12. Source : http://smallbusinessmajority.org/tax-credit-calculator # of FTE employees: _____ Total Annual Wages paid for all employees _____ Total annual employer premium contribution: _____ Are you tax-exempt? Yes No Results will provide the estimated tax credit you’ll receive for 2010-2013 and starting in 2014 Calculate Your Tax Credit
Thank you for inviting me to speak today. The Utah Health Policy Project is a nonpartisan, nonprofit dedicated to creating quality, affordable, comprehensive health care coverage for all people in Utah through research, policy innovation, and civic participation activities. I am a member of UHPP’s Speakers Bureau. ( you can add a little here about your own background, if you wish)
Health reform can feel confusing and overwhelming. You have a lot of questions about what is exactly in the new law of the land and how it affects you and your family. Our presentation today is designed to help you make sense of it all.
Let’s start at the beginning. Why do we need health reform? UHPP has identified 5 main reasons to support health reform. First, to stop denying insurance to Utahns with pre-existing conditions. Second, to give Utahns peace of mind that they can still obtain health insurance even if they lose a job, especially in this economy. Third, to protect those of us with insurance from bankruptcy from a catastrophic medical event. Fourth, small businesses face unique challenges in providing health insurance to their employees and we must remove those barriers to give them more choice and the same competitive advantage as large businesses. When you add all these reasons together (plus many more) the clear conclusion is that the status quo is unsustainable. There is wide-spread bipartisan consensus about the need for health reform. The differences lie in what kind of reform. Additional Background information Over the last decade, premiums grew 3½ times faster than wages, eating up more of our paychecks Nationwide 46 million people are uninsured, and another 44,000 more people lose their coverage each week Over 400,000 uninsured in Utah Even families with insurance cannot afford the growing out-of-pocket costs to get the care they need 45,000 people die prematurely each year because they do not have insurance In 2006, only 32% of Utah small businesses offer health insurance and that number has further declined in the current recession
To help you make sense of health reform and find the answers to your questions, we’ve created a webpage called the “Implementation Station.” There are tons of great nuts and bolts resources here, including a “how does reform affect me” section, where we have different categories like “I am insured,” or “I am a small business owner” or I am uninsured” and for each one we outline the main provisions of the health reform bill that will help you and when they are implemented. On the website, we also have an “ask us” button if you have specific question, and UHPP’s staff will research the answer for you. In addition, we have compiled a list of links to other great resources across the web, if you want to dig in a little deeper. If your friends, family members, colleagues, patients, etc have questions, please refer them to this webpage—it really is a useful tool.
Health reform proposes uniquely American solutions. It builds on the strengths of our current system. The vast majority of us will continue to get our health insurance through our employer. Medicare remains for our seniors, Medicaid for low-income vulnerable Utahns. Along those same lines, nothing requires you to change your coverage, doctor or hospital. What reform does do is provide more choices of quality, affordable private health insurance plans.
Several immediate positive benefits are implemented this year. First, children can’t be denied coverage for pre-existing conditions. For example, we met a 16 year old in Orem was denied health insurance for being prescribed a topical gel for her typical teenage acne. That sort of thing will stop. This year. Second, small businesses who offer health insurance can receive up to a 35% tax credit to help offset those costs. I’ll talk more about this a little later in the presentation. Next, young adults will be able to stay on their parents’ insurance until they turn 26—it doesn’t matter if they’re enrolled in school or not. Utah already has a version of this law, but it doesn’t apply to all plans. That will change. Also, under the reform, you can even be married and stay on your parents insurance. The only restriction is if you have access to insurance coverage through your employer then you cannot enroll on your parent’s plan. Fourth, the reforms set up an interim high-risk pool for Utahns with pre-existing conditions. This pool is for Utahns who are currently uninsured and have been denied insurance because of a pre-existing condition. This pool will run parallel to the high risk pool we already have set up in Utah. Hopefully, however, the premiums will be cheaper. Last, but not least, Seniors caught in the doughnut hole—the gap in prescription drug coverage in Medicare Part D—will get a rebate this year of $250 to help offset those costs. The goal is to completely close the doughnut hole by 2019 through additional discounts on prescription drugs. So there you have it—lots of exciting benefits for Utahns this year!
Health reform guarantees that Utahns will be able to depend on their coverage when they need it. For example, this is the Knight Family from Orem. Both Alan and Diane were small business owners. Within the same year, they both were diagnosed with cancer. Their premiums skyrocketed—they simply could not find an affordable plan anywhere. One quote was more than their mortgage and grocery bill combined. Diane was forced to close her small business that she had successfully run for over 25 year and go work for a local school district just to obtain insurance. Only as part of a large group could they obtain health insurance. Diane says that health insurance is more distressing than the fear of cancer, for their family. Utahns shouldn’t have to completely turn their lives upside down simply to obtain insurance. ( watch the Knights video story on our website here: http://www.healthpolicyproject.org/StorybankVideos.html) This is next picture is of Rochelle Wenger, the local rabbi’s wife. In 2009, Rochelle got really sick, had several surgeries and was in the hospital for several weeks. By May, she hit the $250,000 annual benefit cap on her insurance. So even though she continued to pay premiums every month, her insurance refused to cover any additional items. She racked up more than $30,000 in medical debt, and had to postpone a critical surgery until January 2010 when her benefit cap reset. She wasn’t able to count on her insurance when she need it most. Health reform is specifically designed to eliminate heart-breaking, tragic stories like these. Read Rochelle’s story here: http://www.healthpolicyproject.org/SBRochelle.html
So, let’s discuss those solutions. First, starting in 2014, insurers can no longer deny insurance to Utahns with pre-existing conditions. Again, this benefit for children begins this year. Starting, this year, insurers will no longer be able to retroactively drop your coverage once you get sick. This is a practice called recission. Earlier this year, there was a ton of news coverage about how the insurer Wellpoint was systematically dropping coverage for women who had just been diagnosed with breast cancer. That kind of behavior stops this year. In 2014, insurers will no longer charge higher premiums based on health status or gender. They will still rate premiums on age, tobacco use, family size, and some geographic factors. Those annual benefit caps that Rochelle bumped up against will no longer be allowed starting in 2014. The lifetime benefit limit caps will stop this year, in 2010.
But that’s not all! Also, starting this year, your health insurance will fully cover certain preventative services and screenings like mammograms with no co-pays. In addition, you and I as consumers will finally see some transparency of our insurers. We’ll know how much they spend on patient care/medical claims versus administration and CEO salaries. Then we are empowered and can pick a health plan that spends more of our premium dollars on our medical care. Starting in 2014, as consumers we’ll also know that we are buying a policy that covers the services we need—like prescription drugs and rehabilitative care. We won’t have to worry about getting caught with junk insurance. Finally, simplified health insurance administration will make it easier for our doctors to process their bills to insurers and cut down on the confusing paperwork we get sent! Any questions at this point?
The next big piece of reform is helping our small businesses—the engine of our economy. These are just a few faces of the small business owners we’ve talked to over the past couple years. Most simply can’t afford to offer health insurance. And those that do, face double-digit premium increases every year—15%, 20%, 25%--that is simply unsustainable and undermining the financial viability of these companies. So how does health reform help?
Right off the bat, small businesses can receive up to a 35% tax credit for their entire 2010 contributions towards purchasing health insurance for their employees. The full credit will be available to employers with 10 or fewer employees and average annual wages of less than $25,000. Small businesses employers with fewer than 25 employees and average annual wages of less than $50,000 are eligible for a sliding scale credit. To be eligible for a tax credit, the employer must contribute at least 50 percent of the total premium cost or 50 percent of a benchmark premium. But wait… it gets better from there! The tax credit continues from 2010 to 2013. Starting in 2014, it increases to up to 50% of the premium contribution for eligible employers purchasing coverage through the Exchange for 2 years. That’s real savings you can put towards growing your business or paying higher salaries! In addition, next year, small businesses can apply for grants to start wellness programs to encourage a healthier and thus more productive workforce.
Small businesses—including non-profits—can calculate what their tax credit will be here: http://smallbusinessmajority.org/tax-credit-calculator . This is a really useful tool! Additional Background information Input the number of full-time equivalent employees (add up the total number of worked by all employees during the year, with a max of 2080 hours per employee), then, divide the total by 2080 and round to the next lowest whole number). Enter the total annual wages paid per employee (add up all the amounts in Box 1 of every employee’s W-2 form). Input the total annual employer premium contribution (add up the premium contribution the business pays for each employee. The employer must be paying at least 50% of the total premium cost for every worker). The IRS has a comprehensive Frequently Asked Questions that explains eligibility more in-depth: http://www.irs.gov/newsroom/article/0,,id=220839,00.html .
But that is not all! In 2014, small businesses will be able to shop for and purchase health insurance through an online marketplace called an Exchange. If you think how Travelocity transformed the way we shop for and buy airplane tickets, this exchange is designed to do the same thing. You can input the criteria of what you are looking for and then compare plans apples to apples—all online. Also, small businesses will be able to pool their risk together through the exchange. So, right now, if you are a small company of just 5, then you are only sharing risk with that group of 5. So if one person gets sick—then everyone in the group really feels those premium increases. That doesn’t happen in large groups where there are more people to share risk with. And because of that, the premiums small businesses pay are higher than the average large group. Reforms finally allow small businesses to join together to pool risk—thus giving them the same competitive advantage that large businesses have. This is one of the most exciting provisions of health reform. Having this new marketplace, will increase the number of choices small businesses will have for health insurance, and thus increase competition. . Insurers will compete on price and quality within the exchange. In addition, each plan will be rated bronze, silver, gold or platinum. Small businesses can then pick a level—say silver—and say they will offer that level plan. Then their employees can then go to the exchange and pick a plan that works best for them—finally giving small business employees more choices instead of a one-size-fits all. That means one employee who wants to be part of the IHC network can pick that plan which another in the exact same company can pick a different provider network Small businesses can choose whether or not to participate in the new exchange. However, there are lots of incentives to encourage them to. Utah already has an exchange in place—the 2 nd one in the nation. We have many of these features—including the online shopping and the ability for employees to pick a plan that works best for them. But we don’t yet have several other important elements—like the pooling risk and the tax credits—that will really save small businesses money. However, this exchange is an important foundation that we can build on in the health reforms and puts us way ahead of the rest of the country. And lastly, to ensure health care is affordable for small businesses and their employees, deductibles will be limited to $2,000 for individuals and $4,000 for families. Any questions about the reforms for small businesses?
The next main goal of health reform is to help ensure families can afford health insurance—both the premium and the cost-sharing—and that they don’t go bankrupt if they get sick.
Individuals who cannot get health insurance through their job—or who can’t afford their employer’s plan—will be able to shop on a similar exchange for individuals. Because they don’t have an employer contribution to help offset the cost of health insurance, low-to-middle income individuals and families will be eligible for new premium tax credits through the exchange. Utahns with incomes between 133% and 400% of the federal poverty level will be eligible. In addition, in 2014 annual out of pocket costs will be capped for Utahns at the health savings account limits: $5,950 for individuals and $11,900 for families (indexed for inflation). Utahns buying coverage through the exchange will incomes below 400% of the FPL will have their out of pocket costs capped at a lower rate. Background information 92% of Utahns are concerned about cost 1 in 4 families will spend 10% of pre-tax income on health care in 2009 With reform, 1medical event won’t cause bankruptcy Financial help to small businesses & families who need it most In the Individual Exchange, reduce the out-of-pocket limits for those with incomes up to 400% FPL to the following levels: – 100-200% FPL: one-third of the HSA limits ($1,983/individual and $3,967/family); – 200-300% FPL: one-half of the HSA limits ($2,975/individual and $5,950/family); – 300-400% FPL: two-thirds of the HSA limits ($3,987/individual and $7,973/family). Definition of too expensive employer insurance: The employer plan does not have an actuarial value of at least 60% or if the employee share of the premium exceeds 9.5% of income.
Health policy experts often say there are 3 pillars to reform: containing costs, ensuring quality and expanding coverage. Let’s go through and see what the legislation does on each of these pillars.
$50 million has been set aside as grants to states to develop, implement, and evaluate alternatives to current tort litigations. This can include medical review boards, early sorry and compensation policies, and evidence-based practice protection. Currently incentive providers have to give more care (run more tests, do more procedures) rather than simply to provide quality care. For example, when Intermountain standardized lung care for premature babies, it not only cut the number who went on a ventilator by more than 75 percent; it also reduced costs by hundreds of thousands of dollars a year. Perversely, Intermountain’s revenues were reduced by even more. Altogether, Intermountain lost $329,000. Thanks to the fee-for-service system, the hospital had been making money off substandard care. And by improving care — by reducing the number of babies on ventilators — it lost money. Payment reform pilot projects in Medicare and Medicaid will test on how to change those incentives so more hospitals will focus on providing quality care instead of just more care. Some payment reform policies that will be tested are medical homes, bundled payments and accountable care organizations. In addition, states will have the opportunity to strengthen their rate review processes. Instead of just rubber-stamping an insurers request to increase premiums, they should have to prove and justify why they need to increase premiums, and give the public an opportunity to comment. Finally, reducing waste, fraud and abuse in our public programs will also help to curb costs.
Like I mentioned earlier, insurers will have to disclose how much they spend on medical claims vs. CEO salaries and if the spend less than 85% on medical claims then their enrollees will receive a rebate! Medicare will reduce the payments they make to hospitals for preventable readmissions and infections—again you don’t want to financially reward poor quality care. Better reporting by physicians will finally give us the data to compare results and see scientifically which treatments work best, when compared with each other. The goal is to increase transparency so you can have the tools to pick where you get your care. Finally, you’ll know that the health plan you purchase will cover the things you need—like prescription drugs and preventative care—and that you aren’t being sold junk insurance. Background information: The law requires all qualified health benefits plans, including those offered through the Exchanges and those offered in the individual and small group markets outside the Exchanges, except grandfathered individual and employer-sponsored plans, to offer at least the essential health benefits package. (Effective January 1, 2014). That package includes hospital and outpatient services, prescription drugs, mental health services, maternity care, rehabilitation and preventive care, but not abortion services
Roughly 30 million Americans will gain insurance, raising our nation’s uninsured rate from 85% to 95%. Middle-income Utahns, small businesses and the self-employed will gain the most, especially from the new exchanges. All low-income Utahns with incomes up to 133% of the federal poverty level, will have access to Medicaid. Currently, Medicaid only serves certain catagories—like children or people with disabilities. So in Utah, if you are an adult with no children, you literally could be penniless and not qualify for Medicaid. Health reform changes that, so all low-income Utahns can qualify. CHIP—the Children’s Health Insurance Program—created by our own Senator Hatch will continue. And Community Health Centers will be expanded—their budgets are set to about double in size.
Fundamentally health reform is about creating a culture of coverage—saying as a society we want everyone to have health insurance. Health reforms build on the system where you and I get our insurance through our employer. There are no requirements for employers to offer health benefits. However, there is a free-rider fee and let me explain what that is. Large employers—only those with more than 50 employees—that have an employee who receives a premium tax credit through the exchange are charged a fee. And this makes sense, right? They are either not providing health insurance or are not providing affordable health insurance and now their employees are assessing these new benefits paid for by taxpayers. In addition, this free-rider provision levels the playing field between companies who do and who don’t offer insurance. In Utah, 92% of firms with at least 50 employees already offer health insurance so this is just about bringing in the free-riders and stragglers. It is absolutely essential to note here that small businesses are totally and completely exempted from any of these free-rider provisions. Reforms are entirely about helping small businesses. Did you know that right now, as much as 17% of the health insurance premium that you and I pay goes to cover the costs of uncompensated care? When someone who is uninsured is treated in the ER, those costs are shifted to you and me, which in turn, makes health insurance more expensive, leading to more uninsured who can only get care in the ER. It is death spiral and the only way to stop it is to get everyone covered. Plus, none of those insurance reforms we talked about at first—stopping denying coverage for pre-existing conditions—would work without everyone in the system. That is why individuals will have a requirement to purchase insurance. But remember, we will also be given lots of new tools to help us purchase insurance and remove the barriers that currently stand in our way—access, affordability, etc. In addition, there are exemptions, for example, financial hardship or if you are uninsured for less than three month. Background Information Free-Rider Fee : $2,000 per full-time employee, excluding the first 30 employees from the assessment. For employers that offer coverage and have at least 1 full-time employee access credit will pay the lesser of $3,000 for each employee receiving a premium credit of $2,000 for each full-time employee. Require employers with more than 200 employees to automatically enroll employees into health insurance plans offered by employer. Employees may opt out of employer coverage. Individual Requirement (don’t call it a mandate) Exemptions for individual requirement for religious objection, American Indians, those without coverage < 3 months, undocumented immigrants, lowest cost plan is >8% of income, or income below tax filing threshold Tax for choosing not to enroll (by year) 2014 - $95 or 1% taxable income 2015 - $325 or 2% taxable income 2016 - $695 or 2.5% taxable income Why was the individual mandate included? Without it - difficult to incentivize young, healthy people to buy insurance and help mitigate risk for all Eliminate hidden cost shifting Can’t do the insurance market regulation without it (premiums for everyone would rise)
Optional slide depending on audience There are have been a lot of myths and misinformation about how health reform affects Medicare. So let’s set the facts straight. First, reforms absolutely do not cut any guaranteed Medicare benefits. Period. In fact, reforms strengthen Medicare. Starting this year, seniors caught in the doughnut hole will receive a $250 rebate; Reforms should close the doughnut hole by 2019 through discounts on name-brand prescription drugs and subsidies for generic drugs. In addition, co-payments for annual check-ups and preventative screenings will be eliminated Medicare—making it easier and more affordable for our seniors to get the preventative care they need.
(optional slide) But it doesn’t stop there! Medicare will pay for your doctor to sit down with you once a year to create a plan on improving and managing your health. Hospitals will have financial incentives to keep you healthy and avoid preventable infections and readmissions. A lot of myths and misinformation around Medicare come from this next bullet point. There are actually 2 parts to Medicare. Traditional Medicare is run by the federal government and is fee for service. Medicare Advantage is a program where the government pays private plans to administer Medicare. Currently, for every dollar Traditional Medicare gets, Medicare Advantage is paid $1.14. Thus, they are receiving a 14% subsidy. Reform will cut that subsidy and say “private plans: you can be just as efficient as government.” For every dollar Traditional Medicare gets, Medicare Advantage will get the same dollar. Now, plans that meet certain quality standards will receive bonuses. So the subsidy doesn’t go away entirely. Medicare Advantage plans cannot reduce basic, guaranteed Medicare benefits, but the extras that some plans offer, like free gym memberships or free eyeglasses, will likely be paired down. Those decisions are up to the Medicare Advantage plans.
(Optional slide) Additional information Blue Cross Blue Shield of Utah, United Healthcare, Kaiser Permanente and Humana implementing this policy in June for recent graduates All others, including Select Health, implement in October
(optional slide) Health reforms invests in developing more health care workers and physicians through expanded scholarships, low-interest student loans, loan repayment programs, tax credits, etc. Many of these benefits are targeted at physicians or other providers who want to go into primary care or serve high-need areas, like rural Utah. To also increase the number of primary care providers, unfilled residency slots will be redistributed to emphasize primary care or general surgery. Additional information Expanded scholarships and loan repayment through the National Health Service Corps Additional low-interest student loans, scholarships, loan repayment programs for primary care and general surgery Tax relief for health care workers paying state-issued student loans for working in primary care or high need areas
(Optional slide) Medicare is also giving a bonus payment to primary care physicians and general surgeons working in rural areas, as well as a 5% bonus payment to mental health providers. Medicaid will follow suite shortly thereafter and bring payment rates for primary care physicians in line with Medicare rates. Currently, Medicare pays hospitals different amounts across the country. So a hospital in Utah is actually paid less than a hospital in Florida. Medicare will adjust that formula, resulting in an increase in for states like Utah. Finally, physicians can receive bonuses for reporting quality data to Medicare. Collecting this data is the first step to transparency and better competition in the marketplace.
Eliminating those subsidies to Medicare Advantage pays for about half of the legislation. Reform is also financed by an excise tax on Cadillac insurance plans. This is actually one of the best cost containment tools in our toolbox. Cadillac plans are the ones that no co-pays and a $500 deductible. And when we are consumers are so totally separated from what our health care actually costs, we tend to use a whole lot more of it than we need. So, this tax disincentives employers from offering them and will help control costs in the long run. Other payment measures include a Medicare payroll tax on high-income earners, savings negotiated with the pharmaceutical industry. Currently hospitals are paid to treat uninsured patients, but under reform when there are less uninsured, those payments will be decreased. Finally fees on devices and tanning salons make up the last piece. Additional Information Additional 0.9% Medicare payroll tax on wages >$250,000 3.8% tax on unearned income (interest, dividends) Cadillac health plans is defined as employer-sponsored health plans with aggregate values that exceed $10,200 for individual coverage and $27,500 for family coverage. The tax is equal to 40% of the value of the plan that exceeds the threshold amounts and is imposed on the issuer of the health insurance policy
All in all, the legislation is predicted to cost $938 billion over 10 years. The nonpartisan Congressional Budget Office estimates it will reduce the deficit by $140 billion the first ten year and an additional $1.2 trillion in the next decade. Very exciting Average premiums are expected to stay the same for the majority of us who get our insurance from our jobs. And costs should go down for those who buy through the exchange and qualify for subsidies.
Health reform can, must and should be a federal-state partnership. Regulating health care is currently shared by both the state and the federal government. The state has responsbility for the individual and small group markets, plus part of Medicaid. The feds oversee Medicare, large employers and part of Medicaid. Health reform preserves this partnership—and in fact depends on it for its success. Fun Fact: Do you know which picture is the U.S. Capitol and which is Utah’s Capitol? Answer: Left pictures is U.S. capitol and the picture on the right is Utah’s Capitol.
The state has an immense amount of responsibility and flexibility within the reforms. As our state has already been studying health reform for that last 3 years, we are in a good position to begin implementing and building on the federal reforms. Utah can choose to create and run the new exchanges, and there is an immense amount of flexibility in how we design the exchange We can strengthen our rate review process so insurers actually have to justify their premium increases instead of having them just be rubber-stamped. Right now, if you need help finding coverage or help understanding your insurance, who can you call? There really isn’t an easy answer. We need to strengthen our Consumer Assistance infrastructure so that if you and I need helping fighting a claim denial or finding coverage, we have someone to turn to. In addition, as part of Utah’s reforms we have developed very promising pilot projects on payment reform with diabetes and pregnancy. We also have an All Payer Database that allows us to collect and analyze claims data so we can being to measure quality and price. This tool will be key to developing cost containment policies down the road As I mentioned before, medical malpractice reform is entirely left up to the states. Finally, Utah can lead the way in developing wellness programs and intiatives. The best cost containment policy is to help Utahns be healthy.
So, to summarize, health reform—the new law of the land—will help Utah families. The insurance reforms means that insurance will no longer dictate Utahns’ career choices. Diane can keep her small business. Utahns with pre-existing conditions can now start their own businesses and not be denied insurance. Utahns like Rochelle can count on their coverage when they need it. More chance and transparency, especially through the new exchanges, help you access a plan that works best for you and your family Finally, reforms mean insurance companies will now compete on price and quality instead of who can cherry-pick out the healthiest people.
Questions?
Thank you for taking the time to listen to our presentation. We know that your friends, family, colleagues probably have lots of questions as well about what is the bill and what is not. Please refer them to our implementation station website (www.heallthpolicyproject.org). You can also invite us to come give this presentation to your next professional association meeting, book club, or any other meeting. I’ve passed around a sign-up sheet. We’ll send you periodic email updates with new resources we’ve posted on our website or announcements about upcoming public events. Plus, we’ll keep you informed in how health policy continues to develop in our state. Please also write down your home address, so we can look up which state legislative district you live in. Over the next year, our State Legislature and Governor’s office will have to makes lots of decisions on implementation. We need your help encouraging them to implement health reforms and take advantage of the flexibility and new responsibility. Finally, we’ll be organizing statewide conference calls and other events that really delve in deeper into the different elements of health reform. We’d love to have you participate in those and get your feedback and input.
Thank you for inviting UHPP to present. As a nonpartisan, nonprofit, we hope to be Utah’s resource for breaking down the nuts and bolts of federal health reform and implementing the new law of the land. Ultimately, health reform is a process and the only way to ensure success is for you to get involved and help us work towards achieving the goal of quality, affordable coverage for all Utahns. Thank you
