KC Health Care Reform

President Obama’s healthcare reform proposal, released this morning, is available in an 11-page summary. Key highlights from the President’s plan are:

• New Federal Health Insurance Rate Authority: The proposal creates a new Health Insurance Rate Authority to provide federal oversight of proposed health insurance rate increases. If the new federal agency determines that a rate increase is “unreasonable and unjustified,” it can require health insurers to “lower premiums, provide rebates, or take other actions to make premiums affordable.”
• Delay in New Insurer Taxes: The proposal delays the Senate bill’s $67 billion assessment on health insurers until 2014 to coincide with the broad insurance reforms.
• Individual Mandate: The proposal somewhat strengthens the penalties for those who do not purchase health insurance coverage. However, the proposal maintains the Senate’s exemption for those who would face premiums of more than eight percent of their income, which would exempt millions of people.
• Immediate Insurance Reforms: The proposal appears to address some of our concerns about the effective date of the immediate insurance reforms in the Senate and House bills. Within “months of enactment,” the proposal requires health plans to cover adult dependents up to age 26, prohibits rescissions, mandates that plans have a stronger appeals process, and requires states to conduct annual rate review backed up by the oversight of the HHS Secretary. In 2014 (instead of almost immediately), the proposal prohibits all annual and lifetime limits and bans pre-existing condition exclusions. Beginning in 2018, the proposal requires “grandfathered” plans to cover preventive services with no cost sharing.
• Exchanges/Subsidies: The proposal is silent on the exchange structure, which appears to signal acceptance of the Senate’s state-based approach. Subsidies are increased slightly for those who purchase coverage through the exchange.
• Delay in Proposed Tax on “Cadillac” Health Plans: The proposal changes the effective date of the Senate’s tax on “Cadillac” plans from 2013 to 2018. It also raises the threshold for premiums that are exempt from the assessment from $8,500 for individual coverage to $10,200 and from $23,000 for families to $27,500. The amounts for subsequent years are indexed at general inflation plus one percent. It also includes an adjustment – as yet undefined – for firms whose health costs are higher due to the age or gender of their workers, not because of rich benefit packages.
• Medicare Part D: The proposal fills the Part D “donut hole” by including a $250 rebate to Medicare beneficiaries who hit the donut hole in 2010 and closes the donut hole completely by phasing down the overall coinsurance to 25 percent by 2020.
• Medicare Advantage: The proposal sets Medicare Advantage (MA) benchmarks at different (unspecified) percentages of fee-for-service with bonuses for quality and enrollee satisfaction. It also increases HHS’ ability to reduce MA plan payments through audits and because of upcoding.
• Medicaid: While the proposal is silent as to the eligibility level for a Medicaid expansion, it includes increased reimbursements for states to cover the expansion population (up to 133 percent of poverty). It also strikes the controversial “Nebraska deal” that would have required CMS to pay that state the full cost of the expansion population in perpetuity. For Puerto Rico, it raises the Medicaid funding cap by 35 percent rather than the Senate bill’s 30 percent.
• Generic Drugs: The proposal generally prohibits brand-name prescription drug companies from delaying generic competition by paying the generic company to keep its drug off the market.
• Fraud and Abuse: The bill includes several new provisions to strengthen Medicare and Medicaid anti-fraud activities. It also holds Medicare Administrative Contractors financially liable for claims paid to providers excluded from federal programs.

President Obama’s Proposal