Summary
This week, we're getting an introduction to the direction that the Democrats want to take the health care reform discussion. Consistent with the mandate viewpoint, the House and Senate sponsors seem to be taking an aggressive stance. While the plans are very complex (and assuredly difficult to administer, especially via the tax code), they contain some interesting details, which, if adopted, will have significant impact on health plans and shape the marketplace for the future.
Analysis
The primary proposal under consideration contains a universal coverage mandate. Senate Democrats have developed a proposal similar to that of their counterparts in the House, which would require everyone in the U.S. to carry health insurance starting in 2013. Interestingly, the plan provides for an explicit exception for illegal immigrants and people with religious objections. Families making up to four times the poverty level ($88,200 for a family of four) would be eligible for tax credits to help them afford coverage. A penalty for not carrying insurance would be imposed via the tax code. The penalty could be up to 75 percent of the premium for the lowest-cost health plan in the area where the person lives.
The federal government would set minimum benefit standards, including physician services, hospital care and prescription medications. All health plans would have to offer four levels of coverage, ranging from basic coverage to the most comprehensive set of benefits and coverage.
Most companies would be required to offer insurance to fulltime employees, or else pay a special tax. The plan proposes tax credits to small businesses with up to 25 employees to lessen the financial burden on employers. However, the plan also calls for an employee "out" privilege, which will allow employees to withdraw from the employer-sponsored plan and seek individual coverage, with the employer still paying a share of the premium.
What does this mean for health plans?
- Probable expansion of the State Children's Health Insurance Program (SCHIP)
for coverage of low income families with children. - Increased administration costs and complexity with new mandated benefit designs, the creation of a national insurance exchange and new regulation of commercial plan marketing.
- Possible "trickle-down" mandates for hospital and physician reimbursement rates putting negative pressure on margins in managed Medicaid.
- Actuarial challenges with higher member turnover, the potential for adverse selection in employer risk pools and the creation of the insurance exchange.
