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The New Health Care Law. What Does it Mean for Me & My Authority? Robert E. Hagan, Jr., CPA American HealthCare Group Pittsburgh, PA. Background Information. Health Care Professionals Financial Background. History of Health Care Reform. History of Health Care Reform. Goals

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the new health care law

The New Health Care Law

What Does it Mean for Me & My Authority?

Robert E. Hagan, Jr., CPA

American HealthCare Group

Pittsburgh, PA

background information
Background Information
  • Health Care Professionals
  • Financial Background

history of health care reform1
History of Health Care Reform
  • Goals
    • Uninsured access to high quality, affordable health care
    • Reduction of cost of health care coverage
    • Promote wellness & change lifestyles
  • Consequences
    • Many changes will come as implementation proceeds and states digest costs

history of social legislation
History of Social Legislation
  • 1913: Establishment of IRS
  • 1935: Social Security Administration
  • 1948: Health Insurance as an Employee Benefit
  • 1965: Medicare & Medicaid
  • 1973: HMO Act
  • 1974: ERISA
  • 1985: PPOs
  • 1994: Managed Care Initiatives
  • 1996: HIPAA
  • 1996: Community Health Centers
  • 2010: Patient Protection and Affordable Care Act

cost containment
Cost Containment
  • Health Care Professionals
  • System based on their advice, referrals

cost containment1
Cost Containment
  • Wellness
    • Use expertise to encourage prevention
    • Stats about Americans (WELCOA)
      • 83% don’t have a good diet
      • 65% are over weight or obese
      • 67% don’t get enough exercise to get the health benefits
      • Up to 70% of all causes of death are lifestyle related and preventable

entities affected by reform1





Foreign nationals

State governments

Federal government



Insurance companies

Pharmaceutical companies

Other health care professionals

Entities Affected by Reform

by the numbers
By the Numbers

40,000,000 uninsured

180,000,000 now insured

45,000,000 Medicare

45,000,000 Medicaid

310,000,000 people

the good the bad
What is good

Shrink costs by 33%

Universal Coverage

Mandatory Coverage

Move more people paying into the pool.

What is bad

Providers will come under intense pressure

Cost is unknown

Cost to administer will increase

Mandatory coverage

The Good & The Bad

current health care reform
Current Health Care Reform
  • The facts
    • Majority of doctors like reform
    • Healthcare system needed to be reformed
    • Cost unknown
    • Utility
    • Access to health care system
    • Creation of state-based exchanges for individuals and small businesses

tax consequences
Tax Consequences
  • 10% excise tax on indoor tanning – 6/30/2010
  • 0.9% Medicare tax on wages – 2013
  • 3.8% Medicare tax on unearned income
    • Single – over $200,000
    • Couples – over $250,000
  • Increase from 7.5% to 10% medical deductions floor – 2013

tax consequences1
Tax Consequences
  • 40% tax on high-cost health plans - 2018
    • Individuals - $10,200
    • Families - $27,500
  • Medical Device Companies – 2012
    • 2.3% tax
  • Pharmaceutical Companies
    • Annual Fees
  • Insurance Companies
    • Annual Fees
  • Long Term Care

public programs
Public Programs
  • CHIP
    • Continue current law through 2019
    • Increased federal subsidies
  • Medicare
    • Added coverage for annual physical exams and other preventive services
    • Eventual elimination of doughnut hole affecting 14%
      • 2010 – doughnut hole participants receive $250 rebate
      • 2011 – discounts and subsidies will decrease doughnut hole to 25% in 2010 from 100% today
  • Medicaid
    • Varies State by State
    • Expand Medicaid to 133% of the federal poverty level.

health insurance exchanges
Aimed at the now uninsured, underinsured and those who buy insurance on their own


State run or will be run by Feds

More organized and competitive market

Choice of Plan

Establish common rates regarding the offering

Understanding options

Common pricing methods

Way to achieve universal coverage

No national government plan

Cut out agents/brokers from commissions

Available to all individuals and small businesses of 100 employees or less

Could be lowered to 50 employees or less

Health Insurance Exchanges

health insurance exchanges1
Health Insurance Exchanges
  • Only US citizens and legal immigrants
  • At least 2 multi state insurers in each exchange
  • At least 1 non profit
  • 4 benefit tiers – bronze, silver, gold, platinum
  • Catastrophic – up to age 30
  • Require guarantee issue and renewability
  • Rating variation on age, geography, tobacco use

the business case for wellness
The Business Case for “Wellness”
  • Although we spend more dollars on health care than any other industrialized nation, we are not the healthiest.
  • Over 70% of illnesses today are attributable to preventable causes.
  • Obesity alone is estimated to cost an employer at least $460 per employee per year.
  • The workplace is the ideal setting to address an employee’s health & well-being.
  • Wellness programs should aim to reduce health benefits costs through SUSTAINED improvements in workforce health.
  • It is a long-term strategy that may not produce significant ROI in the short-term.

wellness and healthy lifestyles
Wellness and Healthy Lifestyles
  • Up to 30% of total premium discounts can be offered as incentives for employees maintaining a health standard. Can go to 50%.
  • Typical wellness initiatives
    • Blood testing
    • Body mass index (BMI)
    • Strength/flexibility
    • Education on Lifestyle/habits
      • Tobacco Cessation
      • Excessive Alcohol/Drugs
      • Weight control
      • Lack of Exercise

what to expect
What to Expect

10 or less employees

  • If average wage $25K or less, tax credit will be 35% of premium
  • Do not have to provide health insurance benefits

what to expect1
What to Expect
  • 24 or less employees
  • Small Business Health Care Tax Credit is available if average wage $50K or less – up to 35% of premium
  • Do not have to provide health insurance

what to expect2
What to Expect

49 employees or less

  • Do not have to provide health insurance

what to expect3
What to Expect

50 or more

  • If health insurance is not covered, will be assessed a fee of $2K per FTE. The first 30 FTE are excluded from assessment.
  • If health care is offered, but someone collects the premium tax credit, the employer is charged a fee of $3K/employee who accesses the credit or $2K for all employees.

what to expect4
What to Expect

201 and more

  • Employees must be automatically enrolled in the plan with an opt out option
  • Employees must be informed of the Health Insurance Exchange

  • No adequate coverage - 2014
    • 50 + employees - $2,000 per worker, not counting the first 30 workers

employer mandates
Employer Mandates
  • Free Choice Vouchers – if an employee opts out and their share of the premium is greater than 8%, but less than 9.8% of the employees household income and they buy through a Health Insurance Exchange
  • Inform employees of Health Insurance Exchange
  • Inform employees if they are eligible for premium assistance tax credits and cost-sharing reductions. Employer pays less than 60% of the cost of coverage.
  • A minimum package of benefits to be designed and defined by Feds. Only four types of plans to be allowed. The Health Insurance Exchange will only offer those qualified health benefit plans.
  • Effective 2014

  • Value of health benefit reportable on W-2’s – 2011
  • Elimination of Part D prescription drug deduction – 2013
  • Health Savings Accounts – double to 20% penalty for non qualified distributions – 2011
  • Unaffordable Coverage – if an employee opts out of plan because premium is greater than 9.5% of family income the employer pays a $3K penalty for each FTE who receives a government subsidy and buys through an exchange

  • Actuarial values – at least 60% of base plan
  • Cadillac plans – in 2018 a 40% excise tax on insurance companies and employers
  • FSA limits - $2.5K limit with no OTC, w/out a prescription
  • HSA – 20% penalty on non-medical distributions
  • W-2 – include value of employer health benefits
  • Long term care enrollment – optional program
  • Nursing mothers – must allow time, space and privacy to mothers who are expressing milk.

  • Small Business Tax Credit – Effective 1/1/2010
    • Receive both State and Federal Tax Credits
    • Non Profits – 25% credit – up to 35% in 2014
    • Dental & Vision Coverage eligible for credit
    • Credit – 35% of premiums – up to 50% in 2014


ABC, Inc. 10 FTE w/average wage: $24K

ABC’s contribution to health insurance: $100K ($10K/FTE)

State Small Business Health Care Tax Credit: $40K

Federal Tax Credit: $35K

  • Individual tax - $95 or 1% of income – 2014
  • Individual tax - $695 or 2.5% of income – 2016
    • Some exemptions: financial, short term loss of coverage (3 months)
  • Premium subsidy for individuals – 133 – 400% of federal poverty level - 2014
    • Singles – up to $44,000
    • Families – up to $88,000

  • Waiting period cannot exceed 90 days
  • Health insurance contract cannot be canceled other than fraud or intentional misrepresentation
  • No copayments or deductibles for preventive care and medical screenings
  • Group plans must:
    • Prohibit lifetime limits
    • Prohibit rescissions
    • Restrict annual limits
    • Include limitation on excessive waiting periods
    • Include coverage for non-dependent children under age 27
    • Prohibit pre-ex condition exclusions and prohibit annual limits

individuals residents

Wellness: Service Coordinator/Nurse Coordinator

strategic planning considerations
Strategic Planning Considerations
  • Senior management should make final decisions
  • Determine total annual budget for health plan
  • CFO – involved in analysis & plan selection
  • 3 Brokers/agents competing for your business
  • Assess employee’s health care needs
  • Review claims data annually
  • Wellness – assessment & incentives

strategic planning considerations1
Strategic Planning Considerations
  • Benefit Structure
    • Determine if existing benefit plan is aligned with prevention and wellness goals & objectives
    • Identify screens & tests not covered
    • Evaluate the potential costs and benefits of preventive services
  • Analyze employee attitudes
    • Interest in participating in specific programs
    • Barriers to participation in prevention programs
  • Perform a Health Risk Assessment
    • Health risks and habits of employees and other beneficiaries
    • Readiness to change unhealthy lifestyle habits

strategic planning considerations2
Strategic Planning Considerations
  • Medical claims analysis
    • Identify “top ten” costliest conditions
      • Are conditions preventable or related to lifestyle choices?
    • Understand services being under- and over-used by workforce population
  • Health plan
    • Understand existing health plans’ current and potential capabilities
      • Ability to incorporate coverage changes
      • Ability to track preventive service utilization by employer or by plan
      • Efforts to educate primary care physicians about appropriate preventive care benefit administration
      • Ability to support efforts to educate employees about preventive services
    • Identify possible gaps between prevention program goals and the capabilities of health plans
    • HIPAA Wellness Incentives

contact information
Contact Information

Bob Hagan

American HealthCare Group

1910 Cochran Road

Manor Oak One, Suite 405

Pittsburgh, PA 15220

Phone: (412)563-7804

Fax: (412)563-8319