Wednesday, September 28, 2011
By Jimmy S. Mallia
While the individual mandate remains tied up in the court system, a number of health care reform measures have taken hold.
As the legal battle over health care reform rages on in an uncertain political environment, many are left wondering where we are with health care reform. While the 2010 and 2011 pieces of reform are in place, the vagueness of the law means some aspects of it are not being enforced.
The main focus of the uncertainty still swirls around the coverage requirement. Upon passage of the Patient Protection and Affordable Care Act, a total of 28 states — largely Republican — filed joint or individual lawsuits challenging numerous key provisions of the law; the most notable being the individual mandate that requires all Americans to purchase health insurance coverage by 2014 or face penalties. The individual mandate takes center stage in this piece of legislation, and without it the law’s mission of expanding coverage to many of the uninsured will be lost — as will the funding.
With appellate courts providing split decisions across the nation, it is anticipated that the final judgment will ultimately be in the hands of the Supreme Court. As recently as Sept. 8, the 4th U.S. Circuit Court of Appeals in Virginia dismissed two lawsuits by the state of Virginia and Liberty University, both challenging the constitutionality of the individual mandate. Although these rulings were largely based on procedural issues, prior to this win the political scorecard was even: a Cincinnati appeals court ruling in favor of the law while an Atlanta appeals court ruled that the individual mandate was unconstitutional.
Still, health care reform measures are moving according to schedule, with the most significant of changes for 2011-2012 being made to the Medicare Part D drug benefit, W-2 reporting capabilities, annual dollar limit changes for health savings accounts, and the implementation of medical loss ratios for insurers.
Seniors currently enrolled in Medicare Part D have seen advantageous changes regarding the coverage gap or “donut hole.” With Medicare Part D, you pay 100 percent of your drug costs until you reach the $310 deductible. Then you pay 25 percent of the cost of your drugs, while the Part D plan pays the rest, until the total you and your plan spend on your meds reaches $2,800. That is when you hit the coverage gap referred to as the “donut hole.” In the past, you were responsible for the full cost of your drugs until the total you’d spent for your drugs reached the yearly out-of-pocket spending limit of $4,550. Now, however, once an individual reaches his donut hole, a 50 percent discount on the total cost of covered brand-name prescription drugs will be applied while in the gap. Over the next 10 years, it is anticipated that additional discounts will be phased into Medicare, assisting with the cost of both brand-name and generic drugs until the gap is closed in 2020.
Starting in tax year 2011, the Patient Protection and Affordable Care Act will require employers to disclose the value of health coverage for each employee on their individual annual W-2 forms. Although the intent of this measure is still unclear, lawmakers in favor of the law are advising employers that this is solely for informational purposes, and will give employees a greater understanding of their overall health care costs, allowing them to be more informed consumers.
If you are currently contributing to a health savings account, there is good news for calendar year 2012. Individuals with self-only coverage will now be allowed to contribute $3,100 per year, up from 2011’s $3,050. Family coverage will also have a contribution limit increase from $6,150 to $6,250 These IRS cost-of-living adjustments follow a year where limits in 2011 were unchanged from 2010.
Perhaps the biggest change to uproot the current health care structure is the implementation of medical loss ratios for insurers. MLRs refer to the percentage of premium dollars spent on medical care versus administrative and overhead costs. Insurers must spend 80-85 percent of the money collected from customers on health care services and health care quality improvement. They must report their MLR to state and federal agencies, and if medical loss ratios are not met, consumers get rebates.
So, where are we? Short term reform is moving forward, albeit slowly. However, long term — the future of health care — is still anyone’s guess.
Jimmy S. Mallia is president of the Employee Benefits Division at Dwight Andrus Insurance and has been with the agency for the past 17 years. In addition to individual health policies, his division specializes in self-funded and employer group plans.