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Insurable Interests

Bensman Risk Management, Inc.
2333 Waukegan Road Suite 275
Bannockburn, IL 60015
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Insurable Interests

Vol. 5, Issue 8April 2010

MONTHLY MESSAGE

Healthcare: We're All in this Together

By Bill Gimbel

The debate over healthcare reform was long and often heated. A Republican leader referred to the passage of the bill as “Armageddon,” while his colleagues on the other side of the aisle called it the most important social legislation since the 1960s. It is clear that the new law ties the healthcare of all Americans together in ways never before experienced. But it is important to get past the rhetoric to examine the facts.

Unfortunately, one of the main facts is that there is a lot about the law that we still don’t know. It is far from clear how some parts of the law will work in real life, especially those that are not due to take effect for several years. It also is unclear whether the cost-savings mechanisms in the law will work, or whether it will end up adding to an ominous deficit.

However, there are some things that we do know. Several changes are set to take effect in 2010 and 2011:

Changes in 2010

Ninety days from enactment of the law, there will be a federally subsidized pool to provide coverage to high-risk individuals with pre-existing conditions who have been uninsured for at least six months. The federal government also will set up a reinsurance program for employers who provide insurance for retirees who are over age 50 but not yet eligible for Medicare.

Six months after enactment, insurance plans will be required to cover adult children up to age 26 on their parent’s plan, unless the child is eligible for an employer-sponsored plan. Also beginning six months after enactment, plans cannot rescind, or cancel, coverage except in the case of fraud.

For plan years beginning six months after enactment, plans cannot have lifetime limits on coverage or restrictive annual limits. (The definition of “restrictive annual limits” will be determined by the Secretary of the Department of Health and Human Services.) And, insurers will not be allowed to limit or refuse coverage for children under age 19 who have pre-existing conditions.

From 2010 through 2013, employers with fewer than 25 workers and average wages of less than $50,000, and who contribute at least half the cost of coverage for those workers or 50 percent of a benchmark premium, can get a tax credit of up to 35 percent of their share of the premium.

Medicare recipients who hit the “donut hole,” the gap in prescription drug coverage, will receive a $250 rebate in 2010. In following years, the law reduces coverage gap.

Finally, in 2010, insurance plans must report the percentage of their premium dollars that are spent on clinical services, quality and other costs.

Changes in 2011 and Beyond

In 2011, insurers in the large group market must spend at least 85 percent of their premium dollars on medical services and quality, and those in the small group market must spend at least 80 percent; otherwise, they must rebate the money to consumers. There also will be changes in the way Medicare Advantage payments are made.

The law calls for tax increases for high-income taxpayers, and for capping contributions to flexible spending accounts in 2013.

The biggest change in 2014 is mandated coverage: Individuals will have to buy insurance and most employers with more than 50 employees will have to offer coverage, or both will pay a penalty. There will be subsidies and changes to Medicaid to help individuals meet the mandate, and there will be state-based exchanges to offer coverage for individuals and small businesses.

In 2018, there will be a tax on “Cadillac plans,” which are insurance plans with extremely rich benefits.

Perspective

There probably will be additional changes to the law, as future politicians continue to wrestle with these issues. However, the main message of the law is clear: We are all in this together. The law commits the government, and all of us as employers and taxpayers, to providing healthcare for virtually all our citizens.

That is not necessarily a bad thing. It is possible that there will be benefits to the economy and job growth as people feel freer to start their own businesses or to retire early, once they are sure they can get affordable health coverage.

But being in it together means more than sharing the cost. It means sharing the responsibility. We all need to help reduce health care costs by taking better care of ourselves. We need to eat better, to exercise more. Some of us need to stop smoking or lose weight. Because now the way in which we take care of ourselves affects everyone.

Meanwhile, we at Bensman will continue to monitor the healthcare law as it is further defined and explained, and we will keep you informed. If you have any questions about how the law affects you or your business, please contact us at 847-572-0800 or bgimbel@bensman.com. Because we’re all in this together.

Bill Gimbel is a Managing Director of The Bensman Group

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