COBRA Components

The plan includes provisions to help eligible jobless workers pay for health insurance under the COBRA revision. Available to employers with 20 or more employees, COBRA allows newly employed workers to keep health insurance provided by their former employers. Traditionally, these premiums have been cost prohibited.

Components Include:

• Premium Reduction/Subsidy: For workers who were involuntarily terminated between September 1, 2008 and December 31, 2009, the government will subsidize 65% of their premiums under COBRA for nine months. This subsidy also applies to healthcare continuation coverage if required by the state.
• Special Election Period: For workers who were involuntarily terminated between 9/1/2008 and the day the Stimulus Law goes into effect, and who did not sighn up for COBRA, will get an additional 60 days to do so and receive the subsidy.
• New Notification Period: Within 60 days of enactment, the Employer or COBRA Administrator shall provide an additional notification to any Assistance Eligible Employee who became entitled to elect COBRA before enactment of this law.
• Tax Credit for Employers: To offset the employer’s expense, the employer may take a full tax credit for its expenditures out of its payroll taxes including both income tax withholding and FICA
  High Income Exclusion: If the modified adjusted gross income (AGI) of a participant exceeds $125,000 per year, or a family’s AGI exceeds $250,000, their income tax will be raised by the premium reduction amount – effectively removing the subsidy.
• Plan Enrollment Option: Qualified Beneficiaries under the stimulus will have the option to change plans to another product offered by the Employer with the following requirements:
  1. Employer agrees to allow the change
  2. Premiums do not exceed existing plan

Business Impact

This law will have a direct impact on your businesses with regard to the administration of the employees healthcare benefits. In Compliance with the Law, employer groups must:

• Send a notice to involuntarily terminated employees since 9/1/2008 with a description of their rights and obligations regarding the subsidy
• Update all COBRA forms and enrollment materials to reflect the changes
• Or, if currently working with a COBRA Administrator, coordinate with the Administrator to send notices and update forms
• Take a full tax credit out of their payroll taxes for its expenditures associated with the subsidy. Organizations who outsource their payroll processing services should contact their payroll provider to ensure these tax credits are accounted for

Below is a high level overview of the timeline. Please note that some of these reforms and their effective dates are subject to the rules and regulations process at the state and federal levels — which could alter the timing of implementation.

2010 New Programs

• $250 rebate for Medicare members who reach the “doughnut hole”
• Temporary retiree reinsurance program is established
• National risk pool is created, small business tax credit is established

2010 Insurance Reforms

• Dependent coverage up to age 26
• Pre-existing condition exclusions for dependent children (under age 19 years of age) are prohibited
• Allows restricted annual limits on the dollar value of certain benefits
• New health plan disclosure and transparency requirements created
• Internal and External appeal processes must be established
• Coverage recissiions/cancellations are prohibited (Except for fraud or internal misrepresentation)
• Cost sharing obligations for preventative services are prohibited
• Small business tax credits to make employee coverage more affordable. Credits up to 35% of premiums will be immediately available to firms that choose coverage.
• Free preventative care under Medicare — eliminates co-payments

2011 Insurance Reforms

• Minimum medical loss ratios are mandated
• Uniform coverage documents are standard definitions are developed

2011 Medicare Reforms

• Medicare beneficiaries who reach the doughnut hole will receive a 50% discount on brand name drugs
• Medicare Advantage plans will begin to have their payments frozen
• Medicare Advantage cost sharing limits in effect
• 10% Medicare bonus will be provided to primary care physicians and general surgeons practicing in underserved areas, such as inner cities and rural communities

2011 Other Reforms

• Employers are required to report the value of health care benefits on employee’s W-2 tax forms
• Annual industry fee for pharmaceutical manufactures of brand name drugs
• Funding for community health centers would be increased to provide care for many low income and uninsured people
• Voluntary long term care insurance program would be made available to provide cash benefit for assisting disabled individuals to stay in their homes or cover nursing home costs — benefits starts 5 years after they begin paying a fee for coverage

2013 Insurance Reforms

• Individuals making $200,000 per year or couples making $250,000, would have a higher Medicare payroll tax of 2.35% on earned income — up from the current 1.45%. A new tax of 3.8% on unearned income, such as dividends and interest bearing accounts is also included
• Medical expense contributions to flexible spending accounts (FSA) limited to $2,500 a year — indexed for inflation. In addition, the thresholds for claiming itemized tax deduction for medical expenses rise from 7.5% to 10%
• Medical device manufacturers would have a 2.9% sales tax on medical devices. Eyeglasses, contact lenses and hearing aids would be exempt
• Eliminates deduction for expenses allocable to Medicare Part D subsidy for employers who maintain prescription drug plans for their Medicare Part D eligible retirees

2014 Insurance Reforms

• Individual and employer coverage responsibilities are effective
• Guaranteed issue, renewability, modified community rating and minimum standards are established
• Lifetime and annual dollar limits are prohibited for essential benefits
• Pre-existing condition exclusions are prohibited

2014 Taxes and Fees

• New taxes may be imposed on health carriers

2014 Medicare and Medicaid Reform

• Medicaid expanded to cover low income individuals under age 65 up to 133% of the federal poverty level — about $28,300 per year for a family of four or more
• Minimum medical loss ratio of 85% required for Medicare Advantage Plans

2018 Insurance Reform

• “Cadillac Tax” imposed on employer sponsored health insurance plans that offer policies with generous levels of coverage

• American Association of Health Plans

  1129 20th Street, NW — Suite 600

  Washington, DC 20036

  http://www.aahp.org

• Life and Health Foundation for Education

  2175 K Street, NW — Suite 250

  Washington, DC 20037

  http://www.life-line.org

• Health Insurance Association of America

  555 13th Street, NW — Suite 600 East

  Washington, DC 20046

  http://www.hiaa.org

• AETNA Health Plans: (888) 422-2128
• AVMED Health Plans: (800) 882-8633
• BCBS of Florida: (800) 477-3736
• CIGNA Health Plans: (866) 438-2446
• HUMANA Health Plans: (800) 833-6917
• Mutual of Omaha Medicare: (800) 693-6083
• UNITED Health Plans: (888) 842-4571

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If your group employs more than 20 employees throughout the prior year (full- or part-time), you will be offered the Federal Cobra option. If your group employs less than 20 full or part-time employees in the prior year, you will be offered the Mini-Cobra option, which is also called Florida Continuation.

As a COBRA recipient, you will be required to pay 100% of the monthly premium and possibly an administration fee. Health Insurance under COBRA is available if you are in these situations:

• You leave a company and become unemployed or self-employed for up to 18 months.
• You are a widow or widower or child of an employee who dies while working for the same company for three years or more.
• You are the divorced spouse or child of an employee who has left the company he or she was employed at for at least three years.
• You are the child of an employee who left a job and have not yet reached age 23.

NOTE: If you need COBRA benefits, you must fill out the appropriate forms from your employer’s benefits department within 60 days of leaving your job. If you do not act within that period of time, you may be denied coverage.

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Positives and Negatives of Owning an Individual Insurance Policy:

Positives

• Able to customize the plan to fit your needs
• Portability
• Rates can be very affordable compared to group rates
• Choose from many plan options (HMO/PPO/POS/Health Savings Account)
• Medical, Dental, Life and Disability options
• Major Carriers are regulated by the State of Florida Insurance Commissioner
• Individual/Family plans can be tax deductible for the self-employed

Negatives

• Rates are based on Age, Gender and Residing Zip Code
• All applicants are medically underwritten
• From the medical questionnaire the Carrier’s final determination can be a rejection, rider attached, a rate up or acceptance
• Maternity is usually not covered by most plans

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Here are some questions you should ask yourself when choosing a health insurance plan:

1. How affordable is the cost of care?

   • What is the monthly premium I will have to pay?
   • Should I try to insure most of my medical expenses or just the catastrophic expenses?
   • What deductibles will I have to pay out of pocket before the insurance plan starts paying?
   • After I have met my annual deductible, what coinsurance will I pay before my out of pocket maximum is met?
   • What expenses will I incur if I use out of network doctors and hospitals?

2. Does the insurance plan cover the services I am likely to use?

   • Are the doctors, hospitals, laboratories and other medical providers that I use in the plan’s network?
   • Do I have out of network benefits? If so, what are the deductibles and coinsurance expenses?
   • Is a primary care doctor needed for referrals?
   • What happens in the case of an emergency or urgent care situation out of network?
   • Are pre-existing conditions covered? If not, when will they be covered?
   • How can I find out if my prescriptions are covered and what tier level will I pay for my prescriptions.
   • Does the plan cover alternative medical therapies such as acupuncture or chiropractic treatments?
     Is Maternity covered?

3. What is the Quality of the Insurance Carrier which I have chosen?

   • How have independent government and non-government organizations rated the plan you have selected?

     For example, the National Committee for Quality Assurance (www.ncqa.org) issues a Consumer Assessment of Health Plans (CAHPS) report for every medical plan and facility.

   • What kind of accreditation has the plan received from groups such as NCQA or the Joint Commission on Accreditation of Healthcare Organizations (JCAHO)? (www.jcaho.org)
   • How many patient complaints were filed against the plan last year and how many were upheld by state regulatory agencies like the state insurance commission or the state medical licensing board?
   • Do the doctors, pharmacies and other services in the plan offer convenient times and locations?
   • Does the plan pay for preventive care such as diet and exercise advice, immunizations and yearly mammograms, yearly physicals and preventive colonoscopies.

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Although these plans differ, they both cover an array of medical, surgical and hospital expenses. Most cover prescription drugs and some offer dental coverage.

Fee for Service

These plans generally assume that the medical professional will be paid a fee for each service provided to the patient. Patients are seen by a doctor of their choice and the claim is filed by either the medical provider or the patient.

Managed Care (PPO/HMO/POS)

More than half of all Americans have some kind of managed care plan. Various plans work differently and can include: health management organizations (HMO), preferred provider organizations (PPO) or point of service plans (POS). These plans provide comprehensive health services to their members and offer financial incentives to patients who use the in network providers.

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