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IDA evaluates potential outcomes of healthcare reform

5/14/2012

By JONATHAN MAYO

Director, IDA Insurance Services, Inc.

President Barack Obama signed the Patient Protection and Affordable Care Act (PPACA) on March 23, 2010. Two years have passed, and there is still much work to do to determine the practical implications of the 2,400-page law.

The law only provides provisions, not regulations. For industry experts, human resource firms and legal teams, it seems as though new government regulations have been announced on a weekly basis. Staying up-to-date with the changes and maintaining compliance can be complicated.

As of the early spring of this year, PPACA has had little impact on patients’ access to dental care. Patients are still purchasing dental insurance from the same distribution channels (employer group benefit plans, individual health insurance with bundled dental benefits or stand-alone dental plans), or traditional fee-for-service models. Many fee-for-service patients take advantage of the favorable tax laws surrounding Flex Spending Accounts (FSA’s), Health Savings Accounts (HSA’s), or Health Reimbursement Accounts (HRA’s). PPACA did not adversely change any of the tax advantages when used for qualified dental services. Beginning January 2014, there will be potential for major changes, especially including the State and Federal Insurance Exchanges.

The concept of the “Exchange,” along with the entire Act, could all be impacted or overturned by the United States Supreme Court ruling, due no later than July 2012. The Court heard testimony last March. The central issue of the legal challenge and testimony is the individual mandate, with the central question being, “Does Congress have the right to require all Americans to obtain health insurance, or to pay a penalty for being uninsured?”

For political enthusiasts, the central arguments are outlined below by Ronald Bachman, a contributing writer to the Hays Company monthly newsletter. Note: Hays Company is the Indiana Dental Association’s retained health insurance and employee benefits consultant.

Arguments made for PPACA constitutionality

The Federal Government argued that Congress expressly found that the minimum coverage provision “regulates activity that is commercial and economic in nature,” namely “how and when healthcare is paid for, and when health insurance is purchased.” In addition to finding that the minimum coverage provision regulates economic activity having a substantial effect on interstate commerce, Congress found that the provision is necessary to achieve the goals of PPACA’s guaranteed-issue and community-rating insurance reforms. Those provisions will require that insurers provide coverage and charge premiums without regard to a person’s medical history.

Arguments made against PPACA constitutionality

Indiana and the 25 other states advancing the case argued that the entire bill should be unconstitutional, because “Congress made clear that the act was structured so that it could not achieve its goal of near-universal coverage without the individual mandate. It is thus clear that without the mandate, Congress would not have enacted the supply-side provisions, and without those costly provisions to offset, the balance of the act never would have emerged.

Being aware of the Supreme Court testimonies and upcoming decision date is noteworthy, but the purpose of this article is to inform, not speculate. As Health Care Reform currently is written, what would the Exchange look like? How would the Exchange change the options your patients have for dental insurance benefits? How will Exchanges impact the number of patients who purchase dental insurance? The answers are, the Exchanges would still present your patients with the opportunity to buy a health insurance plan with integrated dental benefits, similar to an employer group benefits package, or to purchase a stand-alone dental benefit. That model does not look any different than the choices today. Perhaps most important, purchasing dental insurance is not part of the mandate. This keeps the fee-for-service model still viable. So what is different?

The Exchange, as outlined in future regulations, will set a minimum Essential Health Benefit Package (EHBP). Congress recognized the importance of oral health and included “pediatric oral services” as part of the Essential Health Benefit Package. All patients insured through small group or individual health insurance plans – inside or outside the Exchange – must be offered these benefits. The benefits must be provided through the medical plan with the wrap-around or embedded dental benefits, or a stand-alone dental plan. These “essentials” must be covered services on every plan beginning January 2014.

The next important question that you may have already been asking is, “What constitutes ‘pediatric oral services’?” This decision is still to be determined. As stated earlier, PPACA simply laid out provisions. The regulations, which will clearly define the provisions, are being discussed and ruled upon across several state and federal agencies. Among the questions surrounding “pediatric oral services,” one of the most critical is what age is considered “pediatric.” Will the regulations use the clinical age of 12, or the most common public program age of 19 — or the newly defined dependent age 26? Along with bringing clarity to the age question, upcoming regulations will also need to define what is and is not a covered service.

It is expected that all covered services under “pediatric oral services” would be covered by the plan at 100%, with no out-of-pocket costs to the insured. 

The previous paragraphs discussed the Exchange, but what exactly is an Insurance Exchange? Honestly, each state can create their own model of the Exchange, as long as it meets certain federal requirements. Exchanges can be State- or Federal-operated, or States can even establish a multi-state Exchange. The one over-arching premise is that the Federal Government will fund the Exchanges through 2015 (or the first two years), and then the Exchanges must be self-sustaining. The concept of “self-sustaining” will become a delicate balance of enrollment (mandate or not), community rating of premiums, and control of claim costs related to plan design.

Ms. Seema Verma, of SVC Inc., recently spoke to the IDA’s Council on Dental Benefits. Ms. Verma is currently contracted by the Indiana Governor’s Office to advise and guide the State through compliance with Federal Health Care Reform. Ms. Verma’s previous experience includes being the architect for the Healthy Indiana Plan (HIP). She advised the Council that Indiana’s Exchange could be designed in one of four ways. The first is simple: adopt the federal option. None of the plan characteristics, operational costs, or impact to the user, however, are defined. The other three options are: a Clearinghouse, Evaluator, or Active Purchaser models. 

A Clearinghouse model would function similar to the travel website Orbitz.com. It would provide all of the market options, give required information such as price, amenities and locations, but does not influence the marketplace in any meaningful way. Orbitz.com does not tell hotels what price they must charge, or what amenities they must have to be included in a search. An Exchange in this model would simply pool together any and all health insurance options (including dental and vision plans), and display essential information only. Plan prices, benefits and other key components in a Clearinghouse model would be set by the health insurance carriers (the capitalistic marketplace), not the state of Indiana.

The Evaluator model would provide a consumer experience like Amazon.com. Just as Amazon.com rates specific items, even identifies “top sellers” and impacts the marketplace for goods based upon volume and ease of transaction, an Indiana Exchange in this model would do the same. The Indiana Exchange would rate and recommend plans based upon a variety of factors, including customer service and claims payment. This model preserves the marketplace choices and builds upon competition among carriers, because of the rating and evaluation tools. 

The Active Purchaser model is already in use in Massachusetts. This model assigns the State as the price negotiator. The State becomes the bulk purchaser through a request-for-proposal (RFP) process. This could provide the lowest premiums, but would likely limit consumers’ choices. 

Another primary purpose of the Exchange is to provide a mechanism for insureds to apply their qualified tax subsidy to the insurance premiums. Tax subsidies are scheduled to be available between 133%-400% of the Federal Poverty Level (FPL). Below 133% is Medicaid eligibility, and above 400% there is zero tax subsidy. If a single person or family is eligible for a tax subsidy based upon income, the only way to receive the subsidy is to purchase a plan through the Exchange. For individuals or families above 400%, the options will be to purchase insurance either on or off the Exchange. The regulations have not yet clearly defined how similar or different plans on and off the Exchange may be. 

Another subsidy exists for small businesses in the form of a Health Care Tax Credit, effective Jan. 1, 2010. The credit is specific to small businesses providing health insurance for employees. Eligible small businesses must have less than the equivalent of 25 full-time employees, cover at least 50% of the health insurance premiums for their employees and pay average annual wages below $50,000. The actual dollar value of the credit varies, based upon the average annual wage and total full-time employees (or equivalent). The credit is worth up to 35% of the premiums from 2010-2013. Beginning Jan. 1, 2014, the credit increases to 50% of the employee’s health insurance premiums. Businesses can claim the credit from 2010-2013 and any two years after 2013. The maximum number of years a small business can claim the Health Care Tax Credit is six years. Consult with your accountant or tax advisor regarding this credit.

The IDA has provided a Group Health Insurance Program to member dentists and their dependents, employees, as well as students and faculty of the Indiana University School of Dentistry since 1976. PPACA will undoubtedly impact this member benefit. The degree to which the program will be affected is still being evaluated.

More than 4,000 lives are insured through the IDA’s health insurance program today. Hays Companies of Indiana has been retained by the IDA to provide consultation and compliance services relating to our group health plan. Whether you are insured in the group health plan today, or considering its benefits to your practice, you can trust the service and advice of the IDA’s Insurance Services team.

New regulations will continue to be defined by the Federal and State Governments between now and Jan. 1, 2014. The official website for Health Care Reform in Indiana is www.in.gov/aca.

If you have additional questions or concerns about how PPACA will affect your practice or patients, please contact IDA Insurance Services at 800.417.8424.

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