 INDUSTRY NEWS
December 2, 2009 UnitedHealth Group is pleased to bring you this issue of the Health Care Modernization News Flash to update you on health care issues under discussion in Washington, D.C. and in the states. National Spotlight Senate Releases Merged Health Reform Bill and Passes “Motion to Proceed” On November 18th , leadership in the Senate released a bill entitled the “Patient Protection and Affordable Care Act” that merges legislation passed by the Health, Education, Labor, and Pensions (HELP) Committee in July and the Finance Committee in October. With a vote of 60 to 39, the Senate passed a “Motion to Proceed” on November 20th allowing debate to begin on the bill likely this week. Although the motion to start debate secured 60 votes, it is unclear whether Senate leadership will be able to garner support from 60 Senators to defeat a filibuster and allow a final vote on the bill. Disagreements persist on issues related to the public plan, abortion, immigration, financing, coverage expansion, and insurance market reforms that may prevent some Senators from supporting a final vote on the bill. The CBO estimates that this bill will cost $848 billion over ten years and cover 31 million of the 54 million uninsured. To pay for the cost of the bill, the Committee places a 40% excise tax on “high value” employer-based plans (insured and self funded) valued at over $8,500 for individuals and $23,000 for families, places annual fees on pharmaceutical companies, medical device manufacturers, and health insurers (applies to self funded and fully insured plans), sets a 5% tax on cosmetic surgery, increases the Medicare tax by 0.5% on income over $200,000 for singles and $250,000 for couples, reduces spending for the Medicare Advantage program, reduces provider payment rates under Medicare, secures rebates for Medicaid and discounts for Medicare Part D from pharmaceutical companies, and makes changes to HSA and FSA rules. Details of the Senate bill include: · Insurance Market Rules Effective in 2010: Several insurance market rules take effect in 2010, including government review of health plan premiums, prohibition of lifetime benefit limits and “unreasonable” annual limits for all individual and group plans (insured and self funded), a requirement that plans (insured and self funded) that cover dependents cover children through the age of 25, prohibition of waiting periods exceeding 90 days (insured and self funded plans), a requirement that all individual and group plans (insured and self funded) cover preventive services without cost-sharing, and prohibition of coverage cancellation or rescission except in cases of fraud. Prior to the implementation of new market rules and state Exchanges in 2014, the Senate bill also establishes interim provisions that require 75% of individual and 80% of group market premiums be spent on medical care, create high risk pool provisions for individuals who can not obtain coverage due to health status, and establish a reinsurance program for employer coverage of early retirees. · Insurance Market Rules Effective in 2014: Insurance market reforms that require guarantee issue and renewal, establish risk sharing mechanisms (funded in part by the insured and self funded), prohibit pre-existing condition exclusions as well as premium variations based on health status, and limit premium variation to tobacco use, age, family composition, and geography apply to individuals and small groups to size 100 (states may limit small groups to 50 and may increase beyond 100 with expanded Exchange eligibility starting 2017). States can pass legislation to form “Health Care Choice Compacts” to allow the purchase of individual insurance across state lines. “National Plans” are also established with uniform benefit packages not subject to state benefit mandates, unless states elect to opt-out. States can seek a waiver from HHS starting in 2017 to adopt their own rules in lieu of the new federal standards as long as the state standards would result in similar outcomes. · Public Plan and CO-OPs: The Senate bill establishes a national public plan (“Community Health Insurance Option”) in 2014 to compete with private insurers in state Exchanges. States may pass legislation to opt out of the public plan. Provider rates for the public plan are negotiated and providers are not required to participate. The Senate bill also provides start-up funding to establish non-profit member-governed cooperative health plans (CO-OPs) not currently in existence to compete with private insurers and the public plan in state Exchanges. CO-OPs and the public plan must comply with the same rules as other plans in state Exchanges. States are not required to establish CO-OPs. · State Exchanges: The Senate bill establishes state-based “Exchanges” in 2014 for individuals without access to affordable group coverage (and not eligible for Medicare or Medicaid) and small groups to size 100 (states may limit small groups to 50 and may increase beyond 100 starting 2017). State Exchanges are designed to serve as facilitators of comparison shopping, enrollment, and subsidy administration and regulators of plan standards and rules. Participation is voluntary and state Exchanges “certify” or determine which health plans may participate. · Benefit Plans: Individuals and small groups to size 100 (states may limit small groups to 50 and may increase beyond 100 with expanded Exchange eligibility starting 2017). have a choice of up to five plan types including “Bronze” (60% actuarial value), “Silver” (70% actuarial value), “Gold” (80% actuarial value), “Platinum” (90% actuarial value) and “Young Invincible” (catastrophic plan available for adults under age 30 and for those for whom a premium for a higher value plan exceeds 8% of their income). Individuals between 133% and 200% of the federal poverty level without access to employer-based coverage would be enrolled in a state-negotiated “Basic Plan” where available. HHS establishes and updates benefit plan definitions through a public process, but states may establish additional benefit rules. Out-of-pocket spending is limited to HSA limits for individual and group plans (insured and self funded). Wellness incentives up to 30-50% of the cost of coverage are allowed for group plans (insured and self funded). · Coverage Mandates, Penalties, and Subsidies: I n 2014, individuals are required to have coverage through a “grandfathered plan,” a large group plan, a government program (Medicaid, Medicare, and the like), or through an individual or small group plan that meets or exceeds minimum requirements (“Bronze” plan or “Young Invincible” plan for those under age 30), or pay a penalty. Waivers of the penalty are allowed for Native Americans, those with religious objections, and individuals with a financial hardship defined as premiums exceeding 8% of income. A $95 penalty is effective in 2014 and phased-in to $750 by 2016 for adults (penalty is halved for children). Individuals up to 400% of the federal poverty level ($88,000 for a family of four) are eligible for premium and cost-sharing subsidies. Employers are not required to offer coverage, but those with 50 or more employees not offering coverage are required to pay a $750 fee for employees obtaining a subsidized plan through a state Exchange. Employers offering coverage are subject to a $3,000 fee for employees obtaining subsidized coverage through a state Exchange if the employer does not offer minimum “Bronze” benefits, does not pay at least 60% of the premium, and the premium is more than 9.8% of an employee’s income. Employers are also assessed a $400-$600 fee per employee for imposing a waiting period. Low wage employers (average salary less than $40,000) with 25 or less employees are eligible for up to a 50% premium credit for two years if they pay for at least 50% of the premium. · Medicaid and the Children’s Health Insurance Program (CHIP): Medicaid eligibility is expanded to 133% of the federal poverty level for all individuals in 2014 with full federal funding of the expansion until 2017 (up to 95% federal funding thereafter that varies by state). States are required to maintain existing Medicaid eligibility levels. States also receive additional federal funding to cover kids under CHIP, but are allowed to transition enrollees to the Exchange if their federal allotment runs out. · Medicare: The Senate bill changes the payment structure for Medicare Advantage by reducing payments, creating a competitive bidding process, and providing financial incentives for care coordination programs and quality achievement. Pharmaceutical manufacturers provide a 50% discount for brand name drugs purchased in the “donut hole” or coverage gap under Part D and the income subsidy exclusion for employers who maintain prescription drug plans for Part D eligible retirees is eliminated. The Senate bill also links provider payments to quality outcomes, creates pilot programs for coordinated care delivery models, establishes a new “Innovation Center” to test and implement new provider payment methods, and changes payment incentives to reduce hospital acquired infections and preventable readmissions. Annual provider payment updates are reduced for Medicare Part A and Part B and an independent “Medicare Advisory Board” is established to recommend policy changes to limit the rate of growth in Medicare spending and improve quality. CMS Actuary Estimates Cost and Coverage Impact of House Health Reform Legislation The Chief Actuary for the Centers for Medicare and Medicaid Services (CMS) recently released a report analyzing the cost and coverage impacts of the “Affordable Health Care for America Act” passed by the House of Representatives on November 7th . The report states that total national health expenditures will increase by 0.8% under the House language and that “the additional demand for health services could be difficult to meet initially with existing health provider resources and could lead to price increases, cost-shifting, and/or changes in providers’ willingness to treat patients with low-reimbursement health coverage.” The CMS Actuary also states that the House bill “would not have a significant impact on future health care cost growth rates.” In addition to analyzing the impact of the House legislation on costs, the CMS actuary also estimates the impact on coverage. The reduction in Medicare Advantage rates to 100% of Medicare fee-for-service will result in less generous benefit packages for Medicare beneficiaries and enrollment in Medicare Advantage plans is estimated to decrease by 64%. The report also states that "smaller employers would be inclined to terminate their existing coverage, and companies with low average salaries might find it to their – and their employees' – advantage to end their plans." For more information on health reform and modernization and for copies of newsletters and reports visit: www.unitedhealthgroup.com/reform. Questionns? Please contact your Insurance Group USA account representative. We are here to help YOU.
Obtaining Insurance Coverage for a Business August 2009 Every business needs insurance against risks that might threaten its profitability, including theft and work-related injuries. A small business is more vulnerable to the consequences of these incidents, since it rarely has the resources to cover sudden and unexpected expenditures. This article explains what insurance your business is legally required to have and describes some optional types of insurance you may want to consider. What You Need to Know Is insurance compulsory for businesses? Once you establish your business, and before you begin active operations, you should consult a commercial insurance agent or broker to determine the insurance regulations it must meet. You will be told the types of insurance your business requires, as well as other protection that is available and may be recommended. Businesses are required to carry workers compensation insurance immediately upon hiring any employees. Each state has specific business insurance requirements, so visiting the Web site of your secretary of state or your state’s department of commerce to learn more is good idea. If your business is highly complex and considered high risk, it may also be in your best interests to consult an attorney specializing in insurance law to help you determine requirements and coverage options. Any injuries or illnesses arising from motor vehicle accidents that occur while your employees are working for you may be covered separately by your vehicle insurance. All vehicles—cars, trucks,vans, SUVs, motorcycles, et al—that are used on an employer’s behalf must be insured for minimum third party liability. Insurers normally need to know who will be using the vehicle for business purposes (especially any drivers under age 25), what the business use entails, who owns the vehicle, and how it will be used. Make sure you check the licenses of all your drivers. Any serious motor convictions must be reported to your insurer. Are insurance agents and brokers different? An insurance agent customarily has an agreement with an insurance carrier, writes policies only for that carrier, and can provide cost-effective package deals. An insurance broker is an independent business person who deals with numerous insurance carriers. He or she shops around to get the best coverage at the best price for a client. In most cases, a broker is better positioned to find hard-to-get coverage for special or unusual situations. What to Do Choose Your Insurer Carefully Many new business owners begin by speaking with their personal insurance agent. Find out whether yours has specific experience in providing business insurance to organizations such as yours or if the company they work for offers the broad base of coverage your business will need. After talking with your insurance agent, talk with other business owners, too, as well as with your local Chamber of Commerce members to find out with whom they are doing business. You want the very best deal for your business and one that best fits your needs. So talking with many potential sources, including one or more insurance brokers, is time well spent. Besides, their services are usually free; if a fee is cited at all, in fact, consider changing agents! Consider What You Need to Insure The types of business insurance available today cover virtually every conceivable need; a sample appears below. As you look at business insurance coverage per se, you also should ask your agent or broker about health, dental, vision, and other insurance benefits packages you might make available to your employees. Since health care coverage is a vastly complex topic in itself, it is not included in this review. Property Property insurance, as the name suggests, covers a business for loss or damage to property caused by fire, flood, theft, or vandalism. Note, however, that damage caused by certain types of natural disasters—such as earthquakes or tornadoes—is often excluded. You also should check to see if your policy covers computers and communications systems; they may be considered “special property” requiring extra or specialized equipment coverage. You should cover all your property, including buildings (if you own them), contents, stock, and fixtures. If you rent, ask to review the landlord’s insurance policy and check its range of protection. Property insurance can be critically important if you manufacture, repair, install, or even retail goods. Computer and engineering systems Computer insurance policies cover breakdowns and loss of information. Check that your insurance covers the computer environment, including e-mail and Internet access. Different types of engineering insurance policies are available for machinery. This protection can cover breakdowns, consequences of statutory inspections, and related situations. General liability Liability or casualty insurance protects your business in case of bodily injury to a person, or damage to a person’s property, that occurs on your premises for which you might be held legally responsible. Should a client fall down and suffer injury in your office, for example, your liability insurance could cover his heath care costs and expenses. Likewise, if you break something while in a client’s home or office, the cost of replacing the item could be covered. This coverage is invaluable should lawsuits arise from such mishaps—as they too often do. Public liability Public liability covers you and your business against accidents to members of the public or damage to property that occurs as a result of your business activities. It also covers any related legal costs—a most important provision. This type of insurance is compulsory for certain types of businesses, such as health and fitness instructors and similar organizations. Product liability Product liability insurance works on the same principle as professional liability insurance. It protects you against claims arising from faulty products that your company has manufactured, sold, or installed. Professional liability Professional liability insurance, also known as errors and omissions (E&O) or malpractice insurance, covers you against being sued for giving allegedly poor advice or some manner of alleged negligence. This insurance is mandatory in professions such as medicine, law, accounting, and financial services. It is now common among management and computer consulting firms as well as engineering and design professionals. Coverage usually includes breach of professional duty, breach of copyright, breach of confidentiality, libel and slander, and loss of documents. Business income/extra expense This type of insurance protects your company’s income and revenues by compensating you for extra costs incurred and/or revenues lost if your business suffers serious disruption—after a fire, for example. You usually are covered for an interruption of up to 12 months from the date of the loss or damage. If damage to your office increases the cost of working, you can claim added expenses, such as the cost of temporary offices, removal expenses, and increased rent and rates. Directors and officers insurance A company’s directors and officers can be sued personally over an increasingly wide range of business matters—and the personal liability of a director is unlimited. Legally, the directors of a company and the company itself are separate entities, so both may be defendants in any legal action separately or jointly. To protect the personal assets of individuals and, most importantly, to cover the costs of their defense, directors and officers insurance—D&O, as it’s called—is widely used. Directors and officers insurance extends to protect the company, too, rather than leaving it to fund its own defense and consequently acts as a mechanism that protects the value of a director’s personal holding in the company. Key man Key man coverage pays a benefit to the business if a key employee—for example, a chief executive or business partner—is lost through death or incapacity that would otherwise result in financial hardship for the business. Disability Disability (or loss of income) insurance plans cover employees in the event of long-term sickness, paying a percentage of their salaries during the period of incapacity. This relieves your business of the burden of paying for an ailing employee. The benefit is paid tax-free after a deferred period selected by the policyholder and is paid until retirement, recovery, or death, this type of insurance is available to sole practitioners, too, and is especially important to them. If you are self-employed, be sure you are covered if illness or incapacity prevents you from doing the work you currently do, since many policies only cover you if you cannot work at all. What to Avoid You Fail to Obtain the Right Kinds of Coverage Think long, hard and carefully about the amount of insurance coverage and kinds of protection you need. The consequences of not doing so can be catastrophic. Insure stock for its replacement cost without any additions for profit. Plant and machinery should normally be insured on a “replacement as new” basis. Don’t be afraid to shop the market, either. You Fail to Obtain Enough Coverage If you have too little coverage, an insurance company can reduce any claim by the percentage to which you are underinsured. It’s a detail often overlooked—until it’s too late. You Obtain Coverage with Inappropriate Deductibles Most insurance policies require you to pay a deductible amount that coves the first part of any loss. Make sure the deductible included in your policy is appropriate. You often can negotiate a reduction in premiums by agreeing to pay a higher deductible. If most of your claims fall beneath the deductible threshold, you should consider switching to a policy with a lower deductible amount, although the premium will cost you more. On the other hand, you may want to avoid filing claims just above the deductible amount, if doing would result in paying increased premiums in subsequent years.
Supreme Court Sides with Insurers, Against Trial Lawyers in Credit Scoring Case
December 2008 Decision saves insurers from billions of dollars in potential penalties.
In any given year, only a few dozen cases ever make it to the Supreme Court's docket, and very few of those have a significant or direct impact on the state-regulated insurance industry. The Supreme Court handed the nation's insurers an important victory in which billions of dollars and the continued viability of some leading carriers were at stake.
The new decision --- handed down in the cases of Safeco v. Burr and GEICO v. Edo --- addresses insurance company use of consumer credit reports and the obligations that insurers using this information have under the federal Fair Credit Reporting Act (FCRA). The FCRA requires insurers to alert consumers when they take an "adverse action" based on credit scores and information contained in credit reports. These written notices provide affected consumers with the name and contact information of the reporting agency that provided the report, a statement explaining the consumer's right to obtain a free copy of the report and a description of how the consumer can dispute the report's accuracy.
The FCRA was not entirely precise in specifying the instances in which adverse action notices must be provided, and some insurers believed the notices were only required when a person's credit information had an adverse or unfavorable impact on the insurance rates or terms that would otherwise have been provided. The district court that initially heard these cases agreed with the insurers, but the U.S. Court of Appeals for the Ninth Circuit later adopted an expanded view and ruled that adverse action notices were also required whenever more favorable credit information would improve the rates or terms of a policy.
In its 2006 decision, the Ninth Circuit said an adverse action notice must be provided to a person who does not receive the insurer's best rate because of a less-than-perfect credit history, even when the credit information or score is better than average and its consideration by the carrier results in a lower premium for the consumer. On Monday, the Supreme Court disagreed. The court found that an adverse action only occurs when a consumer pays a premium that is worse than what he/she would have paid had credit information not been considered and that notices are not required to consumers in cases where a better credit history or a superior credit score would have produced a cheaper rate.
Perhaps the most crucial elements of Monday's decision were its findings concerning the penalties that apply to insurers who do not satisfy the FCRA's adverse action notification requirements. The law states that insurers who negligently fail to comply are liable for any actual damages incurred by consumers, but those who willfully violate the law can be liable to each consumer for damages between $100 and $1,000 (plus punitive damages). The circuit court determined last year that GEICO and Safeco had recklessly disregarded the law and thus willfully violated the notice requirements even though the carriers claimed to have, in good faith, followed plausible legal interpretations provided by attorneys and adhered to an earlier lower court opinion.
Fortunately, the Supreme Court---as well as common sense---intervened. In addition to confirming that the industry was in fact largely conforming to the FCRA's notice requirements, the court clarified that the penalties associated with willful violations are reserved for companies that do not have an objectively reasonable basis for their interpretation of the law. The court recognized that, given the lack of clarity in the FCRA language, the carriers' positions were not unreasonable and did not pose the type of 'unjustifiably high risk' for illegal behavior that would warrant triggering the harsher, more expansive penalty provisions.
The significance of the court's reversal and its findings concerning liability and penalties are impossible to understate. Although the plaintiffs never alleged that they suffered any actual damages or real harm, the adoption of a contrary position by the court would have meant that GEICO, Safeco and many other insurers had committed millions of technical and inconsequential errors in recent years and faced incalculable financial penalties as a result. Instead, company officials this week find themselves relieved to have survived an extremely close call while many in the trial lawyer community lament the loss of a potentially colossal source of revenue. |
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