Nearly two months after President Obama signed the Health Care and Education Reconciliation Act of 2010, insurance companies are beginning to make changes to policies and Connecticut employers are scrambling to understand what mandates will take immediate effect.
While the law’s major provisions, which aim to expand coverage to 32 million Americans and hundreds of thousands of residents in Connecticut, don’t go into effect until 2014, there are some significant policy changes that hit the books this year.
Last week, for example, the Internal Revenue Service unveiled eligibility guidelines for the small business health care tax credit, which goes into effect immediately and encourages small employers to offer health insurance coverage for the first time or maintain coverage they already have in place.
Stephen Jewett, a spokesman for the Farmington-based health insurer ConnectiCare, said many of the new mandates that will go into effect this year are already in place in Connecticut. The new law, for example, extends the dependent coverage age of young adults to up to age 26, but Connecticut already has that measure in place.
The state also has a strong appeals process for claim denials, a feature of the federal bill. And insurance products with lifetime or annual dollar limits on medical claims, which will soon be forbidden, are not prevalent in the Connecticut marketplace, Jewett said.
“Connecticut was already well ahead of the curve in implementing many of the health reform mandates that will be going into effect immediately,” Jewett said.
One important new measure that will impact Connecticut businesses is the tax credit, which is available to small employers that pay at least half the cost of single coverage for their employees in 2010.
According to the IRS, for tax years 2010 to 2013, the maximum credit is 35 percent of premiums paid by eligible small business employers, and 25 percent of premiums paid by eligible employers that are tax-exempt organizations, including nonprofits.
The maximum credit goes to smaller employers — those with 10 or fewer full-time workers — paying annual average wages of $25,000 or less. The credit is completely phased out for employers that have 25 employees or more or that pay average wages of $50,000 per year or more.
Eligible small businesses can claim the credit as part of the general business credit starting with the 2010 income tax return they file in 2011.
The federal government estimates that as many as 4 million businesses could be eligible for the tax credit.
Whether the health care reform law will reduce costs for businesses is up for debate, and no one really has a clear answer yet. Insurers remain adamant that cost drivers weren’t addressed in the health care law.
“While the bill does very good things to improve access, any rational observer recognizes it doesn’t do enough on cost control,” said Mohit Ghose, the vice president of public affairs at Hartford-based health insurer Aetna.
Ghose said the richer benefits and new mandates that are part of the health care reform package will increase costs.
Aetna and many other insurers, for example, sell employer-sponsored plans with lifetime maximum benefits.
They are offered because they come with more affordable premiums which can be attractive, especially to small business owners.
Under the new law, however, lifetime maximum caps will no longer be permitted.
“There will be price impacts, but we are not able to put a dollar figure on it yet,” Mohit said.
Gloria Barone, a spokesperson for Cigna, the Philadelphia-based health insurer with major Connecticut operations, said insurers are focused on reducing the underlying drivers of health care costs to offset the potential of rate increases.
That includes pushing prevention and wellness rather than sick care, helping passive customers become active customers, and paying doctors for quality outcomes rather than volume of services.
“These messages are not new, but are even more important now as the law did not address costs in a significant way,” she said.
Bruce Barth, a partner at Robinson & Cole in Hartford, said other provisions that will go into effect Sept. 23 include prohibiting health plans from:
• Imposing any preexisting condition exclusions for children who are under age 19;
• Placing lifetime dollar limits on medical claims;
• Placing unreasonable annual dollar limits on claims;
• Rescinding health coverage once an individual is covered under the plan, unless the individual acted fraudulently or made an intentional misrepresentation of a material fact.
Also starting in September, group health plans must cover certain preventive services and immunizations without cost to the employee, Barth said.
More meaningful changes go into effect in 2014, when states will be required to set up Small Business Health Options Programs, or “Shop Exchanges,” where employers will be able to pool together to buy insurance.