Progressive Democrats Attempt to Revive the Public Health Insurance Option
A group of 129 progressive House of Representatives Democrats, seeking to revive the public option, introduced legislation on July 22 to establish a public health insurance plan that would compete with private health insurers. It is highly unlikely that the House will vote on the legislation this year. Republicans and some moderate Democrats remain strongly opposed to the public option, and Democratic leaders have little interest in reigniting the divisive health care reform debate before the November elections.

Supporters of the Public Option Act (H.R. 5808) claim that the legislation would sharply reduce the federal deficit. The non-partisan Congressional Budget Office (CBO) estimates that the bill would reduce the federal deficit by approximately $68 billion from 2014 to 2020. Read the full CBO analysis of H.R. 5808.

The public plan would be administered by the Secretary of Health and Human Services and would be offered through the new health insurance exchanges beginning in 2014.  The bill would require the public plan to charge premiums that fully cover its costs for benefit payments and administrative expenses. The plan’s provider payment rates would be based on Medicare reimbursement rates.

The legislation has been referred to the House Energy and Commerce Committee. <snip>

What this means for Private Health Insurers

Right now the thought is that this new public option would pay Medicare + 5% rates. As the average doctor loses approximately 10% on every medicare patient, this means that either doctors will not accept the new insurance or charge an annual fee to be a part of their practice (concierge doctors).

Private insurance companies pay around Medicare + 20% or +30%. So there is no way they can compete with the Public option, even if ALL OTHER FACTORS ARE THE SAME.

Suggestion for Private Insurance Companies

My recommendation is for private insurance companies to compete on a level playing field with the public option (if it is passed). Wouldn’t it be interesting if all the major insurance companies said the following: “I’m so glad that there is a Public Option that we can compete against. To make things as equal as possible, we are scrapping all our networks and will only pay Medicare + 5% just like the new Public Plan.” That would throw not just the government into a tizzy, but doctors, hospitals, and other providers.

Ultimately it’s about reworking the Health Care and Health Insurance System

The Patient Protection and Affordable Care Act (PPACA) did two things. First is that it “fixed” access issues which was desperately needed [personally I wished it would have included illegal immigrants in the mix]. Second is that it was the first real effort to look at a system that isn’t doing what it should be doing. By creating massive amounts of stress/issues in the marketplace, it forces everyone to the table to start ironing out the problems.

One item that seems the pro-public option legislators miss is what is going on with public health care systems around the world. Many are bringing back private insurance, ALL have problems with the cost of care, ALL have systemic issues. We can learn from what is going on in the world (and Massachusetts, which the PPACA is based on) to help guide us down a path that includes coverage for all while as the same time managing costs.

One Final Thought

The number one driver of cost is the quality of care. Whereas if a person had heart disease 40 years ago, they would die (thereby not need more health care), now that same person is living for another 20+ years. They same can be said for most major diseases. The longer people live, the more health care they consume. So we have this problem due to the high quality of care available to people today. Wow! Isn’t that great!

Now comes the time we need to rethink and rework our high quality system so that it works for everyone. The PPACA started the discussion. It’s up to intelligent people who actually understand the system to come together to make it manageable.

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July 19, 2010, Special Bulletin

Blue Cross and Blue Shield of Illinois Announces New Child-Only Coverage Policy

Blue Cross and Blue Shield of Illinois (BCBSIL) is committed to offering the broadest possible range of products for our members, as well as to maintaining its strong financial position. Thus, on Friday, July 16, 2010, it filed a new policy called Blue Pathway to provide coverage for children age 1 through 18 when the child is the primary insured (commonly called “child-only” policy) with the Illinois Department of Insurance (DOI).

This new coverage option responds to an Interim Final Rule that was issued by the Department of Health and Human Services (HHS) to implement several provisions of the Patient Protection and Affordability Act of 2010 (PPACA). In this Rule, HHS has determined that provisions limiting the application of pre-existing condition exclusions for children under 19 means that all children under 19 who apply for insurance for which they are eligible on or after Sept. 23, 2010, cannot be denied coverage—this is commonly known as “guaranteed issue.”

BCBSIL has long supported guaranteed issue as a way to ensure access to affordable, quality health care for all Americans, particularly children and young adults. However, that must be accompanied by an effective mandate for individuals to obtain coverage. PPACA itself recognizes the importance of pairing guaranteed issue with an effective mandate to ensure a sustainable insurance marketplace, with both being required in 2014. However, this Interim Final Rule addresses only guaranteed issue for children under 19, not any current requirements for them to have health insurance.

Without the mandate, it becomes too easy for people to buy insurance only when they feel they need services. This could be compared to allowing drivers to buy auto insurance once they have a fender-bender, and then drop coverage after their car repairs (financed by the insurance company and other insureds) are complete. This leads to what insurers term as “adverse selection,” which ultimately leads to unaffordable coverage for everyone. The Wall Street Journal recently published an article that demonstrates how this happened in Massachusetts, whose mandate has not proven as effective as originally hoped. This is based on a study commissioned by the Massachusetts Division of Insurance by the consulting firm Oliver Wyman.

We understand that several other carriers have chosen to exit the child-only health insurance market. As a mutual company that is owned by our policyholders and not publicly traded, BCBSIL wants to maintain its presence in all segments of the individual insurance market—for adults, families, and those cases where the primary policyholder is under 19. While we must wait for DOI approval before we can move forward, we are hopeful we can continue to serve this market. As always, as the market leader, we will assess and adjust our approach so we can provide our policyholders with the financial strength on which they rely.

During the interim period while we are waiting for authorization to sell this new product, BCBSIL will temporarily suspend issuing new policies to children under 19 when the child is the primary insured. BCBSIL will stop quoting its current child-only policies on July 30, and the last assigned effective dates for those policies will be Sept. 15, 2010. Any application that has not been approved by Sept. 1, 2010, will be withdrawn from consideration. Once the DOI approves this new policy, BCBSIL will provide information on how to apply for the coverage. BCBSIL is committed to reducing administrative costs for this product. For this reason, Blue Pathway will be available only on a direct-sale basis.

BCBSIL will continue to honor all existing individual policies issued for those under age 19. In addition, those under 19 can request coverage through our individual and group policies that include dependent coverage. Members with concerns may visit our website at bcbsil.com or call our customer service number at 800-538-8833.

Blue Pathway will allow members to enjoy the many benefits of our health insurance products, such as a broad network of participating providers and outstanding customer service. The product benefits are designed to be as affordable as possible given the new PPACA regulations. This new policy, if approved by the DOI, will join our other product offerings for individuals buying their own insurance, including a full range of individual and family products and a popular temporary coverage plan.

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Since the interim final regulations were issued, some plans and issuers have stated that it is common with respect to outpatient benefits for plans and issuers to require a copayment for office visits (e.g., physician or psychologist visits) but coinsurance for other outpatient services (e.g., outpatient surgery, facility charges for day treatment centers, laboratory charges, or other medical items.)

For purposes of determining parity for outpatient benefits (whether in-network or out-of network), can a plan or issuer establish any sub-classifications, similar to the special rule for multi-tier prescription drugs?

Until the issuance of final regulations, the Agencies have determined that they will establish an enforcement safe harbor under which the Agencies will not take enforcement action against a plan or issuer that divides its benefits furnished on an outpatient basis into two sub-classifications for purposes of applying the financial requirement and treatment limitation rules under MHPAEA: (1) office visits, and (2) all other outpatient items and services. After the sub-classifications are established, the plan or issuer may not impose any financial requirement or treatment limitation on mental health or substance use disorder benefits in any sub-classification (i.e., office visits or non-office visits) that is more restrictive than the predominant financial requirement or treatment limitation that applies to substantially all medical/surgical benefits in the sub-classification using the methodology set forth in the interim final rules. Other than as permitted under this enforcement policy, and except as permitted under the interim final rules for multi-tier prescription drug formularies, sub-classifications are not permitted when applying the financial requirement and treatment limitation rules under MHPAEA. Accordingly, and as stated in the preamble to the interim final rules, separate sub-classifications for generalists and specialists are not permitted.

Here is the original link: http://www.dol.gov/ebsa/faqs/faq-mhpaea.html

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Note: Part of the selling point of the new Patient Protection and Affordable Care Act was keeping this reduction in Medicare payments to pay for the reform.

<snip>

Medicare Program Halts Processing of Physician Claims after Congress Misses Deadline to Avert Large Cuts in Medicare Physician Payments
The Centers for Medicare & Medicaid Services (CMS) has notified physicians that it will delay processing Medicare claims until June 14 in order to temporarily avert a 21.3 percent reduction in Medicare physician payment rates that became effective June 1. Congress is expected to pass legislation the week of June 14 (mentioned above) to retroactively delay the Medicare physician payment reduction.

If a large reduction in Medicare physician payments is allowed to take effect, physicians would likely seek higher reimbursement from private insurers in order to offset the decrease in their Medicare reimbursement. <snip>

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I sure hope you like roller coasters . . .

The Good

Due to the Patient Protection and Affordable Care Act (PPACA) of 2010, Golden Rule (as of the middle of May) will allow children on their parent’s plan with no pre-existing condition exclusions or riders. Assurant (as of June 7^th) has allowed children under the age of 19 to be covered on their parent’s medical plan with no pre-existing conditions. Humana is guaranteed issue for children. All other carriers are required to make this change as of 9/23/2010.

The Bad

The aforementioned children can be subject to a rate increase on all. This means the insurance company will charge a higher premium for children who, actuarially speaking, will cost them more money (i.e. from medications taken and/or higher than average medical costs). Parents will be excited to see their children covered, but will probably not like the final premium charged. Golden Rule and Assurant still reserve the right to deny coverage to those children while Humana can place exclusion riders (meaning they can exclude certain conditions from coverage) on children until 9/23/2010.

I also received the first word of it late last week from Golden Rule (aka United HealthOne, a subsidiary of United Healthcare) and today from Assurant. Commissions will be cut on all business written from July 1, 2010 onward. They don’t know by how much, but Golden Rule and Assurant sent a letter to all agents alerting them of this change. This is due to the requirement that they meet the Minimum Loss Ratio (MLR) goals set in the PPACA (80% for individual and small groups, 85% for large groups). It will be the individual health insurance carriers that will get hit the hardest. Get ready for mergers, jumps in premium pricing, aggressive selling of ancillary products (dental/vision/accident. etc) which are not subject to the MLR, and insurance carriers getting out of the individual market over the next couple of years.

For years now the commissions for insurance agents have gotten smaller and smaller. At the same time the burden of complying will new laws, reporting, and paperwork, both for our own agencies and our clients has caused us to do more for less. This means that marginal insurance agents’ service levels will drop and it will be harder than ever to get through to your agent for questions or help with claims.

Couple this with both state and national administrations who vilify the industry (lumping agents in with the insurance companies, even though we are client advocates more than anything else) and you get an industry that is in a state of flux. I wouldn’t be surprised if the smaller agencies will be snapped up by mega-large corporations much like the small farms have gone away once the price for crops dropped (Note that this is only conjecture at this point).

The Ugly

I confirmed with a Humana employee that they are laying off 5% of their workforce. This means, one thousand, four hundred and five (1405 based upon their 2009 annual report) high paying jobs gone, thanks to reform. This caused one of my group’s renewals to take twice as long to be processed and it was processed wrong, causing countless hours trying to fix the problem, manage employees who didn’t get their cards in a timely fashion, and manage all the damage to my reputation that this caused.

Blue Cross Blue Shield of Illinois will only grant effective dates of the first or 15^th of the month on its individual products (probably a good thing), but has suspended individual members’ ability to downgrade their policies (e.g. choosing a higher deductible for a lower premium) at any time.

Furthermore, rates for micro groups have gone haywire with BCBS’s underwriting. Before PPACA, if I wrote a 4 employee group, I could expect the final rate to be around 10% higher for a relatively healthy group. Lately, those rates have been coming back at 40% – 50% higher. [Note: Groups under 50 are subject to underwriting based upon the medical health of their employees. Insurance companies can choose to keep the quoted rate the same or rate the entire group up to 67% higher than the quote based upon the health of the group]. I’ve taken the same set of applications to BCBS and 3 other carriers. BCBS is an expected 45% rate increase, the second company was 15% rate increase, and the final two carriers were a 0% rate increase.

Final Thoughts

Personally, I love the business of health insurance, using a consultative model to assist clients (both individuals and businesses) find the best coverage for the best rate. It is fun looking at creative options that benefit both the employer and employee yet still retain high quality coverage and educating clients on the market, trends, and impacts of new laws. My clients are interesting, funny, and committed to their businesses. As they grow, I grow with them. As they experience downturns, so do I. We share leads, tips, and other information.

As the rules are written for the 2400 page tome plus 153 page sidecar bill of the PPACA, it is safe to say that all the rules are changing. Nobody really knows how this new law will turn out as the rules are the interpretation of the law, so without the rules, nobody can say definitively what is intended. Couple this with elections this year and we’ve got ourselves the biggest roller coaster ride of our generation. At this point in time, all we can do is to hold on, keep up with the changes, and try to have our words heard by our legislators.

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(Original link is: http://www.irs.gov/newsroom/article/0,,id=220839,00.html)

Page Last Reviewed or Updated: March 31, 2010

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March 22, 2010 

Title I – Coverage, Medicare, Medicaid and Revenues

Subtitle A – Coverage

Sec. 1001.  Affordability.  Improves the financing for premiums and cost sharing for individuals with incomes up to 400% of the federal poverty level.  Subsection (a) improves tax credits to make premiums more affordable as a percent of income; and subsection (b) improves support for cost sharing, focusing on those with incomes below 250% of the federal poverty level.  Starting in 2019, constrains the growth in tax credits if premiums are growing faster than the consumer price index, unless spending is more than 10% below current CBO projections.

Sec. 1002.  Individual responsibility.  Modifies the assessment that individuals who choose to remain uninsured pay in three ways: (a) exempts the income below the filing threshold, (b) lowers the flat payment from $495 to $325 in 2015 and from $750 to $695 in 2016 and (c) raises the percent of income that is an alternative payment amount from 0.5 to 1.0% in 2014, 1.0 to 2.0% in 2015, and 2.0 to 2.5% for 2016 and subsequent years to make the assessment more progressive.

Sec. 1003.  Employer responsibility.  Improves the transition to the employer responsibility policy for employers with 50 or more full-time equivalent workers (FTE) by subtracting the first 30 full time employees from the payment calculation (e.g., a firm with 51 workers that does not offer coverage will pay an amount equal to 51 minus 30, or 21 times the applicable per employee payment amount). The provision also changes the applicable payment amount for firms with more than 50 FTEs that do not offer coverage to $2,000 per full-time employee.  It also eliminates the assessment for workers in a waiting period, while maintaining the 90-day limit on the length of any waiting period beginning in 2014.

Sec. 1004.  Income definitions.  Modifies the definition of income that is used for purposes of subsidy eligibility and the individual responsibility requirement.  The modifications conform the income definition to information that is currently reported on the Form 1040 and to the present law income tax return filing thresholds.  The provision also extends the exclusion from gross income for employer provided health coverage for adult children up to age 26.

Sec. 1005.  Implementation funding.  Provides $1 billion to the Secretary of Health and Human Services to finance the administrative costs of implementing health insurance reform.

Subtitle B – Medicare

Sec. 1101.  Closing the Medicare prescription drug “donut hole”.  Provides a $250 rebate for all Medicare Part D enrollees who enter the donut hole in 2010.  Builds on pharmaceutical manufacturers’ 50% discount on brand-name drugs beginning in 2011 to completely close the donut hole with 75% discounts on brand-name and generic drugs by 2020.

Sec. 1102.  Medicare Advantage payments.  Freezes Medicare Advantage payments in 2011.  Beginning in 2012, the provision reduces Medicare Advantage benchmarks relative to current levels.  Benchmarks will vary from 95% of Medicare spending in high-cost areas to 115% of Medicare spending in low-cost areas.  The changes will be phased-in over 3, 5 or 7 years, depending on the level of payment reductions.  The provision creates an incentive system to increase payments to high-quality plans by at least 5%.  It also extends CMS authority to adjust risk scores in Medicare Advantage  for observed differences in coding patterns relative to  fee-for-service.

Sec. 1103.  Savings from limits on MA plan administrative costs.  Ensures Medicare Advantage plans spend at least 85% of revenue on medical costs or activities that improve quality of care, rather than profit and overhead.

Sec. 1104.  Disproportionate share hospital (DSH) payments. Advances Medicare disproportionate share hospital cuts to begin in fiscal year 2014 but lowers the ten-year reduction by $3 billion.

Sec. 1105.  Market basket updates.  Revises the hospital market basket reduction that is in addition to the productivity adjustment as follows: -0.3 in FY14 and -0.75 in FY17, FY18 and FY19.   Removes Senate provision that eliminates the additional market basket for hospitals based on coverage levels.  Providers affected are inpatient hospitals, long-term care hospitals, inpatient rehabilitation facilities, psychiatric hospitals and outpatient hospitals.

Sec. 1106.  Physician ownership-referral.  Changes to December 31, 2010 the date after which physician ownership of hospitals to which they self refer is prohibited and provides a limited exception to the growth restrictions for grandfathered physician owned hospitals that treat the highest percentage of Medicaid patients in their county (and are not the sole hospital in a county).

Sec. 1107.  Payment for Imaging Services. Sets the assumed utilization rate at 75 percent for the practice expense portion of advanced diagnostic imaging services. 

Subtitle C – Medicaid

Sec. 1201. Federal funding for States. Strikes the provision for a permanent 100% federal matching rate for Nebraska for the Medicaid costs of expansion populations. Provides federal Medicaid matching payments for the costs of services to expansion populations at the following rates in all states: 100% in 2014, 2015, and 2016; 95% in 2017; 94% in 2018; 93% in 2019; and 90% thereafter. In the case of expansion states, reduces the state share of the costs of covering nonpregnant childless adults by 50% in 2014, 60% in 2015, 70% in 2016, 80% in 2017, 90% in 2018. In 2019 and thereafter, expansion states would bear the same state share of the costs of covering nonpregnant childless adults as non-expansion states (e.g., 7% in 2019, 10% thereafter).

Sec. 1202. Payments to primary care physicians.  Requires that Medicaid payment rates to primary care physicians for furnishing primary care services be no less than 100% of Medicare payment rates in 2013 and 2014 (the first year of the Senate bill’s   Medicaid coverage expansion to all individuals with incomes under 133% of poverty).  Provides 100% federal funding for the incremental costs to States of meeting this requirement.

Sec. 1203.  Disproportionate share hospital payments.  Lowers the reduction in federal Medicaid DSH payments from $18.1 billion to $14.1 billion and advances the reductions to begin in fiscal year 2014.  Directs the Secretary to develop a methodology for reducing federal DSH allotments to all states in order to achieve the mandated reductions.  Extends through FY 2013 the federal DSH allotment for a state that has a $0 allotment after FY 2011.

Sec. 1204.  Funding for the territories.  Increases federal funding in the Senate bill for Puerto Rico, Virgin Islands, Guam, American Samoa, and the Northern Marianas Islands by $2 billion.  Raises the caps on federal Medicaid funding for each of the territories.  Allows each territory to elect to operate a Health Benefits Exchange.

Sec. 1205. Delay in Community First Choice Option. Postpones from October 1, 2010 until October 1, 2011 the effective date of the option established for State Medicaid programs to cover attendant care services and supports for individuals who require an institutional level of care

Sec. 1206.  Drug rebates for new formulations of existing drugs.  For purposes of applying the additional rebate, narrows the definition of a new formulation of a drug to a line extension of a single source or innovator multiple source drug that is an oral solid dosage form of the drug.

Subtitle D – Reducing  Fraud, Waste, and Abuse

Sec. 1301.  Community Mental Health Centers.  Establishes new requirements for community mental health centers that provide Medicare partial hospitalization services in order to prevent fraud and abuse.

Sec. 1302. Medicare prepayment medical review limitations. Streamlines procedures to conduct Medicare prepayment reviews to facilitate additional reviews designed to reduce fraud and abuse.

Sec. 1303. CMS-IRS data match to identify fraudulent providers.  Allows the Secretary of Treasury to share IRS data with HHS employees to help screen and identify fraudulent providers or providers with tax debts, and to help recover such debts.  Provides strict controls on the use of such information to protect taxpayer privacy.

Sec. 1304.  Funding to fight fraud, waste and abuse.  Increases funding for the Health Care Fraud and Abuse Control Fund by $250 million over the next decade.  Indexes funds to fight Medicaid fraud based on the increase in the Consumer Price Index.

Sec. 1305.  90-day period of enhanced oversight for initial claims of DME suppliers. Requires a 90-day period to withhold payment and conduct enhanced oversight in cases where the HHS Secretary identifies a significant risk of fraud among DME suppliers.

Subtitle E – Revenues

Sec. 1401.  High-cost plan excise tax.  Reduces the revenue collected by the tax by 80 percent.   This is achieved by:  delaying the application of the tax until 2018, which gives the plans time to implement and realize the cost savings of reform; increasing the dollar thresholds to $10,200 for single coverage and $27,500 for family coverage ($11,850 and $30,950 for retirees and employees in high risk professions);  excluding stand-alone dental and vision plans from the tax; and permitting an employer to reduce the cost of the coverage when applying the tax if the employer’s age and gender demographics are not representative of the age and gender demographics of a national risk pool.  Under the modified provision, the dollar thresholds are indexed to inflation and the dollar thresholds are automatically increased in 2018 if CBO is wrong in its forecast of the premium inflation rate between now and 2018.

Sec. 1402.  Medicare tax.  Modifies the tax to include net investment income in the taxable base.  Currently, the Medicare tax does not apply to net investment income.    The Medicare tax on net investment income does not apply if modified adjusted gross income is less than $250,000 in the case of a joint return, or $200,000 in the case of a single return.  Net investment income is interest, dividends, royalties, rents, gross income from a trade or business involving passive activities, and net gain from disposition of property (other than property held in a trade or business).  Net investment income is reduced by properly allocable deductions to such income. 

Sec. 1403.  Delay of the annual limitation on contributions to a health FSA.  Delays the provision by two years until 2013.

Sec. 1404.  Brand name pharmaceuticals.  Delays the industry fee on sales of brand name pharmaceuticals for use in government health programs by one year to 2011, and increases revenue raised by the fee by $4.8 billion.

Sec. 1405.  Excise tax on medical device manufacturers.  Delays the tax by two years to 2013 and converts the industry fee to an excise tax on the first sale for use of medical devices at a rate of 2.9 percent.  Exempts from the tax Class I medical devices, eyeglasses, contact lenses, hearing aids, and any device of a type that is generally purchased by the public at retail for individual use.

Sec. 1406.  Health insurance providers.   Delays the industry fee by 3 years to 2014 and modifies the annual industry fee for revenue neutrality.  In the case of tax-exempt insurance providers, provides that only 50 percent of their net premiums that relate to their tax-exempt status are taken into account in calculating the fee.  Provides exemptions for voluntary employee benefit associations (VEBAs) and nonprofit providers more than 80 percent of whose revenues is received from Social Security Act programs that target low income, elderly, or disabled populations.

Sec. 1407.  Delay of elimination of deduction for expenses allocable to Medicare part D subsidy.  Delays the provision by two years to 2013. 

Sec. 1408.  Elimination of unintended application of cellulosic biofuel producer credit. Adds an additional revenue provision.  In 2008, Congress enacted a $1.01 per gallon tax credit for the production of biofuel from cellulosic feedstocks in order to encourage the development of new production capacity for biofuels that are not derived from food source materials.  Congress is aware that some taxpayers are seeking to claim the cellulosic biofuel tax credit for unprocessed fuels, such as black liquor.  The provision would limit eligibility for the tax credit to processed fuels (i.e., fuels that could be used in a car engine or in a home heating application). 

Sec. 1409.  Codification of economic substance doctrine and penalties.  Adds an additional revenue provision.  The economic substance doctrine is a judicial doctrine that has been used by the courts to deny tax benefits when the transaction generating these tax benefits lacks economic substance.  The courts have not applied the economic substance doctrine uniformly. The provision would clarify the manner in which the economic substance doctrine should be applied by the courts and would impose a penalty on understatements attributable to a transaction lacking economic substance. 

Sec. 1410.  Time for payment of corporate estimated taxes.  Provides for a one-time adjustment to corporate estimated taxes for payments made during calendar year 2014. 

Sec. 1411.  No impact on Social Security trust funds.  Provides that Title II of the Social Security Act (the old age, survivor, and disability benefits program (OASDI)) is not amended or modified by the bill.

Subtitle F – Other Provisions

Sec. 1501.  TAA for communities. Appropriates $500 Million a year for fiscal years 2010 through 2014 in the Community College and Career Training Grant program for community colleges to develop and improve educational or career training programs. Ensures that each state receives at least 0.5 percent of the total funds appropriated.

Title II – Health, Education, Labor, and Pensions

Subtitle A – Education

Section 2001. Short Title; References. Provides that this subtitle may be cited as the “SAFRA Act,” and that, except as otherwise provided, whenever an amendment to, or repeal of, a section or other provision, the reference shall be considered to be made to a section or other provision of the Higher Education Act of 1965.

Part I-Investing in Students and Families

Section 2101. Federal Pell Grants.  Amends the Higher Education Act to include mandatory funding for the Pell Grant.  This provides additional mandatory funding to augment funds appropriated to increase the federal maximum Pell Grant award by the change in the Consumer Price Index.  The mandatory component of the funding is determined by inflating the previous year’s total and subtracting the maximum award provided for in the appropriations act for the previous year or $4860, whichever is greater.  Beginning in the 2018-2019 academic year, the maximum Pell award will be at the 2017-2018 level.

Section 2102. Student Financial Assistance.  This section provides $13.5 billion in mandatory appropriations to the Federal Pell Grant program.

Section 2103. College Access Challenge Grant Program.  This section amends section 786 of the Higher Education Act by authorizing and appropriating $150 million for fiscal years 2010 through 2014 for the College Access Challenge Grant program created under the College Cost Reduction and Access Act of 2007.  Provides that the allotment for each State under this section for a fiscal year shall not be an amount that is less than 1.0 percent of the total amount appropriated for a fiscal year.

Section 2104.  Investment in Historically Black Colleges and Universities and Minority Serving Institutions.  This section amends section 371(b) of the Higher Education Act by extending funding for programs under this section created under the College Cost Reduction and Access Act of 2007 for programs at Historically Black Colleges and Universities and minority-serving institutions through 2019, including programs that help low-income students attain degrees in the fields of science, technology, engineering or mathematics by the following annual amounts: $100 million to Hispanic Serving Institutions, $85 million to Historically Black Colleges and Universities, $15 million to Predominantly Black Institutions, $30 million to Tribal Colleges and Universities, $15 million to Alaska, Hawaiian Native Institutions, $5 million to Asian American and Pacific Islander Institutions, and $5 million to Native American non-tribal serving institutions.

Part II-Student Loan Reform

Section 2201.  Termination of Federal Family Education Loan Appropriations.  This section terminates the authority to make or insure any additional loans in the Federal Family Education Loan program after June 30, 2010.

Section 2202. Termination of Federal loan Insurance Program.  This section is a conforming amendment with regard to the termination of the FFEL program, limiting Federal insurance to those loans in the Federal Family Education Loan program for loans first disbursed prior to July 1, 2010.

Section 2203. Termination of Applicable Interest Rates.  This section makes a conforming amendment with regard to the termination of the FFEL program limiting interest rate applicability to Stafford, Consolidation, and PLUS loans to those loans made before July 1, 2010.

Section 2204. Termination of Federal payments to Reduce Student Interest Costs.  This section makes a conforming amendment with regard to the termination of the FFEL program by limiting subsidy payments to lenders for those loans for which the first disbursement is made before July 1, 2010.

Section 2205. Termination of FFEL PLUS Loans.  This section makes a conforming change with regard to the termination of the FFEL program for federal PLUS loans by prohibiting further FFEL origination of loans after July 1, 2010.

Section 2206. Federal Consolidation Loans.  This section makes conforming changes with regard to the termination of the FFEL program for federal consolidation loans.  This section also provides that, for a 1 year period, borrowers who have loans under both the Direct Lending program and the FFEL program, or who have loans under either program as well as loans that have been sold to the Secretary, may consolidate such loans under the Direct Lending program regardless of whether such borrowers have entered repayment on such loans.

Section 2207. Termination of Unsubsidized Stafford loans for Middle-Income Borrowers.  This section makes conforming changes with regard to the termination of the FFEL program for Unsubsidized Stafford loans by prohibiting further FFEL origination of loans after July 1, 2010.      

Section 2208. Termination of Special Allowances.  This section makes conforming changes with regard to the termination of the FFEL program by limiting special allowance payments to lenders under the FFEL program to loans first disbursed before July 1, 2010.

Section 2209. Origination of Direct Loans at Institutions Outside the United States.  This section provides for the origination of federal Direct Loans at institutions located outside of the United States, through a financial institution designated by the Secretary. 

Section 2210.  Conforming amendments.  This section makes conforming technical changes with regard to the termination of the FFEL program for Department of Education agreements with Direct Lending institutions.

Section 2211. Terms and Conditions of Loans.  This section makes conforming technical changes with regard to the termination of the FFEL program to clarify the terms and conditions of Direct Loans.

Section 2212. Contracts.  This section directs the Secretary to award contracts for servicing federal Direct Loans to eligible non-profit servicers.  In addition, this section provides that for the first 100,000 borrower loan accounts, the Secretary shall establish a separate pricing tier.  Specifies that the Secretary is to allocate the loan accounts of 100,000 borrowers to each eligible non-profit servicer.  The section also permits the Secretary to reallocate, increase, reduce or terminate an eligible non-profit servicer’s allocation based on the performance of such servicer.  In addition, this section appropriates mandatory funds to the Secretary to be obligated for administrative costs of servicing contracts with eligible non-profit servicers.  This section also requires the Secretary to provide technical assistance to institutions of higher education participating or seeking to participate in the Direct Lending program.  This section appropriates $50 million for fiscal year 2010 to pay for this technical assistance. Additionally, this section authorizes the Secretary to provide payments to loan servicers for retaining jobs at location in the United States where such servicers were operating on January 1, 2010.  This section appropriates $25,000,000 for each of fiscal years 2010 and 2011 for such purpose.

Section 2213.  Agreements with State-Owned Banks.   This section amends Part D of Title IV to direct the Secretary to enter into an agreement with an eligible lender for the purpose of providing Federal loan insurance on student loans made by state-owned banks.

Section 2214.  Income-Based Repayment.  The section amends the Income-Based Repayment program to cap student loan payments for new borrowers after July 1, 2014 to 10% of adjusted income, from 15% percent, and to forgive remaining balances after 20 years of repayment, from 25 years.

Subtitle B – Health

Sec. 2301.  Insurance Reforms.  Extends the prohibition of lifetime limits, prohibition on rescissions, and a requirement to provide coverage for non-dependent children up to age 26 to all existing health insurance plans starting six months after enactment. Starting in 2014, extends the prohibition on excessive waiting periods to existing health plans. For group health plans, prohibits pre-existing condition exclusions in 2014 (for children, they are prohibited starting six months after enactment), restricts annual limits beginning six months after enactment, and prohibits them starting in 2014. For coverage of non-dependent children prior to 2014, the requirement on group health plans is limited to those adult children without an employer offer of coverage.

Sec. 2302.  Drugs Purchased by Covered Entities.  Repeals the underlying 340B expansion to inpatient drugs and exemptions to GPO exclusion.  Exempts orphan drugs from required discounts for new 340B entities. 

Sec. 2303.  Community Health Centers.  Increases mandatory funding for community health centers to $11 billion over five years (FY 2011 – FY 2015).

Prepared by Committees on Ways & Means, Energy & Commerce, and Education & Labor, March 18, 2010

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If you are not currently a member, but apply now and are approved before the 3/31 end date, you can then supposedly add your dependent onto your policy.

This is huge for people with uninsurable children. Contact me for details.

Robert Slayton
robert[at]robertslayton.com

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Illinois Insurance Facts

Illinois Department of Insurance

Federal Stimulus – Premium Reduction for Group Continuation Coverage

Updated December 23, 2009

Note: This information was developed to provide consumers with general information and guidance about insurance coverages and laws. It is not intended to provide a formal, definitive description or interpretation of Department policy. For specific Department policy on any issue, regulated entities (insurance industry) and interested parties should contact the Department.

On February 17, 2009, President Barack Obama signed the American Recovery and Reinvestment Act (“ARRA”), commonly called the Stimulus Plan. ARRA provides a subsidy that may reduce by 65% the cost of COBRA and other state group continuation coverage for workers who lose their jobs.

On December 19, 2009, President Obama signed Public Law 111-118 (the “ARRA Subsidy Extension”), which amended ARRA to increase the maximum duration of the subsidy from 9 to 15 months, and to extend the eligibility period from December 31, 2009, to February 28, 2010.

What Are Group Continuation Laws?

Group continuation laws require employers to offer employees who lose group coverage the opportunity to continue their employer-based health insurance.

•COBRA is the federal law that applies to employer groups with 20 or more full-time employees on more than 50% of the business days in the prior calendar year, and to group plans offered by state and local governments.

•State continuation law (“mini-COBRA”) applies to fully insured group plans of any size, including employers with 19 or fewer employees.

If you are uncertain about which law(s) applies to your group plan, contact your employer or the U.S. Department of Labor at 1-866-444-3272.

NOTE: This fact sheet focuses on the premium reductions provided under ARRA. For more detailed information about your rights under federal and state continuation laws, including recent changes to the State mini-COBRA law made by Public Act 096-0013 (signed into law by the Governor on June 18, 2009), please refer to the Department of Insurance consumer fact sheets titled “Health Insurance Continuation Rights – COBRA” and “Health Insurance Continuation Rights – Illinois Law.”

When an Employee Loses Group Coverage and Elects Continuation, Who Pays the Premium?

Normally it is the employee who lost group coverage, not the employer, who must pay the entire health insurance premium.

Who is Eligible for Premium Reductions Under ARRA?

Individuals who lose group health coverage because of an involuntary termination (“former employees”) between September 1, 2008, and February 28, 2010, may be eligible for a 65% reduction of their COBRA or mini-COBRA premiums for up to 15 months.

The premium reduction is not available to workers whose modified adjusted gross income in the year they receive the premium reduction exceeds $145,000 for individuals and $290,000 for couples filing joint tax returns. The premium reduction will be phased out for individuals whose modified adjusted gross income is between $125,000 and $145,000 and for couples between $250,000 and $290,000. If an individual takes advantage of the premium reduction and in the same year exceeds the income limit, he or she must repay the amount of the premium reduction. We encourage individuals and couples to confirm eligibility with a tax specialist.

Who Will Benefit from the ARRA Subsidy Extension?

P.L. 111-118, enacted on December 19, 2009, extended the maximum duration of the premium reduction from 9 to 15 months. Even those individuals who, prior to the enactment of P.L. 111-118, lost eligibility for the premium reduction due to the end of the 9-month period may be eligible for the additional 6 months of subsidized premiums.

•Eligible individuals who chose to continue coverage after the 9-month premium reduction period must receive a refund or credit for premiums paid in excess of the reduced premium rate.

•Eligible individuals who did not pay the premium for a period of coverage beginning after the 9-month premium reduction period must be allowed to continue their coverage by making a retroactive payment. Such payment must be made by February 17, 2010, or within 30 days of receiving the notice described below, whichever is later.

How Do Individuals Sign Up for the Premium Reduction?

Eligible individuals will receive a notice with general information about the premium reduction under ARRA and a form to request the premium reduction.

For group plans subject to federal COBRA requirements, written notice must be provided by the former employer.

•Former employees who lose group health coverage will receive notification and enrollment forms allowing them to continue their group coverage and to request the premium reduction.

For group plans subject only to state mini-COBRA requirements (i.e., employers with 19 or fewer employees), written notice must be provided by the insurer providing coverage under the group plan.

•Former employees who lose group health coverage will receive written notice allowing them to request the premium reduction. This notice must be provided within 10 days of the involuntary termination.

The ARRA Subsidy Extension (P.L. 111-118) requires insurers and employers to provide additional information to former employees about the changes made by the new law, including the extension of the premium reduction period and the option for eligible individuals to make retroactive premium payments. Guidance for insurers and employers on these new notification requirements can be found on the Department’s website at http://insurance.illinois.gov/ModelNotices/COBRA.

If you have questions about the notices described above, you can contact your former employer or the insurer providing coverage under your group health plan. For plans subject to federal COBRA requirements, you may also contact the federal Department of Labor at 1-866-444-3272 or visit the agency’s website (http://www.dol.gov/ebsa/COBRA.html). For plans subject only to state mini-COBRA requirements, you may contact the Illinois Department of Insurance (“Department”) at 1-877-527-9431 or visit our website at http://insurance.illinois.gov/ModelNotices/COBRA.

MODEL NOTICES:

•The Department of Labor (DOL) has published Model Notices for employers to use when providing the notifications required by ARRA. Employers can download copies of these Model Notices from the DOL website at http://www.dol.gov/ebsa/COBRAmodelnotice.html.

•The Department of Insurance has created a state-specific Model Notice for use by insurers providing coverage subject only to state mini-COBRA requirements. These model notices are available on the Department’s website at http://insurance.illinois.gov/ModelNotices/COBRA/.

How will the Premium Reduction be Applied to Group Continuation Coverage?

Former employees who qualify for the premium reduction will only be required to pay 35% of the group coverage continuation premium. The remaining 65% will initially be paid by:

• the former employer, if the employer had 20 or more employees on more than 50% of the business days in the prior calendar year and is subject to federal COBRA provisions; or

• the insurer providing coverage under the group health plan, for those employers with fewer than 20 employees subject solely to mini-COBRA requirements.

The former employer or the insurer will then be reimbursed by the federal government through a reduction in payroll taxes.

What if an Employer or Insurer Refuses to Provide the Premium Reduction?

ARRA provides for expedited reviews if an employer or insurer denies an individual’s application for the premium reduction. Once the denied individual submits an appeal for review, the Department of Labor or the Center for Medicare and Medicaid Services (CMS) will make an eligibility determination within 15 business days.

DOL will handle appeals related to private sector employers subject to federal COBRA provisions (i.e., employers with 20 or more employees). For more information or to submit an appeal, please visit the DOL’s website at http://www.dol.gov/ebsa/COBRA/main.html or call a DOL benefits advisor toll-free at (866) 444-3272.

CMS will handle appeals related to state mini-COBRA plans, as well as appeals for Federal, State, or local governmental employees. For more information or to submit an appeal, please contact the CMS-sponsored help desk toll-free at (866) 400-6689 or via e-mail at continuationcoverage@maximus.com.

Will Individuals be Eligible for the Premium Reduction for as Long as They Are Eligible for Group Continuation Coverage?

The premium reduction will not necessarily last as long as your group continuation coverage. For example, former employees typically qualify for up to 18 months of federal COBRA coverage. The premium reduction lasts only up to 15 months. Therefore, an eligible individual who chooses to pay for 18 months of COBRA coverage would still have to pay 3 months of unsubsidized premiums.

Can an Individual Lose Eligibility for the Premium Reduction?

You can lose eligibility for the premium reduction in two ways. First, the premium reduction lasts only as long as you are eligible for group continuation coverage, but in no event longer than 15 months. Second, you become ineligible for the premium reduction when you become eligible for new group health coverage or Medicare.

•Beneficiaries must notify their former employer when they become eligible for new group health coverage.

•Beneficiaries who willfully neglect to notify their former employer of their eligibility for a new group health plan must repay 110% of the amount of the premium reduction to the federal government. No such penalty shall be imposed if the beneficiary demonstrates “reasonable cause” for the failure.

NOTE:  Eligibility rules for the premium reduction differ from rules governing eligibility for COBRA coverage generally. Eligibility for COBRA continuation coverage ends only when a beneficiary enrolls in new group coverage or Medicare. However, simply being eligible for new group health coverage disqualifies an individual from receiving the premium reduction.

Does the Premium Reduction Apply to Group Continuation Coverage other than COBRA?

The premium reduction under ARRA applies to both federal COBRA continuation coverage and to comparable state continuation coverage known as “mini-COBRA” (215 ILCS 5/367e). ARRA does not apply to the state’s spousal continuation law or dependent continuation law. For more information about these laws, please refer to the Department of Insurance consumer fact sheet titled “Health Insurance Continuation Rights – Illinois Law.”

Does ARRA Extend the Length of Available Group Continuation Coverage?

ARRA itself does not change the length of time that group continuation coverage must be provided to eligible individuals: COBRA typically provides for up to 18 months of coverage, while mini-COBRA had provided for up to 9 months of coverage.

The period of coverage required under the state mini-COBRA law, however, was recently increased from 9 months to 12 months by Public Act 96-0013. All group plans subject to the law that are issued, delivered, amended or renewed after June 18, 2009, must provide for up to 12 months of continuation coverage. If an individual is currently receiving mini-COBRA coverage and the employer’s policy is renewed after June 18, 2009, the individual would be entitled to the additional 3 months of coverage, regardless of the date the individual first elected mini-COBRA coverage.

Who is Eligible for a Second Opportunity to Continue Group Coverage and Receive the Premium Reduction?

ARRA required a “second election period” so that former employees who lost group coverage prior to ARRA’s enactment and who initially chose not to continue their coverage, or chose to continue coverage and later stopped paying premiums, were given a second chance to continue their group coverage and receive the premium reduction. Individuals whose former employer is subject to federal COBRA provisions (i.e., employers with 20 or more employees) and who lost group coverage due to an involuntary termination that took place between September 1, 2008 and February 16, 2009, should have received notice of this second election period from their former employer by April 18, 2009. Former employees then had 60 days after receiving this notice to elect continuation coverage and request the premium reduction.

After the enactment of ARRA, Illinois passed a law (Public Act 096-0013) providing a similar second election period for Illinois employees of small businesses (i.e., employers with 19 or fewer employees). Former employees who lost group coverage due to an involuntary termination that took place after September 1, 2008, and who did not have continuation coverage in effect as of June 18, 2009, were eligible for this second election period. These individuals should have received notice from the insurer providing group coverage by July 18, 2009, and would then have 60 days after receiving notice to elect continuation coverage and request the premium reduction.

If you believe you were eligible for the second election period and did not receive notice, you can contact your former employer or the insurer providing coverage under your group health plan. For plans subject to federal COBRA requirements, you may also contact the federal Department of Labor at 1-866-444-3272 or visit the agency’s website (http://www.dol.gov/ebsa/COBRA.html). For plans subject only to state mini-COBRA requirements, you may contact the Illinois Department of Insurance (“Department”) at 1-877-527-9431 or visit our website at http://insurance.illinois.gov.

Does the Premium Reduction Affect Eligibility for other Income-Based Government Programs?

The amount of the premium reduction will not be counted as income in determining eligibility for, or assistance provided under, any other federal or state program.

Does ARRA Affect Individuals Who Qualify for COBRA Due to Eligibility for Trade Adjustment Assistance or Eligibility for Benefits from the Pension Benefit Guaranty Corporation?

ARRA provides significant extensions of COBRA coverage periods for individuals who receive benefits directly from the Pension Benefit Guaranty Corporation or are eligible for Trade Adjustment Assistance. If you have additional questions about these extensions, contact the federal Department of Labor at 1-866-444-3272 or visit the agency’s website (http://www.dol.gov/ebsa/COBRA.html).

For More Information

Call the Department of Insurance Consumer Services Section at (866) 445-5364 or our Office of Consumer Health Insurance at (877) 527-9431 or visit our website at http://insurance.illinois.gov

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News Statement

Release Date: December 21, 2009
Contact Name: Gloria Della or Joseph De Wolk
Phone Number: 202.725.8422/202.579.4681

Statement of Phyllis C. Borzi on COBRA subsidy extension

Washington, DC – Phyllis C. Borzi, Assistant Secretary of the Employee Benefits Security Administration (EBSA) today released the following statement regarding the Consolidated Omnibus Budget Reconciliation Act (COBRA) and the recent extension of the premium reduction under the COBRA subsidy:

“I am pleased Congress has acted and the President has signed the Fiscal Year 2010 Defense Appropriations Act. The act extends the eligibility period for the COBRA premium reduction for an additional two months (through Feb. 28, 2010) and the maximum period for receiving the subsidy for an additional six months (from nine to 15 months). Millions of unemployed Americans and their families will be better able to afford and keep their health benefit coverage because of this new law.

“Individuals who had reached the end of the reduced premium period before the legislation extended it to 15 months will have additional time to pay the reduced premiums related to the extension. To continue their coverage they must pay the 35% of premium costs by (60 days after date of enactment) or, if later, 30 days after notice of the extension is provided by their plan administrator.

“We encourage you to subscribe to our COBRA Web site, www.dol.gov/cobra, to get information on new notice requirements, updated guidance, fact sheets, and frequently asked questions as they become available.

“Individuals should contact their plan or health insurance provider for information regarding the extension under their health plan. If you need further assistance contact an EBSA Benefits Advisor toll-free at 1-866-444-3272.”

U.S. Department of Labor news releases are accessible on the Department’s Newsroom page. The information in this news release will be made available in alternate format (large print, Braille, audio tape or disc) from the COAST office upon request. Please specify which news release when placing your request at 202.693.7828 or TTY 202.693.7755. The Labor Department is committed to providing America’s employers and employees with easy access to understandable information on how to comply with its laws and regulations. For more information, please visit the Department’s Compliance Assistance page.

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