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The US Healthcare Reform Landscape
An Objective Review of the Affordable Care Act and What Might Replace It
March 2017
Phi...
© iPower Consulting Inc. All rights Reserved | www.ipowerconsult.com Page 1PhilKelly
Understanding the US Healthcare Refor...
© iPower Consulting Inc. All rights Reserved | www.ipowerconsult.com Page 2PhilKelly
Diagram 2:
US Healthcare Expenditures...
When I told a colleague my
premiums just went up 40%,
he said; “Is that all?
You’re lucky.”
Unfortunately, ACA has not man...
Obamacare provided
coverage for 20 million more
Americans, but at significant
cost to the public
Unfortunately claim costs...
Understanding the US Healthcare Reform Landscape
March 2017
What Might an ACA Replacement Look Like?
It’s difficult to pre...
Understanding the US Healthcare Reform Landscape
March 2017
4. Minimum Benefits & Premiums
A better way repeals the 10 min...
Understanding the US Healthcare Reform Landscape
March 2017
© iPower Consulting Inc. All rights Reserved | www.ipowerconsu...
Understanding the US Healthcare Reform Landscape
March 2017
© iPower Consulting Inc. All rights Reserved | www.ipowerconsu...
Understanding the US Healthcare Reform Landscape
March 2017
© iPower Consulting Inc. All rights Reserved | www.ipowerconsu...
© iPower Consulting Inc. All rights Reserved | www.ipowerconsult.com Page 10PhilKelly
• Tax penalty for not having minimum...
© iPower Consulting Inc. All rights Reserved | www.ipowerconsult.com Page 11PhilKelly
• ACA taxes repealed, effective Janu...
Children’sHealth
InsurancePlan
(CHIP)
© iPower Consulting Inc. All rights Reserved | www.ipowerconsult.com Page 12PhilKell...
© iPower Consulting Inc. All rights Reserved | www.ipowerconsult.com Page 13PhilKelly
• Tax penalty for large employers th...
About The Author
Phil Kelly is the founder and principal consultant of iPower Consulting. He helps healthcare organization...
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US Healthcare Reform Landscape - Addendum to June 2018 Presentation to the Chicago Technology For Value-Based Healthcare

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This is an addendum to the June 2018 presentation (to the Chicago Technology For Value-Based Healthcare Meetup https://www.meetup.com/Chicago-Technology-For-Value-Based-Healthcare-Meetup/) containing interesting info. about what may replace the Affordable Care Act

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US Healthcare Reform Landscape - Addendum to June 2018 Presentation to the Chicago Technology For Value-Based Healthcare

  1. 1. The US Healthcare Reform Landscape An Objective Review of the Affordable Care Act and What Might Replace It March 2017 PhilKelly www.ipowerconsult.com
  2. 2. © iPower Consulting Inc. All rights Reserved | www.ipowerconsult.com Page 1PhilKelly Understanding the US Healthcare Reform Landscape March 2017 Although many in the country may be fatigued by politics after this past election cycle, there’s a whole lot more coming with Healthcare Reform. This report isn’t a political analysis of reform, but rather an objective analysis of the Affordable Care Act and what might replace it. Healthcare is a very complex and personal issue. Everyone uses Healthcare and we all pay for the $3.2 trillion system that delivers care in this country. Understanding this complex topic is critical to forming an opinion about how it should or shouldn’t be changed by our government. That is the goal of this report. How is the Affordable Care Act (Obamacare) Working? In March of 2010 the Affordable Care Act (ACA) was enacted. The legislation was sweeping in its reforms and primarily focused on health insurance reform. Although incredibly complex there were five major elements to legislation. 1. Individual Mandate All citizens & legal residents are required to have health insurance to avoid a tax penalty. This element was legally challenged in June of 2012 and was upheld by the Supreme Court. 2. Minimum Essential Health Benefits ACA established 10 essential health benefits that must be included in both individual and small group health insurance policies. ACA also established 4 standard cost sharing models; Bronze, Silver, Gold, and Platinum. Pre-existing condition exclusions and lifetime or annual dollar limits were also prohibited. 3. New Insurance Market Regulations Required the guaranteed issue of all non-group health plans during open enrollment periods. Premiums could only vary based on 4 factors; age, geography, family composition, and tobacco use. State based insurance exchanges were established that allowed individuals and small groups to shop for and purchase coverage. 4. Medicaid Expansion ACA expanded Medicaid eligibility from 61% to 138% of the federal poverty level (FPL). Medicaid must also meet the minimum essential health benefits defined by ACA for newly eligible adults. It also increased the Medicaid drug rebate percentage. 5. Tax Increases To cover the expansion of eligibility and minimum benefits, ACA introduced a number of new healthcare related taxes. These taxes represent between $20 and $30 Billion in 2017 alone and include; increases to the Medicare payroll tax on wages from 1.45% to 2.35%, new escalating taxes on Healthcare Insurers that peak at $14B annually in 2018, new escalating taxes on pharmaceutical manufacturers that peak at $2.8B annually in 2017, a new excise tax of 2.3% on the sale of medical devices (delayed until 2018), and exclusion of over-the-counter drugs from HSA reimbursement. The US uninsured rate is at an all time low; but the public doesn’t know.
  3. 3. © iPower Consulting Inc. All rights Reserved | www.ipowerconsult.com Page 2PhilKelly Diagram 2: US Healthcare Expenditures 1995-2015 Diagram 1: US Uninsured Rate It’s been a little over 4 years now, so the natural question is; How is ACA doing? Is it working and if so, why do people want to repeal it? To answer these questions lets go back to the most basic premise of Obamacare, namely reducing the number of uninsured in the US. Clearly ACA has accomplished its primary goal. The number of individuals in the US without health insurance is at an all-time low of 10%. The Affordable Care Act has covered about 20 million previously uninsured Americans. An accomplishment that has gone largely without notice by the general public. Beyond politics, the most likely reasons for this has to do with affordability, which doesn't tell the same positive story. Understanding the US Healthcare Reform Landscape March 2017 ACA has reversed a 12-year slowing in the growth rate of US healthcare costs
  4. 4. When I told a colleague my premiums just went up 40%, he said; “Is that all? You’re lucky.” Unfortunately, ACA has not managed to contain Healthcare or health insurance related costs. It has in fact had the opposite effect by reversing a 12-year slowing in the growth rates for Healthcare costs. To be fair Healthcare expenditures are still growing at a rate well above inflation, but the growth in spending has returned to 2007-2008 levels under ACA. Americans feel this in very real ways. Let me give you a real-life example. I was having coffee with a colleague when the topic of health insurance premiums came up. Thinking I’d get a reaction, I told him my premiums went up 40% just this past year alone. His response; “Oh, is that all. You’re lucky.” For many people insurance premiums are now competing with house and car payments as their largest single household expenditure. Even for people with employer sponsored plans. Deductibles have also risen significantly and have moved into the realm of a significant financial event for families who have a major medical issue. Insurance carriers have also had a mixed experience with ACA. Nearly all of them had to make significant technology investments to comply with the new law. They also benefited from the additional 20 million people who were required by law to buy insurance, but that came at significant cost. There is a little-known provision in ACA called the risk-corridor program. This provision is virtually unknown by the public, but it’s had a major impact in the industry. The risk-corridor program was established to help offset insurer losses in the first three years of the insurance exchanges. The program, which expired at the end of 2016, was designed to help insurers deliver more affordable premiums given the uncertainty of who would enroll in their plans. It was designed to require profitable insurers to pay funds into the program, while plans with higher medical claims would receive money. © iPower Consulting Inc. All rights Reserved | www.ipowerconsult.com Page 3PhilKelly Understanding the US Healthcare Reform Landscape March 2017 Diagram 3: Premium and Deductible Trends
  5. 5. Obamacare provided coverage for 20 million more Americans, but at significant cost to the public Unfortunately claim costs from the insurance exchanges significantly exceeded expectations and the program found itself massively underfunded. That means the government is now on the hook for more than $8 billion in payments to cover insurer claims from the health insurance exchanges. The government hasn’t paid up. Several insurers have sued the government and won. However, it’s still unlikely the government will ever pay and these loses are resulting in significant write-offs for insurers. The risk-corridor program has been one of the major reasons insurers are leaving the individual exchanges. In case you’re thinking, who cares? This is the insurance companies’ problem. Think again. You and I get to foot the bill for this in the form of higher premiums. In essence, this is another tax. This issue has also had the unintended consequence of reducing people‘s access to coverage. The public knows them as co-ops. They’re officially called consumer operated and oriented plans in ACA. They were designed to provide a non-profit option for Healthcare coverage. A year ago, there were more than 20 co-ops up and running with about 1 million Americans insured through them. Today only seven co-ops are expected to remain in 2017. Co-op’s now cover only 350,000 members. The co-ops were simply too small to absorb the impact of the government’s inability to make it’s risk-corridor payments. Setting aside the ideological and political motivations behind the ACA repeal movement, it does seem realistic to expect that changes need to be made. But as the saying goes… be careful what you wish for. © iPower Consulting Inc. All rights Reserved | www.ipowerconsult.com Page 4PhilKelly Understanding the US Healthcare Reform Landscape March 2017 Diagram 4: Ten largest CMS risk corridor payments for 2014 and 2015
  6. 6. Understanding the US Healthcare Reform Landscape March 2017 What Might an ACA Replacement Look Like? It’s difficult to predict exactly what an ACA replacement will look like given the political volatility in the country right now. Republicans introduced a bill this month called the American Healthcare Act. In addition, the Speaker of the House published a proposal late last year called A Better Way: Our Vision for A Confident America. This proposal is not a single piece of legislation, but rather a legislative agenda targeted at Healthcare reform. You might expect that these two documents would take a consistent approach since they were both introduced by Republicans. That was not the case however. It’s clear the Republican party is not of the same mind on the topic of Healthcare reform. While the American Healthcare Act (AHA) doesn’t implement everything described in the Better Way vision. It seems that AHA is the first act and additional legislation that builds on or changes AHA is likely. For that reason, the best opportunity for understanding the longer term given a Republican led Congress is to begin with the Better Way proposal. Overview of the Better Way Proposal A detailed side by side comparison of the Affordable Care Act, the American Healthcare Act, and the Better Way proposal can be found in the appendix of this report. For now, let’s talk about the 7 major components of the Better Way Proposal. 1. Repeal ACA While it seems likely this will happen, it’s unlikely that every component from ACA will go away. Even if the law gets repealed entirely, similar versions of ACA like components will take their place. Good examples of these include prohibitions on pre-existing conditions and extending dependent coverage to age 26. However, the individual mandate and the new taxes put in place by ACA are likely to be repealed. 2. Private Market Rules A Better Way maintains the employer sponsored model and the basic structures of the individual markets. However, the proposal loosens many of the rules at the federal level and gives individual states much more power to make decisions for their states. One significant change is permitting the sale of insurance across state lines. Today the state you live in dictates which insurer you’re allowed to buy from. This is a major change for the insurance industry. It’s believed this will spur more competition, innovation, and lower premiums. 3. Individual Protections The individual mandate that everyone buy health insurance and the ACA cost subsidies would be repealed. However, some protections currently in place with ACA are likely to remain. That includes prohibiting denial of coverage based on health status, portability protections for those that maintain continuous coverage, and lifetime benefit limits. The proposal also establishes a one-time open enrollment for the uninsured. Coverage will still be available after that period, but without the continuous coverage protections. (meaning at higher premiums) © iPower Consulting Inc. All rights Reserved | www.ipowerconsult.com Page 5PhilKelly The Better Way proposal isn’t legislation, but rather a Healthcare reform agenda
  7. 7. Understanding the US Healthcare Reform Landscape March 2017 4. Minimum Benefits & Premiums A better way repeals the 10 minimum health benefits and cost sharing models currently defined by ACA. Instead individual States will be able to define the minimum benefits for insurance sold in their states. Fair premium guidelines would dictate that there can’t be more than a 5X difference in premiums between the young and old. In addition, individuals, will be provided a refundable, flat, age-adjusted tax credit for the purchase of insurance in the individual market. 5. Rollback of Medicaid Expansion This includes eliminating the federal eligibility requirement that states provide Medicaid coverage up to 138% of the federal poverty level (FPL). States are free to maintain that level but beginning in 2019 federal Medicaid funding will be capped and allotted based on a per capital basis across four major categories; aged, blind and disabled, children, and adults. States would be allowed to require able-bodied adults on Medicaid to be employed, looking for a job, or in an education program. States would also be allowed to charge premiums to the most non-disabled adults, offer limited benefit packages, and impose waiting lists. 6. Medicare Reform ACA didn’t make significant changes to Medicare, but Medicare reform is a major component of the Better Way proposal. It increases the eligibility age from 65 to 67 to correspond with Social Security and combines part A & B with a single deductible that is based on a 20% cost sharing on all covered services. There would also be an annual limit on out of pocket expenses beginning in 2020. Over time Medicare would be converted to a premium support system where beneficiaries get payments to purchase private insurance or traditional fee-for-service Medicare (beginning in 2024.) Also beneficiaries & insurers will be allowed to design plans to meet their needs with Value Based Insurance Design. 7. Healthcare Delivery Reform The ACA established Independent Payment Advisory and Center for Medicare & Medicaid Innovation (CMMI) would be repealed. This was essentially where ACA stopped in terms of Healthcare Delivery reform. The Better Way agenda proposes passing a law called the 21st Century Cures Act. This act includes reforms to accelerate the delivery of new treatments, remove regulatory barriers to sharing health data, modernize clinical trials, and encourage re-purposing of drugs for rare diseases. In addition to the 21st Century act, a Better Way also proposes medical liability reform that includes caps on non-economic damages and pursues options such as loser-pays, proportional liability, and safe harbor provisions. All these elements seem designed to encourage innovation and lower costs in the Healthcare system. © iPower Consulting Inc. All rights Reserved | www.ipowerconsult.com Page 6PhilKelly
  8. 8. Understanding the US Healthcare Reform Landscape March 2017 © iPower Consulting Inc. All rights Reserved | www.ipowerconsult.com Page 7PhilKelly Overview of the American Healthcare Act By contrast the American Healthcare Act (AHA) appears to have some significant compromises when compared to the Better Way vision. Below are the 7 major components of the legislation. 1. Repeat ACA; Sort Of While the political rhetoric seems to be repeal and replace, AHA tells a slightly different story. AHA includes provisions to repeal major elements of ACA like the individual mandate and nearly all the taxes on employers, insurers, pharmaceutical, medical device manufacturers, and individuals. However, it keeps important elements like guarantee issue during open enrollment and the minimum benefits defined by ACA. 2. Private Market Rules AHA maintains the employer sponsored model and the basic structure of the individual markets defined by ACA. The state exchanges would continue and, unlike the Better Way proposal, AHA has no provision for selling insurance across state lines. For the most part, AHA leaves the employer and individual markets unchanged. 3. Individual Protections The individual mandate that everyone buy health insurance is repealed by AHA. It’s replaced with a tax penalty for not maintaining minimum essential coverage. A late enrollment penalty (30% of otherwise applicable premium) applies for individuals buying non-group coverage who have not maintained continuous coverage. ACA prohibitions of denial of coverage based on health status and lifetime/annual benefit limits remain in place with AHA. 4. Minimum Benefits & Premiums The 10 minimum health benefits defined in ACA remain in place with AHA. The primary change is prohibiting the requirement that abortion be covered. The approach to minimum health benefits is a significant departure from the Better Way proposal which included repealing the ACA minimum health benefits. 5. Rollback of Medicaid Expansion AHA does rollback the Medicaid expansion defined in ACA. AHA codifies that the Medicaid expansion is a state option and eliminates the requirement to extend coverage to adults above 133% FPL. It also eliminates the enhanced match for the Medicaid expansion as of January 1, 2020 and converts federal Medicaid funding to a per capita allotment and limit growth beginning in 2020. It also provides $10 billion over 5 years (CY2018 – CY 2022) to non-expansion states for safety-net funding. The proposed Medicaid rollback is in-line with the Better Way vision, but stops short of requiring able-bodied adults to be employed, charging premiums to the most non-disabled adults, or allowing wait lists. The American Healthcare Act appears to be a ACA course correction rather than repeal and replace of ACA
  9. 9. Understanding the US Healthcare Reform Landscape March 2017 © iPower Consulting Inc. All rights Reserved | www.ipowerconsult.com Page 8PhilKelly 6. Medicare Reform Like ACA, the American Healthcare Act does not include major reform changes to Medicare. It does include increases to Medicare premiums for Parts B & D, but maintains the Independent Advisory Board and CMMI structures from ACA. This is a significant departure from the Better Way vision. However, it seems republicans have simply punted on Medicare reform for now. Additional legislation that moves Medicare towards a premium support system may still be coming. 7. Financing AHA repeals all the major taxes defined by ACA. That includes tax penalties associated with the individual and small employer mandate, the Cadillac tax on high-cost employer-sponsored group health plans (suspended for tax years 2020 through 2024), the increase in Medicare payroll tax (HI) rate on wages for high-wage individuals, a 3.8% tax on unearned income for high-income taxpayers, the tax on health insurers, the tax on pharmaceutical manufacturers, a new excise tax on the sale of medical devices, and provisions excluding costs for over-the-counter drugs from being reimbursed through a HSA. However, the act establishes a State Innovation Grants and Stability Program with federal funding of $100 billion over 9 years. States may use funds to provide financial help to high-risk individuals, promote access to preventive services, provide cost sharing subsidies, and for other healthcare related purposes. Of course, the American Healthcare Act is far from a reality. It’s making it’s way through committee reviews and there will be changes before it comes to a vote. Our political process is messy and full of compromise. And once laws are enacted, there’s no guarantee they’ll be administered properly or have the intended effect in the real world. As we watch Healthcare Reform unfold there will be a lot of noise. Some real and some not. I’d encourage you to pay attention to how any proposed legislation addresses these 4 major issues. 1. Guaranteed Issue/Affordability The individual mandate and guaranteed issue components of reform drive cost, which in turn drives taxes. We’re getting a glimpse of those costs now with ACA. They also impact access to health insurance and health care. While maintaining the guaranteed issue model from ACA, the impact of AHA on affordability is unclear. There doesn’t appear to be significant changes proposed in AHA to address the current issues with affordability. 2. Healthcare Reform Taxes The $20B-$30B in new taxes enacted by ACA represent a significant percentage of our $3.2 Trillion Healthcare system. Eliminating or reducing these taxes could improve affordability. But AHA has allotted $100 billion over 9 years to establish a Grants & Stability program for the states. The net up or down of costs between ACA and AHA is still unclear. There are 4 major issues to watch as healthcare reform legislation unfolds
  10. 10. Understanding the US Healthcare Reform Landscape March 2017 © iPower Consulting Inc. All rights Reserved | www.ipowerconsult.com Page 9PhilKelly 3. Medicare & Medicaid Reform The proposed changes in the Better Way vision and AHA are significant and will impact the most vulnerable populations in our country. The rollback of the Medicaid expansion will have a significant impact on services in the states that chose to pursue the expansion. Additionally, it seems likely that after the political dust settles from the American Healthcare Act, there will be additional legislation proposed to reform Medicare. 4. Healthcare Delivery Reform This is an area where, in my opinion ACA, fell short. AHA has fallen short as well. The idea that reforming insurance will somehow make Healthcare more effective and affordable is incredibly naive. The more we work to improve the quality, efficacy, and cost of care, the better off we’ll all be. While the Better Way proposal is broader than ACA, it’s not clear it will be enacted. If legislative conversations stops at insurance reform, we’ll just be doing ACA part II. The US Healthcare Reform landscape is a complex one, with the underlying political landscape being even more murky. Holding our leaders accountable is crucial to making sure we end up with a healthcare system that takes care of people, we can practically afford, and is something the country will accept.
  11. 11. © iPower Consulting Inc. All rights Reserved | www.ipowerconsult.com Page 10PhilKelly • Tax penalty for not having minimum essential coverage is eliminated effective January 1, 2016 • Late enrollment penalty (30% of otherwise applicable premium) applies for individuals buying non-group coverage who have not maintained continuous coverage. • Require guaranteed issue of all non-group health plans during annual open enrollment. • Retain private market rules; prohibition on discriminatory premiums and pre-existing condition exclusions, requirement to extend dependent coverage to age 26, prohibition on lifetime and annual dollar limits • For health plans first sold on or after January 1, 2014, ACA rating rules continue, except age rating of 5:1 is permitted unless states adopt a different ratio.  • ACA requirement to cover 10 essential health benefit categories is not changed • Requirement for individual and group plans to cover preventive benefits with no cost sharing is not changed • Requirement for all plans to apply in-network level of cost sharing for out-of-network emergency services is not changed • Prohibit abortion coverage from being required • State exchanges continue, though premium tax credits can be used for eligible non-group policies regardless of whether they are sold through an exchange • No provision for selling insurance across state lines • Establish State Innovation Grants and Stability Program  with federal funding of $100 billion over 9 years. States may use funds to provide financial help to high-risk individuals, promote access to preventive services, provide cost sharing subsidies, and for other purposes American Healthcare Act (3-6-17) • Individual & Employer Coverage Mandate - All citizens & legal residents required to have health insurance to avoid tax penalty • Individual insurance sold via state based health insurance exchanges • Expansion of Medicaid eligibility from 61% to 138% of Federal Poverty Level (FPL) • Guaranteed issue for all non-group health plans during open enrollment • Required to provide dependent coverage for dependent children up to age 26 • Requires all plans to offer independent external review for disputed claims Requires external review for disputed claims • Requires 10 minimum benefits that must be included by individual & small group insurance policies • Plans must offer 4 cost sharing levels; Bronze, Silver, Gold, and Platinum • No pre-existing condition exclusions • No lifetime or annual dollar limits on coverage for individual & group coverage • Prohibits cost sharing for preventative healthcare for individual & group coverage • State based insurance plans & exchanges • Insurers can sell policies in other states where states have compacts between each other Affordable Care Act (Obamacare) • Repeal the Individual & Employer Coverage Mandate • Maintains employer sponsored model • Establishes Association Health Plans and Individual Health Pools where employers and individuals can purchase coverage • Prohibits denials of coverage based on health status • Establishes a one-time open enrollment for uninsured individuals; coverage will be available at other times, but without continuous coverage protections and at higher premiums • Requires insurers to offer portability protections for people who maintain continuous coverage • Requires dependent coverage for dependent children up to age 26 • Repeal ACA minimum benefits and preventative health benefits • Implements Fair Premiums guidelines; the cost of an older individual’s plan can't be more than 5 times that of a younger person • Permits state flexibility to mandate benefits, including policies by insurers selling across state lines • Prohibits excluding pre-existing conditions for those with continuous coverage • Retains ACA prohibition on lifetime limits; annual limits not yet addressed • Permit consumers to purchase health insurance from insurers licensed in other states • States establishes benefit minimums, including for policies sold by out of state insurers A Better Way Proposal (House Speaker Paul Ryan) CoverageAccessBenefitsDesignStateRoleConsumerProtections Healthcare Reform Side-by-Side Comparison
  12. 12. © iPower Consulting Inc. All rights Reserved | www.ipowerconsult.com Page 11PhilKelly • ACA taxes repealed, effective January 1, 2018; • Tax penalties associated with individual and large employer mandate, reduced to zero effective on January 1, 2016 • Cadillac tax on high-cost employer-sponsored group health plans is suspended for tax years 2020 through 2024 • Increase in Medicare payroll tax (HI) rate on wages for high-wage individuals; also 3.8% tax on unearned income for high-income taxpayers • Tax on health insurers • Tax on pharmaceutical manufacturers • Excise tax on sale of medical devices • Provision excluding costs for over-the-counter drugs from being reimbursed through a HSA • Federal Medicaid funding capped, effective FY 2020; enhanced match for Medicaid expansion population eliminated beginning January 1, 2020; and Medicaid DSH cuts repealed, effective FY 2020 • ACA cost sharing subsidies are repealed effective January 1, 2020. • Modify ACA premium tax credits for 2018-2019 to increase amount for younger adults and reduce for older adults • In 2020, replace ACA income-based tax credits with flat tax credits adjusted for age.  • Tax credit reduced to zero at income of $95,000 for single individuals up to age 29, $115,000 for individuals age 60 and older • For joint filers, credits begin to phase out at income of $150,000; tax credit reduced to zero at income of $190,000 for couples up to age 29; tax credit reduced to zero at income $230,000 for couples age 60 or older; tax credit reduced to zero at income of $290,000 for couples • Increase HSA annual tax free contribution limit to equal the limit on out-of-pocket cost sharing under qualified high deductible health plans American Healthcare Act (3-6-17) • Tax Penalties from individual and employer coverage mandate • Applies a 'Cadillac tax' on high-cost plans starting in 2020; $10.5K for individuals/$27.5K for families • Increased Medicare payroll tax on wages from 1.45% to 2.35% on earning over $200K/$250K • New tax on health insurers; $8B in 2014, $11.3B in 2015-2016, $13.9B in 2017, $14.3B in 2018 • New tax on pharmaceutical manufacturers; $2.8B in 2012-13, $3B in 2014-16, $4B in 2017-18, $2.8B in 2019 and forward • New excise tax of 2.3% on the sale of medical devices (delayed until 2018) • Exclude over-the-counter drugs from HSA reimbursement • Increase tax on HSA distribution of HSA distributions for non-qualified medical expenses from 10% to 20% • Requires insurers to set prices based on a single risk pool; rate variations only for age, geography, family/single, and tobacco use • Premium tax credits to individuals with income between 100-400% of FPL • Cost sharing subsidies to individuals with income between 100-250% of FPL • Establishes a transitional reinsurance program to help stabilize premiums for coverage in the individual market from 2014 through 2016 • All health plans must make contributions to support reinsurance payments to cover high-cost individuals in the individual market Affordable Care Act (Obamacare) • Repeal ACA taxes including mandate related taxes, Cadillac taxes, and additional taxes on health insurers, pharmaceutical manufacturing, and excise taxes ($20B+ in 2017) • In 2019 cap the total federal Medicaid funding; move to a per capital allotment • For states that expanded Medicare, phase down federal funding beginning in 2019 • Permit states to receive block grant funding to allow transition of Medicaid individuals to other coverage • Repeal FY 2018-2020 Medicaid DSH cuts and Medicare DSH cuts • Create a national pool of uncompensated care funds • Allows individuals to purchase through individual health pools (IHPs) that are 'unbound by state specific mandates' • Provide a refundable, flat, age-adjusted tax credit for purchase of health insurance • Requires a single risk pool with; rate variations by age; other factors still undefined • Tax credits can be applied to any health insurance policy sold by a licensed insurer; administered via portals, including private exchanges • Repeals ACA cost sharing subsidies, risk corridors, reinsurance, and risk adjustment payments to insurers • Encourage use of Health Savings Accounts (HSA's); 1 time $1,000 tax credit, raise contribution limits to $5,500 • Allows tax free transfer of HSAs at death. Expands definition of qualified medical expenses A Better Way Proposal (House Speaker Paul Ryan) FinancingIndividualInsurance Healthcare Reform Side-by-Side Comparison
  13. 13. Children’sHealth InsurancePlan (CHIP) © iPower Consulting Inc. All rights Reserved | www.ipowerconsult.com Page 12PhilKelly • Repeals the HI payroll tax on high earners, beginning after December 31, 2017 • ACA benefit enhancements (no-cost preventive benefits; phased-in coverage in the Part D coverage gap) are not changed • Increase Medicare premiums (Parts B and D) for higher income beneficiaries • Authorize an Independent Payment Advisory Board to recommend ways to reduce Medicare spending if the rate of growth in Medicare spending exceeds a target growth rate • Establish various quality, payment and delivery system changes, including a new Center for Medicare and Medicaid Innovation to test, evaluate, and expand methods to control costs and promote quality of care • Codify that the Medicaid expansion is a state option upon enactment; eliminate option to extend coverage to adults above 133% FPL effective January 1, 2020; eliminate the enhanced match for the Medicaid expansion as of January 1, 2020 • Convert federal Medicaid funding to a per capita allotment and limit growth beginning in 2020 • Per enrollee caps for five enrollment groups—elderly, blind and disabled, children, expansion adults, and other adults—are based on 2016 expenditures  • Provide $10 billion over 5 years (CY2018 – CY 2022) to non-expansion states for safety-net funding  • Prohibit federal Medicaid funding for Planned Parenthood clinics • States may use Innovation and Stability Program grants to fund high-risk pools, and for other purposes • States may use Innovation and Stability Program grants to fund high-risk pools, and for other purposes American Healthcare Act (3-6-17) • Close Medicare Part D doughnut hole by 2020 • Eliminates cost-sharing for preventative services. Prohibits Medicare Advantage from imposing higher cost sharing requirements • Increases Medicare premiums (Part B & D) for higher income beneficiaries • Expanded Medicaid eligibility to from 61% to 138% of the federal poverty level • Must meet minimum ACA benefits standards for newly eligible adults • Increased Medicaid drug rebate percentage. Provides states with new options for offering home and community-based services • Medicaid expansion; 100% federal funding with sliding reduction to 90% for 2020 and beyond • Increased the E-FMAP (federal funding) rate by 23% up to 100% • Requires states to maintain eligibility level for children through 2019 • Created a temporary national high-risk pool for individuals with pre-existing conditions (2010-2013) Affordable Care Act (Obamacare) • Convert Medicare into a premium support system where beneficiaries receive contribution payments to purchase private insurance or traditional fee-for-service Medicare beginning in 2024 • Increase the age of Medicare eligibility from 65 to 67 to correspond with Social Security • Allow flexibility for insurers and beneficiaries to design their plans; Value-Based Insurance Design • Combine parts A & B with a single deductible, 20% cost sharing on all covered services • Annual limit on out of pocket expenses beginning in FY 2020 • Expand eligibility of HSAs to enrollees of Medicare (Part A only) • Repeal the Medicaid expansion defined in ACA • Allow states that expanded Medicaid to reduce income eligibility levels below 138% FPL • Allow states to require able-bodied adults on Medicaid to be employed, looking for a job, or in and education or community program • Allow states to charge premiums to the most non-disabled adults • Allow states to offer limited benefit packages, impose waiting lists, and enrollment caps for optional populations • Continue CHIP at its original match rate • Adopt changes to prevent crowd-out of private coverage • Target resources on children in working families • Encourage states to establish high-risk pools for individual who are priced out of coverage • Max premiums would be capped Wait lists would be prohibited • Provides at least $25B in federal funding for high risk pools A Better Way Proposal (House Speaker Paul Ryan) Medicare(Over65)MedicaidHighRiskPools Healthcare Reform Side-by-Side Comparison
  14. 14. © iPower Consulting Inc. All rights Reserved | www.ipowerconsult.com Page 13PhilKelly • Tax penalty for large employers that do not provide health benefits is reduced to zero, retroactive to January 1, 2016 • Wellness incentives permitted under the ACA are not changed • Repeal tax credits for low-wage small employers, effective January 1, 2020 • Authorize an Independent Payment Advisory Board to recommend ways to reduce Medicare spending if the rate of growth in Medicare spending exceeds a target growth rate • Establish various quality, payment and delivery system changes, including a new Center for Medicare and Medicaid Innovation to test, evaluate, and expand methods to control costs and promote quality of care • ACA reductions to Medicare provider payments and Medicare Advantage payments are not changed • Not Applicable • Not Addressed • Wellness incentives permitted under the ACA are not changed American Healthcare Act (3-6-17) Healthcare Reform Side-by-Side Comparison • Imposes a tax penalty on employers with 50 or more employees who don't offer coverage • Applies a 'Cadillac tax' on high-cost plans starting in 2020; $10.5K for individuals/$27.5K for families • Requires employers over 200 employees to auto enroll employees in coverage • Provides tax credits for 2 years for low-wage small employers (up to 25 employees) • Established the Independent Payment Advisory • Sets minimum medical loss ratio standards for all health plans • Medicare; reduce payment updates for hospitals & providers • Established the Center for Medicare & Medicaid Innovation (CMMI) to control costs & promote quality of care • Medicaid; create demonstration projects to test home health models and new payment approaches • Not addressed • Permits employers to adopt wellness incentives up to 30% of premiums (50% for tobacco cessation) Affordable Care Act (Obamacare) • Permit small employers to buy through associate health plans (AHPs) • AHPs prohibited from charging higher rates for sicker people & state benefit laws would be preempted • No requirement for large employers to meet minimum value & affordability standards • Cap annual tax exclusion for employer-sponsored benefits to encourage more cost-effective benefit design • Exempt employee pre-tax contributions to HSAs from counting toward annual cap • Repeal the Independent Payment Advisory Board (IPAB) • Repeal the moratorium on physician-owned hospitals • Require GAO study of advantages-disadvantages of repealing McCarran-Ferguson anti-trust exemptions for health plans • Repeal CMMI beginning in 2020 • Pass the 21st Century Cures Act which includes reforms to accelerate the discovery, development, and delivery of new treatments and cures • Remove regulatory barriers to sharing and analyzing health data • Incorporate patient perspective into the drug development review process • Measuring success and identifying disease through personalized medicine, modernizing clinical trials, and removing regulatory uncertainty for new technology like medical apps • Provide new incentives for repurposing drugs for patients with rare diseases • Implement medical liability reform that includes caps on non-economic damages • Pursue options such as loser-pays, proportional liability, collateral source rule, safe harbor provisions, health courts, and medical review panels to reduce the level of frivolous lawsuits • Permit employers to offer wellness programs that are tied to financial rewards of surcharge up to limits of current law A Better Way Proposal (House Speaker Paul Ryan) Group HealthInsuranceCostManagementInnovation Health Improve- ment Medical Liability Reform
  15. 15. About The Author Phil Kelly is the founder and principal consultant of iPower Consulting. He helps healthcare organizations improve their ability to access and use data. With over 25 years’ experience, he has helped organizations be more data-driven, deliver technology solutions faster, and improve their collaboration. If you are a healthcare leader that has ideas about how you want to use data in your organization, but aren’t quite sure how to go about it, Phil may be able to help. You can learn more about Phil at www.ipowerconsult.com or contact him directly at 630.219.0047 or phil.kelly@ipowerconsult.com. If you want to dive deeper into any of these topics, below are some additional resources to help you get more informed on this important topic. 1. Peterson-Kaiser Health System Tracker This interactive tool provides up-to-date information on U.S. health spending by federal and local governments, private companies, and individuals. http://www.healthsystemtracker.org/interactive/health-spending-explorer 2. ACA Replacement Tool This interactive tools provides a detailed comparison of 5 different proposals in a side by side format. http://kff.org/interactive/proposals-to-replace-the-affordable-care-act/ 3. Future Directions for the ACA and Medicaid A recent poll on attitudes towards the Affordable Care Act (ACA). http://kff.org/health-reform/poll-finding/kaiser-health-tracking-poll-future-directions-for-the-aca-and-medicaid/http://kff.org/health-ref orm/poll-finding/kaiser-health-tracking-poll-future-directions-for-the-aca-and-medicaid/ 4. The state of the ACA's risk corridors A recent Modern Healthcare article on the current state of ACA’s risk-corridor program. http://www.modernhealthcare.com/article/20161205/NEWS/161129937 5. A Better Way Overview A white paper from the Speaker of the House & Republican’s that outlines the details of the Better Way Proposal. http://https://abetterway.speaker.gov/_assets/pdf/ABetterWay-HealthCare-PolicyPaper.pdf 6. Affordable Care Act Summary This summary describes key provisions of the Affordable Care Act (ACA) related to private health insurance, Medicaid, and Medicare. http://files.kff.org/attachment/Summary-of-the-Affordable-Care-Act 7. Empowering Patients First Overview A summary of the Empowering Patient’s First Act (H.R. 2300). This bill was sponsored by then senator Tom Price who is now the current HHS Secretary. http://files.kff.org/attachment/Proposals-to-Replace-the-Affordable-Care-Act-Rep-Tom-Price © iPower Consulting Inc. All rights Reserved | www.ipowerconsult.com Page 14PhilKelly

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