans as qualified health plans, but minimum
criteria are defined in statute.
 Only qualified health plans may be offered through an
exchange, but a health insurer can offer plans outside of
exchanges.

24. Health Insurance Exchange Functions
 An exchange will (1) establish procedures for
certification and decertification of qualified health
plans; (2) offer a toll free number; (3) maintain
internet site for standardized comparison of
information on plans; (4) assign a rating to each
QHBP; (5) utilize standard format for presenting
plan options; (6) inform individuals about eligibility
for Medicaid CHIP; (7) establish a calculator to
determine actual cost of coverage after any premium
credit or cost-subsidy; and (8) provide procedures for
certification for exemption from individual excise
tax.

25. Health Insurance Exchange Programs
 Office of Personnel Management (OPM) shall contract with health
insurers to offer at least two multi-state qualified health plans
through the exchanges to provide individual and small group
coverage.
 Medical loss ratios, profit margins, premiums and other terms and
conditions shall be implemented in a manner similar to FEHBA
Program.
 States may offer additional benefits, but cannot add to Federal cost.
 Small Employers (100 or fewer employees) may elect to make all
full-time employees eligible for plans through the Exchange.
 In 2017, Large Employers can participate in the Exchange

26. Health Insurance Exchange Insurer Requirements
 Insurer must offer at least one silver and one gold level plan in
the Exchange and charge same plan premium offered inside
and outside of the Exchange.
 Agents and brokers are permitted to serve as “Navigators” and
may enroll individuals in plans offered through the Exchange.
 Health insurers cannot serve as navigators and navigators
cannot receive consideration from insurer in connection with
participation or enrollment of individuals or employees.
 HHS will establish standards for navigators by regulation.

27. Employer and Individual Mandates
 Employers offering minimum essential coverage through employer-
sponsored plan must offer free-choice vouchers to employees to
purchase coverage through the Exchange. Voucher amount is
determined by the most generous amount the employer would have
contributed for coverage under employer’s plan.
 If employer contributes less than 60% of costs of employer plan or
premiums exceed 9.8 percent of employee’s income, then employee
is not considered to have minimum essential coverage and is eligible
for premium assistance.
 Employers with more than 200 employees must automatically
enroll new full-time employees in coverage with the opportunity to
opt out.
 Individuals are required to maintain minimum essential coverage
beginning in 2014.

28. Insurance Market Reforms
 HHS will award grants to states to establish or expand health
insurance consumer assistance or a health insurance
ombudsman.
 A state office of health insurance consumer assistant or health
insurance ombudsman shall: 1) assist with filing and
complaints and appeals; 2) collect, track and quantify
problems encountered by consumers; 3) educate consumers
on their rights and responsibilities; 4) assist consumers with
enrollment; 5) resolve problems with premium tax credits.
 Coverage cannot be rescinded except in the case of fraud or
intentional misrepresentation of a material fact.

29. Insurance Market Reforms - Continued
 A group health plan or health insurance issuer must give at
least 60 days notice if it makes any material modification in
the terms of the plan or coverage.
 Increases wellness incentive limit currently codified in
HIPAA, but increases incentive from 20-30%.
 Wellness incentive may be increased by regulation up to 50%.
 Cannot require pre-authorization for emergency care in
hospital or for female participants for OB/GYN care.
 Cannot impose conditions for participation in clinical trial.

30. Plan Disclosures
 Within 24 months of enactment, health plans must use HHS
standards for provision of summary of benefits and coverage
explanation. HHS will work with NAIC to develop standards.
 Standards shall ensure that outline of coverage is: presented
in uniform format, not more than 4 pages in length and in 12-
point or larger font; in a manner understandable to average
enrollee; includes definitions of standard terms; includes
coverage limitations or exceptions, cost-sharing provisions,
renewability and continuation provisions, examples of
common benefit scenarios, a statement the outline is a
summary and a web link to the actual coverage policy or group
certificate.

31. HEALTH CARE REFORM
Certain provisions become
Effective for calendar year
Plans:
• Coverage for adult children
• No lifetime caps
• Restriction on annual caps
• No pre-existing conditions
for children under age 19
6/21/2010
• 0.9% additional Medicare tax becomes
2013
effective
• 3.8% Medicare ta on unearned income • Exchanges become
becomes operative
3/23/2010
Reinsurance
effective
Patient 2014 “Cadillac” plan • 2018 mandate
Individual
Program for
Retirees becomes
• 2011
Medicare Part D subsidiaries effectively
Protection and
Act signed
tax becomes provisions apply
become effective • Employer
operative into law
taxable responsibility
• $2,500 limitation on health FSAs becomes obligations apply
effective

32. HEALTH CARE REFORM
Permitted Grandfathering of Existing Coverage
 The Act grandfathers plans in effect on March 23, 2010
 A grandfathered plan may provide that individuals who are covered
on March 23, 2010 can continue coverage under the plan generally
. without regard to the requirements of the Act
 Family members may enroll in the grandfathered plan in the future
if family coverage was permitted under the terms of the plan as in
effect on March 23, 2010
 New employees may join the grandfathered plan in the future if the
plan permitted new employees to join on March 23, 2010
International Claim Association– 101st Annual Education Conference – October 4, 2010 – Renaissance Austin Hotel – Austin, Texas

33. HEALTH CARE REFORM
Permitted Grandfathering of Existing Coverage
 Even though existing plans are grandfathered, certain interim
requirements still apply:
• No lifetime limits (2011)
• Restrictions on annual limits (2011)
• Restrictions on coverage rescissions (2011)
• Extension of dependent coverage to adult children (2011)
• Advance notice of material modifications (2011)
• Uniform summary of benefits (2011-2012)
• No pre-existing condition exclusions for enrollees under the age
of 19 (2011)
• No pre-existing condition exclusions for enrollees of any age (2014)
• Maximum waiting period is 90 days (2014)

34. HEALTH CARE REFORM
Interim Requirements That Do Not Apply to
Grandfathered Plans
Coverage requirements for preventive care services
Coverage requirements for emergency services
Non-discrimination rules that apply to insured plans

35. HEALTH CARE REFORM
Interim Requirements Effective Dates
 The interim requirements first become effective for
plan years beginning on or after September 23, 2010
(6 months after the law was enacted)
 For calendar years plans, the interim requirements
will begin to apply on January 1, 2011
 For October, November and December fiscal year
plans, the interim requirements will begin to apply
on the first day of the plan year in 2010

36. HEALTH CARE REFORM
Lifetime and Annual Limits
 No lifetime limits
 No annual limits
 Prior to 2014, plans may establish a restricted annual
limit (to be determined by HHS) on the dollar value
of benefits with respect to the scope of benefits that
are “minimum essential benefits” under the Act

37. HEALTH CARE REFORM
Lifetime and Annual Limits
 To the extent that a plan offers specific benefits that
are not considered “minimum essential benefits”
under the Act, the plan may impose annual or
lifetime limits on such specific benefits that are
otherwise permissible under federal law
 Note: The Act does not define the specific benefits
covered by this exception

38. HEALTH CARE REFORM
No Rescission of Coverage
 A plan cannot rescind coverage unless the participant
or beneficiary has engaged in fraud of intentional
misrepresentation of material fact as prohibited by
the terms of the plan

39. HEALTH CARE REFORM
Coverage for Adult Children
 Adult children must continue to be eligible to be covered until they turn
age 26
 Adult children may be covered as dependents tax-free until the year
they turn age 27
 IRS has clarified that the tax-free status of this coverage runs from
March 30, 2010, and that in 2010 cafeteria plans can permit adult
children to be covered pre-tax mid-year (and make or change health
care FSA contributions) as if their becoming eligible was a change in
family status (IRS Notice 2010-38, 4/27/10)
 Child is defined as a son, daughter, stepson, stepdaughter, eligible
foster child, adopted child legally placed with the participant for
adoption

40. HEALTH CARE REFORM
Coverage for Adult Children
 Children of children are not required to be covered
 For grandfathered plans prior to 2014, an adult child
is only required to be offered coverage if such adult
child is not eligible to enroll in another eligible
employer-sponsored health plan

41. HEALTH CARE REFORM
Material Modifications
 Notice of material modifications to plan benefits
must be provided at least 60 fays before the
modifications become effective

42. HEALTH CARE REFORM
Pre-Existing Conditions
 A plan may not impose pre-existing condition
limitations on enrollees who are under the age of 19
 Note: This requirement expands to apply to all
enrollees beginning in 2014

43. Coverage for Emergency Services
 Participants may use emergency room services
without the need for prior authorization. In
addition, a plan may not impose any additional co-
payment or co-insurance requirements if the
emergency facility is not part of the plan’s network
 Note: Grandfathered plans are not required to
include this provision

44. HEALTH CARE REFORM
2014 Requirements

45. HEALTH CARE REFORM
Individual Responsibility
 Individuals will be required to maintain health insurance
(known as “minimum essential coverage”)
 Individuals who do not maintain such coverage will be
required to pay a penalty equal to the grater of $695 or
2.5% of the individual’s income
 Families that do not maintain such coverage will be
required to pay a penalty equal to the greater of $695 for
each non-covered family member (capped at $2,085) or
2.5% of the family’s income

46. HEALTH CARE REFORM
No Pre-existing Conditions
 Plans may not impose any pre-existing condition
 As noted above, beginning in 2011, plans may not
impose any pre-existing condition limitations on
children under the age of 19

47. HEALTH CARE REFORM
Waiting Periods
 Plans may not impose waiting periods that exceed 90
days

48. HEALTH CARE REFORM
No Health Status Discrimination
 Plans may not impose coverage rules based on any
health status related factor
 Note: For employers, it is not clear how (or if) this
requirement differs from the existing HIPAA non-
discrimination rules that are applicable to employer-
sponsored plans

49. HEALTH CARE REFORM
Wellness Programs
 Wellness programs that do not depend on health status factors:
• Program must be made available to all similarly situated
individuals
• Can reimburse all or a part of the cost for membership in a
fitness center
• Diagnostic testing program that provides rewards for
participation, not outcomes
• Encourages preventive care related to a health condition
• Reimbursements for costs of smoking cessation programs
regardless of outcomes
• Rewards for attending periodic health education seminars

50. HEALTH CARE REFORM
Wellness Programs
 Wellness programs currently in existence under
existing regulations may continue to follow those
regulations as long as those regulations remain in
effect

51. HEALTH CARE REFORM
Insurance Company Required Pay-Outs
 Insurers required to spend at least $.80 out of every
dollar they collect in premiums on patient welfare
 A critical Issue for the insurance industry's bottom
line
 What does this mean precisely ?

52. HEALTH CARE REFORM
Insurance Company Position
 Include the cost of verifying the credentials of
doctors in its networks
 Ferreting out fraud by identifying doctors performing
unnecessary operations
 Typical business expenses such as insurance
commissions to agents/brokers and taxes paid on
investments

53. HEALTH CARE REFORM
Penalties for failing to meet 80% Rule
 Medical-loss ratio is important because law requires
a refund to consumers if too much is spent on
administrative costs

54. HEALTH CARE REFORM
Consumer Advocacy Group Position
 Insurance industry wants to "water down" the law by
including too many administrative costs under the
guise of patient care
 If six largest for-profit insurers had been required to
meet these new standards last year, they would have
been required to refund $1.9 billion

55. HEALTH CARE REFORM
Interim Final Rules For Group Health Plans And
Health Insurance Issues Relating To Coverage Of
Preventive Services Under The Patient Protection And
Affordable Care Act Promulgated By
 Department of Treasury, 26 CFR Part 54;
 Department of Labor, 29 CFR Part 2590; and
 Department of Health and Human Services, 29 CFR
Part 147.

56. HEALTH CARE REFORM
Interim Final Regulations Effective On
September 17, 2010
A) Interim Final Regulations apply to group health plans and
group health insurance issuers for plan years beginning on
or after September 23, 2020; and
B) These interim regulations generally apply to individual
health insurance issuers for policy years beginning on or
after September 23, 2010.
Comments on regulations due on or before September 17,
2010

57. HEALTH CARE REFORM
Stated Need For Regulatory Action
Identifies three reasons for current under-utilization
of preventive services.
1) Turnover in health insurance market offers no incentive for
insurers to cover preventive services;
2) Preventive services often offer no immediate benefit,
making it easy to postpone in the face of immediate cost; and
3) Some benefits of preventive services accrue to society as a
whole and are not factored into individual decisions.

58. HEALTH CARE REFORM
Interim Final Regulations Require A Group Health Plan and Health Insurance Issuer
Offering Group Or Individual Health Insurance Coverage To Provide Benefits For And
Prohibits Imposition Of Cost Sharing With Respect To:
1) Evidence-based items or services that have in effect a rating of A or B in
the current recommendations of the United States Preventive Services
Task Force (Task Force);
2) Immunizations for routine use in children, adolescents, and adults that have in
effect a recommendation from the Advisory Committee on Immunization
Practices of the Centers for Disease Control and Prevention (Advisory Committee);
3) With respect to infants, children, and adolescents, evidence-informed preventive
care and screenings provided for in the comprehensive guidelines supported by
the Health Resources and Services Administration (HRSA); and
4) With respect to women, evidence-informed preventive care and screening
provided for in comprehensive guidelines supported by HRSA (not otherwise
addressed by the recommendations of the Task Force).
Complete list of recommendations and guidelines that are required to be covered under
the interim final regulations can be found at
http://www.HealthCare.gov/center/regulations/prevention.html.

59. HEALTH CARE REFORM
Benefits Anticipated From Interim Final Regulations
1) Individuals will experience improved health
as a result of reduced transmission,
prevention or delayed onset, and
earlier treatment of disease;
2) Healthier workers and children will be more
productive with fewer missed days of work
or school;
3) Some of the recommended preventive
services will result in savings due to lower
health care costs; and
4) The costs of preventive services will be
distributed more equitably.

60. HEALTH CARE REFORM
Projection of Lives Saved From
Increasing Utilization of Selected
Preventive Services To
90 Percent
Lives saved annually if
Preventive service Population Percent utilizing percent utilizing
group preventive preventive service
service in increased to
2005 90 percent
Regular aspirin use ……………………………… ……….. Men 40+ and women 50+ …………………… 40 45,000
Smoking cessation advice and help to quit ………. All adult smokers …………………………….... 28 42,000
Colorectal cancer screening …………………………….. Adults 50+ ………………………………………… 48 14,000
Influenza vaccination ……………………………………… Adults 50+ ………………………………………… 37 12,000
Cervical cancer screening in the past 3 years …….. Women 18-64 ………………………………....... 83 620
Cholesterol screening …………………………………….. Men 35+ and women 45+ ……………………. 79 2,450
Breast cancer screening in the past 2 years ……….. Women 40+ ………………………………………. 67 3,700
Chlamydia screening ………………………………………. Women 16-25 ………………………….. ……….. 40 30,000

61. HEALTH CARE REFORM
Estimate Of Average Change In Health Insurance
Premiums Resulting From Interim Regulations
 The Departments used BC/BS FEHBA standard plan for
comparative purposes;
 BC/BS covers most of preventive services listed in the Task Force
and Advisory Committee recommendations;
 The Departments estimated that adding coverage for genetic
screening and depression screening would increase benefits an
estimated .10 percent;
 Adding lead testing, autism testing and oral health screening
would increase insurance benefits by an estimated .02 percent;
and
 This results in a total average increase in insurance benefits for
these services of .12 percent, or just over $4 per insured person.

62. HEALTH CARE REFORM
Interim final regulations make clear that a plan or
issuer is not required to provide coverage or waive
cost-sharing requirements for any item or service
that has ceased to be a recommended preventive
service. Other requirements of Federal or State law
may apply in connection with ceasing to provide
coverage or changing cost-sharing requirements for
any such item or service. For example, PHS Act
section 2715(d)(4) requires a plan or issuer to give 60
days advance notice to an enrollee before any
material modification will become effective.

63. HEALTH CARE REFORM
Pending Legal Challenges
 Virginia: Passes Virginia Health Care Freedom Act, prohibiting any
individual from being required to purchase health insurance.
 Attorney General filed a lawsuit [Commonwealth v. Sebelius]
challenging constitutionality of “individual mandate”
 District Court denies motion to dismiss, ruling that constitutional
issues must be resolved by hearing on the merits (currently set for
October 18, 2010).
 Other States: Twenty states, two individuals and the National
Federation of Independent Business filed a separate lawsuit in the
Eastern District of Michigan which makes similar challenges.
 No Severability Provision: A successful judicial challenge to the
constitutionality of any provision could invalidate the entire Act.