Major Health Reform Initiatives Go Into Effect

Six months after President Barack Obama signed the Patient Protection and Affordable Care Act (HR 3590), several provisions of the healthcare reform bill were recently enacted. The legislation significantly altered the healthcare industry, and the rules implemented in late September will likely have a major impact on consumers, state and national government, health insurers and other businesses. The costs associated with the legislation created a stir in September. Citing filings with state regulators, the Wall Street Journal reported that several insurers such as Aetna and some BlueCross BlueShield plans asked for premium increases of between 1% and 9% for the extra benefits required under the law. The front-page article mentioned the increases will affect mostly individual and small business policies and not those for large employers and Medicare recipients.

Most of the increases are for policies written after Oct. 1, although consumers may be affected if they modify their existing plans. Department of Health and Human Services Kathleen Sebelius responded by writing a letter to Karen Ignagni, president and CEO of America's Health Insurance Plans. According to the Wall Street Journal, Ms. Sebelius wrote that “there will be zero tolerance for this type of misinformation and unjustified rate increases.” Ms. Ignagni told the Wall Street Journal that insurers increase premiums because of the higher costs of medical services, younger and healthier people dropping their insurance, and the increased benefits of the new healthcare reform bill. “There are a significant amount of changes,” AHIP press secretary Robert Zirkelbach told First Report Managed Care. “Any new benefits have additional costs, but the impact they have on costs depends on the coverage (people) have today…Our industry has been working very hard to implement all of these new changes to minimize disruption to the 200 million people we serve. We have an all hands on deck approach to implement the reforms to minimize disruptions and make it as streamlined as possible.”

The following provisions took effect for health plans beginning on or after Sept. 23:

Extending coverage for young adults: According to the new rules, children under 26 years old can be insured on their parents’ health plan if the policy allows for dependent coverage. If the child is offered his or her own job-based coverage, he or she cannot continue on the parents’ plan. Several insurers took steps before Sept. 23 to comply with the new rule. Shortly after the Patient Protection and Affordable Care Act passed, UnitedHealthcare and Humana offered to extend coverage to college students already covered under a fully insured plan. Meanwhile, effective June 1, WellPoint allowed young adults to remain on their parents’ policies for fully insured group and individual plans. By implementing the rule early, new college graduates and others under age 26 avoided gaps in coverage while insurers saved on administrative costs associated with stopping coverage of May 2010 graduates and then re-enrolling them in September. “We believe this decision will provide not just extended health insurance coverage but also some peace of mind for our Humana members and their adult children who are Humana members,” Bill Tait, Humana’s vice president of sales and market operations, said in a company news release on April 19. “Now, young adults who are finishing college or just beginning to look for a job in such a competitive environment won’t have to worry that they’ll lose their health coverage.”

Providing free preventive care: The regulations require health plans to cover preventive services that have strong scientific evidence of their health benefits, according to the U.S. Department of Health and Human Services (HHS). Patients will not be charged a copayment, coinsurance, or deductible when the services are provided by a network provider. Preventive services are rated by the U.S. Preventive Services Task Force, an independent panel of scientific experts. The new rule covers preventive services that receive an A or B grade, which includes breast and colon cancer screenings, screening for vitamin deficiencies during pregnancy, screenings for diabetes, high cholesterol and high blood pressure, and tobacco cessation counseling. Health plans are also expected to standard vaccines recommended by the Advisory Committee on Immunization Practices, among them routine childhood immunizations and periodic tetanus shots for adults. In addition, health plans will cover preventive care for children recommended under the Bright Futures guidelines, developed by the Health Resources and Services Administration with the American Academy of Pediatrics. The services will be provided to children from birth until age 21 and include regular pediatrician visits, vision and hearing screening, developmental assessments, immunizations, and screening and counseling to address obesity and help children maintain a healthy weight.

Prohibiting insurance companies from rescinding coverage: This stipulation makes it illegal for insurers to cite an error or other technical mistake on a customer’s application to deny payment for services. In December 2009, the National Association of Insurance Commissioners released the results of a report on 52 companies that wrote individual major medical policies or individually underwritten certificates. Of the 6.7 million insured policies inspected, there were 27 246 rescissions, or 3.7 rescissions for every 1000 policies/certificates that were written from 2004 to 2008. The rates of rescissions per 1000 policies were 4.41 in 2004, 5.12 in 2005, 3.67 in 2006, 2.93 in 2007, and 2.89 in 2008. The most frequent conditions cited as the basis for a rescission were psychiatric (18%), hypertension (10%), height and weight (9%), substance abuse (9%), and gynecological (9%). Health insurers have declared they will stop rescissions except in cases of fraud. In late April, WellPoint and UnitedHealth Group announced they would immediately end rescissions. WellPoint’s announcement came a few days after an April 22 Reuters report that said WellPoint used computer algorithms to target women with breast cancer and intended on canceling their healthcare policies. WellPoint has denied Reuter’s claims. “Our goal is to make reform work for our members and for the country,” Angela Braly, Chief Executive Officer of WellPoint, said in an April 27 news release. “There have been a lot of misrepresentations and inaccuracies in recent days that have caused confusion among our members and among the public generally about our policies in this area. We think today’s announcement will go a long way toward bringing greater clarity.”

Appealing insurance company decisions: Consumers now are able to appeal to their health insurers regarding coverage determinations or claims. According to the HHS, consumers can present information to their health plans through an internal appeals process. The insurers’ process must allow consumers to appeal when a health plan denies a claim for a covered service or rescinds coverage; gives consumers detailed information about the grounds for the denial of claims or coverage; require plans to notify consumers about their right to appeal and instruct them on how to begin the appeals process; ensure a full and fair review of the denial; and provide consumers with an expedited appeals process in urgent cases. The HHS estimated that 31 million people in new employer plans and 10 million people in new individual plans will benefit from the new appeals by 2011 and that 78 million people enrolled in employer plans will benefit by 2013. “For many years, America’s consumers wanted the right to appeal adverse health plan decisions to an objective and unbiased decision-maker,” Ron Pollack, executive director for healthcare consumer organization Families USA, said in a statement on July 22. “Thankfully, with the new rules issued today, consumers throughout the nation, irrespective of the health plan they are in, will be empowered to contest wrongful decisions.”

Eliminating lifetime limits and regulating annual limits on insurance coverage: The regulation prohibits health plans and insurance policies from implementing lifetime limits. It also restricts the annual dollar limits, which will be phased in over the next 3 years and banned for most plans starting in 2014. For plans issued or renewed beginning on Sept. 23, 2010, the minimum annual limit on insurance will be $750,000. The annual limit will be increased to $1.25 million beginning Sept. 23, 2011, and to $2 million beginning on Sept. 23, 2012. All employer plans and all new individual market plans must comply with the new limits. For plans issued or renewed beginning Jan. 1, 2014, all annual dollar limits on coverage of essential health benefits will be prohibited. According to the HHS, employers and insurers can delay compliance with the rules if they demonstrate their current annual limits are necessary to prevent a significant loss of coverage or increase in premiums. The HHS said group health plans or health insurers can apply for a waiver if the plan was offered before Sept. 23, 2010 for a plan between Sept. 23, 2010 and Sept. 23, 2011. They must submit an application 30 days before the policy year begins. If the plan begins before Nov. 2, 2010, they must apply 10 days before the policy year begins. If a waiver is granted, it only applies from Sept. 23, 2010 to Sept. 23, 2011. The group health plan or health insurer must reapply each year prior to Jan. 1, 2014, when there will be no more waivers. The HHS has cited limited benefit insurance plans as examples of insurers that may seek the delay. The restricted annual dollar limits do not apply to grandfathered plans, which existed when the reform bill was signed into law March 23, 2010 and do not significantly raise premiums or reduce benefits.

Prohibiting denying coverage of children based on pre-existing coverage: Under the new law, group health plans and health insurance issuers in the group and individual markets cannot exclude children under 19 years old based on pre-existing conditions. The HHS said the regulations apply to grandfathered group health plans and group health insurance coverage but not to grandfathered individual health insurance coverage that existed on March 23, 2010. The regulation applies to benefit limitations such as a health plan refusing to pay for chemotherapy for a child with cancer because the child had the cancer before getting insurance as well as outright coverage denials such as when insurers refuse a policy to a family because of a child’s pre-existing medical condition. The provision will include Americans of all ages beginning in 2014. In addition, after 2014, insurers also will not be able to charge higher premiums based on a pre-existing condition, except for in grandfathered individual family policies.—Tim Casey