Friday, December 25, 2009

When the Health Care Changes Could Take Effect

WASHINGTON -- For consumers, the most confusing part of the health-care bill may be when -- and if -- they will see its benefits.

Under the Senate bill scheduled for a vote Thursday, a slate of provisions designed to be immediately visible to consumers would kick in six months after the bill takes effect.

But those changes wouldn't affect people who stay in employer health plans. For people who buy insurance on their own, the provisions would only have an effect when they buy a new policy. And one of the health bill's most widely debated features -- a mandate that most Americans obtain health insurance or pay a fine -- won't take effect until 2014.

Starting next year, insurance companies would no longer be able to place lifetime caps on coverage, and they would begin to lose their ability to set annual limits on benefits. Insurers would have to pay the entire cost of preventive services such as mammograms, colonoscopies, flu vaccines and assistance to people trying to quit smoking.

But these changes apply only to new insurance plans purchased after the bill takes effect. Employer plans, under which more than 160 million Americans are covered, will be grandfathered in and won't have to adopt such changes.

Insurance companies say they may not be able to put some of the new provisions in place by next year. America's Health Insurance Plans, the main industry lobby, said it could take up to a year to put new plans on the market because they need regulatory approval.

"The timeline to implement new benefits isn't feasible," said Robert Zirkelbach, a spokesman for the group. A Senate Democratic aide said the bill's crafters factored in the time needed to make the changes and considered them reasonable, since they apply largely to new policies.

Other provisions begin to kick in six months after President Barack Obama signs the bill, which could happen next month at the earliest. These include the one where Medicare beneficiaries would get a 50% discount on brand-name prescriptions that fall within a coverage gap known as the doughnut hole.

Some of the bill's provisions could cost consumers money, but most of those will kick in after 2010. By 2011, all consumers would face caps on flexible spending accounts -- which allow people to use tax-free money for health expenses like prescriptions and doctors visits -- of $2,500 a year. Currently, some employers impose their own limits. The bill would also put new restrictions on withdrawals from health savings accounts.

In 2013, people with an insurance plan worth more than $8,500 for an individual and $23,000 for a family will face a new tax of 40% on the amount of the benefit that exceeds those levels. Insurance firms are expected to reduce the benefits in their plans in order to keep them under that level and avoid the tax.

The biggest changes for consumers wouldn't come until 2014. That is when the government will start to hand out tax credits to low- and middle-income Americans to offset the cost of buying insurance and expand the Medicaid federal-state program to provide insurance to a greater swath of the poor.

The most powerful insurance-market changes don't take effect until 2014. Insurance companies insist on getting all the healthy people in the system before they take all adults regardless of pre-existing conditions. Starting that year, insurers would no longer be able to charge older people more than three times as much for insurance. That is also the year states would set up new insurance exchanges where people without employer plans and small businesses would shop for coverage. In addition to plans from private insurers, the exchanges would offer plans administered by the same entity that handles insurance for government workers.

In 2014, consumers will face a $95 fee if they don't carry insurance and are deemed able to afford it. That penalty increases to $495 a year in 2015 and $750 a year by 2016. The Senate bolstered the fine last week so that consumers could have to pay up to 2% of their income, up to the value of the cost of a basic insurance plan, if that level is higher than the $750 fine.

There's a chance that some of the main provisions could end up taking effect a year earlier, in 2013, because that's when they start in the health bill passed by the House. But the Senate bill is expected to form the backbone of any final legislation, and starting them earlier could end up increasing the cost of the bill, something lawmakers want to avoid.

Write to Janet Adamy at
Here is an article from the NY Times, "Health Care Changes Wouldn’t Have Big Effect for Many":

The other proposed changes for employer-provided coverage seem aimed mainly at workers whose benefits are either very generous or exceedingly skimpy.

On the generous end, about a fifth of employers now offer health plans that could be affected by a new 40 percent excise tax in the Senate bill on so-called Cadillac policies, according to an estimate by Mercer, a benefits consulting firm. That tax, to be imposed on annual premiums that exceeded $23,000 for family coverage, would go into effect in 2013. For example, if an insurer, or a self-insured employer, offers a plan costing $25,000, it must pay a 40 percent tax on the $2,000 that is above the threshold, or $800.

If the excise tax survives the House-Senate negotiations, it is hard to predict how employers will respond. But almost two-thirds of the employers Mercer recently surveyed said they were likely to reduce employee benefits rather than pay the tax.

“They’re going to work hard to find a way to keep the cost of their plans below the threshold,” said Beth Umland, Mercer’s director of health and benefits research.

She predicts that many of those companies will rely on what she described as “the tried-and-true method” — passing along more of the costs to employees, in the form of higher deductibles and co-payments, in order to reduce overall premiums.

The public policy goal of the tax, in theory, is to have everyone spend less on medical care, even if it means using it less.

“We know people will use less care under such plans,” said Paul Ginsburg, president of the Center for Studying Health System Change, a nonpartisan group.

What is not so clear, Mr. Ginsburg said, is whether people will make — or be able to make — rational choices between treatments that are not particularly effective and treatments that may help them from becoming sicker later.

Congress also seems intent on establishing some minimum insurance standards so people with coverage could not end up with large piles of unpaid medical bills anyway. Both the House and Senate bills contain measures meant to eliminate lifetime maximum limits on coverage, for example.

But that might end up affecting relatively few people. Many plans limit how much they will pay out over a lifetime, but the ceilings are generally so high that the vast majority of people never hit them, according to a new study that used existing coverage for workers in California to compare the House and Senate proposals.

Still unclear is whether any of the new standards — the lifetime caps, the out-of-pocket maximums, the minimum coverage standards — would apply to employer-based policies.

Because most big companies already offer plans that would meet the minimum standards being set, their workers would probably be unaffected by the new rules in any case.

But it is a different story for small businesses. Much of the legislation is aimed at making it easier for them to provide affordable coverage by trying to make changes to the insurance market.

People working for small businesses — an estimated 40 percent of the private labor force — could see their coverage affected. And if their employer decided to use one of the new insurance exchanges, workers might have a much broader choice of plans than they do now.

The premiums a small-business employee are charged could also change, especially if that company’s work force is particularly young and healthy. Those people could wind up paying more, Mr. Ginsburg said, because the legislation tries to spread the risk of covering employees with expensive medical conditions by setting new rules over how insurers can determine premiums.

The real unknown, of course, is whether any final legislation will accelerate the rise in premiums or slow it. At least one impartial analysis, by the nonpartisan Congressional Budget Office, concluded that the legislation was not going to have much of an effect on the cost of premiums either way.