The IRS’s structure and funding will make it difficult to carry out its assigned obligations under health reform, according to IRS ombudsman, Nina E. Olson. In a recent report to Congress, Olson indicates that she has “no doubt the IRS is capable of administering social programs, including health care. However, Olson adds that the IRS itself “must recognize that the skills and training required to administer social benefit programs are very different from the skills and training that employees of an enforcement agency typically possess. While some enforcement measures are required to prevent inappropriate claims, the overriding objective of agencies that administer social benefit programs is to help as many eligible persons qualify for the benefits as possible.”
The IRS has been assigned a number of new tasks under health reform, such as verifying income for those applying for premium assistance credits and verifying that individuals are complying with the health insurance mandate.
In her report, Olson suggests that the IRS’s mission statement should be revised to explicitly acknowledge the agency’s dual role as part tax collector and part benefits administrator. “Such a revision would require the IRS to develop a strategic plan that gives sufficient attention to both roles and would underscore that the IRS requires sufficient funding to perform both functions effectively,” she says.
“If the IRS continues to ramp up enforcement while reducing taxpayer service programs, I would be concerned about its ability to administer the new health care credits and penalty taxes in a fair and compassionate way,” Olson concludes.
For more information. For a comprehensive analysis of the Patient Protection and Affordable Care Act, and additional information on health reform and other developments in employee benefits, just click here.
Wednesday, July 14, 2010
Monday, July 12, 2010
Survey reveals employers' reactions to various health care reform provisions
Now that health care reform legislation is law, how are employers responding to it? A key takeaway from a recent survey on this topic by the International Foundation of Employee Benefit Plans (IFEBP): Despite a slew of health care reform challenges, most (87%) employers remain confident that they will continue to offer health care benefits to their active employees because they are critical to employee recruitment, retention and remaining competitive.
According to Sally Natchek, Senior Director of Research at the IFEBP, “employers at this point are reacting to the first wave of requirements, knowing they need to make some initial immediate decisions. They are also looking at the next few years and how the timeline of regulations will impact their organizations.”
Extension of health care benefits to children up to age 26. Twenty percent of employers are taking immediate action to change eligibility requirements for employees' adult children up to age 26. The majority of employers however (67%), report that they will not extend coverage to dependents up to age 26 until required by law; about 5 percent of respondents' plans say they currently meet legal requirements and 9 percent are not sure.
A large majority of employers (75%) identify extending coverage to adult children until age 26 as the major reform requirement impacting plan costs.
Early retiree reinsurance program. The survey found that just over half (52%) of employers who currently offer medical benefits to retirees plan to take advantage of the one-time federal reinsurance program established by health care reform legislation. Many (35%) have not yet decided whether they will apply and just 13 percent have decided not to apply.
"Even before health care reform, employers offering benefits to retirees experienced increased financial strain in the form of an aging population and escalating health care costs," explained the IFEBP’s Natchek. "New requirements such as eliminating the federal income tax deduction for the subsidy that employers receive for maintaining drug coverage for Medicare-eligible retirees could increase the likelihood that employers will take a fresh look at their medical strategy for retirees."
Other key findings. Additional results from the survey are as follows:
According to Sally Natchek, Senior Director of Research at the IFEBP, “employers at this point are reacting to the first wave of requirements, knowing they need to make some initial immediate decisions. They are also looking at the next few years and how the timeline of regulations will impact their organizations.”
Extension of health care benefits to children up to age 26. Twenty percent of employers are taking immediate action to change eligibility requirements for employees' adult children up to age 26. The majority of employers however (67%), report that they will not extend coverage to dependents up to age 26 until required by law; about 5 percent of respondents' plans say they currently meet legal requirements and 9 percent are not sure.
A large majority of employers (75%) identify extending coverage to adult children until age 26 as the major reform requirement impacting plan costs.
Early retiree reinsurance program. The survey found that just over half (52%) of employers who currently offer medical benefits to retirees plan to take advantage of the one-time federal reinsurance program established by health care reform legislation. Many (35%) have not yet decided whether they will apply and just 13 percent have decided not to apply.
"Even before health care reform, employers offering benefits to retirees experienced increased financial strain in the form of an aging population and escalating health care costs," explained the IFEBP’s Natchek. "New requirements such as eliminating the federal income tax deduction for the subsidy that employers receive for maintaining drug coverage for Medicare-eligible retirees could increase the likelihood that employers will take a fresh look at their medical strategy for retirees."
Other key findings. Additional results from the survey are as follows:
- One in five employers (21%) is planning to add or increase emphasis on high-deductible health plans in the next 12 months. Close to 70% of these employers are likely to focus on account-based plans linked to health savings accounts.
- Close to half of all respondents (48%) are focusing on redesigning their health plans so that by 2018, their plans will avoid triggering the excise "Cadillac" tax for high-value plans.
- Sixty-six percent of employers agree that their organizations will take advantage of the new legal provision that will offer increased levels of financial incentives available to employees who participate in employer-provided wellness programs; 9% disagree, and 25% are not sure.
- Employers are planning to communicate and educate their employees on the new legislation through e-mails to participants (51%), special written communication pieces (49%) and their organization's Web site (42%). Only one-third of employers (37%) have already communicated with employees; almost half (42%) are planning communication efforts for annual enrollment.
Friday, July 9, 2010
Report Gauges Impact Of Health Reform On Small Group Plans
The impact of the Patient Protection and Affordable Care Act on small group and individually purchased health insurance will depend upon many important factors, according to a recent paper issued by the Urban Institute.
According to the paper’s author, Linda J. Blumberg, some of the factors are the characteristics of the health insurance markets prior to reform, whether plans are grandfathered or are newly created under reform, the health status and claims experience of the covered group or individual, individual coverage decisions, policy decisions that will be made at the state level, and success of cost containment efforts.
Changes to Be Implemented in 2010
While the most significant changes to private health insurance markets under the Affordable Care Act will not occur until January 1, 2014, there are a number of provisions that take effect in 2010. These changes affect both group and non-group plans and include prohibitions on lifetime benefit limits and unreasonable annual limits, extension of dependent coverage to adult children up to age 26, prohibitions on rescissions, elimination of pre-existing condition exclusions for children, and elimination of waiting periods of more than 90 days.
The impact of these provisions on the premiums of current policy holders is a function of the type of coverage currently held, according to Ms. Blumberg.
Those policies that did not include lifetime or annual limits prior to reform should see no premium impact of these provisions. For plans with lifetime maximums of $2 million or higher, removing the limits entirely will tend to increase premiums by less than 1% (with the small group impact being smaller than non-group). And according to America
Federal agencies estimate that the provisions related to annual and lifetime limits will increase group premiums by about 1/2 of 1 percent and will increase non-group premiums by less than 1%. While premiums could increase modestly in such a way, out-of-pocket costs for those using care will fall as a result, potentially leading to very significant savings for those with serious health care needs, according to Ms. Blumberg.
The prohibitions against pre-existing condition exclusion periods for children, including denials of coverage due to such conditions, should have little to no impact in the small group market, which already is required to guarantee issue policies. The federal agencies estimate the effect to be negligible in the group market. Again, the provision will decrease out-of-pocket costs for those who would have had care excluded from reimbursement without the reform.
Ms. Blumberg notes in the paper that if the insurer charges a significantly higher premium for the family newly enrolling in coverage with a sick child, then the premium impact will fall on those families specifically and will not affect the premiums of others. This is the most likely scenario, as it is typical of rating practices in most non-group markets today. Federal agencies estimate the average effect of the prohibition on pre-existing condition exclusions for children will be 1% or less in the non-group market.
As a percentage of policies sold, the number of rescissions is actually very small. Consequently, the prohibition under the Affordable Care Act should not have a significant effect on premiums in either market, according to Ms. Blumberg. Some insurers are concerned that the language of the law will increase the number of applicants misrepresenting their health status, which, if true, could have larger effects. The federal agencies estimate the rescission provisions will increase premiums by no more than a few tenths of 1 percent, while acknowledging that this is the roughest of the estimates provided.
Estimates of the group premium effect of extending coverage for young adults on parents’ policies are provided in May 13 interim final rules. The effect of this provision can be expected to be small in the group market as well, with estimates ranging from .5 to 1.2% of premiums, depending upon the participation assumptions made, according to Ms. Blumberg. With regard to non-group coverage, similar issues arise as detailed for the pre-existing condition exclusion period for children. Carriers are expected to charge the specific families enrolling high-cost young adults in non-group plans significantly higher premiums than similar families with healthier adult children, then there will be little to no impact on the general population of insureds.
The full report, How Will the PPACA Impact Individual and Small Group Premiums in the Short and Long Term?, is available at http://www.urban.org/publications/412128.html.
