The health care reform legislation signed into law by President Obama has been hailed as a landmark achievement because the law aspires to achieve universal health coverage in America. Whether the law achieves this goal, and whether it radically reshapes how Americans obtain health insurance in the process, will largely depend on how the states implement the legislation.
The centerpiece of this health care reform is the creation of state-based insurance exchanges where individuals or small businesses can obtain coverage from an array of insurers competing for consumers. States may band together to create larger markets or may opt out of developing an exchange altogether. The effectiveness with which state governments create these exchanges, and the extent to which businesses participate in them, will then determine whether America maintains an employer-based health insurance system or becomes a nation where individual coverage is the norm.
The states now have until 2014 to set up insurance exchanges for individuals as well as Small Business Health Options Programs, or “SHOP Exchanges,” where small businesses will have the opportunity to purchase coverage being offered to other businesses. States may choose to establish separate exchanges for individuals and for small businesses, or they may set up a single exchange to serve both.
In 2014, small businesses will be enticed to participate in the exchanges with tax credits of up to 50 percent of their employees’ premiums for two years. The law mandates heavy regulation of the insurance coverage available through the state exchanges. Policies sold through the exchanges will be unable to deny coverage based on pre-existing conditions and insurers will be allowed to vary premiums based only on geographic location, age and tobacco use.
Connecticut has a head start in the establishment of an insurance exchange. The state legislature established the Charter Oak Health Plan in 2007 to provide insurance to Connecticut residents who do not receive coverage through an employer.
The Charter Oak Health Plan should find new life with the passage of this national legislation. One important impact will be federal subsidization of individuals’ purchases of insurance on the exchanges, which will alleviate the burden currently borne by the state. Whereas Charter Oak offers a state-defined benefit package, the new law envisions several benefit packages with different levels of cost sharing being available on the state exchanges. Charter Oak is open only to individuals, whereas the new law allows state exchanges to include businesses with as many as 100 employees.
For small businesses, the establishment of a SHOP Exchange will provide more options for purchasing coverage of their employees. The exchanges will be set up with web portals that provide standardized information, allowing for ease in comparing available health care coverage. The information provided on the web will include a new rating system developed by the Secretary of Health and Human Services for use in assessing the policies offered at each benefits level according to their relative quality and price. The law also requires the exchanges to publicize an enrollee satisfaction survey to share others’ evaluations of the available plans. The usefulness of these surveys should be familiar to any frequent online shopper. The intention in providing this information is to bring small businesses’ premiums in line with those of large companies by pooling their purchasing power.
Employers of 50 or more workers who do not offer health insurance coverage will pay a $2,000 assessment for each employee obtaining individual benefits through an exchange. Part-time employees will be counted towards this 50-employee threshold. The new law also discourages businesses from providing insurance plans to employees with costs of coverage in excess of $27,500 for families and $10,200 for individuals by imposing an excise tax on such plans.
Small businesses will see some immediate effects of this legislation. A tax credit is available this year to businesses with fewer than 25 employees whose average annual wages are $50,000 or less and who contribute at least 50 percent of total premium costs for their employees’ health insurance.
Still, businesses may find health insurance premiums continuing to rise, just as they have prior to the passage of this recent legislation.
Dr. Orlosky is executive vice president and chief operating officer at Human Capital Specialists, Inc., a management consulting firm that specializes in the healthcare industry and advocates for improvements within the system. He serves as instructor in the Department of Psychiatry at Yale University School of Medicine. He can be reached at morlosky@hcspecialists.com or at www.hcspecialists.com.
provide health benefits for early retirees.
Until 2014, businesses that cover retirees aged 55-64, who are not yet eligible for Medicare, will be reimbursed for 80 percent of their claims between $15,000 and $90,000.
Measures in the law aimed at lowering insurance premiums through lower overall health care costs are less direct and it will take much longer for their effect to be measured or noticed. In the meantime, businesses may find health insurance premiums continuing to rise, just as they have prior to the passage of this recent legislation.
Dr. Orlosky is executive vice president and chief operating officer at Human Capital Specialists, Inc., a management consulting firm that specializes in the healthcare industry and advocates for improvements within the system. He serves as instructor in the Department of Psychiatry at Yale University School of Medicine. He can be reached at morlosky@hcspecialists.com or at www.hcspecialists.com.
