The Fact of the Month
Here’s something to talk about when you are discussing plan design options with your clients.
Have you been sticking your head in the sand when it comes to the impact artificial intelligence has on healthcare and the insurance industry? Better pull your head out. According to an Accenture Consulting study titled “Healthcare: Walking the AI Talk”, healthcare ranks as the top industry using artificial intelligence, and the insurance industry ranks 5th. Potential cost savings and health outcome improvements are why 72 percent of health insurance executives rank artificial intelligence as a top strategic objective for the coming year.
The Big Three
Each month GPAHU identifies three top public policy or legal developments that could impact our members and their clients. Here are this month’s big three!
House Repeals Cadillac Tax
On July 17, the U.S. House of Representatives passed legislation to eliminate the excise tax on high-cost group health plans created by the ACA (aka the “Cadillac tax”). Full repeal of the 40 percent excise tax has been a top federal policy priority for GPAHU and our parent organization, the National Association of Health Underwriters. GPAHU members met with our members of Congress about the excise tax during NAHU’s Capitol Conference in February, and we are pleased to report the entire Pennsylvania delegation voted for the repeal.
The next step is for the Senate to take up the legislation. Senators Mike Rounds (R-SD) and Martin Heinrich (D-NM) have sponsored a companion bill with 61 co-sponsors, including Pennsylvania Senator Robert Casey. It is essential that Pennsylvania’s other Senator, Pat Toomey, knows about our organization’s support for the full repeal of the excise tax. So please click here to send him a message by utilizing NAHU’s Operation Shout platform.
Unless the Senate acts to repeal or delay the tax, it will go into effect on January 1, 2022. All employer-based coverage that exceeds an estimated $11,200 in annual premiums for individuals and $30,100 for families would be subject to the tax. All group plans, health insurance carriers and third-party administrators would have to engage in complex reporting related to the tax, regardless of whether or not they owe a payment. A recent analysis from the Kaiser Family Foundation estimates 21 percent of employers that offer health insurance coverage would have to pay the tax in its first year, so GPAHU supports its full repeal.
Two New IRS Notices That Will Impact Clients
During July, the Internal Revenue Service (IRS) issued two pieces of guidance that will affect health insurance coverage and your clients in the year ahead. GPAHU has broken down both Revenue Procedure 2019-29 and Notice 2019-45 so that you will know quickly how each one will impact your clients. Here are the key things you need to know about each notice:
Revenue Procedure 2019-29: Indexing Adjustments for Certain Provisions under IRC § 36B
Why You Should Care – Bottom Line
This notice reduced the “affordability” percentage for employer-sponsored coverage to 9.78 percent of household income for 2020. All businesses that offer health insurance benefits need to understand the impact this information will have, both in informing employees and in adhering to a multitude of compliance requirements.
- The Patient Protection and Affordable Care Act (ACA) establishes that anyone offered employer-sponsored coverage only qualifies for an individual market premium tax credit if their group coverage option is “unaffordable.” Each year, the IRS sets a percentage of household income to use in determining if an employee’s coverage meets this “affordability test.”
- In 2019, the rate was 9.86 percent of household income, and for 2020, it will drop to 9.78 percent. So, some companies will need to raise their premium contribution for 2020 if they want to keep their coverage “affordable.”
- For coverage to be “affordable,” the employee’s share of the single tier (self-only) premium for the lowest cost minimum value plan must be less than the employee’s household income multiplied by the year’s affordability percentage. The single tier rate and the lowest cost minimum value plan are always used for the calculation, no matter what plan option the employee actually selects.
- All businesses that offer health insurance to their employees should determine if the coverage they provide meets the annual affordability standard. That way, they can share accurate information with employees who might be interested in exchange-based individual coverage and premium tax credits. If an employee declines “affordable” coverage in favor of an exchange-based premium tax credit, then the employee could have to pay back their tax credit, with a penalty.
- Employers of all sizes that are subject to the Fair Labor Standards Act need to know how the affordability rate applies to their coverage offerings. Under the law, applicable employers are required to complete the annual exchange notice and distribute to employees within 14 days of hire.
- The affordability rate is particularly crucial for applicable large employers (ALEs) subject to the ACA’s employer shared responsibility provisions (employer mandate.) ALEs should take the annual affordability rate into consideration when setting their premium contributions for the 2020 plan year. If any employee’s premium share cost exceeds the employee’s household income multiplied by the affordability percentage, then the ALE has a potential tax penalty liability.
- Understanding the affordability rate upfront also helps ALEs determine which affordability safe harbor to use for employer reporting purposes.
Notice 2019-45: Additional Preventive Care Benefits Permitted to be Provided by a High Deductible Health Plan Under § 223
Why You Should Care – Bottom Line
This guidance affects any person or business with a qualified high deductible health plan (HDHP) paired with a health savings account (HSA). It expands the list of preventive care services an HDHP could cover before applying the policy deductible to include some specific treatments for people who suffer from certain chronic diseases
- To legally pair with an HSA, HDHPs must subject all benefits to a minimum deductible, except for preventive care as defined by the IRS. Previously, the IRS excluded any medical care considered treatment from the list of preventive care services for HDHP purposes. With Notice 2019-45, the IRS expands its view and lists 14 specific types of care for individuals diagnosed with conditions like asthma, congestive heart failure, diabetes and high blood pressure that can be considered preventive care.
- The new guidance is the result of an executive order issued by President Trump in June of 2019 on health care price transparency and account-based plans.
- The notice went into effect right away, but that does not mean qualified HDHPs will immediately cover these treatments before the application of the deductible. This guidance is optional. Carriers and third-party administrators that want to take advantage of it will need time to establish revised claims procedures and plan designs.
- If new services are covered on a first-dollar basis, then there could be a corresponding rise in HDHP premiums.
- To qualify, a person must have a diagnosis of one of the specific conditions listed in the notice and the preventive care designation only applies to the particular treatments listed. People who have other chronic conditions, people who are being treated in a different way for a listed chronic disease, and people who may be receiving one of the services on the list for another purpose, do not qualify. Their care and services will be subject to the HDHP deductible.
- The IRS will review the list every 5-10 years to update conditions and approved treatments.
- This guidance does not impact any other guidance the IRS has issued about preventive care and HDHPs.
Surprise Billing Legislation – A GPAHU Priority Moving in Both DC and Harrisburg
Our lawmakers in both Washington, DC, and Harrisburg continue to work one of our association’s top policy priorities – legislation to help people who go to an in-network health care facility but later receive an expensive medical bill from an out-of-network provider. This summer, GPAHU legislative team members have been meeting with federal and state representatives in our area about this issue. We hope to see surprise billing measures advance in both jurisdictions this fall when our lawmakers return from summer recess.
There are three main pieces of legislation to address surprise balanced billing under consideration in Congress
- The No Surprises Act (HR 3630), introduced by the leaders of the House Energy and Commerce Committee
- The Stopping the Outrageous Practice (STOP) of Surprise Medical Bills Act of 2019 (S 1531), introduced by Senators Bill Cassidy (R-LA), Michael Bennet (D-CO), Todd Young (R-IN), Maggie Hassan (D-NH), Lisa Murkowski (R-AK) and Tom Carper (D-DE)
- The Lower Health Care Costs Act (S 1895), introduced by the leaders of the Senate Health, Education, Labor and Pensions (HELP) Committee
The most recent legislative activity on this issue concerned the No Surprises Act. On July 17, the House Energy and Commerce Committee marked up and passed this measure, along with 25 other bills. During the mark-up process, they amended the original proposal which used a benchmark rate for provider payments, by adding an arbitration process to address payment disputes in certain situations. The committee also voted to combine the surprise billing legislation within a larger health bill that includes reauthorization of the Medicare and Medicaid programs that need reauthorization or additional funding before September 30, 2019. The new bill is referred to as HR 2328, and due to the funding deadline attached to it, it is very likely that the House will move on this legislation in September
Meanwhile, the Senate Health, Education, Labor, and Pensions (HELP) Committee approved the Lower Health Care Costs Act on June 26. This measure addresses surprise medical bills as well as health care cost transparency and drug prices, but it also includes broker fee disclosure provisions that are concerning to NAHU. The hospital and provider community have also expressed concern about the structure of this measure, which does not include an arbitration provision. Lawmakers have been using the August recess to hash out the contents of this legislation. So far, S 1895 is not scheduled for Senate floor consideration. However, on July 16, the Congressional Budget Office released a cost estimate of the bill, indicating that its passage would result in a net decrease in the deficit of $7.6 billion over the 2019-2029 period.
In Harrisburg, the House Insurance Committee has a pending measure to address surprise out-of-network medical billing. The measure would protect people who unintentionally get emergency care from an out-of-network provider. In those cases, consumers would pay in-network cost-sharing; all balance billing would be settled by the provider and carrier, shielding the consumer. In non-emergent cases, patients will be notified and could seek other care in-network. GPAHU legislative team members have been meeting with members of both the House and Senate Insurance Committees about this measure this summer. A meeting is currently scheduled for August 14th with State Senator Tom Killion, who represents Chester and Delaware Counties. We expect the legislature to consider the bill later this year.
Check This Out!
If you want to expand your health policy knowledge beyond this newsletter, here is a brand-new resource to check out!
The National Association of Insurance Commissioners (NAIC) has a launched a podcast, “The Regulators.” The monthly podcast features interviews with state insurance regulators and focuses on issues facing the insurance industry both today and in the future. Its inaugural segment covers long-term care insurance, in particular, balancing insurer solvency with consumer access to coverage options. You can listen and subscribe to “The Regulators” on Spreaker and Spotify.