Objective 6 - Regulation and Taxation Flashcards
The “triple aim” (three goals) of health policy
- Better care for individuals - Institute of Medicine lists 6 characteristics of quality health care: safe, effective, patient-centered, timely, efficient, equitable
- Better health for populations - public health initiatives to address upstream causes of poor health (list)
- Lower per-capita costs
Causes of poor health and public initiatives to address them
- Environmental factors contributing to poor population health:
a) Unsanitized water
b) Pollution (air, water)
c) Violence (domestic, street)
d) Unhealthy living environment
e) Food-borne illnesses
f) Lack of access to fresh, healthy foods - Community disease prevention - initiatives include childhood immunization requirements, free flu shots and preventive screenings
- Lifestyle (obesity epidemic) - initiatives include healthy school lunch programs, safe pedestrian walkways, taxes on unhealthy foods
- Smoking and substance abuse - anti-smoking laws have been effective
- Socioeconomic factors - income related to poor health. Social programs like Medicaid try to address.
- Wellness and disease management solutions - include programs around disease prevention, smoking, diet, fitness, weight loss
PPACA individual and group market reforms
- Individual mandate (list)
- Employer mandate - beginning in 2014, employers with 50+ full-time employees must offer coverage or pay a fee = $2,000 * (full-time employees - 30), adjusted based on number of employees who receive premium tax credit
- Essential benefit package - must be offered by all qualified health benefit plans by 2014. Will provide comprehensive set of services, cover preventive without cost sharing, cover at least 60% of AV of covered benefits, limit annual cost sharing to current law HSA limits
- MLR - starting in 2011, plans must provide rebates to consumers if MLR is below 85% for LG (101 or more Ees) or 80% for SG and Ind
- Benefit and coverage requirements (list)
- Rating requirements (list)
- Benefit tiers - new plans must be platinum (90%), gold (80%), silver (70%) or bronze (60%). May offer catastrophic plan to enrollees under 30, those exempt from individual mandate
- Grandfathering of existing plans - plans in existence on March 23, 2010 are exempt from many PPACA requirements. But most benefit and coverage requirements still apply.
PPACA benefit and coverage requirements effective in 2010
- All individual and group plans must cover dependent children up to age 26
- Rescissions of insurance coverage are prohibited except for fraud
- Pre-existing condition exclusions for children are prohibited
- No individual or group plans may impose lifetime limits. Plans may impose annual limits only for non-essential health benefits (was graded in thru 2014)
- Services rated A or B by USPSTF must be covered at 100%
PPACA rating requirements effective in 2014
- Individual and small group plans must be offered on guaranteed issue and renewal basis
- Plans may not impose pre-existing condition exclusions
- Rating variation allowed only based on:
a) Age (limited to 3:1 ratio highest:lowest)
b) Geographic rating area
c) Tobacco use (limited to 1.5:1 ratio)
d) Family composition - Waiting periods for coverage must not exceed 90 days
Provisions of PPACA health insurance exchanges
- Each state will have American Health Benefit Exchange for individuals and Small Business Health Options Program (SHOP) for businesses with up to 100 Ees
- Plans in exchanges must cover essential health benefits, have OOP limit at or below HSA limit, and fall into on metal tier
- Risk pooling - insurers must pool all individual market plans (other than GF) into a single risk pool. Similarly, must pool all SG plans.
- Participating insurers must meet many qualification requirements such as networks, marketing, reporting, consumer assistance
- Exchanges may also offer Consumer Operated and Oriented Plans (CO-OPs), which are nonprofit, member-run health insurance companies
Other PPACA provisions
Not covered by other lists
- Premium credits and cost sharing subsidies for those with low incomes (effective 2014)
a) Premium credits for qualified individuals with incomes 133-400% of FPL for covg purchased through exchange
b) Cost sharing subsidies for those enrolled at silver level in exchange with incomes 100-400% of FPL - Small business tax credits
- Medicare provisions
a) MA plans can receive bonuses or re-allocations of rebates based on quality. Beginning 2014, subject to MLR requirements
b) Medicare Part D - beneficiary coins in gap will be phased down from 100% to 25% by 2020. RDS payments lose tax exempt status starting 2013 - Revenue provisions
a) New health insurer tax will collect $8 billion in 2014, grading up to $14.3 billion in 2018, indexed thereafter
b) Excise tax for high-cost health plans beginning 2018
c) Limitations to tax-favored allowances for FSAs and HSAs
d) New taxes on certain medical devices - Medicaid expanded to all non-Medicare elig. inds with incomes up to 133% of FPL. Due to Supreme Court ruling, fed govt cannot withhold original Medicaid funding from states who do not expand
Potential problems in an unregulated insurance market
- A dishonest company could gain competitive edge via:
a) Misleading marketing materials
b) Unfair price (only appears to be good value)
c) Inadequate reserves - Customers do not have time or expertise to determine which firms are dishonest
- Companies could become insolvent with no warning, leaving policyholders without coverage
Goals of insurance regulation
- Eliminate policies not providing benefits expected
- Prevent insolvency
- Eliminate policies that provide poor value
- Solve minor consumer problems
- Maintain fair competition
- Raise tax money
- Promote social goals
The steps of regulation
- Licensing - firm agrees to be regulated. Agents may be required to get a license
- Information gathering - purpose is to monitor financial soundness, confirm compliance, provide consumer information, design new regulatory requirements
- Prior approval of policy language, premium rates, reinsurance arrangements, dividends, mergers, investments
- Enforcement - includes penalties such as fines, legal action and/or license removal
- Receivership - may initially track financial condition, or may take over insolvent company
Actions commonly taken by state regulators to help prevent insolvency
- Capital requirements (such as RBC) - protect against adverse deviations in experience
- Guaranty funds - all companies assessed to create fund to protect insureds of insolvent companies
- Reserve requirements - for claim reserves and liabilities, contract reserves, provider liabilities, and premium deficiency reserves
Types of consumer protection regulation in the US
- Disclosure - must disclose to potential customer the key features of insurance policy. May include shopper’s guide, outline of coverage, summary of benefits, or illustration
- Reasonableness - includes mandated benefits, prohibited exclusions. Premiums must be reasonable in relation to benefits (MLR)
- Fairness - includes prohibitions on discrimination even though data may support it (i.e., unisex rates)
Responsibilities of the insurance commissioner
- Oversee operation of insurance department
- Interpret insurance laws
- Make regulations implementing insurance laws
- License insurance companies, agents, brokers, consultants
- Conduct examinations of licensed insurers, assess penalties for violations of laws
- Review form and rate filings - some states require that commissioner approve forms and rates prior to use
- Regulate advertising - to protect consumers from unfair, inaccurate, deceptive, and misleading advertisements
- Regulate business practices - such as underwriting and claims practices
- Enforce prompt pay laws
- Regulate insurer solvency - most important duty of the commissioner
Reasons for an insurance commissioner to assume an insurer’s assets
- Non-cooperation with examiners
- Refusing to remove questionable officers
- Charter violations
- State law violations
- Endangered capital or surplus
- Technical insolvency
Standard group contract provisions required by most state insurance laws
- Grace period - 31-day grace period for payment of premium
- Incontestability - validity of policy cannot be contested after the policy has been in force for 2 years
- Application and statements - application has to be made part of policy, and statements made by insured are considered representations (not warranties)
- Evidence of insurability - policy must state when evidence of insurability is required
- Misstatement of age provision - policy must state how premiums or benefits will be adjusted due to misstatement of age
- Certificates - insurer must issue certificates to policyholder for delivery to each insured
- Benefits and eligibility - policy must state the benefits and to whom they are payable, and include specific terms of eligibility for coverage