Healthcare Reform Update

Posted on: February 13th, 2012 by Jon No Comments

We wish we had more black and white guidance, but the reality is that many provisions are still in play with the Patient Protection and Affordable Care Act (PPACA), such as:

  • U.S. Supreme Court to hear arguments in March regarding the constitutionality of the Individual Mandate and Medicaid Expansion provisions
  • House votes to repeal CLASS act, the long-term care (LTC) provision
  • Arizona moving forward but several other states delaying implementation of Health Insurance Exchanges
  • Current Medical Loss Ratio (MLR) calculation reducing the number of licensed health insurance agents that service small businesses and individuals

U.S. Supreme Court

Florida and 25 other states, including Arizona, have challenged the constitutionality of the Individual Mandate and Medicare Expansion provisions of the PPACA.  The U.S. Supreme Court is scheduled to hear arguments March 26-28th and a ruling is expected this summer.

The Individual Mandate is the requirement for all individuals to buy health insurance or pay a penalty, and is the underpinning for the guarantee issue provision.  The argument against is it exceeds the federal government’s power.

The Medicaid Expansion is the additional population covered when increasing the Medicaid qualifying income of individuals and families to 133% of the federal poverty level.  The argument against is it is a federal infringement on state legislative authority.

Regardless of the outcome of the Supreme Course case, we do not anticipate the whole PPACA will be repealed, especially given the popularity of provisions already in place (e.g., dependents now covered to age 26).  Instead, it will continue to be tweaked and refined via legislative and legal avenues.

CLASS Act

Last October Health and Human Services (HHS) determined the Community Living Assistance Services and Support program (CLASS Act) was not financially solvent and earlier this month the House voted to repeal it.  We expect more legislative activity in this space given it is projected that by 2020, 15 million Americans will need LTC assistance, but currently less than 10 percent of people purchase private LTC insurance, putting further strain on Medicaid.

Health Insurance Exchanges

28 states, including Arizona, have taken steps to establish insurance exchanges; however, that is less than 60% overall.  Many states are holding off given the uncertainty of the outcome of the Supreme Court case (see above) and/or choosing to use the to-be-built federally run exchange instead.

Kristine Kassel continues to participate on the Arizona exchange work group for brokers and agents focusing on broker licensing and compensation, including the TBD “Navigator” role.  Other work groups include a health plans work group led by the Department of Insurance and concentrating on plan management requirements; a tribal work group developing outreach and education plans; an information technology infrastructure work group led by the Arizona Health Care Cost Containment System (AHCCCS); and a legislative work group.

Medical Loss Ratio (MLR)

The current MLR calculation received much attention during the National Association of Health Underwriters (NAHU) Capitol Conference in Washington DC last month.  Kristine Kassel and Jon Dolgaard were on the Arizona team who met with Representatives Jeff Flake (R-AZ) and Ed Pastor (D-AZ) to discuss the following.

  • Most small businesses work with a licensed independent health insurance agent given they do not have the expertise in-house to do this on their own.  This is the same approach they use for their legal, tax, 401(k) administration, etc. needs.
  • Independent health insurance agents do not work for insurance carriers; however, their commissions are paid by insurance carriers as a pass-through percentage of their client’s premium or client’s employee headcount.
  • Many independent insurance agents are already cutting back on health insurance services or no longer selling health insurance which is impacting small businesses’ and individuals’ ability to make educated choices about their health insurance.  The reason is that the PPACA’s MLR calculation currently includes insurance agent commissions; therefore, carriers are reducing the commissions to meet these requirements.

Two Congressional bipartisan bills are in progress to address this.  H.R. 1206 (Access to Professional Health Insurance Advisors Act) was introduced in the House last March and has more than 170 cosponsors thus far, including David Schweikert and more recently Ed Pastor from Arizona.  S. 2068 (Access to Independent Health Insurance Advisors Act) is the corresponding bill introduced earlier this month in the Senate.

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